Shortage-Driven Inflation: Causes, Effects, and Modes of Manifestation in the Socialist Romanian Economy

The illusion cultivated by the doctrinaires of the socialist system was the belief that they could resolve the problem of economic disequilibrium. In reality, the issue extended far beyond the imbalance of the economy; it involved the rewriting of all governing laws, including economic ones. The socialists lived under the conviction that their world was perfect—so perfect that it stood above individuals and their actions. History has shown that this was nothing more than a naïve and misguided form of arrogance. Hayek describes this mechanism of dictatorial conceit in his work The Fatal Conceit: The Errors of Socialism. The communist authorities undertook a rapid and superficial classification of economic phenomena into “good” and “bad.” They imagined a perfectly stable economic system in which phenomena such as inflation and unemployment would not exist. Reality contradicted them. Economic laws continued to operate even where legislation sought to prohibit them. The collapse of communism stands as evidence that the economy and its laws remain above human intervention. Inflation silently eroded socialist economies, including Romania’s. Even though price increases were prohibited by law, inflation did not recede. Instead, it manifested as shortage-driven inflation, characteristic of shortage economies. This study examines how inflation continued advancing even when explicitly forbidden by legislation.