Lajos Bokros et al.

Economists are looked upon in Hungary as a fiercely independent group within the intellectual elite whose only guideline is strict professionalism. They are respected scholars, and whatever they say is the "truth." Apparently, according to Zsófia Mihancsik (in the last issue of Mozgó Világ, a monthly), this high esteem of economists goes back to the Kádár regime when at one point it seemed that the ills of the regime were not so much political as economic in nature. Even practicing journalists, admittedly without any economic background, look upon economists' words as holy writ. I had an interesting experience with one of these journalists. Some time ago in Napkelte (Sunrise), the early morning political show on the Hungarian equivalent of public television, the journalist confidently explained to an MSZP politician that the American experience proves that lower taxes translate into higher economic growth. This was the situation under President Reagan, he added. Well, my curiosity was aroused and I decided to inquire from him where he learned that. Answer: From So and So. I asked him: Don't you realize that there is this kind of economist and that kind of economist? Or, as the standard joke goes about the dismal science, on the one hand, on the other hand, and on the third hand. It seems that this never occurred to him. If an economist says something it must be true.

Anyone who has followed recent Hungarian developments must be struck by the sudden activity of economists. Suddenly they are full of excellent ideas. Not a day passes that one of these gurus doesn't come up with some plan that will save, if not the world, at least Hungary. And their recipes are fullproof. Not long ago I talked about the four young economists of Oriens who promised an economic paradise in two years if their plan is accepted. Luckily it wasn't. There are two or three all-knowing economists who can be heard practically daily. One of them is László Csaba about whom I will say nothing because he is considered to be Fidesz's "court economist." However, I would like to say a few words about László Békesi and Lajos Bokros, both former ministers of finance under Gyula Horn, and both of whom, by the way, were eventually fired by the socialist prime minister.

Békesi always looks as if the end of the world were at hand. He had the same demeanor during his tenure as minister of finance. Mind you, then the situation was really critical. But since then Békesi has not become a more cheerful soul. And now that Fidesz has managed to whip up a "crisis situation" Békesi is an obvious media guest. It is not necessary to go into the details of what Békesi says because he is completely in sync with the other suddenly active economists. What they all have in common is a firm grasp of textbook economic theory and a total disregard of the existing political situation.

Listening to Békesi, as I indicated above, is not fun, but I must say that I had to laugh the last time I heard him. He was being interviewed after the deal with Daimler-Benz became public. He was asked how it was possible that such a prestigious, world-renowned auto manufacturer decided to establish a large plant in Hungary if the Hungarian economic situation is as bad as he and his economist friends claim. Békesi was at a loss. The decision, he kept repeating, was totally unexpected. Something must be not quite right. We will perhaps one day find out what kind of illegal, sinister force is behind it. He didn't elaborate, but I had the feeling that what he had in mind was something like this: Perhaps pressure was put on Daimler-Benz from above (the German government, European Union?) to choose Hungary and thus bolster Ferenc Gyurcsány's government. One possibility he didn't contemplate: he is exaggerating the problems of Hungary, and the situation doesn't look so bad from abroad as the Hungarian economists would like us to believe.

And now let's talk about Lajos Bokros. I used to respect the man, but lately I have very serious reservations about him. Not as an economist because he admittedly did a very good and brave thing in the spring of 1995 that helped to save Hungary from economic and financial ruin. But where was he with all his reform ideas when the government announced its reform plans two years ago? Did he help? Did he tell Hungarian society that these measures were necessary? Did he tell the Hungarian people that Fidesz's attacks on the government's reform plans were misplaced? That Fidesz and Orbán were outright wrong? No, he didn't. He said nothing. Now that Fidesz has managed to put an end to many of the reforms, Lajos Bokros surfaces and attacks Ferenc Gyurcsány and his government for not having the guts to continue the reforms that were killed by Fidesz. This is not decent behavior. Not in my eyes.

And by the way, for those of you who understand Hungarian I highly recommend Sándor Friderikusz's final program tomorrow night on ATV. Inspired by Zsófia Mihancsik's penetrating article about Lajos Bokros in Mozgó Világ, Friderikusz has organized a get-together between Ferenc Gyurcsány and three economists. It should be a real treat. As for Mihancsik's article I will summarize it next time. 

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I’m not an economist by any stretch of the imagination so I can’t say if Bokros is a good or bad economist. However, I seem to recall that he wrote several long ‘open letter’ type pieces that were published in Elet es Irodalom and/or Nepszabadsag regarding necessary reforms; now, whether those were written before or after Gyurcsany’s reforms were announced, I can’t recall. But I do recall him appearing on Friderikusz’s show earlier where he said something to the effect that he would help if he were asked to, but that the government had not asked him for help. Perhaps the government was afraid to call him in based on the aftermath of the poor communications in 1995 concerning the much-needed reforms at the time. Only in Hungary would a man whose methods are taught and applauded in major universities abroad be derided in his native country. And therein lies the rub perhaps?

Eva: I think you’re being harsh on Bokros. He was saying back in autumn 2006 that the government’s reforms weren’t going far enough, as can be seen on Edward Hugh’s blog here He said then that Hungary needed “a multi-insurance model in healthcare, a market-based higher education and sweeping reforms in the pension regime”. This in an interview with the weekly Heti Válasz, whose audience is on the right. He also argued for a multi-player health insurance system and structural reforms shortly after the austerity plan was announced in the summer of 2006: I certainly don’t think Bokros is pro-Fidesz, but I do think he is consistent. I believe he would be criticising their policies if they were in power and not following his prescriptions. On another point, Horn did not fire Békesi or Bokros, both of them resigned. Békesi quit because Horn had reversed a privatisation deal; Bokros quit because Horn wasn’t prepared to go as far along the reform path as Bokros wanted. It may well be that at the time, Bokros had “a total disregard of the existing political situation” as you say all economists have, but it’s not up to finance ministers to win… Read more »
John Hunyadi
“He was asked how it was possible that such a prestigious, world-renowned auto manufacturer decided to establish a large plant in Hungary if the Hungarian economic situation is as bad as he and his economist friends claim.” I can understand why the questionner may be so misguided on this issue, but for an economist not to be able to answer suggests to me that, at the least, his communication skills are lacking. It amuses me when Hungarians describe something (usually something or someone Hungarian) as világ híres (world famous or world renowned). In this case, the strength of the company’s brand has no connection with business decisions on where to relocate a new factory. The issues are the same whether it is Daimler or a manufacturer of steering columns that no one in Hungary has heard of. Neither do I see that the strength or otherwise of the local economy would have much bearing on the decision. The fact is that 99% or so of the factory’s output will be for export; it matters not if Hungarians can afford to buy the cars produced there. Hungary would, or should, have been chosen on the basis of costs, availability of a… Read more »

I fear, you are bit harder on Bokros than he deserves.
In the last couple of years he published numerous articles in Elet es Irodalom. Some f them long enough to make up severel installments. Every one of them an interminable and deep-cutting analysis, practically so dry that even a student of economy can only read them with a mazochistic attack. I couldn’t finish reading them.
However, he also published a book summary of the same articles recently. He was quite active and very, or you may say, exceedingly and mercilessly productive.
The other thing I find a bit unreasonable is the demand that the economists should criticize the opposition. The management of the economy is the government’s job and the responsibility is there too. Nor would it be professional if the economist profession would give up its professional detachment and risk their credibility by openly joining either side.

Te Jó Ég!

“One cannot look only one half of the picture and analyze that half but not the other. False picture will emerge”
Pont úgy van!

Odin's lost eye
Prof Balogh, I see you have been reading Lewis Carol (The Hunting of the Snark – an Agony in Eight Fits). You say *** “If an economist says something it must be true.” *** You are not quite right here, the economist has to say the thing ‘three times’ – then ‘it is true’. I am always worried by economists, they can only bubble on about the short term, medium term and long term aspects and fiscal out turns with out ever actually pulling a rabbit from the hat. They are unlike a chemist who can repeatedly cook up an evil smelling brew of your choice (with or without the accompanying brown fumes). Or mathematicians like Charles Lutwidge Dodgson could prove by rigorous argument and faultless logic the theorem of Pythagoras. We poor mortals have to take the economist’s words as gospel and then all too often pay more of our hard earned gold to a government. The decision by Daimler-Benz by, who are, I understand, not in a very sound position, to locate a plant in Kecskemet is not untoward. They are relocating some of their production there because of :- · Grants, · Land Values, · Tax advantages… Read more »

I cannot read the press, but did the Hungarian press balance the mania? Odin rightly points out that no multi-national corporation puts in a new plant without a lot of enticements and promises by government entities. Furthermore, I remember D-B chose Birmingham, Alabama, as their plant location about 10-15 years ago. Does this make Hungary the Alabama of Europe?