Vivid Politics March 2005

Regulars
POLITICS
Let them die

by Andrei Postelnicu
March 2005

It was vintage post-communist Romania. Stunned by the sudden jump in the exchange rate, the country’s leading exporters beelined to Bucharest with a plea to the central bank to, well, do something.

Presented with the harsh reality that the central bank does not owe them a favourable exchange rate, the exporters threatened to sue, and they still might. The suggestion that – horror of horrors! – they should become more competitive in other ways drew irate reactions from the exporters. How dare the central bank suggest that instead of expecting government help, the companies should sort their own lot out?

To be fair, exporters pleading for lower exchange rates are nothing new. America’s leading companies have complained for ages that the dollar was too high. Chrysler’s Lee Iacocca famously said in the late 1970s that a lower yen could save Detroit’s problems. Decades later, Toyota and Honda have decimated the market share of US carmakers on their own home turf, even though the dollar declined on more than one occasion in that time.

Fluctuating exchange rates are a fact of life. So are bankruptcies among exporting companies covering their losses under ever-decreasing exchange rates for the national currency. Quite frankly, the National Bank of Romania was too nice to the exporting companies. Having warned for years that he cannot cover the inefficiencies of the economy through exchange rates, Mugur Isarescu should have just sent them packing with a “Tough luck and good riddance!” send-off.

The very stridence of the screams from the exporters demonstrates that Romanian exporters were relying on little else except the exchange rate to stay alive. They, and the rest of Romania, must understand that no company is too big, or too important, or too whatever, to fail. Like nature, the economy must live and let die in order to survive as a system.

The ostensible revolt of the exporters reflects that worryingly widespread view in Romania that somehow the state owes Romanian companies and citizens a prosperous existence, jobs and profits. Wrong! At best, it owes them a functional society, the rule of law allowing them to pursue a prosperous existence, but nothing more.

I dream of the day when a Romanian politician, a leading journalist, anyone, will serve the country a cold and harsh but necessary truth: a job is not a right, not all companies deserve to exist and not all people deserve the jobs they have been accustomed to.

It will hurt to admit that, but once the pain goes away, then the healing can begin and maybe the country can get over this sick and twisted reliance on handouts and guarantees. Commenting on the exporters’ trip to Bucharest the Adevarul daily produced an abject example of journalistic hand-wringing by fretting about the prospect that Romania might no longer have a furniture industry. It went on to explain to readers how horrible that would be.

But the newspaper – which proclaims itself as Romania’s most important – did not ask whether it actually made sense for Romania to have a furniture industry at all. Since we’re on this matter, does Romania need a national airline? Does it need any of the loss-making state-owned enterprises that are tethered to the budget for subsidies? Does Romania need as many embassies as it has?

The fact that Romania once had companies and industries that were an object of national pride is no reason to sustain them on life support for any longer than it takes to relocate workers in a socially responsible manner. An efficient bankruptcy system is imperative and a judiciary that is willing to enforce it is also essential.

For similar reasons, the recent protests by union leaders about revising the labour code are equally ridiculous. Maybe some of the proposed changes go too far, but there is a bit of a stretch from that to saying the revision plans seek to destroy Europe’s social model by making a Trojan horse of Anglo-Saxon jungle capitalism out of Romania. Those union leaders apparently are unaware that much of that fabled European social model has failed.

The irrational and absurd emotional attachment by Romanians to certain companies and ideas about the economy has got to stop, and soon. Companies fail, people lose jobs. Yes, it’s harsh, but far from a big deal. Any barrier in the way of that process is an obstacle to the way of new and better jobs being created by new and stronger companies.

Andrei Postelnicu writes for the Financial Times from its New York bureau and for Vivid in a personal capacity.