Economics – Alexandru Diduc

Is Moldova still a failed state (2025 update)?

As a born on the territory of the Republic of Moldova, I naturally tend to follow what is happening in the country. Normally, I refrain from commenting about the political events because find it as interesting as commenting flea racing. Why would I change the habit?

While checking through my old notes and files, I stumbled upon something I wrote in almost ancient 2008. We were assigned to produce an essay arguing why our home country is a failed state for the Political Economy class. It was quite interesting to read it after the passage of time. I am pleased to notice that although I had rather naive perceptions about the potential of better future for the Republic at that time, the background analysis of the problem still remains rather valid.

So, what has changed since?

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Essay: “Republic of Moldova – Natural Tragedy or Controlled Disaster” (2008)

PDF version: Diduc Alexandru – Political Economy, Moldova

Alexandru Diduc
April 22, 2008
Moldova – Natural Tragedy or Controlled Disaster
4052 words

Abstract

This essay will focus on the reason for the instability in Moldovan economy and the failing state the Republic of Moldova is. The central idea of the paper is that the causes for the controlled disaster in the country are not only internal but mostly they are of the external origin. The internal causes are the mostly agrarian economy and the transnistrian conflict. The external causes are the incompatible geopolitical and geo-economical interest of the EU and Russia. Transnistrian region and Moldova is used in this game as a small change and a tool of control. The change in the wellbeing of the united Moldova is expected to come with the settlement of the conflict and dynamic implementations of reforms.

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Introduction

Moldova is widely famous for its wines, its poverty and 4,163 km² of uncontrolled territory on the left bank of the Dniester River. It is a matter of fact that Moldova is a failed state and a weak functioning economy. These are just consequences of the more complicated processes that influence the outcome. The Republic of Moldova (RM) is just a small card played on the table in the geopolitical game of the superpowers in the region. Unmatched geopolitical and geo-economic interests of pragmatic and contradicting Russia and EU and of ambitious Moldova are the main reason for the failed state and poor economy as Moldova is now. But the change is expected to come in 2009 and the following years with the settlement of the Transnistrian conflict and the energetic implementation of the reforms.

My assumption is that there are no any inner parties interested in fueling the instability in the state between Moldova and Transnistria, and which stand behind the weak economy. Thus, there should be any external forces, Russia and EU, which directly or indirectly influence the present situation in the economy and state. Moldova is a peaceful nation and the nation that highly values stability, predictability and wealth. Moldovan people like to work and enjoy the times of economic and political stability more than anything else. Moldovans have low but firm expectations of stability, which they pursue either through the migration or short term employment abroad. But mostly these are the short-term solutions and in the good times the population is going to return. Thus, the resolution of the Transnistrian conflict and dynamic economic reforms along with the EU integration will bring the prosperity and positive change in this region.

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Globalisation no more… what is next?

Image source: http://www.chinadaily.com.cn/a/201907/01/WS5d196537a3103dbf1432b248.html

Mark my words, but the situation we have today (as of May 2020) in the economy and politics globally is the end of globalisation as we know it. If you missed somehow in the notion of globalisation, it is, according to IMF 2000 definition, “the increasing integration of economies around the world, particularly through trade and financial flows.” Besides the trade and capital movement, it relates among many others to the movement of people and the spread of knowledge/technology as some of the most important mechanisms for the existence of globalisation. We are about to witness how all of these are going to be trashed or replaced. Replaced with what? Now, this is a good question. To even distantly approach it, we need to see why/what for globalisation exists, what happens now (past years, even a decade) to threaten its existence. Only then we can imagine/fantasise what is next.

Why globalisation exists?

It is almost a common sense that trade is a part of the big geopolitical game and the rules were set to serve the interests of the main beneficiary (-ies). Let me reemphasise: it was assembled by the interested player(s) for the expected benefits of the interested player(s). If someone is good at swimming, it would be naïve to propose to compete at marathon running especially with professional runners. If you are good at swimming, then make everyone swim. The existing global trade system was designed to facilitate trade in those areas, where the western civilisation has a relatively good edge against the rest. The system is designed to support the trade of high-tech products, goods and services, and financial instruments which yield thicker profit margins. The rest of manufacturing, for instance, is considered insignificant and was outsourced to the second and third world countries. No one designed the system for the resistance of the heavy stress conditions, global crisis, major threats as this is not the main strength of the one who sets the rules.

In the post-Soviet era/post-Cold War era, it was considered that the development of the globalisation would secure the leading position of the USA as the main beneficiary. The foreign policy of Ronald Raegan administration brought “the giant” to the knees. The decision was made to ransack the Soviet Union, Russia and the satellite states, benefiting of the abundant resources and relatively unsaturated market of Eastern Europe. Think for a moment about the geographic spread: from Eastern Germany on the west, to Yugoslavia on the south, up to Estonia and all the way to Russian Kamchatka laid the market to consume the manufactured products and resources awaiting for someone to get hold of them. The pie was too big to digest alone so the States brought to the table its Western European allies. At about the same time, China was allowed to get access to the globalisation system. China, at the time, was a huge pool of cheap human resource and outsourcing some of the insignificant tasks made good sense. Then producing more advanced products made equally good sense, since no one expected anything of China. The players made money out of this cooperation, but no one expected that China can win the race. The race was for the white gentlemen to win – not for China. Fast forward to present days, here we are: China is the biggest manufacturer, biggest economy, with the biggest internal market, projecting its influence there, where only the gentlemen were allowed (Africa, Middle East, Europe and even Americas).

What happens now?

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Internationalization strategy: how to go from local to global

Internationalization is a complex process with many scientific articles dedicated to that. Comprehensively presenting it in a format of a short blog post is a task that requires major simplifications. Nevertheless, here is what it takes from a company to consider this major step in terms of market, operation modes and product – internationalization strategy canvas.

Understanding the big picture is critical for strategic decision-makers. Implementation of a decision too early or too late can turn very costly. Especially in the context of internationalization, a right decision in a right time makes an ordinary company extraordinary. The challenge is though how to understand the timing and correctly interpret the operational context of a firm, when external environment is always in a change?

International trade is an “infinite game” (see Carse 1986). Good news is that rules are the same for all players; the pace of the game is different, but stages are the same; the sequence of steps is different, but steps are the same. Each player sets own goals and selects a strategy. As it is common for the games, choices come with a price tag. Once the setup of the game is clear, the action is just a matter of imagination.

Figure 1. Internationalization process canvas

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