The Political (Macro) Economy of Poverty in Romania (1990–2023)

This chapter contributes to the literature on poverty by highlighting the role of macroeconomic factors shaping employment and redistribution in Romania, a country where, for a quarter century, the lack of adequate safety nets meant that losing one's job meant a choice between migration and destitution. The analysis focuses on the variable capacity of the Romanian state to deliver protection to labor by saving and fostering employment through economic growth or by providing adequate safety nets. The evidence suggests that successive Romanian governments struggling with the mixed legacy of state socialism (egalitarian economic system with macro vulnerabilities) adopted at first eclectic macroeconomic policies and then radicalized neoliberal policies to transition the socialist economy to a capitalist one. The effects of these factors led to a lost decade for the economic situation of labor and the poor during the 1990s. EU integration eventually enabled a stronger growth model whose superior macro performance relative to the 1990s helped reduce poverty through more labor market demand. Nevertheless, Romania's political economy has remained plagued by thin safety nets and a state lacking both the resources and the political determination to calibrate its macroeconomic policy to deal with the difficult legacies of mass poverty.