2012/11/01 by Cornel Ban · 44 citations
Social Sciences · Energy · #Post-Communist Economic and Political Transition #Energy, Economy, and Technology Trends #Austerity #Economics #External debt #Recession #Debt #Economic policy #Internal debt #Debt crisis #Politics #Political economy #International economics #Keynesian economics #Macroeconomics #Political science
paper · doi:10.1177/0888325412465513
published in East European Politics and Societies and Cultures 26(4), 743-776 (SAGE Publishing)
openalex publication_date 2012/11/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/05/21
Historically, high sovereign debt and austerity policies have coincided with regime-changing popular uprisings. Nicolae Ceausescu’s Romania was no exception. Why, when faced with a sovereign debt crisis in the 1980s, did his regime choose to pay its foreign debt as early as possible, at the cost of economic recession and dramatically compressed consumption? How did these choices relate to the regime’s failure to survive the end of the decade? The article argues that while exogenous shocks shattered the economic bases of the regime, it was the ideas with which the regime understood development and interpreted the crisis that shaped government policy responses in the 1980s. When the price of oil and development finance went up abruptly in 1979, the low energy efficiency of Romanian industry pushed the country into a situation where debt levels became unsustainable. Committed to a view of development that blended nationalist and Stalinist ideas, but with a focus on policy sovereignty, Ceausescu diagnosed the crisis as evidence that debt-financed development and policy independence were incompatible. Consequently the regime decided to pay off foreign debt through a mix of austerity, import substitution, and export-led accumulation of dollar reserves. By the time all debt was paid off in 1989, the regime’s economic sources of legitimacy were exhausted. In the external environment of 1989, this policy regime change contributed to political regime change even in the absence of an organized civil society. In addition to casting a new light on the causal mechanisms of the Romanian revolution of December 1989, the findings of this article contribute to emerging scholarship that stresses the nexus between debt-induced economic crisis and popular uprisings.