Moldova: Economic Status Report

Introduction

Located in Eastern Europe between Romania and Ukraine, Moldova was founded in 1346 as part of Moldavia, a Romanian principality. In 1812 Moldova was ceded to the Soviet Union before gaining its independence in 1991. Due to the effects of sequent occupance, wars, and immigration, Moldova has become extremely diverse in language, architecture, and culture.

Many Moldovans are either bilingual or trilingual, and the most common languages are Moldovan/Romanian, Russian, and Gagauz, which is a critically endangered language (telegraph.co.uk). There is dispute whether there is a difference between the Moldovan and Romanian languages.

To distinguish between the two ethnic groups, the Soviets converted the Moldovan alphabet from Latin to Cyrillic in 1939; however, after the fall of the Soviet Union, the government of Moldova decided to revert back to Latin script (foxnomad.com). To this day, the citizens of Moldova are split as to whether they speak Moldovan or Romanian, although they are technically the same language.

During World War II, when Moldova was still under Soviet control, Moldova was invaded by Romanians who had previously been persecuted and deported from the region.

The Romanian army cooperated with Nazi Germany and assisted with the deportation of about 147,000 Moldovan Jews to concentration camps (ww2db.com). Before the war, Moldova had one of the largest Jewish populations in Europe. Once the war began, many Jews fled the area; however, it is estimated that approximately 60,000 Jews were killed in Moldova with over 23,000 being buried in a cemetery just outside the capital city of Chisinau, making it the largest Jewish cemetery in Europe (https://foxnomad.

com).

Today, Moldova is developing because it is the poorest country in Europe with a largely agricultural economy, is considered politically unstable, and faces many cultural and social inequality issues.

Economic Development

The Lewis Structural Change Model reflects a country’s transition from a mostly traditional, agricultural economy to a more industrialized one as the country develops (tutor2u.net). Moldova is in the beginning stages of this model due to its agriculturally dominant economy, but it is continuing to develop. One of the main reasons that Moldova has been unable to develop economically as quickly is because of Russia’s intervention in the Moldovan economy. Russia banned Moldovan wine and doubled gas prices for Moldovans when the government started to attempt to join the European Union, which badly hurt Moldova’s economy. This is represented in Lewis’ model because Moldova’s poor economy leaves little room for industrialization.

In Rostow’s Five Stages of Economic Growth Model, Moldova is in the second stage, “preconditions for take-off.” In this stage, international economic relations begin, agriculture starts to become increasingly mechanized, and increases in exports occur. Often, external funding is required in countries in the second stage, Moldova included. This provides evidence that Moldova is in the developing stage because they are still somewhat dependent on other countries for funding.

Agriculture plays a very large role in the economy of Moldova, and 32.3% of the population has an occupation in agriculture, compared to the United States at 0.7%. Both mixed livestock and crop farming, and fruit, truck, and specialized crops are the predominant types of agriculture in this region (De Blij, 334). The main agricultural product and source of pride of Moldova is wine with domestic vineyards covering over 110,000 hectares and involving 25% of the population. “The wine industry accounts for 3.2% of the Gross Domestic Product and 7.5% of Moldova’s total exports, employing over 250 thousand citizens at the 140 wine companies. Moldova has the biggest density of vineyards in the world – 3.8% of the country’s territory and 7% of the arable land,” (wineofmoldova.com). Other agricultural products include fruit such as plums, peaches, and cherries, grains, and sunflower seeds.

Moldova is in the third stage of the Demographic Transition Model, which is characterized by low death rates, decreased birth rates, and increases in education for women. The reason why education for women is important to this model is that as education opportunities for women continue to get better and better, women are more likely to pursue careers in quaternary and quinary economic activities rather than being housewives. The third stage also represents stability within the country, which provides evidence for Moldova being almost developed. In addition to the Demographic Transition Model, statistics such as the dependency ratio, population growth rate, and life expectancy of a country can provide insight into the development of a given country. An example of this for Moldova is the population growth rate, which is -1.06% as of 2018 (CIA World Factbook). As previously mentioned, a low population growth rate characterizes a developing country. The dependency ratio of Moldova is 34.5%, which is low compared to the United States’ 51.2%. Although this seems positive, a possible reason for this is the high rates of emigration. Another characteristic used when analyzing a country’s economic development is their population pyramid. As of 2018, Moldova’s population pyramid can be described as a “pyramid,” which is characteristic of a developing country. In comparison, the population pyramid predicted for 2050 can be described as a “cup,” which is characteristic of a developed country. This provides evidence that Moldova is developing and is likely to become developed in the next 30 years.

Political Status and Stability

Moldova is considered politically unstable, with its political stability index being -0.24 in 2017 — where 2.5 is strong and -is 2.5 weak. In comparison, the United States’ political stability index is a 0.3 (World Bank). One of the main factors for the political instability in Moldova is due to the discord between Moldova and Transnistria. Transnistrian residents declared themselves an independent state in the early 1990s after the fall of the Soviet Union, but is not universally recognized as such. Instead, it is recognized as part of Moldova; however, the governing body is different. One of the primary reasons for Transnistria declaring independence was rooted in the concern about the possibility of Moldovan reunification with Romania. Another factor for the instability in Moldova is the high level of corruption in the government. For example, there was a banking scandal in 2014 in which a total of over $1 billion USD disappeared from the state-owned bank and two other private banks (https://www.cnbc.com). For context, this is equivalent to one-eighth of Moldova’s GDP. This scandal and poor follow-up investigations has led to widespread distrust of the government and law enforcement, which resulted in civic protests, then transitioned into political infighting. These factors, along with other scandals such as bribes and falsifying documents have led to swift turnover in the parliament, resulting in political instability.

A SWOT (strengths, weaknesses, opportunities, threats) analysis of Moldova can provide additional insight into the political instability in Moldova, along with the political strengths of the country. Strengths include a free market (which attracts foreign direct investment), a low unemployment rate, and a large tourism industry that makes up almost five percent of Moldova’s GDP (CIA World Factbook). It is interesting to note that the low unemployment rate may be deceiving due to the mass legal and illegal emigration, and may not technically be able to be characterized as a strength. Despite this possible irregularity, Moldova’s strong agricultural base provides opportunity for further industrialization and, in turn, could increase Moldova’s GDP. Another opportunity is Moldova’s cooperation with the International Financial Institution (IFI), which has provided guidelines to help strengthen Moldova’s economy since 1992. Although Moldova’s government has complied with these guidelines, they lack the ability to understand and implement the necessary changes. However, an opportunity lies for future growth in the understanding of these necessary changes and best practices to implement the guidelines. This opportunity could result in drastic positive changes in Moldova’s government, both economically and socially. Although these opportunities are promising, there are some challenges that need to be addressed. In addition to the previously mentioned factors such as political instability and high rates of emigration, Moldova is also the poorest country in Europe with a GDP in the lowest 30% worldwide. A major threat to Moldova is its largely agricultural economy. Although this can be seen as an opportunity, there are some vulnerabilities with the high reliance on agriculture. For example, there was a devastating drought in 2007 in which 96% of families experienced losses in production, resulting in families going into debt in order to obtain food (https://borgenproject.org).

With regard to geopolitical theories, Moldova fits in to Wallerstein’s world-systems theory as a periphery country. This characterization means that the country supplies raw materials and is a source of cheap labor. Some of Moldova’s top exports include sunflower seeds, wheat, and aluminum, which are considered raw materials (atlas.media.mit.edu). This provides evidence that Moldova is, in fact, a periphery country and is in the developing stage.

Imperialism has had an impact on Moldova’s economic stability due to Moldova’s long and complicated relationship with the Soviet Union/Russia. As previously mentioned, the Soviet Union controlled Moldova from 1812-1991. Over the years, both the region and the Moldovan people have been exploited for Russian/Soviet benefit. In 1999, at an Organization for Security and Co-operation (OSCE) summit in Europe, Russia promised to remove military forces from the Moldovan region. However, they never did, due to the fact that they still wanted to have control over the region. This situation occurred again in 2014 when Moldova began processes to join the European Union. In response to the action, Russia banned Moldovan wine and doubled gas prices for Moldovans. This provides evidence that Russian/Soviet imperialism over Moldova has had a significant impact on the country and its residents.

Culture and Social Development

In the Moldovan constitution it states: “All citizens of the Republic of Moldova are equal before the law and public authorities, regardless of the race, nationality, ethnic origin, language, religion, sex, opinion, political affiliation, property or social origin.” (www.presedinte.md). Although this seems promising, there are many inequalities, especially gender inequalities. The gross national income (GNI) for women in Moldova is $4,849 (USD), while the GNI for men is $6,318 (CIA World Factbook). In addition to this wage gap, patriarchal attitudes limit educational and occupational opportunities for women in Moldova. In 2011 a study by the UN called “Violence against Women in the Family” found that “63 percent of women (in Moldova) experienced psychological, physical or sexual violence from their husband or partner and one in 10 experienced economic violence at least once” (moldova.unwomen.org). Similar to the inept implementation of economic policies in Moldova, the enforcement of gender equality legislature is insufficient.

In addition to gender inequalities, religious discrimination is prevalent in Moldova. With 92.7% of the population identifying as Christian, and all other religions at less than 1% each, reports of prejudice and violence occur. (CIA World Factbook). Religious discrimination by the government is prevalent in regards to gaining registration for new churches and obtaining necessary construction permits for new churches. For example, in an undated report from the US State Department, a group of Orthodox Christians protested when the Jewish community placed a menorah in a park in the capital of Chisinau. This event provides insight in one aspect of social inequality in Moldova.

Moldova has a very rich and diverse culture, with influences from Romania, Russia, and other European countries. Traditional practices such as weaving and ceramics are common, and traditional music, dance, and dress are highly valued. Although Moldova’s folk culture is very prevalent, popular culture also has impact on the country. Western European cultural influences on Moldova became common in the 18th century, and is visible in day-to-day life. For example, Western clothing is predominantly worn with the exception of ethnic ceremonies.

Cultural and social factors have had an impact on Moldova’s development due to the fact that the Moldovan government has historically been corrupt and not well prepared for change. Cultural and social issues tend to take precedence and limits the efficacy of the government’s agenda. In order for the developmental barriers to be

resolved, the cultural and social issues need to be addressed first. In addition to gender and religious inequality, many Moldovans face hunger, poverty, and alcoholism. For these all of these reasons, Moldova is not able to surpass the developing stage.

Conclusion

Moldova is developing because it is the poorest country in Europe with a largely agricultural economy, is considered politically unstable, and faces many cultural and social inequality issues. The agricultural economy leaves the country vulnerable since a natural disaster would greatly impact their ability to obtain funds and food for the country. The political instability including corruption and unreliable action by the government leads to limitations in development. Lastly, cultural and social issues hinder development because when social inequalities are the norm, it is very difficult for progression to occur. Going forward, Moldova will continue to be in the developing stage as more and more citizens continue to emigrate. However, if the government is able to break the cycle of corruption, distrust, and failure to follow through, the is hope for the future of Moldova.

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