Post Communist Economics in Poland and Romania
... of the two figures. Poland’s budgets are far greater than those of Romania’s, which is indirectly related to both countries’ economies. Now both countries are provided with foreign aid to help strengthen their status. The amount of aid is represented as a percentage of the country’s GDP. For example, Poland receives about 0.9% of it’s GDP in foreign aid. Now Romania only receives about 1.2% of it’s GDP in foreign aid. Therefore $3.3 billions of Poland’s total GDP is foreign aid while only $2 billion of Romania’s total GDP is foreign aid. This is significant because it is logical for more aid to be directed towards a country with less economic strength and less aid to be given to a country that already has a stronger economy than the other. Countries need to have foreign trade in order to maintain a strong economy. The idea that a country and isolate itself and be completely independent is a false ideology. Countries generally will produce a few major products to other countries and then import what it doesn’t have an abundance of. Of course, the amount of export and imports and the balance between is also a huge factor in how well a country’s economy is. For example, Poland’s export growth is currently a %5 increase per year and Romania’s export growth is only 4.9% as of 2003. Between 1993 and 2002 Poland’s total amount of export growth was 12.3%. Poland also generated $32.4 billion in exports in 2002 while Romania only generated $13.7 billion that same year. Why is Poland able to generate more money than Romania in exports? One must first look at what exactly the country is exporting and how much of this product or service it is exporting in relation to the overall scheme. For instance, Poland exports 30.2% of machinery and transport equipment, 25.5% of intermediate manufactured goods, 20.9% of miscellaneous manufactured goods, and about 8.5% of food and live animals. Good and services make up 34% of Romania’s exports while high technology only makes up 6%, and manufactured goods make up the other 77%. So compared to Poland, Romania has less technology to export which already puts it at a disadvantage economically. Romania exports about 24.4% of its total exports to Italy, 15.5% to Germany, 7.7% to France, 5.4% to the UK, 5% to the United States, and 4.4% to Turkey. Now compare that to Poland who exports about 33% to Germany, 5.7% to Italy, 5% France, 4.8% to the United Kingdom, and 4.3% to the Czech Republic. This information is important because it shows the range of how much each country exports to one country. It is true that Romania seems to have more countries that it exports to but that do not necessarily make it better. For example, these statistics could often fluctuate from year to year and the countries that Romania exports a small percentage to might not import anything from Romania one year and then maybe a small amount the next. Poland on the other hand exports to a less amount of countries but the percentage of exports to each country is far higher than Romania. Therefore Poland has more stable economic partners than Romania when it comes to exports. Imports also play a large role in any economy. Poland’s import growth is currently about 3.4% and its growth between 1993 and 2002 was roughly 13.7%. A total of $43.4 billion went into imports for Poland and %16.7 billion into Romania. So Poland imports far more than Romania but that is really neither a good or bad thing. It all depends on other factors such as the amount both countries export. Poland’s economic success is partly due to the amount of foreign investment it has which is about 5.9%. Romania unfortunately only has a net foreign investment of about 2.8%. The country that invests more into foreign economies will generally have a more stable and prosperous economy itself. Both Poland and Romania seem to have a decent balance between what they produce, export, and import. The only advantage that Poland has over Romania that keeps it ahead is that Poland has had more time to find that balance. Romania has only very recently started to find that stable ground from which it can begin rebuilding its economy. The status of industry and inflation are good factors to consider when comparing two economies. Obviously inflation can have large negative effects on any countries economies. For example, both Romania and Poland’s inflation rate between 1970 and 1979 were about 8%. Why was it so low? The reason is because during communist rule stagnation of prices was a common occurrence. Granted some might see the positive aspects, such as the prices of items did not frequently go up. The problem with this was that the cost of living remained very low and therefore poverty remained very high. Now when communism collapsed in 1990 there was a huge difference in the inflation rates of both countries. From 1990 until 2000 the inflation rate for Poland was about 25.3% and the inflation rate for Romania for the same time period was 100.5%! Both countries suffered under socialist ideals before 1990, so why is there such a huge difference between the two inflation rates? Poland’s economy went through a lot of reform before many of the other countries in Eastern Europe such as Romania. This head start allowed for Poland’s inflation rate to gradually rise to the international norm whereas Romania’s had to make a huge jump in a shorter amount of time. This transition period is where the largest difference is seen between Poland and Romania economically. The inflation rate from 2000 to 2004 in Poland decreased to 4.7% and Romania’s decreased down to 29.7%. When analyzing this data and comparing 1990 to 2000 data with 2000 to 2003’s data it shows that Romania today stands where Poland did about five years ago. If this trend continues it is reasonable to say that Romania will be where Poland is today in another five years or so. Of course the industrial production growth rate for Poland in 2001 was 0.3% while Romania’s in 2002 were 6%. This proves that Romania is doing far better than it had been right after the fall of communism and that Poland has a lesser need for improvement. The percentage of the GDP of the added industry value for Poland was 37.3% while Romania’s was only 34.5% in 2001. Romania’s economy is largely reliant on its textile industry and despite it being a large contributor to its economic growth since 2000 the lack of advanced technology is placing restrictions that Poland doesn’t have. The people and laborers of a country play an outstanding role in shaping any country’s economy. The problem is that the economy affects the workers and the workers in turn affect the economy and due to this circular redundancy if there is a problem occurring with one it causes a problem in the other. In 200 Poland had 18.4% of its population below the poverty line and Romania had 44.5% of its population below its poverty line. With almost half of the Romanian population, not just the laborers, living in poverty it makes it much more difficult for the economy to thrive. This contributes to the problems that Romania has had to face and still must face to revive their struggling economy. There are 16.92 million people that make up Poland’s labor force as of 2003. Romania’s labor force was a mere 9.28 million people, almost half of Poland’s! Obviously the country with a larger labor force has more potential economically than that of one that has only half of the others. The unemployment rate in 2003 for Poland was around 20% and Romania’s only 7.2% in 2003. This proves that Romania’s economy is starting to show some life but despite its low rate of unemployment it continues to be plagued by poverty. The labor force is divided into three categories, agriculture, industry, and services. Romania’s labor force is mostly focused in agriculture, in fact about 41.4% of it. It has 27.3% of its labor force in industry which is higher than Poland which only has 22.1% of its labor force dedicated to industry. These percentages are important indications but not independent of other data. For example, even though Romania has a larger percentage of its labor force dedicated to industry one must also...