The Agrarian Crisis and the Rise of the Iron Guard
Romania's economy boomed during the interwar period. The government raised revenue by heavy taxation of the agricultural sector and, after years of Liberal Party hesitation, began admitting foreign capital to finance new electric plants, mines, textile mills, foundries, oil wells, roads, and rail lines. Despite the industrial boom, however, Romania remained primarily an agricultural country. In 1929, when the New York Stock Exchange crashed, world grain prices collapsed, and Romania plunged into an agricultural crisis. Thousands of peasant landholders fell into arrears, and the government enacted price supports and voted a moratorium on agricultural debts to ease their plight. In 1931 Europe suffered a financial crisis, and the flow of foreign capital into Romania dried up. Worse yet, the new industries could not absorb all the peasants who left their villages in search of work resulting in high unemployment. When recovery began in 1934, the government used domestic capital to fund new industries, including arms manufacturing, to pull out of the agricultural slump. The depression slowed capacity growth, but industrial production actually increased 26 percent between 1931 and 1938, a period when practically all the world's developed countries were suffering declines.
In the early 1930s the Iron Guard, a macabre political cult consisting of malcontents, unemployed university graduates, thugs, and anti-Semites, began attracting followers with calls for war against Jews and communists. Peasants flocked to the Iron Guard's ranks, seeking scapegoats for their misery during the agrarian crisis, and the Iron Guard soon became the Balkans' largest fascist party. Corneilu Zelea Codreanu, the Iron Guard's leader who once used his bare hands to kill Iasi's police chief, dubbed himself Capitanul, a title analogous to Adolf Hitler's Der Führer and Benito Mussolini's Il Duce. Codreanu's henchmen marched through Romania's streets in boots and green shirts with small bags of Romanian soil dangling from their necks. Codreanu goaded the Iron Guards to kill his political opponents, and during "purification" ceremonies Guard members drew lots to choose assassins.
After an Iron Guard assassinated Premier Ion Duca of the National Liberal Party in 1933, Romania's governments turned over in rapid succession, exacerbating general discontent. Iron Guards battled their opponents in the streets, and railroad workers went on strike. The government violently suppressed the strikers and imprisoned Gheorghe Gheorghiu-Dej and other Communists who would later rise to the country's most powerful offices.
In December 1937, when the National Liberals were voted out of office, King Carol handed the government to a far-right coalition that soon barred Jews from the civil service and army and forbade them to buy property and practice certain professions. Continuing turmoil and foreign condemnation of the government's virulent anti-Semitism drove Carol in April 1938 to suspend the 1923 constitution, proclaim a royal dictatorship, and impose rigid censorship and tight police surveillance. Carol's tolerance for the Iron Guard's violence wore thin, and on April 19 the police arrested and imprisoned Codreanu and other Iron Guard leaders and cracked down on the rank and file. In November police gunned down Codreanu and thirteen Iron Guards, alleging that they were attempting to escape custody.
Codreanu's violent activities were endorsed and funded by Nazi Germany, which by the late 1930s was able to apply enormous military and economic leverage on Bucharest. Throughout the 1920s and early 1930s, however, Romania's foreign policy had been decidedly anti-German. In 1920 and 1921, Romania had joined with Czechoslovakia and Yugoslavia to form the Little Entente, agreeing to work against a possible Habsburg restoration and oppose German, Hungarian, and Bulgarian efforts to seek treaty revisions. France had backed the agreement because it hemmed in Germany along its eastern frontiers, and the three Little Entente nations had signed bilateral treaties with France between 1924 and 1927. In February 1934, Romania had joined Yugoslavia, Turkey, and Greece to form the Balkan Entente, a mutual-defense arrangement intended to contain Bulgaria's territorial ambitions. By the mid-1930s, however, support for Romania's traditional pro-French policy waned, and right-wing forces clamored for closer relations with Nazi Germany; at the same time League of Nations-imposed trade sanctions against Italy were costing the Balkan countries dearly. Germany seized the opportunity to strengthen its economic influence in the region; it paid a premium for agricultural products and soon accounted for about half of Romania's total imports and exports. The Little Entente weakened in 1937, when Yugoslavia signed a bilateral pact with Bulgaria, and Hitler gutted it altogether in September 1938, when he duped Britain and France into signing the Munich Agreement, which allowed Germany to annex Czechoslovakia's Sudetenland. After Munich, Romania and Yugoslavia had no choice but appease Hitler. On March 23, 1939, Romania and Germany signed a ten-year scheme for Romanian economic development that allowed Germany to exploit the country's natural resources.
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