The USV Annals of Economics and Public Administration

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1 ISSN ISSN-L Revistă ştiinţifică indexată în baze de date internaţionale The USV Annals of Economics and Public Administration VOLUME 13, ISSUE 1(17), 2013 Editura Universităţii Ştefan cel Mare din Suceava

2 EDITORIAL BOARD: Editor in chief: Carmen NĂSTASE General editorial secretary: Adrian Liviu SCUTARIU Editors: Elena HLACIUC, Carmen CHAŞOVSCHI, Florin BOGHEAN, Mariana LUPAN, Ovidiu Florin HURJUI, Simona BUTA SCIENTIFIC COMMITTEE: Angela ALBU, Ştefan cel Mare University of Suceava, Romania Paolo ANDREI, University of Studies in Parma, Italy Stefano AZZALI, University of Studies in Parma, Italiy George P. BABU, University of Southern Mississippi, USA Christian BAUMGARTNER, International Friends of Nature, Austria Grigore BELOSTECINIC, ASEM, Chi şinău, Republic of Moldova Ionel BOSTAN, Alexandru Ioan Cuza University of Iaşi, Romania Aurel BURCIU, Ştefan cel Mare University of Suceava, Romania Gheorghe CÂRSTEA, Academy of Economic Studies, Bucharest, Romania Slobodan CEROVIC, Singidunum University, Belgrade, Serbia Simion CERTAN, State University of Chişinău, Republic of Moldova Carmen CHAŞOVSCHI, Ştefan cel Mare University of Suceava, Romania Liliana ELMAZI, Tirana University, Albania Cristian Valentin HAPENCIUC, Ştefan cel Mare University of Suceava, Romania Elena HLACIUC, Ştefan cel Mare University of Suceava, Romania Elena IFTIME, Ştefan cel Mare University of Suceava, Romania Marian JALENCU, State University of Chişinău, Republic of Moldova Miika KAJANUS, Savonia University of Applied Sciences, Iisalmi, Finland Alunica MORARIU, Ştefan cel Mare University of Suceava, Romania Maria MUREŞAN, Academy of Economic Studies, Bucuresti, Romania Carmen NĂSTASE, Ştefan cel Mare University of Suceava, Roman ia Alexandru NEDELEA, Ştefan cel Mare University of Suceava, Romania Ion PÂRŢACHI, ASEM, Chişinău, Republic of Moldova Rusalim PETRIŞ, Ştefan cel Mare University of Suceava, Romania Abraham PIZAM, University of Central Florida, Orlando, Florida Ion POHOAŢĂ, Alexandru Ioan Cuza University of Iaşi, Romania Gabriela PRELIPCEAN, Ştefan cel Mare University of Suceava, Romania Gheorghe SANDU, Ştefan cel Mare University of Suceava, Romania Petru SANDU, Elizabethtown College, Pennsylvania, USA Doru TILIUŢE, Ştefan cel Mare University of Suceava, Romania Viorel ŢURCANU, ASEM, Chişinău, Republic of Moldova Diego VARELA PEDREIRA, University of A Coruna, Spain Răzvan VIORESCU, Ştefan cel Mare University of Suceava, Romania Cover design & graphic layout: Adrian Liviu SCUTARIU Contact: Faculty of Economics and Public Administration Ştefan cel Mare University of Suceava Str. Universităţii nr. 13, Corp H, Birou H105, SUCEAVA, ROMANIA Phone: (+40) int cercetare@seap.usv.ro Journal web site: Faculty web site: University web site: Întreaga răspundere asupra conţinutului articolelor publicate revine autorilor. The entire responsability for the content of the published articles rests with the authors. 2

3 The USV Annals of Economics and Public Administration Volume 13, Issue 1(17), 2013 CONTENTS SECTION 1. ECONOMY, TRADE, SERVICES...6 SOCIAL ECONOMIC INEQUALITIES EXISTING AT RURAL LEVEL SOUTH WEST OLTENIA REGION...7 Emilia UNGUREANU, Cristina Florentina BÂLDAN, Ramona Florina POPESCU SOME ASPECTS REGARDING THE PREDICTABILITY OR NON PREDICTABILITY OF THE GREAT DEPRESSION. CASE OF ROMANIA...16 Mariana LUPAN GRANT SCHEMES FOR SME S AN OPPORTUNITY FOR EASTERN CROSSBORDER AREAS IN THE ACTUAL ECONOMIC LANDSCAPE...23 Marcela SLUSARCIUC, Gabriela PRELIPCEAN THE IMPACT OF FOREIGN DIRECT INVESTMENT OVER ROMANIA'S EXPORTS...33 Flavian CLIPA, Paul CLIPA, Raluca Irina CLIPA, Claudiu ŢIGĂNAŞ MARKETING CONCEPTS WITHIN THE POLITICAL FIELD...42 Ovidiu Aurel GHIUŢĂ THE INFLUENCE OF E.U. INTEGRATION ON THE OVERALL DEVELOPMENT IN THE REGIONS NORTH EAST OF ROMANIA, SUBCARPATHIA OF POLAND AND CENTRAL SLOVAKIA...50 Adrian Liviu SCUTARIU THE QUALITY OF HEALTH AND EDUCATION SERVICES IMPERATIVE FEATURE OF THE MODERN ECONOMY...60 Gabriela Liliana CIOBAN, Costel Ioan CIOBAN UNCERTAINTY IN CREATING MACROECONOMIC POLICY: KNOWLEDGE, SKILLS AND (UN)PREDICTABILITY...68 Tome NENOVSKI, Elena Makrevska DISOSKA COMPARISON OF PROFITABILITY FOR PHARMACEUTICAL ROMANIAN LISTED COMPANIES USING DUPONT IDENTITY...78 Ioana Cristina COLBU THE DYNAMIC AND IMPORTANCE OF SMES IN ECONOMY...84 Maximilian ROBU THE AIDA MODEL FOR ADVERGAMES...90 Alina Irina GHIRVU SECTION 2. MANAGEMENT AND BUSINESS ADMINISTRATION APPROACHES ON THE COMPETITIVE INTELLIGENCE Ioan PETRIŞOR, Natalia Ana STRĂIN (SILAŞ) 3

4 ANALYSIS OF STRESS SOURCES IN RETAIL ORGANISATIONS Carmen CHAŞOVSCHI, Carolina NICULESCU GROUPS AND TEAMS AS BUILDING BLOCKS FOR ORGANIZATIONAL LEARNING Raluca ZOLTAN, Otilia Maria BORDEIANU, Romulus VANCEA APPROACHES TO ORGANIZATIONAL CHANGE WITHIN MODERN COMPANIES Ruxandra BEJINARU, Camelia BAESU WRITTEN COMMUNICATION IN BUSINESS Oana COSMAN SECTION 3. ACCOUNTING - FINANCES THE ACCOUNTING PROFIT A MEASURE OF THE PERFORMANCE OF THE BUSINESS ENTITY Mihaela TULVINSCHI THE ECONOMIC ADDED VALUE MAJOR CRITERION ON ANALYZING THE FINANCIAL PERFORMANCES ON THE LEVEL OF HIGH DEVELOPED COMPANIES Ştefăniţă ŞUŞU THE EFFICIENCY OF TRANSPARENT COMMUNICATION OF THE MONETARY POLICY DECISIONS IMPLEMENTED BY THE EUROPEAN CENTRAL BANK Anisoara APETRI, Ionela Daniela GAITAN LEGAL BARRIERS IN THE LENDING ACTIVITY OF THE COMPANIES IN ROMANIA Gheorghe MOROŞAN SYSTEMIC RISK IN BANKING SECTOR Oana Raluca DRAGAN (SANTAMARIAN), Ioan BATRANCEA, Liviu BECHIS IMPACT OF CAPITAL STRUCTURE ON PROFITABILITY OF LISTED COMPANIES (EVIDENCE FROM INDIA) Khalid Ashraf CHISTI, Khursheed ALI, Mouh i Din SANGMI CONSIDERATIONS ON THE QUALITY OF INFORMATION IN PROFESSIONAL ACCOUNTANT S ACTIVITY Ana Maria PASCU, Emil HOROMNEA THE ROLE OF SMALL AND MEDIUM ENTERPRISES IN THE MODERN ECONOMY AND THE IMPORTANCE OF IFRS APPLICATION FOR SMES Marius Sorin CIUBOTARIU SECTION 4. STATISTICS, ECONOMIC INFORMATICS AND MATHEMATICS DYNAMIC SYSTEMS BASED ON NEURAL NETWORKS USED IN TIME SERIES PREDICTION. 212 Valeriu LUPU, Nina HOLBAN 4

5 THE VALUE OF CLOUD COMPUTING IN THE BUSINESS ENVIRONMENT Mircea GEORGESCU, Marian MATEI SECTION 5. LAW AND PUBLIC ADMINISTRATION ISSUES AND PROBLEMS REGARDING E.U. COMPETITION LAW PRIVATE ENFORCEMENT: DAMAGES AND NULLITY ACTIONS Fernando PEÑA LOPEZ LEGAL DIMENSION OF THE RESPONSIBILITY FOR NUCLEAR DAMAGE Elena IFTIME LOCAL PUBLIC ADMINISTRATION AUTHORITY LOANS Cristinel ICHIM CONCEPTUAL APPROACH REGARDING THE PUBLIC POLITICS WITHIN THE EDUCATION SYSTEM IN ROMANIA Irina Ştefana CIBOTARIU MULTINATIONAL COMPANIES AND THEIR ATITUDE TOWARDS UNION ACTIVITY Maria Cristina BĂLĂNEASA SANCTIONS IN THE INTERNATIONAL PUBLIC LAW Dumitriţa FLOREA, Natalia CHIRTOACĂ ASPECTS RELATED TO THE AUTONOMY MANIFESTATION IN LOCAL PUBLIC ADMINISTRATION MANAGEMENT Petronela ZAHARIA MIRON CRISTEA S ADMINISTRATIVE REFORM AS PRIME MINISTER (11 FEBRUARY 1938 MARCH 6, 1939) Narcisa GALES, Silviu GALES THE TRADING COMPANY IN THE LIGHT OF THE NEW CIVIL CODE Eugenia Gabriela LEUCIUC, Anca POPESCU CRUCERU THE PRINCIPLE OF OPPORTUNITY IN THE FORTHCOMING CRIMINAL LEGISLATION Daniela Iuliana LĂMĂŞANU LOCAL PUBLIC 0 EXPENDITURE AUTONOMY MEASURING APPROACH Elena CIGU, Irina BILAN INSTRUCŢIUNI UTILE PENTRU AUTORI / AUTHOR GUIDELINES

6 The USV Annals of Economics and Public Administration Volume 13, Issue 1(17), 2013 SECTION 1 ECONOMY, TRADE, SERVICES 6

7 The USV Annals of Economics and Public Administration Volume 13, Issue 1(17), 2013 SOCIAL-ECONOMIC INEQUALITIES EXISTING AT RURAL LEVEL SOUTH WEST OLTENIA REGION Professor Ph.D. Emilia UNGUREANU University of Pitesti, Romania Lecturer Ph.D. Cristina Florentina BÂLDAN University of Pitesti, Romania Lecturer Ph.D. Ramona Florina POPESCU University of Pitesti, Romania Abstract: The article includes a part of a complex research concluded under a larger project and refers to the social economic inequalities found at South West Oltenia region level, in rural areas. The basic unit of research was the commune and it was used a set of five criteria. The results of the study indicate a large degree of inequality, due to economic and territorial infrastructure criteria. Depending on the importance of the indicators included in each criterion and on the importance of the criterion itself upon the total degree of inequality at rural level, there were proposed measures of reducing those inequalities. The study was finalized by developing complex scenarios for inequality attenuation, depending on the determined situation. If we look at this region s situation in a larger context, at national level, we can observe a relatively high inequality degree, with high intervals between minimum and maximum levels which lead us to the conclusion that this region needs more than others firm, rapid and radical measures on all levels of social and economic life, so that development discrepancies do not amplify, but even diminish. This paper was elaborated under the MESAIR Project - Contract no / Program no. 4 Partnership in priority domains. Key words: economic development, socio-economic inequality, inequality attenuation, social infrastructure, economic dimension JEL classification: R11, R13, R58 INTRODUCTION The analysis presented by this article refers to the inequalities that can be noticed at rural level in South West Oltenia region. The data that could be obtained entirely are from 2008 and take part from a larger study conducted during a complex research project. The socio-economic particularities were divided into five categories, playing the role of relying criteria for the study. The criteria were the following: Territory equipment. This criterion offers information on the comfort of living, technicalurban infrastructure as support of rural development - including business environment. Socio-demographic dimension. The criterion gives information on the local demographical perspectives, disintegration degree of family values, and attractiveness degree for living and presumed socio-economic opportunities of the region. Social infrastructure. The information regards educational and health infrastructure and their degree of adaptation to community needs such as potential accessibility to TIC. Economic dimension. The criterion offers information about the chances to acces a working place and the dependency degree of rural population to social transfers from agriculture, intensification degree of land exploitation, development degree of economic activities complementary to agriculture, capacity to promote rural services complementary to agriculture. Investments. The criterion reveals the projection upon the development potential of rural communities. Each criterion was based on a set of indicators (from one indicator to five indicators), as follows: 7

8 territory equipment: habitable area/inhabitant, quantity of distributed potable water to households (cubic meters/inhabitant), simple length of potable water network (km), simple length of sewage network (km), simple length of the natural gas distribution network (km). socio-demographic dimension: natural population increase/1000 inhabitants, divorces/1000 inhabitants, sold of domicile changing/1000 inhabitants, sold of residence changing/1000 inhabitants, sold of external migration/1000 inhabitants. social infrastructure: number of pupils/teacher, number of inhabitants/physician, number of PCs/1000 inhabitants. economic dimension: number of employees/1000 inhabitants, percent of arable area in total agricultural area, percent of vineyards and orchards in total agricultural area, average number of accommodation places/accommodation unit, number of overnights/accommodation. investments: finished homes in 2008/1000 existing homes. The analysis of those indicators led to the establishment of some inequality levels for each criterion and those, in their turn, led to conclusions regarding each ones importance to the region s inequalities at rural level. The resulting sizes were compared to the national average, the minimum level and the maximum one calculated for all the Romanian development regions. As a consequence, for each criterion was established measures that could lead to the reduction of the induced inequality degree and therefore, to a much more equilibrated development at all levels. GENERAL INFORMATION REGARDING SOUTH WEST OLTENIA REGION South West Oltenia region is placed in the south west part of Romania and includes five counties: Dolj, Olt, Valcea, Mehedinti and Gorj. Mostly, it is the Olt historical region named Oltenia, into its natural borders: Danube at south, Olt River at east, the Carpathians at north and west. Having square km it is the 7 th among Romanian regions and represents 12.25% in the total area of the country. The network of localities is composed of 40 cities and 408 communes. The most important cities are Craiova, Ramnicu Valcea, Drobeta Turnu Severin (over inhabitants each one), Targu Jiu and Slatina (over inhabitants each one). Most of the small towns (under inhabitants) don t have an appropriate structure and level of development. Regarding the distribution of communes, most of them are in Dolj (104) and Olt (104) Counties, and fewer in Gorj (61) and Mehedinti (61) counties. From the geographical point of view, the region is equilibrated, including mountains, planes, hills and plateaus. The north of the region is dominated by forests and pastures and the south is specialized in cereal cultures. The hydrographic network gives the region the main role in the production of hydroelectric energy. THE ANALYSIS OF THE INEQUALITY CRITERIA AND THE INDICATORS IMPORTANCE FOR EACH ONE AT REGIONAL AND NATIONAL LEVEL For the South West region, the general inequality degree in rural zones is differently justified by the five selected criteria, their influence ranging from 19.25% to 38.07% (as indicated in the table below). 8

9 Table 1. The importance of the socio-economic inequalities for the justification of the general variation of the inequality degree comparative situation (%) Regional Maximum level Minimum level National level level (South West) Territory equipment Socio-demographic dimension Social infrastructure Economic dimension Investments Source: processing made under the project PNII partnerships, no /2008, based on statistical information from Communes Sheets. As shown above, the criterion with the greatest influence on the inequalities at South West region level is the economic dimension (38.07%), followed by the territory equipment (22.73%). These two criteria will be analyzed in a following section of this article in order to establish necessary measures to attenuate the inequalities. Table 2 reflects the importance of the socio-economic inequality indicators for the justification of the general variation of the inequality degree of the South West region (rural level), also analyzed in a following section of this article. If we look at the level of importance of the indicators, it can be noticed that the first most important indicators are (by decreasing importance): average number of accommodation places/accommodation unit (13,26%) number of overnights/accommodation (11,56%) number of pupils/teacher (9,47%) percent of vineyards and orchards in total agricultural area (8,02%) quantity of distributed potable water to households (cubic meters/inhabitant) (6,71%) simple length of the natural gas distribution network (km) (5,72%) sold of domicile changing/1000 inhabitants (5,40%) Table 2. The importance of the socio-economic inequality indicators for the justification of the general variation of the inequality degree of the South West Region (rural level) % in the total Criteria Indicators variation of cumulated variation South West Territory equipment Sociodemographic dimension Habitable area / inhabitant (square meters / inhabitant) 2.99 quantity of distributed potable water to households (cubic meters/inhabitant) 6,71 simple length of potable water network (km) 2.15 simple length of sewage network (km) 5.17 simple length of the natural gas distribution network (km) 5.72 natural population increase/1000 inhabitants 0.46 divorces/1000 inhabitants 2.80 sold of domicile changing/1000 inhabitants 5.40 sold of residence changing/1000 inhabitants 4.11 sold of external migration/1000 inhabitants 4.58 number of pupils/teacher 9.47 number of inhabitants/physician 4.72 Social infrastructure number of PCs/1000 inhabitants

10 Economic dimension number of employees/1000 inhabitants 3.78 percent of arable area in total agricultural area 1.44 percent of vineyards and orchards in total agricultural area 8.02 average number of accommodation places/accommodation unit number of overnights/accommodation Investments finished homes in 2008/1000 existing homes 2.61 Source: processing made under the project PNII partnerships, no /2008, based on statistical information from Communes Sheets. Compared to the national situation, there can be noticed resemblances and some differences. The factors on which the rural socio-economic inequality level mostly depends are those regarding the demo-social dimension, the indicators attached to this criterion explaining 31.4% of the total variation of the inequality level. Under this dimension, the most relevant aspects are related to: sold of residence changing/1000 inhabitants which reflects the demographic desertification risk of rural communities that are economically and socially isolated and are no longer attractive for living; the second demo-social aspect relevant to socio-economic inequality is the natural increase, which reflects the demographic ageing risk, labor force ageing and depopulation of rural communities. The territory equipment of the rural communities is the second predictor of inequality, as this explains 24.8% of the total variation of rural inequality. The most important aspect from the territory equipment point of view, relevant for socio-economic inequality, is the dwelling comfort (expressed by the quantity of distributed potable water to households and the habitable area/inhabitant. Equipment of the communes with technical infrastructure elements (water supply networks, natural gas supply networks and sewerage systems) which, in its turn, has a significant contribution to the explanation of the general socio-economic inequality, as the indicators that measure the simple length of natural gas supply pipelines of the are the most relevant for the general inequality, as compared to the indicators related to other technical infrastructure networks. The indicators related to the economic dimension of rural communities represent the third stage in the order of importance of factors determining the socio-economic inequality level. Overall, the economic dimension explains 23.1% of the total variation of the inequality level. Among the indicators composing this dimension, the most relevant in the differentiation of communes is average number of accommodation places/accommodation unit due to the poor development of tourism infrastructure and weak tourism potential promotion. The second aspect, economically important, is the incidence of contractual relations on the labor market (measured by the indicator number of employees/1000 inhabitants), which reflects the access opportunity to a paid job and the diminution of the risk of dependence on own agricultural holding. Social infrastructure is on the fourth position in the hierarchy of criteria conditioning the distribution of communes on the socio-economic inequality scale, this criterion explaining 17.1% of the total variation of the inequality level. The indicators that measure the social infrastructure development level (number of pupils/ teacher, number of inhabitants/physician) have a narrow variation range, the most part of the communes from Romania being characterized by the poor development of these infrastructure elements which make them have a low incidence on the inequality level. The number of computers/1000 inhabitants reflects the risk of not having access to electronic information resources. This indicator is the third indicator that explains the total variation of cumulated socio-economic inequality. The criterion Investments has a low incidence upon the general inequality level (it explains only 3.6% of the general variation of socio- economic inequality). For most of the communes the share of new dwelling (finished homes in 2008/1000 existing homes) is not significant, which overall also makes the criterion Investments be less relevant for the economic-social inequality 10

11 structuring in rural Romania at present. The relevant two indicators are socio-economic dimension (31.38%) and economic dimension (23.11%) criterion situated on the first position in the case of South West Region (see Table 1). Table 3. The importance of the socio-economic inequality indicators for the justification of the general variation of the inequality degree at national level (rural level) % in the total Criteria Indicators variation of cumulated variation National TERRITORY EQUIPMENT DEMO-SOCIAL DIMENSION SOCIAL INFRASTRUCTURE ECONOMIC DIMENSION Habitable area / inhabitant (square meters/inhabitant) 1.86 quantity of distributed potable water to households (cubic meters/inhabitant) simple length of potable water network (km) 2.64 simple length of sewage network (km) 3.01 simple length of the natural gas distribution 6.59 network (km) natural population increase/1000 inhabitants 5.67 divorces/1000 inhabitants 3.70 sold of domicile changing/1000 inhabitants 2.64 sold of residence changing/1000 inhabitants sold of external migration/1000 inhabitants 5.37 number of pupils/teacher 5.21 number of inhabitants/physician 3.81 number of PCs/1000 inhabitants 8.10 number of employees/1000 inhabitants 4.80 percent of arable area in total agricultural area 4.22 percent of vineyards and orchards in total agricultural 4.36 area average number of accommodation places/accommodation unit 6.46 number of overnights/accommodation 3.28 INVESTMENTS finished homes in 2008/1000 existing homes 3.63 Source: processing made under the project PNII partnerships, no /2008, based on statistical information from Communes Sheets. As for the indicators, the seven most important ones are (see Table 3): sold of residence changing/1000 inhabitants (14.00%); quantity of distributed potable water to households (cubic meters/inhabitant) (10.65%); number of PCs/1000 inhabitants (8.10%); simple length of the natural gas distribution network (km) (6.59%); average number of accommodation places/accommodation unit (6.46%) natural population increase/1000 inhabitants (5.67%); sold of external migration/1000 inhabitants (5.37%). Only three of the indicators selected at national level are relevant for the inequalities manifested at South West region level: average number of accommodation places/accommodation unit, quantity of distributed potable water to households (cubic meters/inhabitant), simple length of the natural gas distribution network (km). Based on the figures characterizing the indicators and the criteria presented above for the South West Region, a SWOT analysis was sketched: Table 4. SWOT analysis for South West Oltenia Region Strengths Weaknesses High comfort of living in communes from Dolj and Mehedinti Counties; Quality technical infrastructure in some communes; 11 Low comfort of living in communes from Olt, Gorj and Valcea Counties; Poor technical infrastructure in many communes;

12 Tendency to preserve traditional values (such as family); Weak migratory flows abroad; Premises for a good quality of social services (education, sanitary); High share of arable land in the whole agricultural land; High fertility of arable land; Experience and tradition of communes from hilly zone in vineyards and related activities; High touristic potential of communes of mountain zones or of balnear resorts; Existence of mining areas in Gorj department. Opportunities Development of the comfort of living in order to increase the quality of life of rural population; Development of the rural technical infrastructure in order to develop business environment; Increase of active population by attracting the urban population affected by the precarious economic situation; Keeping teachers and physicians by rising the quality of endowments; Increasing agricultural and touristic investments; Economic development of communes nearby Danube while intensifying the efforts to better exploit it; Development of social infrastructure and services; Increasing the attractiveness degree of rural environment. Tendency of population reduction and ageing; Weak tendency of social emancipation; Relative instability of habitation; Low access to information; Poor accommodation capacity; Lack of employment opportunities; Low capacity to promote rural services complementary to agriculture (agro-tourism); Low interest for property investments in communes outside the influence area of urban centers. Threats Insufficient funds on short and medium term to develop rural infrastructure; Deepening the discrepancies between rural and urban; The fast population decline; Teachers and physicians leaving in the context of the demographic reduction; The impossibility of a real competition between rural inhabitants and urban ones (mostly on the labor market) and deepening of social and professional training discrepancies; Increase of the rural population dependency on social transfers and agriculture; Migration of young rural population towards urban zones; Loss of capitalization opportunities for the touristic potential of the region; Insufficient funds for infrastructure and social services development as a base for the increase of the rural attractiveness; Slow development of rural economy; Increase of economic disparities between north and south of the region; Deepening of the imbalance inside rural communities. ECONOMIC POLICY MEASURES THAT CAN ATTENUATE THE INEQUALITIES MANIFESTING AT RURAL LEVEL IN SOUTH WEST OLTENIA REGION, CONSIDERING THE TWO SELECTED CRITERIA The two relevant criteria and the seven indicators resulting from the analysis of the South West region make the object of proposals for the reduction of the inequalities, as follows. Proposals of necessary measures for the attenuation of inequalities observed at rural level must begin with the analysis of socio-economic facts characterizing this region. We are talking about a region reuniting departments heterogeneous not only in terms of nature facts (relief, area, minerals) but also in terms of economy. The departments from the north have a high touristic potential (bathing waters, natural landscapes, historical objectives, religious objectives), while the departments from the south are mostly agricultural (cereals in particular). Industrial activity is referring to minerals extraction, chemistry, wood exploitation and other manufacturing industries. Efforts in order to improve the territory equipment are necessary because of the fact that the lack of investments in modernizing public sewage and drinking water networks affect upon the quality of water and thus, upon population s health. Also, bad conditions of residual waters collection imply a 12

13 high degree of pollution of streams and the insufficient number of garbage dumps negatively affect environment. Further we will present measures regarding the two relevant indicators selected in the table above as the most important for the territory equipment: attraction of investments in infrastructure by accessing European funds; finding funding sources at local level, possibly by uniting the efforts of several neighboring communes which can beneficiate of mutual utility networks; another possibility are private-public partnerships in order to realize such works; a better informing of the population about the benefits of using sewage and drinking water networks, while maintaining low costs for those services; encouraging the establishment of bank branches and other credit institutions at rural level for a better access to funding; The economic situation of South West region is rather precarious, the low level of development of the region being due to the low level of directs foreign investments. Economic restructuration made a part of the aged unemployed population from urban centers to head to rural zones where they practice subsistence agriculture. The large share of rural population and the large area of arable lands, mostly in the south, make from agriculture the most important sector of the region s economy. About the reduction of economic discrepancies of the region, measures can be conducted for: accessing European funds in order to develop mountain and health tourism; supporting the local business (from agriculture but also from industrial manufacturing of agricultural products), in their efforts to obtain funds (national or European ones) in order to conduct their activity and also to find new markets; Transforming the Danube from a natural barrier to economic changes into a favorable factor by putting into place custom checkpoints to Bulgaria and ex-yugoslavia countries. In this manner, Danube can be used as a faster transportation route. Establishing free zones along the Danube; Developing the transportation infrastructure at rural level (mostly railways and routes); Reviving the former industrial zones by putting into place industrial parks in communes situated nearby big cities. ECONOMIC POLICY MEASURES THAT CAN ATTENUATE THE INEQUALITIES MANIFESTING AT RURAL LEVEL IN SOUTH WEST OLTENIA REGION, CONSIDERING THE SEVEN SELECTED INDICATORS The analysis of the seven indicators selected above need correction measures of inequalities, such as: The indicator average number of accommodation places/accommodation unit (13.26%) and number of overnights/accommodation (11.56%) are deeply connected and, in order to attenuate the inequalities, we propose the following measures: o Attracting European funds in order to develop rural tourism activities; o Establishing information and counseling points about European funds attraction in zones with unexploited touristic potential; o Exploitation of local specificity for touristic development even in less attracting zones from natural point of view (in the neighborhood of European and national routes, organizing local celebrations and festivals, organizing events with local specificity wine testing, thematic agricultural exhibitions, religious touristic circuits); o Orientation to recreational activities without rural specificity but which can be conducted in rural areas horse riding, mountain trips, extreme sports, sporting competitions; 13

14 The indicator number of pupils/teacher (9.47%) may lead to inequalities either because of a reduction of the number of teachers working at rural level, or because of a depopulation of communes, of their ageing, having as a consequence the reduction of the number of pupils. The measures must be oriented in two directions: o The restoration of the teachers number by: Encouraging the teachers to activate at the country by facilitating their transportation, accommodation or meals and encouraging the young university graduates to return into the community; Rehabilitating the educational spaces and their endowment with modern teaching means computers, labs; o Increasing the number of pupils in communes by: Increasing natality by ensuring better means of living; Reducing migratory flows towards urban centers or abroad by ensuring jobs at local level. Inequalities induced by the indicator percent of vineyards and orchards in total agricultural area (8.02%) can be explained by the heterogeneity of landforms at regional level, only a part of those being appropriate for orchards or vineyards. Still, even in communes where the necessary conditions are fulfilled it can be noticed a trend of reduction of such areas. Therefore, measures can target: o Reestablishment of vineyards and orchards where they existed before and where, by retrocession, they were dissolved or abandoned, using fiscal facilities (at local level) or supporting funds accession; o Encouraging the establishment of agricultural associations; o Supporting local producers in their efforts to find business opportunities in order to sell the production, by organizing local or regional fairs, informing media and tourists about local or regional industries. The indicator quantity of distributed potable water to households (cubic meters/inhabitant) (6.71%) explains inequalities because in more than half of the region s communes drinking water networks are missing, therefore there is no distributed water. For the regions beneficiating of drinking water networks, the discrepancies among used quantities of water are explained by various factors: some communes don t have alternative sources of drinking water, others use water for agricultural purposes watering gardens, feeding animals, in other communes with relatively large networks distributed quantities are small because many households chose not to use those networks. Inequalities reduction measures may be: o Accessing European funds in order to develop water networks; o Encouraging branching to water networks, some arguments being water quality and its high degree of accessibility; o Maintaining reduced prices for the distributed water by using local sources of potable water and reducing distribution lengths. In the case of simple length of the natural gas distribution network (km) (5.72%) it can be noticed that the region has 90% of the communes not branched to gas networks (in Mehedinti county, the proportion is 100%), therefore the measures may be: o Higher accession of European funds for gas networks development; o Attracting investors in industry, mostly for communes nearby cities, interested to develop gas networks that can be expanded afterwards; About the indicator sold of domicile changing/1000 inhabitants (5.40%), its high influence upon inequality degree can be attenuated using the following measures: o Reducing migratory flows, both internal and abroad, by rising living standards and assuring a good insertion on local labor market for active population; o Creating development opportunities for small family businesses, both in agriculture and tourism or in small traditional crafts; 14

15 o Developing community cohesion through a bigger attention paid to social and cultural activities taking place at local level. CONCLUSIONS This analysis was completed under the frame of the project by a cluster-type analysis, the region s communes being divided into three clusters, depending on the degree of social and economic inequality, making possible the extraction of other types of conclusions. The results of cluster analysis and data series on rural economic and social inequalities led to the partitioning of the communes in the South West region into three clusters. Thus, communes can be divided into: rural communities characterized by a lower level of rural socio-economic inequalities (cluster I) 11.3%; those communes are situated nearby big cities, nearby important transportation routes, in hilly and mountain zones, the main activities being tourism, orchard and vineyard culture and they also have a good access to technology and information ; rural communities characterized by a medium level of socio-economic inequalities (cluster II) 42.1%; rural communities characterized by a higher level of rural socio-economic inequalities (cluster III) 46.6%; communes included into this category are situated in plains and the main occupation is agriculture. The study was finalized by developing complex scenarios for inequality attenuation, depending on the determined situation. If we look at this region s situation in a larger context, at national level, we can observe a relatively high inequality degree, with high intervals between minimum and maximum levels which lead us to the conclusion that this region needs more than others firm, rapid and radical measures on all levels of social and economic life, so that development discrepancies do not amplify, but even diminish. REFERENCES 1. Popescu Ramona Florina, Ungureanu, Emilia, (2012), Attenuation Scenarios of Socio- Economical Inequalities at Rural Level - South-West Oltenia Region, The USV Annals of Economics and Public Administration, vol.12, issue 1(15), pp Rusu Marioara, Florian Violeta., Tudor Monica (coordinators), (2011), Socio-economic inequalities in rural space, Regional profile analysis, Terra Nostra Publishing House, Iasi. 3. Tudor Monica, Rusu Marioara, (2011), Romanian rural area typology by the inequality level - A multicriterial approach, Scientific papers, Series I, Volume XIII, USAMVBT Faculty of Agricol Management, Agroprint Publishing House, Timişoara, pp ***, Project PN II, Partnership, no /2008 Economic-social models to attenuate the inequalities in the rural areas by regions ( ). 5. NIS (2010) Communes Sheets

16 The USV Annals of Economics and Public Administration Volume 13, Issue 1(17), 2013 SOME ASPECTS REGARDING THE PREDICTABILITY OR NON- PREDICTABILITY OF THE GREAT DEPRESSION. CASE OF ROMANIA Lecturer Ph.D. Mariana LUPAN Stefan cel Mare University of Suceava, Romania Abstract: Analysis of the crisis, particularly financial ones, the generating factors and the applicable patterns to return to normality is a consistent and timely concern of researchers in economics. After the advent of the global crisis in mid- 2007, many researchers recognized internationally and nationally formulated theories about the causes, effects and intensity of the current crisis, providing reference works in the field. The starting point of the research puts in the spotlight the fact that the deepest crises have their "origins" in developed countries, but are funded by the emerging countries. In the context of this "reality" the economy seeks to predict the possible behaviours in configuration of a context to return to normality, where unexpected trends and consequences of unintended effects require completion of the theory deficit in Romanian economic literature regarding the economic effects caused by subjective decision, especially political decisions. Carrying out research with a high degree of completeness, necessarily requires knowledge and understanding of the history of financial crises, starting with the Great Depression, focusing on the implications on the Romanian economy, and in particular, on the intervention models commonly used in order to identify "optimal model" that allows escalation of the current crisis, but also a more accurate predictability of future adverse events. Key words: financial crisis, economic crisis, economic growth, banking, globalization JEL classification: F61, F62, G01, O10 THE GLOBAL ECONOMY AND THE GREAT RECESSION OF 2007 Since the beginning of the current crisis, theorists, economists, but also major economic actors and governments have sought to identify similarities with the Great Depression in the years , and with the crisis that followed the Second World War. There are also many questions about the ability of models and quantitative analysis to signalise or not the onset of such a deep crisis. On September 7, 2006, being present at a conference organized by the International Monetary Fund in Washington DC, Nouriel Roubini issued a warning hard to be accepted at that moment by the U.S. economy: "the nation's economy will soon suffer a dramatic fall, that you only assist once in a lifetime, of the housing market; a brutal shock oil; a steep decline in consumer confidence and, inevitably, a deep recession". The end of that speech was quite clear "housing market collapse could lead to a systematic problem for the financial system", and unfortunately only a few months after this warning the events precipitated, and this scenario has become a cruel reality. It is widely accepted that the Great Recession that began in 2007, which had its epicentre in the U.S. was caused by speculative bubbles in the housing market due to unprecedented growth and no correlation with price reality on the housing. But this was not the only trigger, we can talk about a number of factors, namely: trade record deficit and current account deficit, which attracted cheap foreign capital inflows and permissive regulatory policy. Profound effects manifested on financial markets and also at the level of global economy emphasize that we are dealing with "the most serious global financial crisis since the Great Depression" (Reinhart and Rogoff, 2009). We can question whether, at least in the year 2006, we could identify some signals that could attract attention to the event triggering the crisis. Reactions in the period before the crisis can be grouped into two categories: alarmist reactions (those that predicted the occurrence of events leading to a crisis), and refusal reactions in which regards the possibility of crisis to started. 16

17 Refusal reactions Dooley, Folkerts-Landau and Garber from Deutsche Bank (2004): [ ] U.S. current account deficit is only a natural consequence of the emerging states efforts to engage in export-based economic growth and their need to diversify investments in safe assets. Ben Bernanke (2005), referring to the overindebtedness of USA: [ ] Middle East countries are looking for ways to use their earnings from oil, and countries with underdeveloped systems as China, are seeking to diversify their investment portfolio with safer assets. The low rates of return on investment from the rest of the world simply make our country to be particularly attractive for investment. Alan Greenspan (2006) [ ] the growing deficit (of the U.S.A) reached over 6.5% of GDP in 2006, is merely a reflection of the more general trend towards global financial development, which allows countries to sustain current account deficits and surpluses more higher than in the past. Alarmist reactions Obsfeld and Rogoff (2005): [ ] c The U.S. current account was unsustainable oversized. Roubini and Setser (2005) [ ] U.S. loan problem will worsen even more, reaching 10% of GDP before the dramatic collapse. Paul Krugman (2007) [ ] will inevitably occur a Wile E. Coyote moment when the unsustainability of the U.S. current account will become clear as day to everyone, and the dollar will fall sharply. If we review the events that occurred after the Second World War, I think the situation would become slightly clearer especially in terms of forecasting ability or non-predictability of the current financial and economic crisis. The period after the Second World War was characterized by a multitude of turbulence situations that have caused systemic crisis: the first oil shock of the mid- 1970s has been accompanied by episodes of severe inflation; the banking crisis in Spain 1977; recessions caused by measures to combat inflation that occurred in the early 1980s; banking crises in the Nordic countries (Norway in 1987, Sweden and Finland in 1991) and the crisis in Japan in the early 1990s (lost decade); exchange crisis called "Black Monday" of 19 October 1987, when stock markets around the world have lost large sums of money (e.g. Hong Kong stock exchange recorded a loss of 45.8% of its value, market London has lost 26.4%, while the New Zealand stock exchange recorded a loss of 60%) dot-com crisis in Each of these crises have affected equally both developed and emerging countries, however some authors believe that after the mid-1980s the world economy was characterized by a "decline in macroeconomic volatility" (McConnell and Perez-Quiros, 2000; Blanchard and Giavazzi, 2001). But would things have been like? The debt crisis of the 1980s that manifested as tough as the Great Depression of the 1930s, affected the Asia, Africa, Latin America and some countries in Eastern Europe (the former Soviet Union and Romania) and culminated with the insolvency of Argentina from Therefore, I consider that period between the early 1980s and until 2003 was characterized by a high degree of macroeconomic volatility. The period was characterized by global economic growth, the increase in the price of goods due to lower interest rates, lower unemployment, and these positive developments have led many scholars to believe that the global economy has entered an uptrend. However, although the "positive aspects" are undeniable, my first warning sign that comes to contradict the optimism of that period appeared in September 2001, when the United States suffered the worst terrorist attack in history. I think that was the start of the global economic decline that culminated in September 2007 with the outbreak of the current crisis. Referring to how a crisis is signalled, Reinhart and Rogoff (2009) consider that the majority of attacks that hit the global economy after the Second World War have two basic elements in common: on the one hand, raising venture capital to counter current account deficit, on the other hand unprecedented growth of real estate prices. Therefore, where these two elements are emerging, 17

18 it is necessary to adopt measures to limit their adverse impact. Also, as Reinhart and Rogoff (2009) but also Krugman (2007) and Minsky (2008) argue that liberalization and poor regulation played a major role in triggering the global financial crisis. We must not lose sight of the fact that liquidity shortages cause problems for the banking system, in particular, and the reduction of cash flow is the initial stage for the emergence of a crisis. In this situation, banks are forced to put up for sale assets, causing a domino effect that leads to lower the bank's assets and ultimately to the crisis of solvency (Lybeck, 2011). Referring to the instability that can be caused by the banking system, Keynes (1936) stated that "the alarm associated with the rapid growth of debt is the fragility of many of our financial institutions." Also Keynes is one that draws attention to the economic boom that we associate with "optimistic expectations of future yield of capital-assets ratio," but he further states that "when disillusionment is installed in a too optimistic market with excess demand the market collapse is imminent. Another way to estimate the crisis is highlighted by Minsky (2008). He states that "financial panic is possible because of changes in financial structure that occur during the long expansion of optimism." Typically, during periods of economic expansion, both investors and financial institutions consider that they are safe and will focus on investments with high risk and most relevant example of this is the large number of securitized products traded in the period before the crisis in 2007, which led to the development of a "shadow banking system". Also, Minsky believes that the gap between the financial economy and the real economy will lead to future instability. In this respect, the most relevant examples are Ireland, Iceland, the UK and U.S.A, where oversized financial components of the economy is evident in relation to the real economy (Lybeck, 2011). The empirical analysis conducted so far allows synthesizing crisis warning signals (Lybeck, 2011): - unrealistic increase in the value of assets, shares and house prices; - current account growth deficit; - lowering the household savings; - increasing indebtedness; - large volume of short-term loans of corporations, banks and households; - investing with a high degree of risk; - excessive liberalization of the capital market and its poor regulation. KEYNES S INTERVENTIONISM VS. SCHUMPETER'S CREATIVE DESTRUCTION The devastating effects of the financial crisis require the implementation of recovery measures which have to be more easy to apply by all governments of the affected countries, and the results of these measures should focus primarily on economic growth, financial stability, decreasing unemployment, and diminishing and stabilization of government debts, in a word, going beyond the highest rate of growth. Measures to overcome the crisis are addressed differently from country to country and in the USA, but also most representatives of the G20 agreed that the measures J.K. Keynes found to be optimal for the Great Depression of the 1930s are to be applied to the current crisis. Thus, Keynes argued that the deficit should be increased to stimulate the economy, i.e. states must intervene to make the economic system work, but the intervention must be limited meaning that "will leave untouched the private property and the right to make decisions" (Krugman, 2008). State intervention in the economy, advocated by Keynes, was also criticized by proponents of the Austrian School who believe that economic interventionism, implementation of some loose monetary policies and the regulation will generate disturbances in the effective functioning of the free market. An important representative of this school of thought is Joseph Schumpeter and the theory of "creative destruction" that he developed is considered a more viable alternative to escalating financial and economic crisis. According to this theory, times of crisis and recession caused by this crisis is "the process of industrial mutation which revolutionizes the economic 18

19 structure from inside" after which will survive the economic agents that have a high capacity for innovation and succeed in creating a new economic order (Schumpeter, 2006). Keynes' interventionist effects are concretized in fixing of prices for the capital assets and for the special economic properties of financial institutions capitalist economy. The focus is on performance capitalist system which emphasizes investment, the way in which investments are funded and the effects of financial commitments. The author points out that the market mechanism is not necessarily a system capable of self-regulation which pursues and sustains for itself the full employment of labour, therefore capitalism is a system that occasionally unbalances, but can be stabilized by state intervention. (Keynes, 1936) Contrary to these arguments Schumpeter believes that the state should not intervene in the economy even when it is facing a situation of crisis because instability is the consequence of innovation, and this is the essence of capitalism. Therefore both businesses and nonperforming financial institutions should be left to self-destruct so that in the end only the strong to hold (Schumpeter, 2006). I appreciate that the effects of "creative destruction" can be harmful to the global economy, particular in the situation of devastating crisis, as the current one, if we consider interconnections that actually enable the economy to function as a whole. Considering sustainable the Keynes's approach regarding to measures to stimulate the economy, Stiglitz (2010) consider that a well-found incentive scheme is based on the following principles: a) must be fast, i.e. it is absolutely necessary the supply of money in the economy; b) must be effective, in the sense that each monetary unit spent should generate increased employment and production growth; c) must address long-term problems of the country, which means that an effective system of measures to consider raising national saving, reduction of trade deficits, rehabilitation and development of infrastructure, provision of long-term financial programs for social assistance, etc.; d) must concentrate on investments: investments are envisaged investments in assets that lead to long-term productivity of the country, which will positively affect the standard of living; e) must be equitable, i.e. do not undertake measures that will be advantageous only for certain category of the population (this refers to the top class of society); f) must deal with pressing short-term needs that would be created by crisis in the sense that a well-designed set of measures should assist countries which, due to the lack of money, they cut jobs; g) stimulation should be directed to areas where there are layoffs in the sense of allocating financial resources to personnel retraining. SOLUTIONS FOR ROMANIA: LIMITED INTERVENTIONISM OR DISRUPTIVE ACTION The effects of financial crisis triggered in 2007, which had its epicentre in the United States still has adverse effects on the economy of our country. I will address solutions which Romania has implemented and will implement them to climb out of the recession through a comparative study between the Great Depression of the 1930s and the Great Recession that we face This approach was taken also by Reinhart and Rogoff (2009), and the authors believe that there are similarities between the two crises, first of all because it had the same trigger point location (USA) but also by the fact that in both cases we are dealing with the increase in government debt in affected countries, as well as with a high volatility in asset prices Certainly, the current crisis differs from the Great Depression by the fact that due to financial globalization, technological change and information technology spillovers are much faster and recovery measures are more diversified. Financial innovations and poor regulation and supervision of financial institutions are distinct elements that differentiate the current crisis. 19

20 It is generally accepted that programs of severe cost reduction and increase taxes as well as growing in rates of interest lead to reduction of economic activity, also causing decreasing of budget revenues The austerity measures that the Romanian government has taken in May 2010 such as cutting wages, social insurances and pensions, are consistent with those the executive in the period has considered optimal for reducing the government expenditures are known as "curves of sacrifice". On the other hand, we can identify as being of nature of "limited interventionism" the measures Romanian government envisaged, and these measures are consistent with measures taken at EU level, namely: 1. the ratification of Fiscal Stability Treaty which provides common budgetary rules entitling control over national budgets to the European Commission. Treaty establishes as threshold limit for structural budget deficit up to 0.5% of GDP, which implies maintaining public debt below 60% of GDP. The "Golden rule" of the treaty refers to the fact that the budgetary deficit plus the structural one will be within the limit of 3% of GDP. Failure to comply with these terms will trigger an automatic correction mechanism which shall be provided in national law. Therefore, the aim of this treaty is to strengthen the fiscal discipline. 2. the establishment of the Financial Supervisory Authority (FSA) which merges the National Securities Commission (NSC), the Insurance Supervisory Commission (ISC) and the Commission for the Supervision of the Private Pension System (CSPPS) and is responsible for the prudential supervision of the capital market, insurance sector and system of private pensions funding. A highly debated and analysed issue regarding measures and solutions to revive the economy, is the financial stability and economic growth. Analysing this issue Krugman says that "you cannot have prosperity without a functioning financial system but financial system not necessarily leads to prosperity." Also, NRB governor Mugur Isărescu pays particular attention to financial stability, but it is an interesting approach that he had it before the crisis, and then, after its effects have been felt plentiful in the Romanian economy Before the crisis The main source of financial instability is inflation therefore the condition "(almost) sufficient" to promote financial stability is to ensure price stability. To simplify the design and implementation of monetary policy and to avoid conflicts at the level of proposed objectives it is necessary the clear separation of function of price stability assurance from function of financial stability assurance. Markets always have the ability to self-regulate and therefore it is not required extensive intervention in the financial markets from the monetary authorities. After the crisis The global financial crisis that broke out in 2007, in the conditions of an economic environment characterized by low inflation, shows that price stability does not guarantee financial stability. Mitigating the consequences of the financial crisis is proving much more expensive than authorities intervention to limit or correcting imbalances in an early stage of their manifestation. "The costs associated with distortions a relatively high level of inflation generates may be less important than the losses caused by distortions in the financial sector" (Stiglitz 2010) Therefore, the crisis revealed on the one hand, that globalization involves a high degree of difficulty to macroeconomic governance; on the other hand, the relationship between financial system and the unpredictable effects of external events is a major obstacle to the implementation of internal policies. CONCLUSIONS In 2011 the negative effects of the financial crisis triggered in 2007 have increased as a result of the sovereign debt crisis of the old continent countries. Most European Union member states, except Germany, have faced and unfortunately continue to face with low rates of economic growth, and this period of instability caused a reduction in living standards for the entire society. At 20