A Monarchy Saves the Economy


We all know these: the Romanian Athenaeum, the Peles Castle, the Cotroceni Palace, the Botanic Garden, the Cernavoda Bridge. But do you know how these historical landmarks are connected? All were built within the same period, between 1870 and 1914. The list can be extended: the Romanian National Bank (BNR) Palace, the University of Bucharest, the North Railway Station, the CEC Palace, the Boulevard Hotel, the National Military Club, the Fire Sentry Tower, the Postal Service Palace, the Justice Palace, the Cantacuzino Palace (Enescu Museum), the Agricultural Bank (Ministry of Agriculture), the University of Medicine, the Carol I University Foundation (Central University Library), the Assan House (Scientists’ House), the Vernescu House.



Boulevards and parks later lined up around these buildings: Elisabeta Boulevard, Carol Park, Ioanid Park, St. George Square where the Capitoline Wolf statue was placed.

Then, even more important than the building works itself came public utilities. In 1872, the North Railway Station was inaugurated, a terminal for the Bucharest – Ploiesti railway, second in Romania after Bucharest – Giurgiu.

In 1882, the people of Bucharest advanced from gas lamps to electric light. In 1884, the first popular newspaper was printed. The same year, the first telephone line was installed. In 1894, the first electric tram was commissioned, replacing the horse car circulating from 1872. And in 1909, the first movie theater, Cinema Volta, opened to the public…


Therefore, Romania’s landmark buildings were erected under King Carol I, who can be rightfully called the civilizing king. And it’s a striking fact that over few years of his rule, the moneychangers and loan sharks vanished, leaving the place to bankers. From various pennies and Turkish guineas, bazaars and traveling merchants, Romania got to its own national currency, exchanges and chambers of commerce. In a very short while, we stepped from oriental tunes to western sobriety.

But one thing is sure: none of these palaces, parks, universities or boulevards, bridges and railways could have been made without money.



Although those times are hard to consider in terms of gross domestic product, inflation, public debt, trade deficit or foreign debt, to our overwhelming amazement, economists Paul Bairoch, Colin Clark or Angus Maddison managed to retrieve approximate data and provide meaning to an empiric assessment based on palaces and boulevards and railways.




For instance, according to Maddison, in 1870 Romania was already last, because 861 dollars per capita (“1990 international dollars”) placed the country behind Greece (996), Serbia (934) or Portugal (926). But by 1913, Romania had quickly advanced to 1378 dollars, ahead of either Greece (1225), Portugal (1244) or Serbia (1152).

Another estimate – Bairoch’s – placed 1870’s Romania behind Poland, too, but sees it ahead in 1910. Like Maddison, Bairoch certifies the position of Romania’s economy above Portugal’s; our GDP per capita stood in 1870 at 19.2% of Britain’s, compared to 35.3% of the same for Portugal, but by 1910 we had grown to 28.8%, and the Portuguese only to 27.6%.

Of course, Romania managed a steeper climb than others owing to budget deficits constantly growing between 1900 and 1912, financed from government debts (domestic and foreign). Nevertheless, it’s worth mentioning that debts were made only for development, which should set an example for present days. In actual terms, we might say that investments resulted in increased productivity, which in its turn allowed closing the gaps.



And when discussing the debts, we must mention the National Bank of Romania. The credit system got a strong support from the BNR, through its cheap credits policy at 5-6% interest. As the Romanian economy advanced overall, the number of those asking for BNR’s discount grew, and the commercial banks took up the first instance review of those who called for discounts, because they were discounting the trade consequences themselves, then asked BNR for a rediscount.

Eugeniu Carada, the true founder of BNR, forced the establishment of a bonds market and directed towards them the available capitals. He realized the potential of cheap credit for the national development and the importance of using cash (bills) as payment instruments, curbing the circulation of gold coins with intrinsic value. As long as it worked within BNR, between 1883 and 1910, the circulation of bills quadrupled, and the central bank’s reserves increased 60-fold.



One Step Forward, Two to the Left 

Unfortunately, after half a century of uninterrupted progress, the Great Blow came. Although Romania had reached an enviable economic potential by expanding the Old Kingdom with Dobruja, Transylvania, Bessarabia and Bucovina, Romania was left with no gold. The Romanian treasury sent to Moscow to protect it from German troops was grabbed by the Soviets. From a currency with good gold coverage at the beginning of the war, the Romanian leu was left completely uncovered. The, after hardly recovering, the 1929-1933 crisis came.

However, the solid foundations laid between 1870 and 1914 proved useful again, and in 1938 Romania reached the peak of its economic development. The GDP per capita that year amounted to 110 (gold) dollars, more than Hungary’s (108), Bulgaria’s (89), Portugal’s (81), Greece’s (76) or Turkey’s (62). The literacy rate among Romanians was 80% in 1939-1940, way above the Portuguese (34.8%), Greeks (56.7%) or Spaniards (57%).



All to no avail when from a GDP of 600 million dollars Romania paid to the Soviet Union, after WWII, 300 million in damages. An in itself, the amount was nothing, compared to the 45 years of Communism that followed.

It took Romania 15 years of post-Communism to return to the GDP of 1989.This happened because the national interest, which made the difference in the times of Carol I, Bratianu and Carada, was replaced by a hoard of petty interests who didn’t follow a shared direction, but pulled chaotically, like Brownian motion, even if small vectors temporarily arranged in similar orientations – the so-called group interests.



Of course, the unfortunate balance of the past six decades comes down again to the GDP. With a GDP per capita at one third of the EU-25 average, Romania is at exactly the same gap calculated by Bairoch for 1933-1938 against Western Europe (France, Germany, the Netherlands, Sweden, Belgium and Switzerland). Greece and Portugal, the red lanterns of the EU before the East Europeans joined, are now far ahead, at more than 80% the average of the larger Union.


The Missing Link


The conclusion is sad. Under the Communist regime, the old and new merits of those deemed undesirable were invariably attributed to the “Romanian people”. Alvin Toffler begs to differ: he talks about “integrating elites”, the forces who program the political machine, leaving to the people the mere illusion of governing.

The Turkish guineas were replaced with the Romanian leu by education, the most important domestic capital and the main raw material for producing elites. This explains why the bourgeoisie insisted to send their sons to Paris or Berlin to become bankers or industrialists.

But you know what eventually happened to the Romanian elite? The forefathers’ work was dumped in the Danube – Black Sea Canal, where Romania’s bankers and industrialists meet their death in the 1950s.


And if you think the aforementioned about our past and our present an exaggeration, let me remind you the 1867 postulate of Eugeniu Carada: “Our financial crisis is not caused as much by a lack of resources, as by a lack of true economic spirit in our expenditure budget, by our bad and unfair tax system, by our vicious fiscal laws, by the lack of organization of credit institutions, which push the national trade and industry into decline. We will improve our finances, especially, as soon as we organize the credit through agricultural and commercial banks, to promote the trade, the industry, the agriculture; to instill new life by stimulating and facilitating the private trading and the state and county public works. Without trade, without a prosperous industry, a state cannot advance; without communication routes and credit institutions, the former cannot flourish. Henceforth, building the credit, completing our roads system are the best way of facilitating the production and making the export of our products cheaper. With this kind of life given to our agriculture and industry, we will increase the private wealth, and thus we will also multiply the resources of the public treasury.”



So there is a tradition that was not lost. Sadly, it is not the one imposed by the elites of Carol I’s times, but the practices of an epoch of various pennies and Turkish guineas, when the moneychangers and loan sharks ruled the Romanian Principalities. After 60 years of Communism and post-Communism, we went back to the mentality of one and a half centuries ago.

It might seem utopic, but why wouldn’t history repeat itself? If we really had elites now, they should ponder whether the EU will turn one day from an economic and monetary union to a single state – an empire ruled by a monarch. And if they come to think that it will happen within 10 or 15 years, all they have to do is bring us a Germanic prince to rule over us like Carol I, towards the Western values, until his dynasty will take the reins of the United Europe.

Monarhia salvează economia