Growing up Under Communism – Fiscal Reform

Romania, my home country, is mostly an agrarian society. Almost 75% of the land is arable. The rest are mountains and hills with plenty or rivers providing sufficient natural water with no need of extensive irrigation. It was called the food basket of Europe during the WW2.

During the war, the only areas destroyed were the main oil fields some 150 miles south of my home town of Brasov. After the war, the whole country was still intact and functioning as usual. There was still plenty of food although the inflation was high.

By 1947 the Communist Government was in full in power helped by the presence of Soviet army. The government expelled the monarchy from the country and within few years nationalized or rather confiscated all private industries, including small businesses, and most of the private farming land.

My grandfather lost his farming land and my father had to close his shop.

Private taxi drivers who owned their vehicles were forced out of business when the government lifted their car registration license. They were not allowed to drive their own cars even for private use nor could they sell since there was no market. The reason behind it was to eliminate illicit taxi service business.

In the early fifties, when I was 11 years old, I was helping my mother with various chores, including going to the store to buy food. One day I noticed something that used to cost L100.00  (Leu is the Romanian currency), over night it was just L1.00 and the money looked different. It took me a while to figure out what happened.

It was called Fiscal Reform. By now the government owned all businesses and the banks.

The salaries were paid using the new bills, adjusted accordingly by a ratio of 1 to 100.

I didn’t know at the time that each employed individual or family, in exchange for their savings, regardless of how much money they had, received L1,200.

That was it.

If you had millions or nothing based on the previous currency you received the same L1,200 amount.

Now everybody was equal financially. There was no recourse.

That was the communist solution to make everybody equal over night. It certainly solved the inflation problem.

Within a short time the goods, including food, became scarcer and scarcer.

All retail shops were owned by the government. The butcher shops carried only bones and low quality meats. The local farmer’s market carried a limited selection of vegetable (seasonal) and live chickens. There was no processed poultry in the food stores anymore.

My mother would buy a live chicken when she could, bring it home and place it in an improvised scoop for few days, until we were ready to eat it. Live chicken in the city? Even during the war we didn’t have to do that.

Tr Cojoc is retired in California and he is advising clients in financial matters, on how to preserve capital as well as high risk investment strategies such as trading foreign currency or FOREX.

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