A Short Look at the Interactions Between Old Money and New Money in Romania
The Issue
The often-colourful admixture of three historical regions, the country that has come to be called Romania has traditionally had one of the most dynamic and at times eyebrow-raising relationships between the historic upper-class, the medieval ‘those who fight’, and the newly emergent bourgeoisie of the early Age of Capital, ‘those who trade’. That relationship between these two classes is coming back and that may very well prove to be one of the most pivotal moments for Romania.
To put things into their historical perspective, we passed a ‘red washing’ of feudal structures into communist structures and about 40 years of state building which, to paraphrase Eugen Weber, was not always successful in its aim of turning ‘Peasants into Romanians’. To this day, unfortunately, close to a majority of pupils are classed as functionally illiterate, 46% of people live in the rural area, only 65% of the population have bank accounts, 36% are at risk of poverty and one of the few rankings where Romania comes on top is the proportion of adolescent pregnancies. Despite these figures that could seem discouraging to some, there are reasons for hope that we should keep on our radar. I will expand on this in the second half of the article.
The Rise of Old Money
In the context of a weak state with little social cohesion, high political instability and little in terms of national strategy, what emerged after the collapse of communism has primarily been dominated by where scarce capital and scarce trust could be found:
- the family unit and
- former nomenklatura/intelligence structures that used the networks built during communism.
From these arose various private, often family-owned, conglomerates which still tend to dominate the business landscape. Lacking a particularly cohesive national strategy for export competitiveness and, as time went by, competitive advantages, the vast majority are domestically focused. This, in effect, is what has become the Romanian ‘old money’.
The Rise of New Money
In the previous decade, a new breed of entrepreneur has also emerged. Quite simply, following the early 2000s, incomes have begun rising at the national level and places such as Transylvania have begun adopting new, often export-led industries. Notable successes include Cluj’s emergence as an IT hub as well as national success stories such as UiPath. While successful, most of the ‘New Money’ seem fully cognizant that success is partially a matter of tolerance from ‘Old Money’ – as new wealth is created, it does not necessarily come into competition with old wealth, and, like Vkontakte, Yandex or Wildberries in Russia (unfortunately, sometimes these comparisons are more than meaningful), it is partially kept protected by the public relations narrative they provide.
A Coming Alliance
Realistically, most companies which emerged in the second wave cannot expand much beyond their current position without causing friction with ‘Old Money’. Few have any second thoughts as to who would emerge as the winner. Cognizant of that, many are expected to diverge into those entering formal alliances with ‘Old Money’ and attempt to gain the long-lasting bonds and protections that come with it, while some will either stay as regional success stories or internationalise away, such as UiPath. This coming alliance may provide a solution to Romania’s economic ills. While growing at close to 7%, much of that growth is domestic, based on a rapidly ageing market that has left pension and healthcare liabilities worryingly unattended and whose supply-side has been deteriorating for close to 30 years.
The natural solution to that is export-competitiveness, something that cannot be realistically achieved without joint-operations from both the public sector and the private sector. An alliance between New Money and Old Money that allows this to happen might achieve more than 30 years of elections.
Every push to create this alliance so far was generated from a European Union policy creation level, and technology was at the forefront of the motive behind the implementation of such a regulation. Romania’s implementation of these policies helped bring New Money and Old Money closer to the same goals.
Old Money might see technology as a threat in a few cases, but the smartest Old Money representatives actually do see the potential in the adoption of new technology and innovation in the businesses. Their survival or expansion ambitions surely depend on this adoption in the long term even if they don’t see it yet. Little actions like allowing payments by crypto for example could generate massive extra income streams.
But it is also the job of the New Money representatives to get closer to the Old Money representatives, to understand their needs and present them with the solutions, explanations, and examples of the benefits of the adoption of new technologies.
At the same time, the government must try to be the bridge between these companies/sources of capital when implementation policies come into question, simplifying (and not complicating) these collaborations.