REVISTA ECONOMIC Nr. 3(50)/2010

Nr. 3(50)/2010 REVISTA ECONOMIC Nr. 3(50)/2010 Universitatea Lucian Blaga din Sibiu Bd. Victoriei nr. 10 cod 550024, România Centrul de Cercetri Economice U.L.B.S. Cl. Dumbrvii nr.17 cod 550324, România tel./fax: 40-269-235 879 Revist de teorie i practic economico-financiar G.P.E. «Continent» Str. dr. I. Raiu Nr. 2, Sibiu cod 550012, România tel.: 40-269-243 210 revista.economica@ulbsibiu.ro ISSN 1582-6260 SIBIU, 2010 http://economice.ulbsibiu.ro/rom/profesori/publicatii/revista_economica.php 3

Nr. 3(50)/2010 THE RELATIONSHIP BETWEEN THE UNEMPLOYMENT RATE AND THE SIZE OF THE SHADOW ECONOMY-A NONPARAMETRIC ANALYSIS OF USA DATA WITH SPLINE MODELS... 9 ALEXANDRU Adriana AnaMaria, DOBRE Ion... 9 THE MEASUREMENT OF CORRUPTION AND THE IDENTIFICATION OF ITS PROPAGATION FACTORS... 19 ANDREI Tudorel, MATEI Ani, IACOB Andreea Iluzia... 19 THE IMPACT OF LISABON STRATEGY ON THE DIFFERENT ECONOMICS AREAS IN EU AND THE NEW ECONOMIC STRATEGY EUROPE 2020... 28 ANGELESCU Coralia, CREU Alina tefania, STANEF Roberta Mihaela... 28 SCHOOL-TO-WORK TRANSITION AND LABOUR MARKET INTEGRATION OF ROMANIAN UNIVERSITIES GRADUATES... 37 ANGELESCU Coralia, DOBRE Mihaela Hrisanta, MOSORA Cosmin Liviu... 37 THE COORDINATED EFFORTS OF THE EUROPEAN UNION AND THE MEMBER STATES IN FIGHTING THE ECONOMIC CRISIS... 45 ANGHEL Cristian... 45 DEMOGRAPHIC PRESSURE ON HEALTHCARE FINANCING IN ROMANIA... 51 ASANDULUI Laura, BACIU Livia,... 51 Regional attractiveness in Romanian development regions... 59 BAKO Dana, VARVARI tefana... 59 THE NECESSITY TO IMPLEMENT A NEW MODEL OF GOVERNANCE IN ROMANIA... 67 BLCEANU Cristina Teodora... 67 GLOBALIZATION AND EDUCATION FOR SUSTAINABLE DEVELOPMENT... 72 BALAN George, VASIU Diana Elena... 72 THE IMPACT OF THE CURRENT CRISIS ON THE ROMANIAN ECONOMY... 81 BEGU Liviu-Stelian, DAVID Nicoleta, ISTRATE Ioan... 81 COHESION AND DISPARITIES IN THE EUROPEAN UNION CAUSES AND EFFECTS OF ECONOMIC CRISIS... 85 BEGU Liviu-Stelian, TEODORESCU Irina-Teodora, DIMIDOV Ioana Catalina... 85 LISBON STRATEGY REVIVAL AND EUROPEAN UNION STRATEGY 2020 - SOME REMARKS... 89 BELACU Lucian, OLTEAN Livia, BALTADOR Lia... 89 THE INTERRELATIONS BETWEEN LABOR MARKET POLICIES AND DEMOGRAPHIC BEHAVIOR WITH SPECIAL EMPHASIS ON NEW MEMBERS OF EU... 93 BOBOC Cristina, PELE Daniel, TITAN Emilia... 93 WORLD FINANCIAL MARKETS DECOUPLING THEORY POST REVIEW... 101 BOTIKA Marianna... 101 ECOLOGICAL PROCESSES UNDER THE IMPACT OF GLOBALIZATION: CONTRADICTORY TRENDS OR SUBJECTIVE INTERPRETATIONS? CASE STUDY: ROSIA MONTANA... 108 BRAN Florina... 108 Global economic crises and its impact on Romania... 115 BUCUR Ion, BUCUR Cristian... 115 5

Revista Economic GLOBALIZATION OF ECONOMIC DEVELOPMENT... 121 BUCUR Ion, DONE Ioan, BUCUR Cristian... 121 TRIANGLE MANUFACTURING WITHIN EAST-EUROPEAN APPAREL INDUSTRY... 127 BURNETE Sorin... 127 TOPICALITY OF SCIENTIFIC RESEARCH AND INNOVATION IN ROMANIAN ECONOMICS... 136 CIUCUR Elena, CIUCUR Dumitru... 136 AN ECONOMETRIC ANALYSIS CONCERNING THE INFLUENCE OF THE INVESTMENT CLIMATE ON THE INVESTMENT DECISIONS... 141 CORDUNEANU Carmen, DIMA Bogdan, MILO Laura Raisa... 141 PUBLIC-PRIVATE PARTNERSHIP UNDER GLOBAL ECONOMIC CRISIS... 149 CORTECHI Doru - Cristian... 149 ROMANIA AND THE ECONOMIC CRISIS AN EVOLUTION FILLED WITH PROMISES AND INCONCLUSIVE RESULTS... 155 CRISAN Silviu... 155 THE ROLE OF THE GROUP OF TWENTY- G20 IN RESHAPING THE GLOBAL ECONOMIC AND FINANCIAL SYSTEM... 161 DAEA Alexandra Renate... 161 SYSTEMIC INTERDEPENDENCIES: UNEMPLOYMENT - PURCHASING AND CONSUMPTION BEHAVIOUR. AN EUROPEAN APPROACH... 166 DANU Marcela-Cornelia... 166 THE FOREIGN DIRECT INVESTMENTS IN EUROPE AND THE GLOBAL FINANCIAL CRISIS... 174 DIACONU Laura, POPESCU C. Cristian... 174 INTERNATIONAL TRADE IN THE MIDST OF GLOBAL CRISIS... 181 DOBRE I. Claudia, SORICI Costin Octavian, POCIOVALISTEANU Diana-Mihaela... 181 ADAPTATION TO CLIMATE CHANGE... 187 DOBRE Ion, BRAN Florina, IOAN Ildiko... 187 SOURCES FOR DIMINISHING THE CLIMATE CHANGES... 191 DOBRESCU Emilian... 191 ASPECTS REGARDING THE IMPORTANCE OF NATIONAL COMPETITIVENESS FOR IMPROVING THE INTEGRATION S DEGREE... 199 DUDA-DAIANU Dana-Codruta1, HARANGUS Daniela... 199 THE PERSPECTIVE OF ROMANIAN EUROPEAN INTEGRATION IN TERMS OF INTERNATIONAL COMMERCIAL RELATIONS... 206 GAGEA Andreea, NEGU Silviu, STNCULESCU Anca Maria... 206 PEOPLE OF INDONESIA AGONY: A LENGTHY FOREST DESTRUCTION CONSEQUENCE... 215 GATUT L Budiono... 215 GLOBALIZATION AND CONSUMER PROTECTION... 220 GHEORGHIU Gabriela, BUNDA Nicoleta Ramona, POPOVICI Veronica... 220 NON-STATE ACTORS IN THE GLOBALIZATION OF THE ECONOMY... 224 GHERGHEL Laura... 224 A STASTISTICAL ECONOMETRIC APPROACH OF THE FAMILY STRUCTURE AND BEHAVIOR IN EUROPEAN COUNTRIES... 232 GHITA Simona, VOINEAGU Vergil, VIRJAN Daniela... 232 ASPECTS OF PHRASAL ANGLICISMS IN THE ROMANIAN ECONOMIC LANGUAGE... 239 GREAVU Arina... 239 PANEL DATA USE FOR THE ANALYSIS OF THE ECONOMIC AND SOCIAL PHENOMENA AT REGIONAL LEVEL... 244 IACOB Andreea Iluzia, ANDREI Tudorel, OANCEA Bogdan... 244 6

Nr. 3(50)/2010 INSTITUTIONAL QUALITY, ECONOMIC FREEDOM AND SUSTAINABLE DEVELOPMENT. A COMPARATIVE ANALYSIS OF EU COUNTRIES... 252 IACOBU Andreea, GAGEA Mariana... 252 STATE AID AND STRUCTURAL FUNDS IN THE EUROPEAN UNION. CONNECTION WITH MEMBER S TRADE FLOWS... 261 ICHIM Nela Ramona, PAVEL Elena Mihaela, NITULESCU Ioana... 261 THE PRESENT ECONOMIC CRISIS: A GLOBAL AND WORLD CRISIS... 271 IGNAT Ion, TIGANAS Claudiu... 271 FINANCIAL INSTRUMENTS FOR BIODIVERSITY PRESERVATION... 278 IOAN Ildiko¹, RADULESCU Carmen Valentina, BURUIANA Viorel... 278 PUBLIC POLICIES STILL A NATIONAL CHARATERISTIC OR A MATTER OF INTERNATIONAL LEVELING... 284 JULA Octavian... 284 A MATCHING THEORY PERSPECTIVE ON DISEQUILIBRIA IN THE ROMANIAN LABOR MARKET... 292 KORKA Mihai, DIMIAN Gina Cristina... 292 THE INVESTMENT CLIMATE AND THE DECISION TO UNDERTAKE FDI... 303 MACELARU Patricia-Sabina... 303 INTRA-FIRM TRADE AND GLOBALIZATION... 311 MAHA Liviu-George1, DONICI Gabriel-Andrei, MAHA Sorin-tefan... 311 PREDATORY PRICING: PARADOX OR CHALLENGE FOR COMPETITION POLICY?... 317 MRGINEAN Silvia... 317 ANTI-CRISIS MEASURES TAKEN IN THE EU. ICT INDUSTRY DEVELOPMENT AS THE MAIN MEASURE OF THE ROMANIAN ECONOMY OUT OF CRISIS... 323 MIHILESCU Mariana, LZRIC Marinela... 323 ENERGY SECURITY POLICIES IN POST-GLOBALISATION COMPARATIVE STUDY... 332 MIRON Ramona, TACHE Ileana... 332 ECONOMIC CRISIS IN ROMANIA. A BRIEF ANALYSIS... 344 MURSA Gabriel, BACIU Livia... 344 SOCIAL RESPONSIBILITY OF FIRMS AND ABUSIVE LABOR PRACTICES ABROAD: IS CONSUMERS BOYCOTT THE ETHICAL ANSWER ON THE HOME MARKET?... 350 Muetescu Radu... 350 EUROPEAN UNION UNEMPLOYMENT AND SOCIAL EXCLUSION... 356 NAE Tatiana-Roxana... 356 CARBON EMISSION ALLOWANCES FINANCIAL INSTRUMENTS TRADED ON CAPITAL MARKETS... 362 NAN Sanda Simona, SOLOVASTRU Mircea Stefan... 362 ADAPTING to the times: THE CASE OF EU Competition Policy regarding the Motor Vehicle Sector... 372 NIMINE Liviana Andreea... 372 THE INVISIBLE HAND HIDDEN BEHIND THE CURRENT ECONOMICAL REALITY... 378 OPREANA Alin... 378 THE EFFECTS OF THE CURRENT CRISIS ON EMPLOYMENT... 382 PAPUC Chiva Marilena¹, ACELEANU Mirela Ionela... 382 RURAL DEVELOPMENT POLICY IN ROMANIA... 389 PAUL Lucian... 389 HUMAN CAPITAL. ANY INVESTMENT IN EDUCATION LEADS TO ECONOMIC GROWTH?... 392 POPESCU C. Cristian, DIACONU Laura... 392 7

Revista Economic CIVILIZATIONS FROM «CLASHES» TO EVOLUTION... 400 POPESCU Dan... 400 Opening towards Europe: Regional development between strategic approach and priority policy... 402 POPESCU Dan-Alexandru... 402 THE ROMANIAN VILLAGE: ORIGINS AND CURRENT MANIFESTATIONS OF A PERPETUAL CRISIS... 405 POPESCU Doris-Louise... 405 THE REGIONAL COMPETITIVENESS OF THE WEST REGION OF ROMANIA... 410 POPOVICI Adina, NAGY Csaba... 410 USING TOURISM STATISTICS: A CASE STUDY OF SIBIU, ROMANIA... 418 Rotariu Ilie, Richards Greg... 418 CRISIS ELEMENT OF ECONOMIC CYCLICITY. RETROSPECTIVE LOOK OVER A FEW FINANCIAL CRISIS OF THE TWENTIETH CENTURY... 423 ROVINARU Flavius, ROVINARU Mihaela... 423 MANAGING CULTURAL DIVERSITY IN INTERNATIONAL TOURISM... 429 ROVINARU Mihaela, ROVINARU Flavius... 429 THE IMPLICATIONS OF FINANCIAL CRISIS ON LOCAL PUBLIC FINANCES FROM EUROPEAN UNION COUNTRIES IN A GLOBALIZATION WORLD... 435 RUSU (CHELARU) Elena... 435 TRADE BALANCE AND REAL EXCHANGE RATE CHANGES: A REVISIT... 441 Shahbaz Muhammad, Jalil Abdul... 441 INNOVATION, RESEARCH AND DEVELOPMENT IN ROMANIAN SME s... 448 SORICI Costin Octavian¹, DOBRE I. Claudia², POCIOVALISTEANU Diana-Mihaela... 448 POLICY FAILURES AND CURRENT CRISIS... 456 STRASEK Sebastjan, JAGRIC Timotej... 456 AN APPROACH IN DATING ROMANIAN BUSINESS CYCLE`S TURNING POINTS... 463 TNSESCU Cristina, BUCUR Amelia... 463 THE SOCIAL ASPECTS OF GLOBALIZATION... 469 ZODIERIU ELENA... 469 8

Revista economic THE INVISIBLE HAND HIDDEN BEHIND THE CURRENT ECONOMICAL REALITY OPREANA Alin Assistant Professor/Ph.D. student, Faculty of Economic Science, Lucian Blaga University of Sibiu, Romania, aopreana@yahoo.com Abstract. According to the invisible hand theory, stated by A. Smith, the economy, based on competitive market forces, can provide, spontaneously, equilibrium between production and consumption, supply and demand, which makes government intervention unnecessary. In the last century, the two most important schools of economic (The Chicago School and the Keynesianism) thought had an open confrontation regarding the most effective market economy system and which one should be adopted by the state in its policies for sustainable economic development and sustainable economic growth and today Friedman s critics recognize the beneficial effects of state intervention in the economy (deregulation, privatization, reduced public spending, reduced taxes, non-intervention in the currency market). Key words: the invisible hand, economic equilibrum, crisis, market freedom JEL classification: E13 1. Introduction "An individual who intends to win only for himself is determined by an invisible hand to promote a goal, which was not part of his initial intentions. And it is not always the worst case scenario that could happen to society if that aim was not part of the initial intentions. By not deviating from the personal interest, it frequently promotes the interests of society more effectively than when it only intends to support it." (Adam Smith) We can state that the central problem of economic science is given by the following question: How do the actions of a multitude of autonomous human beings reconcile? In this regard it can be claimed that one answer is the plan and the other one is the market. If we analyze the first response, throughout time, the systems which were based on central and imperative planning, proved to be unsuccessful and inefficient in terms of achieving a certain degree of prosperity. Thus, in the struggle between plan and market the result was that a sustainable growth can only be achieved within the system which revolves around the market, by applying a laissez-faire policy in which economic agents are free to make their own decisions and to take the best strategy, which they consider appropriate, in order to maximize their results. Following this confrontation of market traders in a free scenery, without any interference from other forces that could have negative influence, market equilibrium is achieved, and also the state of equilibrium of all participants, which further leads to maximized earnings and higher living standards. 2. The Invisible Hand Theory The problem of economic equilibrium concerns the political economy since its early beginnings, more precisely speaking since economic thinking was established as an independent science. Classic economic thinking of equilibrium can be found in works of A. Smith, D. Ricardo and St.Mill, to mention the most representative exponents of classic liberalism. In this context, publishing the book "The wealth of nations" by Adam Smith, in 1776, is considered to be the origin of economics as a science. Classics evolved their works in an era when the industry was going through an unprecedented development. Their main concern was economic growth and related issues such as distribution, value, international trade, etc. One of the main goals was denouncing the restrictive mercantilist ideas of free competition which were even more extensive in their time. For Adam Smith, the state must refrain from intervening in the economy because when people act freely in search of self-interest there is an invisible hand that transforms efforts into benefits. In fact, the theory of "the invisible hand", stated by A. Smith, can be regarded as a form of expressing a concept related to economic equilibrium. According to this theory, the economy, based on competitive market forces, can provide, spontaneously, equilibrium between production and consumption, supply and demand, which makes government intervention unnecessary. Also under the theory of "the 378

379 Nr. 3 (50) vol.1/2010 invisible hand", the interest game, which unfolds in a market, is sufficient to even economic life (Jessua C., Labrousse C., Vitry D., Gaumont D., 2006). Thus, the market represents a decentralized coordination process, which requires no intervention or control: the invisible hand justifies the laissez-faire policy. Also, it must be mentioned that the basic principles of Classical Liberal School were based upon the philosophical foundation of classical deterministic science, inherited from Newton and then used in all sciences, including political economy. In the Classical School of economic thought, economic issues were analyzed from the perspective of a model with ideal conditions of stable equilibrium, according to which, if economic freedom is ensured, then the system is accomplished and works by itself, being governed by natural laws. Classical economists did not remark the fact that between their model of thinking, which was perfectly justified, and economic conditions prevalent in real life was a huge difference and did not study with equal consideration the disequilibrium which dominates the economic realities. Also, they did not grasp the need for structural reforms, creating an ideal model where natural laws would govern. Over time, Classical School was the subject of various critics because of existing discrepancy between theory and practice; it considered physical, social and economic reality through the perspective of stable equilibrium. In other words, evolution is towards unity, harmony, symmetry, reversibility in the sense that if we consider ex-ante or ex-post, micro or macro has makes no difference, because the result must be the same. This presentation is narrows down to two ideas. The first idea regards the convergence of individual interests with the general interest, attributed to Mandeville and was also present in the works of Hume, Ferguson and Hutchinson, all inspired by Adam Smith; and the second idea consists of the fact that the result obtained through market is the most likely. This is not the result which could have been obtained by a perfectly rational individual. The presence of the invisible hand in the market requires permanent adjustments, adapting individual behavior based on information provided by relative prices and profits, which are also variables as the transactions take place. Thus, the market represents a process of continuous discovery, with unexpected and unpredictable results, unable to "simulate the market," as Lange and Kanda suggested and as today the supporters of "market socialism" claim. In this dynamic vision, economic agents play the fingers of the invisible hand (being motivated by profit ownership); they pay attention to the information conveyed throughout the market and then they manage the disequilibrium, which this information reveals. These entrepreneurial reactions ensure the better overall coordination of business than any adjustment through which hypothetical general equilibrium is searched. Invisible hand originates from a eighteenth century Scottish social philosophy, but also has roots in the works of Austrian School economists, according to whom the social order is the unwanted result of voluntary actions of individuals. In his studies, Adam Smith described the essential institutional framework: the invisible hand can function only if there are property rights, security contracts, currency stability, competition (i.e., freedom to enterprise and trade). Later, Hayek concluded an evolutionary theory of institutions, so that today we speak of an "invisible hand approach" (Ullmann-Margali) in order to characterize theories explaining the emergence and changes in institutions without the intervention of voluntary human action. Following the above statements we can say that the invisible hand is central to the fundamental debate on individual freedom and social harmony. 3. Market freedom between Friedman and Keynes Classical liberal theory is called into question by the Chicago School by one of its foremost exponents, Milton Friedman. In his book, Free to Choose, Milton Friedman points out, through a series of examples of several countries from both sides of the former "iron curtain", that the economy will not be functional as long as it is commanded and controlled by a center, by comparison with countries where the implementation of measures such as price liberalization and free exchange, have acted as a propellant engine, ensuring a functioning economy. Among other interesting topics considered in this book, the renowned professor emphasizes the importance of clear delimitation of the powers assigned to the state and to the government, revealing how certain economies, which practiced a centrally planned economy, could not function, like for example the former Soviet Union. Of course, analyzing this fact, we understand even more as our country was led, in the past, by a government that applied such an ineffective system. Obvious ineffectiveness which resulted from the centralized economy system is exposed broadly, as the author manages to show through some examples how it has failed. It is clear that countries whose economy was based on free exchange had only to gain, benefiting from both human prosperity and freedom. Of course, in a society mutually agreed exchange, competition and free choice have a positive impact on the economy and

Revista economic on increasing living standards; as obvious examples are the countries which today have a strong economy. In relation to the price system which works so well when it is free, the author talks about the oil crisis of 1974, when the U.S. government, trying to intervene by adopting measures in order to prevent domestic oil price increases, had the opposite effect than the one expected, leading to long queues for gasoline and supply shortages even in the U.S., the country that produced most of its oil. Meanwhile, countries like Germany and Japan dependent on imported oil, were not affected. Friedman manages to show how the transmission of price information may be one of the most harmful effects of inflation. In contradiction with concepts of "the invisible hand" and the "laissez faire" policy is a Modern School (which argues through Keynesianism correcting market imperfections solution through state intervention in the economy) which brings an important contribution in terms of achieving economic equilibrium. Thus, within the Modern School, economic problems are seen exclusively through the perspective of a model which assumes conditions of disequilibrium or deviations from the classical model, but with the premise that government intervention through fiscal and monetary policy implementation can promote the overall prosperity and stability, as recommended by Keynes. The peak of the modern school was achieved through the formulation of the Law of Full Employment regarding natural and human resources, stated by John Maynard Keynes, in his book that became famous during the last century "The General Theory of Employment, Interest and Money" (1936). This represents the modern concept of stable equilibrium through government intervention from outside the system. 4. The invisible hand hidden behind the current economical reality In the last century, the two most important schools of economic thought had an open confrontation regarding the most effective market economy system and which one should be adopted by the state in its policies for sustainable economic development and sustainable economic growth. Also, when analyzing the pros and cons of the invisible hand from the perspective of the two concepts of economic thinking, the two major economic crises, that have marked economic developments in the last century, must be taken into. Thus, the crisis of 1929-1933, which had overproduction as the main cause, supported the idea of state intervention policies. And yet, after a number of years later, clear observations show that the most liberal states, regarding their market economy system, are the strongest economies in terms of economic growth and sustainable development (United States and United Kingdom), and today Friedman s critics recognize the beneficial effects of state intervention in the economy (deregulation, privatization, reduced public spending, reduced taxes, non-intervention in the currency market). Friedman says that it is essential to leave people the freedom to make their own decisions, even though many will experience loss as a result of their decision - because whether an individual loses or wins, we, as a society, have only to gain from the fact that someone has taken some risks. The economic crisis inspired courage among many not only to doubt the virtues of free market and globalization, as they have been theorized by Friedman and by the Chicago School, but also to call into question the old ideas regarding Keynesian s origin - stimulating the economy by increasing public spending and state involvement in regulating the economic disequilibrium, rather than allowing the market to adjust itself. Paul Krugman sees as the obvious solution for the crisis introducing more capital in the system. In fact, this is a standard response in crisis situations. Krugman also offers a set of examples to highlight this issue. Thus in 1933 the Roosevelt administration created the Reconstruction Finance Corporation, which was used to recapitalize the banks by buying preferred stocks. Swedish Government intervened in the crisis in the early 1990s and provided the banks with an extra capital, equal to 4% of the country's GDP. In 1998, the Japanese government purchased preferred stocks of 500 billion US dollars, in order to save the banks. In each case, the additional capital contribution helped restore banks capacity to provide loans and thawed the credit market. A financial rescue operation takes place, in similar conditions, in present times, in economies which are heavily affected by the crisis, from the United States (where an intervention plan worth $ 700 billion was applied) to Ireland (where a rescue plan for the banking system worth 81 million was applied). Also Greek s economy, the most affected one out of the euro area, seeks emergency measures that will most likely result in a capital injections program into the economy. Just as considered by Krugman in his work entitled The Return of Depression Economics and the Crisis of 2008 still seems quite doubtful that this will be enough to topple the whole situation. The Nobel laureate also comes with the solution to this uncertainty: the recapitalization will eventually have to get bigger and broader, and that there will eventually have to be more assertion of government control in effect, it will come closer to a full temporary nationalization of a significant part of the financial system. This assumption that Krugman made, since 2008 became a certainty 380

Nr. 3 (50) vol.1/2010 in the rescue plans of national economies; financial markets received capital injections in exchange of a temporary nationalization. However, this is a short term solution and should not represent a long-term goal, otherwise the positive effects of the rescue plans will be insignificant. Thus, the financial sector must be reprivatized as soon as it is safely to do so, just as Sweden did when the banks got restored in the private sector, after the rescue operation, in early 1990. (Krugman, 2009) Even if the rescue operation of the financial system begins to revive credit markets, there is a danger that savings could face further global decline. Regarding this aspect, the answer seems to be traditional Keynesian fiscal stimulus. United States tried a fiscal stimulus in early 2008; that the Bush administration touted it as a plan to jump-start the economy. The actual results were, however, disappointing, for two reasons. First, the stimulus was too small, accounting for only about 1 percent of GDP. Second, most of the money in the first package took the form of tax rebates, many of which were saved rather than spent. The usual objection to public spending as a form of economic stimulus is that it takes too long to get going that by the time the boost to demand arrives, the slump is over. Also, the cost for the taxpayers would still be a concern - any government intervention in a market almost always involves socializing losses and privatizing earnings. Therefore, it extends the moral hazard - the inclination of private participants towards the markets where there are explicit or implicit warranties, to take risks that under other conditions would have avoided. Thus, further market regulation the will not lead to improvements of markets performance. (Greenspan, 2008) The crisis is seen, by many economists, as an inevitable consequence of past excesses in the economy and indeed as a healing process. Recovery, as stated by Joseph Schumpeter, is only sound if it does come from itself. For any revival which is merely due to artificial stimulus leaves part of the work of depression undone and adds, to an undigested remnant of maladjustments, new maladjustments of its own. " 5. Conclusions The current economic crisis context offers positive prospects in developing a synthesis of various models regarding the aggregate market equilibrium, which could lead to a stable general equilibrium with a sustainable framework for re-launching and then developing the global economy. In other words, getting the economies out of the crisis will be achieved through concerted action by state and by market forces, as long as it is taken into consideration the fact that the market represents a system based on the principle of selfregulation, and the state should not interfere in its functioning mechanism; it must remain a "partner" in order to ensure a consistent fiscal policy and a regulatory framework for markets, enabling traders to express freely in a legitimate competition, so that the desired benefits can be obtained. Regarding the results of the economic crisis we can state that the answer can be found within classical liberal thinking. In fact, the economic crisis caused a sharp decrease in demand in almost all markets. In this case, the principle of physics according to which every action has a reaction, undertaken from the Classical School, we can say that it perfectly applies in these circumstances. Thus, the power of the self-regulating market ("the invisible hand") will lead the markets to equilibrium through the readjustment and the decrease of the supply so that new market equilibrium conditions can be provided. Certainly the state has an important role in developing the strategies that would lead to the solving of the economic crisis, but eventually "the invisible hand", that determines the behavior of market trades, will have the last word. 6. References Krugman, P. (2009) Intoarcerea la economia declinului si criza din 2008, Editura Publica Friedman, M.; Friedman, R. (2009) Libertatea de a alege. O declaratie personala, Editura Publica Jessua, C.; Labrousse, C.; Vitry, D.; Gaumont, D. (2006) Dictionar de Stiinte Economice, Editura ARC Krugman, P. (2010) Constiinta unui liberal, Editura Publica Greenspan, A. (2008) Era turbulentelor. Aventuri intr-o lume noua, Editura Publica Smick D.M. (2008) The World is Curved. Hidden Dangers to the Global Economy, Penguin Group, NY, USA 381

Revista economic THE EFFECTS OF THE CURRENT CRISIS ON EMPLOYMENT PAPUC Chiva Marilena¹, ACELEANU Mirela Ionela² ¹Ph.D. Senior Lecturer/Faculty of Economics/Department of Economics and Economic Policies/Academy of Economic Studies, Bucharest, Romania, papuc.marilena@economie.ase.com ²Ph.D. Lecturer/Faculty of Economics/Department of Economics and Economic Policies/Academy of Economic Studies, Bucharest, Romania, aceleanu_mirela@yahoo.com Abstract: We live in an era where most of the social and economic life is determined by global processes, where the cultures, the economies and the national boundaries have begun to disappear. The transcontinental spread of the crisis phenomena reveals other facets of the globalization, the less attractive ones. Thus, in a world where values and institutions by which they are expressed acquire a crucial importance, and the competition for resources and markets becomes fiercer, the human factor is decisive. That is why, our work aims to capture some aspects of the implications of the current crisis on employment in our country and provide some solutions to overcome it. Key words: globalization, economic crisis, financial crisis, employment, unemployment JEL classification: E24, G01, J64 Under the circumstances of the globalization, the economic and financial developments in a country influence and are influenced by the developments in the other countries. The current crisis has once again confirmed that economies are interconnected and no region in the world can be independent in a globalized world economy. The economic crises can be defined as situations characterized by instability, and thus, they are accompanied by volatility and uncertainty in growth. Under crisis situations (whatever form it would take) we are in a constant state of anxiety and uncertainty state, fear or panic related to the future. Our instinct for defense and preservation sometimes encourages us to behave irrationally and to emphasize this more volatility because each of us, with our cognitive capacity filters information and understands the phenomenon in his/her way and then translating it into a certain behavior related to market. It is difficult to appreciate when a financial crisis becomes an economic crisis, or if an economic crisis generates a financial crisis or vice versa. Mainly, we always talk about an economic crisis caused by financial, political or social reasons. The financial crisis is only a form of manifestation of the economic crisis and reflects mistrust in the financial system, a significant decrease in the volume of stock transactions, a disorder of market mechanisms. The stock trading is a barometer of the economy and businesses of different sizes and from different sectors. When the market of this business (the real estate market, oil market, labor market) suffers from disorder or major corrections they will be reflected in the listed stock market business profitability and hence in the price of the financial assets (shares or bonds) that directly depend on the expectations of the investors. The panic related to the economy only increases the amplitude of these corrections and uncertainties the economy. From here to reducing the appetite for savings and investment and then to the increase of market interest is only a step. We talk about a crisis only when its effects affect a large number of people / companies. But crises can exist in a latent and not so visible state, gradually deteriorating our existence. These are not hard to predict (their causes are quite clear) but who will make such a prediction would be hard to believe by most of us far too little concerned with the effects of global warming or with the expansion of money and more concerned how to exploit better our privileged position (see Robert Triffin`s example who predicted a few years before the fall of the Bretton Woods System). 1. Formal similarities of the current crisis with the crisis in years 1929-1933 It is not the first when time the world`s economy is facing recession. The Great Economic Crisis or The Great Depression of the years 1929-1933 was a period characterized by a dramatic decrease in the global economic activity. The first signs of crisis occurred since 1928. The beginning of The Great Depression in the United States is usually associated with the collapse of the Stock Market on Tuesday (the so-called Black Tuesday) October 29, 1929. The economic crisis had devastating effects both in industrialized countries and in the least developed ones, whose economy 382

383 Nr. 3 (50) vol.1/2010 depended mostly on exports of raw materials. The world trade levels fell rapidly, as it also decreased the personal income, budget revenues and profits from business. Cities worldwide have suffered heavily from the crisis, especially those dependent on heavy industry. The construction activity was virtually stopped. The rural areas suffered from the falling of prices of agricultural goods by 40-60%. Mining and timber probably suffered the most dramatic decline, as demand fell sharply and re-employment of the miners and forestry workers were at the lowest level. Thus, the unemployment increased considerably, so in 1932, the year with the peak of the crisis in the developed countries there were more than 30 million unemployed people. The world economic crisis of 1929-1933 was a crisis of overproduction. During the crisis, the industrial production of the capitalist countries fell by 37%, inseminated mass of agricultural products have not found buyers because of the significantly reducing solvent demand. Almost all the currencies of countries, including the sterling, the U.S. dollar depreciated. The international famous banking crash, the industrial and commercial bankruptcies followed one after another. The international trade decreased in a few years up to a third. Many restrictions were applied in the foreign trade, in particular to the importation of goods. The economic crisis was also accompanied by strong price reduction, which was unequal in different categories of goods and in producer groups. Such a price reduction made, except for the general negative effects on the material situation of those with relatively fixed incomes, to register strong income redistribution at the expense of the small agricultural producers and countries with a main agrarian economic structure. The crisis has greatly intensified the so-called price scissors for the price of goods produced and sold by large monopolies. In Romania, the 1929 outbreak of the crisis occurred when our country had a mainly agrarian economy - a weak and poorly technical equipped agriculture. About 78% of the country's active population worked in agriculture, most of the agricultural producers were little and medium peasant farms, which combined in varying proportions in the system of natural economy work with the one in the production of goods. This led to the deepening of the gap between the prices of agricultural products and the ones of the industrial products. Based on this gap there was made a great new value transfer from agriculture to industrial monopolies and thus, across borders. That certain mechanism led to the loss of a great part of the national income. On the other hand, the prior large loans made at the banks by the peasants were very difficult to pay, under the conditions of very low prices for the agricultural products. The living standards fell considerably due to the increasing revenues and reducing lower the solvent demand of the masses. The crisis also led to a lower industrial production and in all industries, to significant effects and in finance, the monetary circulation and credit. The taxes increased, especially the indirect ones. The economic crisis of 1929-1933 has some formal similarities with the one we live in today. Thus, the focus of these events is the private entities controlling The U.S. Federal Bank (FED). The imposed measures and their effects also resemble. The interwar financial crisis was triggered by an excessive investment in stocks and in real estate markets, being taken great risks in searching a great profit. The abuse of consumer credit, stock and property speculation created an imbalance which ultimately led to a major economic crisis. The story repeats itself 80 years later, when the U.S. market aims to throw 700 billion dollars in an attempt to artificially artificially keep prices from the over-evaluation of some securities covered by mortgages and other assets of the same type. The Federal Reserve has become active in this unstable market, according capital to entities in bankruptcy (Fannie Mae and Freddie Mac). In February 2007, the future global crisis seemed to be more a U.S. financial problem. And this is because increasingly more customers in the United States have not paid the mortgage with high risk, which caused the first bankruptcy of the specialized banking institutions. The present crisis resembles to its predecessor and because the interventionism is felt not only by infusion, but also by nationalization. This happened with The Northern Rock Bank (UK), AIG (USA), Fortis (Benelux), Bardford & Bingley (United Kingdom). Despite the name, FED is not a state bank, but a consortium consisting of private banks, controlled directly or through subsidiaries by representatives of financial structures such as: Rothschild Bank in Paris and London, Lazard Brothers Bank of Paris, Israel Moses Safe Bank of Italy, Wartburg Bank (Amsterdam and Hamburg), Lehman Brothers and Chase Manhattan Bank. In August 2007, the U.S. stock markets started declining and the central banks intervened in markets with liquidity. The American financial problems continued in 2008, when the financial crisis was felt also in Europe. The crisis has caused and continues to cause effects in different economic sectors, and the job losses are among the most acute effects of the economic system, because of the companies` lack of necessary funds to