Romania after the transition - restructuring and struggle, 2004

Energy workers strike, Romania 2007
Energy workers strike, Romania 2007

Article looking at capitalist restructuring and economic changes in Romania, and the growing militancy of the working class.

Submitted by Steven. on November 24, 2006

Romania after the Transition
Promised Land and Class Struggle

The restructuring of production and society which happened in Romania also sheds new light on the changes in all the EU-countries. With its new and old forms of work and workers’ struggles, Romania is an integral part of wider Europe. The integration of Romania in the European employment system made possible a continuous exchange of experience between Romanian and foreign enterprises, but also between Romanian and foreign workers. This is due to the changes in Romanian companies and changes in migration, which both form part of this integration. Several political and social phenomena have changed Romania in the last few years:

a) the investment of foreign capital, whose main aim was purely the exploitation of the local labour force,

b) the steady increase in workers’ struggles, some of which were partly connected to the official unions and some of which completely independent of them,

c) the beginning of free migration, esp. of women,

d) the increasing impoverishment, which mainly affects elderly people and women.

Ruralisation as an expression of increasing unemployment
The economic and political process of re-structuring since 1990 has intensified the material differences between regions. Especially during the first years the flow of foreign investments was directed towards the regions which could provide the politically most favourable conditions. Partly the influx of foreign capital enforced already existing models of migration in these regions, which, compared to the past, appear to be freer and more numerous and overcome the previous bureaucratic barriers to internal migration. One of the most remarkable phenomena of the Romanian new development is the increasing migration of people back to the countryside (ruralisation). Reasons for the return back to the countryside are the loss of work places, the increasing living costs, an atmosphere of insecurity and the lack career possibilities. The escape from the cities contradicts the desire of many young people who would prefer the big city lights to country life, but who cannot earn enough to be able to live there. Another reason for the movement back to the countryside are the land privatisation laws of the 90s, which lead to thousands of people receiving small patches of land, practically as a present.[1] In the countryside people survive by working on the fields, by rearing cattle and by exchanging daily necessities.

Initially, the foreign investments in Middle- and East Europe were mainly concentrated around Hungary, the Czech Republic and Poland. Only since 1997, after the total sum of investments topped 1.215 billion Dollars[2], has the investment flow become increasingly directed towards Romania. The acceleration of foreign investments continued during the following years. These investments mainly came from the Netherlands (17.3 percent), from France (10.5 percent), from Germany (8.5 percent), from the US (6.7 percent) and Italy (6 percent). Germany and Italy have similar characteristics: a lot of individual investors (nearly 11,000 from Germany, over 14,000 from Italy) and a relatively low volume of investment. Invested was mainly in industry (54.4 percent), in professional services (15.8 percent) and trade (16.6 percent).[3] It was mainly international capital that constructed new green field factories, but also invested in recently privatised former state owned companies.[4] The investments in green field factories were mainly flowing towards areas which up to then were used for agriculture or mining and the investors were making use of the establishment of ‘ Special Export Zones’. In these zones special rules apply, such as tax breaks for set up costs and the possibility for the company to draw up work contracts with favourable conditions (for them!). At the moment foreign capital mainly flows to the capital Bucharest, to the north-east of the country (Timisoara and Arad) and to its centre (Brasov, Sibiu, Cluj).

Green Field Factories
Production has changed fundamentally, especially in the work intensive sectors with huge investment sums of international capital and strong orientation towards export: Nearly the half of Romania’s import and export is controlled by companies in Bucharest or in the regions of Timisoara, Arad, Sibiu and Bihor, companies which are entirely or partly owned by foreign proprietors. In this way the economic integration has de facto already taken place: the main economic partners are Italy, followed by Germany, Russia and France.[5]

In contrast to neighbouring Hungary, the various Romanian governments have mainly supported the outsourcing of parts of the manufacturing process, meaning that in order to evade import taxes, raw material and half manufactured goods are imported and finished products are exported. The customs duty is only paid on the difference between these two values. This lowers production costs both at the time and in the long term, but at the same time the Romanian state’s sovereignty over their own territory diminishes.[6]

Production in Romania is essentially based on imported raw materials and machinery from abroad. The medium sized and big international companies raise or lower production according to workers’ protests and to what extent the local work force is dependent on a wage.

Due to the intensive re-structuring process of production, the number of wage workers dropped from about 8.3 million in 1989 to about little more than 4.7 million in 1999. This drop was particularly marked in certain sectors such as the industrial sector (from 4 million to 2 million), in construction (from 706,000 to 338,000) and in the transport sector (from 667,000 to 310,000). Within the industrial sector the impact of the re-structuring process varied a lot: the sectors with a high proportion of fixed capital, such as textile industry and machine construction, shrank considerably, whereas the garment industry did not even loose a quarter of its employees during the re-structuring in the mid 90s and today represents the industrial sector with the highest employment numbers. Now the number of those in the industry working for private companies has nearly reached two thirds of all those employed. The big differences between the various sectors also indicate the respective advancement of international capital: the 97 percent private companies in the garment sector and the 80.6 percent in the textile industry are contrasted by 25.3 percent in machine construction and 24.2 percent in the metal industry. Private capital kept away from these sectors.[7]

Workers’ Protests
In the 90s workers in Romania were able to stage their protests with less fear than in the previous decades. The different governments tried in various ways to defuse the social confrontations and regulate them in legal terms: now, before an industrial dispute takes place, arbitration proceedings have to be undertaken.[8] The governments uses these kind of legal instruments to try to take the sting out of the unions’ power. This is necessary partly because the workers seem to be looking for such a unifying factor, e.g. the unions, after having not wanted to deal with unions during the first years after the fall of the regime. At first glance the new labour law which was passed in 2003 seems to be favourable for the working class and the bosses were up in arms against it.[9] The number of union industrial actions increased during the period from 1990 to 1999 by 235 percent to 653 conflicts in 1999, with over one million workers engaged in them. These workers’ struggles mainly took place in the public sector (mining, gas, water, refineries, transport, post and telecommunication, health and social care), but the sectors with a strong presence of private and international capital were also partly affected (textile, garment, shoe industry). These struggles increasingly evolved around the issue of wages, work conditions, re-structuring and redundancies, but also around questions such as new shift regulations or an increase in work intensity. The regions where most of the struggles originate are the province Hunedoara in the south, which is characterised by mining and the provinces Sibiu in the centre and Timis in the northwest, where industry and international capital are concentrated. One example is the well-known strike of 60,000 workers of the national brown coal corporation Oltenia. In February 2004 the strike completely shut down the coal extraction for about a week.

Wages and Working Hours
The biggest social conflicts are triggered by the low wage level and by the working conditions in the factories. The minimum wage, which was raised to 2.8 million Lei per month (about 70 Euros) at the beginning of 2004, is regularly adjusted to inflation. In addition to that, there are bonuses and food vouchers, which are widespread in Romania. The average wage is about 100 to 150 Euros, although given the increasingly extreem wage differences it becomes more and more difficult to talk meaningfully about an average at all. The employees in the finance and banking sector, in post and telecommunications and in the public sectors are doing comparably better. The highest wages can be found in the state owned companies, particularly in the mining sector, where wages are about 50 percent above average.[10] It is particularly amongst industrial workers that the differences have become more acute. In the manufacturing sector (textile, garment, shoes, leather and wood) the wages are considerably lower than in mining or the energy sector: in the time from 1990 to 1999 the wage difference increased from 28 percent to 42 percent. Major inequalities can also be seen between the wages of factory workers and those of tradesman like electricians or plumbers. Although there are more union struggles in the state owned sector than in the private one, under international capital numbers of struggles also increased. At the Italian textile company Radici, production came to a halt for several days after it became known that, due to the bad situation on international markets, the management wanted to sack 200 people. Most widespread is still the silent and individual struggle: absenteeism has risen from about 5 percent to 10 percent and the turnover of staff is accelerating due to people trying to find better paid employment and therefore changing jobs as soon as possible. During the ten years after the transition (1989-1999) about 40 percent of all people employed have changed jobs and/or profession. This mainly applies to the unqualified workers. Of those people in work immediately after the revolution in 1989, about a quarter have become unemployed, about 10 percent have been dismissed due to re-structuring and another 10 percent, especially those who moved, retreated from the job market. In general, job mobility and the process of marginalisation are more marked in towns than on the countryside. The means by which they try to prevent strikes from happen are the same as in former days: disconnecting telephone lines, dis-information, sacking of union leaders.[11]

Factories owned by foreign capital are affected by struggles, not at least because in companies with foreign management work intensity has increased considerably: in a kind of Neo-Taylorism a precise work rhythm is dictated, without leaving the workers any breathing spaces. The introduction of new work methods encounters more intensive resistance in the old Romanian factories, while in green field plants they can be enforced more easily, given that there exists no historical memory or practical alternative. On the other hand the working class in Romania today has to deal with a type of machinery which is not in use any longer in more industrialised countries, machinery which had previously been the battleground for workers - and bosses - from other countries.

The Women Migrate
The young people find it hard to get used to faster work rhythms and low wages, for them it is a good reason to leave the country. The real number of Romanian emigrants is closer to an estimated 1.7 million than the official number of 300,000. Mostly people emigrate to Italy, Spain, Germany, Israel, Hungary, Greece, Belgium and Austria. About 72 percent of them have work permits, but a lot of them also work without papers.[12] Emigration is an answer to investment of foreign capital in work intensive and low wage sectors as well as to increasing impoverishment. The fact that it is mainly women who leave the country indicates that emigration is also an answer to the re-emergence of forms of patriarchy and the de-valuation of female labour in the process of neo-accumulation, which is at the same time relying on the invisible female labour. The more women are pushed out off public sphere, the more individual emigration increases.

The situation in Romania is very complicated and some of the foreign companies are already preparing to re-locate their production to other countries, e.g. nearby Ukraine where wages are lower and labour laws certainly less strict. Many foreign capitalists think that they can re-locate production to Romania and enforce there what they are not politically able to enforce in their home countries anymore. But nevertheless and despite their difficult wage situation, the working class in Romania doesn’t seem willing to play the games of foreign capitalists much longer.

Devi Sacchetto

Unless indicated otherwise all figures are from the Romanian Statistical Yearbook, National Institute of Statistics (2000), Bucharest (CD-Rom).

[1] The law of 1990 initiated the reconveyance of land up to a maximum size of 10 hectares of arable land and 1 hectare of forest land. With the reform of 2000 this maximum size changed to 50 hectare and 10 hectare respectively.

[2] Measured by the share values at the end of year the foreign investments in Romania developed as follows: 1990: 87 million, 1991: 217 million, 1993: 621 million, 1994: 1. 271 billion, 1995: 1.595 billion, 1996: 2.209 billion US-Dollars.

[3] Compared to countries like Czech Republic, Poland and Hungary these are nevertheless comparably little sums.

[4] For example Renault took over Dacia in 1999 and negotiated the purchase directly with the state Administration for Privatisation. ‘Renault redecouvre Billancourt dans les Carpartes’, Le Monde 13.07.2001.

[5] In 2001 about 67.8 percent of all Romanian exports went to EU-countries: 24.9 percent to Italy, 15.6 percent to Germany, 8.1 percent to France, 5.2 percent to Great Britain, 3.4 percent to the Netherlands and 3 percent to Austria. The exported goods are mainly textile and garment products (26.2 percent) mainly of outward processing, mechanical machinery, electrical machines and devices. With regards to import, the countries are essentially the same (Italy 20 percent, Germany 15.5 percent). The important position of Russia is due to its supply of oil and oil related products; Ice (ed.), Congiuntura economica 2001, Bucharest 2002.

[6] The passive refinement can mainly be found in textile, garment, and shoe production, but affects other sectors, too, such as wood industry or machine construction.

[7] Machine construction was the biggest sector, employing 600,000 people. To date, employment numbers have practically halved. Textile industry shrank by two thirds and employed about 98,000 workers in 1999.

[8] An investigation undertaken by the Ministry of Work concerning 1507 workers’ struggles in the period between 1992 and 1996 and with about 3 million workers involved, came to the conclusion that about 35 percent of these conflicts ended during the arbitration process (the conflicting parties being union reps, representatives of the employers and in some cases the government). The Settlement of Labour Disputes in Central and Eastern Europe, ILO-CEET Report Nr. 22, Geneva, 1997, p.17.

[9] Above other things the new labour law abolishes temporary work contracts. Temporary contracts can only be implemented in exceptional cases which are defined by the law. There were protests by the employers about the new regulation of the work contracts, about the protection against dismissal, about the missing flexibility in the negotiation process about new job schemes. The chairman of the Romanian Employers Association (AOAR) stated that “increasingly social security is shifted from the state to the employer”. Il Gazettino romeno, n.79 (4th of December 2002) p.11.

[10] OECD (ed.), Economic Surveys Romania, OECD, Paris, 1998, p.129.

[11] After protests of the ILO the management of the railways re-hired the dismissed union leaders. There were more protests at the railways in 1998 and 1999 with workers demanding a 70 percent wage rise. The struggles lead to a 25 percent increase in April 2000, 15 percent in September 2000 and 20 percent in June 2001.

[12] Martin P., (2004), Migration News, vol. 1, no. 11, (January).

From prol-position news #2, 5/2005
From Wildcat no.70, Summer 2004