Moldova: an example of transition from the Soviet Colossus.  
Jean Avebe  

The Moldavian Soviet Socialist Republic was the second smallest of the Soviet Unionís   constituent republics, after Armenia. It was made up of the province of Bessabaria, bordered by   the rivers Prut to the west and Dniester to the east, and by the Black Sea and the Danube in the   south. History shows that it was incorporated into the Russian empire in the 19th century, and   during the Soviet period, representatives of non-native groups (mostly Russians and Ukrainians)   moved into the republic while some of the local people moved elsewhere. Over the years the   coexistence of different ethnic has been harmonious for the most part despite some points of   conflicts in time such as the anti-Jewish pogroms of the early 20th century.

Nevertheless, issues   relating to the ethnic and cultural composition of the population were significant in identifying the   republicís status. It is a movement for reunification with Romania that will push Moldova to   seek independence from the Soviet Union in the late 19980ís. How did Moldavia come to be an   independent institution is the main focus of our argumentation.  It is commonly admitted that Moldavia is a consequence of the disintegration of the Soviet   Union, and that the collapse of the Union was mainly due to economic reasons; but what led the   Soviet economy to collapse?  Basically, economies grow because they save from current output, and invest to create more   output. In the early stages of economic development, it is quite critical to create and develop   institutions and policies appropriate to bringing inputs (such as capital) in the production process.  

 Over time, it is also important to develop ways in which available inputs can be used more   effectively, in other words, with increasing efficiency. In fact the Soviet Union chose institutions   and policies fundamentally different from those typical to the market experience. Consumer   sovereignty was replaced by state control; and this lead to a shift of resources away from the   expansion of the consumersí well-being towards the growth of output, especially industrial   inputs. In its application, this system used  force to shift resources to those activities that were   able to generate high initial rates of economic growth, despite the very high costs. This can   explain the failure to evolve that characterizes the Soviet economic system.

 Beyond these   mechanisms of the growth equation, many other important explanations can be listed for the   decline of the Soviet system.   First it seems obvious that while markets are far from perfect, they somehow generate important   information for decision-making purposes along with appropriate incentives to stimulate efforts   in the pursuit of economic objectives. The Soviet experience with planning shows that, while   some state objectives could be achieved at considerable costs, the system itself was incapable of   rationally allocating resources over time.

   Second, of course planning could realize some basic objectives at high costs; but the system   became increasingly ineffective in an economy growing more complex over time (repeated   attempts to reform the economy failed).  Third, the most fundamental element in enhancing efficiency is technological change, originating   in the scientific establishment and contributing to the economic growth through application in the   field. Even though the Soviet system placed great emphacizis upon the achievements of its   scientific establishment, they were not soared widely in the economy.  Finally, replacing private gain with public benefit clearly failed in the Soviet Union. It seems just   strange how soviet leaders have chosen to ignore the economic reality for so long.       This said, the above seen economic decline, leading to an overall collapse was the cause   of the collapse of the communist system in Moldavia as well as anywhere else.

The trends of   perestroika only encouraged the situation. In fact Moldavia suffered the disruption of economic   links with other arts of the Union at the collapse of 1991. Heavily depending on Ukraine and   Russia for its energy imports, it was affected seriously when Russia demanded payment in hard   currency for these resources. As it turned out Moldavia was unable to develop products for sale in   Western markets, and was unable to sell into the distressed traditional economies of Russia and   Ukraine. Following the breakdown of the Union, the performance of the Moldavian economy   declined sharply, and with the imposition of trade barriers by other Soviet states, the situation   deteriorated. The major markets for Moldavian products started to fail; imports rose steadily and   without matching sales the trade balance deteriorated sharply.

  Between 1989 an1997 Moldavia is   in bad shape; the GDP fell by around 60%, leading to an average income of about $33 per month.   Due to its heavy dependence on trade for most of the inputs in the industrial sector, Moldavia was   left extremely vulnerable to the fluctuations abroad, namely Russia and Ukraine. For example the   break up of Aeroflot and the rail and road system in Russia was devastating on Moldavia. Since   1993 the economy has continued to display all the signs of distress common to the region. The   official unemployment at less than 3%(amazingly), was outweighed by the number of part time   employment workers. By the end of 1998, the average income per capita was in the $30 a month;   GDP has fallen to 39% of the level it was in 1989.  

 Moldavia has by the end of the 1990ís experienced the steepest decline in the region, and is   falling further. Nevertheless there were some hopes of recover in 1997 (engendered by a 1,3%   increase in GDP); the collapse of the Russian rubble took away all expectations. Academics and   research institutes have been looking so far into possible future development of the country; but   the immediate prospects appear bleak indeed. Lacking a clear identity to assist its foreign   marketing strategy, and unable to produce other than fairly basic agricultural commodities for   sale for hard currency, Moldova has found that its economic viability is under persistent threat.                



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