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.
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