Vivid Economics and Business September 2004

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Why not try good government,
for a change?

by Matei Paun
September 2004

Good government is fundamental to a nation's success. More important than natural resources or geography, transcending history and culture, good government can make the difference between poverty and wealth for an entire nation. Countless nations rich in abundant natural resources are flirting with poverty. Some of the most successful countries on earth are in remote locations, have little or no natural resources, and have painful histories of subjugation and underdevelopment. Clearly, the difference lies in good government, or the lack thereof.

In the past fifteen years, Romania has had probably some of the worse governments in Europe. Many countries in Asia, South America and even Africa, have surpassed it in good government. As a result, Romania finds itself with little foreign investment, high inflation, rampant poverty and little infrastructure. It did not have to be so.

Money has always been available - but to no good, as we've been incapable of properly spending it. 'Technical assistance' has always been granted, but with little results, as long as there is no one willing to take the advice. If former Soviet republics managed to join the EU in 2004, there leaves few excuses for Romania's still struggling ambitions.

In its fifteen years of post-communist history, Romania has perhaps seen good government in the form of real reforms only once, for fewer than twelve months, starting in January 1997 and ending later that same year. During that period, prices were liberalised, the currency was freed, and privatisations and restructurings were finally kicked off. If the economy is growing today, it is for no other reason than as a direct result of those few key reforms. Yet, what is truly amazing is that no one today refers to that period as the beginning of real change and economic growth in Romania. Not even those in power at the time are conscious of their deeds. Romania can't see good government when it is staring it in the face.

It now remains to be seen, assuming that some form of non-PSD governing coalition is formed (I intentionally do not chose that much overused word, 'opposition'), whether bad government will continue. It would be a pity if it did, as it does not need to. Romania can be competitive. It can achieve strong economic growth as well as low inflation. It does not have to bow its head out of ignorance, every time it meets the IMF.

Good government has not been implemented for lack of good people. Romania has an experienced and highly competent core of professionals capable of providing world class government anywhere on earth. Unfortunately, thus far a corrupt and shortsighted political class has not wanted their services, remaining fearful of losing its grip on the levers of power.

So others benefit from their dedication and talents: top investment banks in London and New York, multinationals inside and out of Romania; some of the brightest can even be found at such esteemed institutions as the IMF, the EBRD, the European Investment Bank, and the International Bank for Settlements. Still, many others are honing their skills, completing higher degrees and doctorates at foreign universities. Will Romania ever opt for good government and put these young people to work?

Money is not an obstacle to good government. I personally know that many of the aforementioned professionals will gladly give up their high paying positions for more modest remuneration if, and only if, they will be given the satisfaction of being allowed to carry out their job and participate in giving Romania the good government it deserves. In any case, Romania's problem is that it has access to too much money, and is incapable of properly investing it, not the contrary.

If only Romanian politicians and their voters would consider just once the immense opportunity costs they are forsaking by ignoring the option of good government. Every year, every day and every second that is lost to bad government has immeasurable consequences on this country's future. We do not live in a static world, where others will wait for us to catch up. On the contrary, our economic universe has become so dynamic that we've lost sight of the fact that we are not only competing with our neighbours, but with far flung countries in Asia and South America.

The only obstacles to good government are fear, greed and ignorance. These can indeed be redoubtable foes, but they can be overcome through courage, vision and communication. Let us hope that Romania will cease being the victim of bad government, and rather, will transform into the success of good government.

Matei Paun is an investment banker who has covered Romania since 1997.