The economic crisis in Romania in 1899-1901 was the first major economic crisis , which became a serious test for independent Romania , which gained independence only in 1877. Its main reason was the underdeveloped economy of the country, which was agrarian , and - as a result - in those years extremely dependent on agricultural prices. It was also a “growth crisis” that occurred after two decades of continuous economic development — but turned out to be unsustainable in the long run, as it was based on large government infrastructure work funded by foreign loans. The crisis had two “triggers” (reasons): one of an internal character - the great damage caused to the Romanian agricultural producers by the long (ten-month) drought of 1899 - and one of an external one - reducing the ability to raise funds in foreign markets as a result of events related to the global crisis intensified by the Boer War in Africa and Boxer Uprising in China .
The crisis led to a number of serious consequences: a decrease in agricultural production by 65%, a decrease in revenue from imports by 48%, an unprecedented budget deficit in the history of a young country (in the amount of 35 million lei), a sharp increase in interest rates, a series of bankruptcies , a significant reduction in budget and its expenses and so on. To combat the crisis, the government turned to foreign loans, which amounted to 175 million lei under very unfavorable conditions for the payer. Also, the bank “Casa de Economii și Consemnațiuni” (CEC Bank) had to take a foreign loan in order to avoid the cessation of payments to its depositors.
After the financial and budgetary policies of the two conservative governments that were in power at that time and headed by Gheorghe Grigore Cantacuzino and Petre Karp did not improve the situation in Romania, King Carol I decided to hand over in July 1901 power of the National Liberal Party . The new government imposed a heavy austerity program - based on a sharp reduction in budget expenditures - which helped restore the country's budget balance. This plan had significant long-term negative consequences for Romania: since it envisaged stopping the growth of defense spending, during the First World War this was expressed as the absence of armaments, ammunition and equipment from the Romanian army .
The crisis also had positive consequences: it led to the adoption of measures to improve the functioning of the entire state apparatus , as well as the financial and banking institutions of the country. This made it possible to mitigate the consequences of the crises that Romania subsequently faced. As a result, after 1901, the country entered a period of rapid economic growth, which allowed the kingdom in ten years (by 1912) to reach the maximum level of its economic development.
Reasons
The economic crisis of 1899-1901 had three main reasons, which were based on economic and financial imbalances in the economic structure of the young Romanian state, which gained its independence only 20 years before. An analysis published already in 1900 in the economic journal refuted the idea that the trade and financial crises were caused only by the poor harvest of that year: the authors argued that if the cause was only a low harvest and a concomitant lack of export, signs of the crisis would appear before it collection. And the symptoms of “financial weakness” appeared in the country as early as the beginning of spring — and in all areas of trade and the economy — so that, according to their version, the best crop could only delay but not prevent a crisis.
The first cause of the crisis was the very high vulnerability of the Romanian economy , due to its structure, in which grain production and trade accounted for more than 80%. Although such critical dependence was known for a long time, successive governments of the country resolutely ignored this fact, as income from agriculture filled the budget: “Let's think about what we did for agriculture? We spent the money from the sale of grain on luxury : we build at home as they build in the richest cities in Europe; "we send abroad wheat and other crops, and then we buy luxury goods that only increase insatiable appetites."
The second reason was the lack of economic policy to ensure the prevention or mitigation of the consequences of the difficult situation in agriculture. For Romania in those years, low yields, drought or, on the contrary, excessive rain certainly meant a crisis, budgetary difficulties and economic stagnation: “A bad crop can happen in any country, but it can try to stop the negative consequences.”
The third reason was the country's technological backwardness and the small development of agricultural machinery . When agricultural markets were “flooded” with cheap products from the USA , Argentina and the Far East. Its price was lower due to improvements in agricultural machinery and lower transportation costs.
Literature
- Ionescu Take, Deux ans de finances roumaine 1899-1901. Pro Domo, Imprimerie ES CERBU, București, 1902
- Axenciuc, Victor, Evoluția economică a României. Cercetări statistico-istorice 1859-1947, vol. III, Editura Academiei Române, București, 2000