Unable to Stop Inequality from Rising: Evidence from Romania

Abstract

The different perspectives on inequality and its evolution in the post-crisis period have emerged in recent years. The first was introduced by Piketty (Capital in the twenty-first century. Transl. Arthur Goldhammer. The Belknap Press of Harvard University Press, Cambridge, 2014), who emphasized cyclicity as an inherent feature of inequality. According to the author, inequality tends to increase or decrease according to the variations of the economy. In times of robust economic growth, the rate of return on capital (consisting of profits, dividends, interest, rents) and the labour force can both be satisfied to reasonable extents. When the rate of economic growth is low, wealth accumulates in favour of the capital instead of labour, thus increasing inequality. The second view on inequality is authored by Milanovic (Global inequality: A new approach for the age of globalisation. Belknap Press of Harvard University Press, Cambridge, 2016), who focuses on the evolution of inequality in a global setting. He draws attention to the growing gaps between nations that pose a threat to international stability. Lastly, Graham (Happiness for all? Unequal hopes and lives in pursuit of the American dream. Princeton University Press, Princeton, NJ, 2017) contrasts objective inequality to its subjective perceptions. There are cases in which factual inequality is high, but the existence of social mobility policies based on personal merit leads to acceptance and tolerance towards inequality. The most obvious example is “the American dream”, with all the hope it encompasses. According to Graham, during the last decade, tolerance to inequality has decreased, leading to a crisis of trust. By relating to the three aforementioned ways of understanding inequality, and other prominent views in the literature, this paper investigates through quantitative methods the different faces of inequality within Romania, with an emphasis on regional disparities. Furthermore, we aim to find the country’s ranking in its geographic region (Central and Eastern Europe). A secondary focus of the study is on the Romanian citizens’ perceptions of inequality. The findings suggest that, in its post-communist existence, Romania did experience economic growth but, unfortunately, little development, while inequalities became more severe.