Peter Rona’s ideas on the Hungarian economy and society (I)

Peter Rona (or Róna Péter) had a distinguished career in the financial world. He was only fourteen in 1956 when he left Hungary with his parents. The family headed for the United States where Peter graduated with a major in economics from the University of Pennsylvania in 1964 (an institution, by the way, known as a powerhouse in finance, home to the Wharton School, the first collegiate business school in the U.S.). He then went to Oxford where he received another degree in 1966. I couldn't find details, but as far as I know he also has a law degree and was a member of the New York bar. For a while he worked for a Washington law firm and from 1971 on at Schroders Bank. Eventually he became CEO of Henry Schroder Bank and Trust, at that time both an investment bank and a global asset management firm.

Sometime after the change of regime he returned to Hungary and began writing articles, mostly on economics. Recently he became adjunct professor of economics at ELTE and the number of his publications multiplied. The latest is a three-part "opinion piece" that appeared in Népszava (September 2, 3, and 4, 2008). It is a thorough examination and critique of Ferenc Gyurcsány's "Compact."  His overall verdict is that Gyurcsány is "the first Hungarian politician in the last eighteen years who instead of engaging in political skirmishes is trying to find solutions." The first part's title is "State, Citizen, Trust." The second, entitled "Competitiveness," explains in layman's terms why the Hungarian economy is not competitive at the moment. The title of the last article in the series is: "About Taxation in Black and Grey."

I think his analysis is incisive enough that I will spend three days on it. Today I will deal with Rona's ideas on the relationship between state and citizen. Rona begins with the constitution.

Let me interject a few words about the history of the Hungarian constitution. I can be very brief because there was no written constitution in Hungary until 1949 when Mátyás Rákosi's communists created one based on Stalin's 1936 Soviet constitution. At the time of the change of regime from a one-party dictatorship to democracy this constitution either had to be modified or an entirely new constitution written. The members of the Oppositional Round Table (Ellenzéki Kerekasztal, 1989) opted for the former; they asked a group of constitutional lawyers to work on rewriting the old constitution. A standard joke is that they tinkered and tinkered until only one sentence remained unchanged: The capital of Hungary is Budapest. Well, this is a bit of an exaggeration. Unfortunately, quite a few provisions remained. For instance, there are state obligations that are impossible to fulfill. One day I will comb through the constitution and find some examples.

But let's see what Rona has to say about this constitution as it evolved from its communist incarnation. The 1949 constitution, he contends, put all the responsibilities on the state but at the same time demanded total obedience from the citizenry. The new (revised) constitution left all the obligations of the state intact while it lifted all the obligations of the citizens in the name of freedom. So the new Hungarian constitution became a lopsided document, and the Constitutional Court (a new institution in the Hungarian judicial system), instead of trying to bring individual freedom and governmental responsibility into greater balance with its decisions, made things worse. By the way, Rona takes a swipe at the Constitutional Court by calling its members people of "modest ability." Rona believes that Hungary should start from scratch and write a new constitution. However, both President Sólyom, previously chief justice of the Constitutional Court, and the current chief justice think that the constitution is fine as is.

Rona argues that the Hungarian people still think that "Uncle State" (Állambácsi) ought to take care of them, but at the same time the Hungarian citizen doesn't trust the state. And, on the other side, the state doesn't trust the citizens either, and with good reason. According to Rona, Gyurcsány perceives the mutual distrust but doesn't really understand its cause. Rona, I think correctly, points out that the Hungarian people are no more prone to immorality and corruption than any other national group. Sure, there are real crooks in Hungary, but there are real crooks everywhere. The problem is not with morality but with the legal system and the functioning of the state. Corruption is prevalent in countries where "normal things cannot be taken care of in a normal way." And, he adds, where "bad things are not punished properly." Thus, Rona says, the functioning of the state must be repaired first and only then one can expect the people to be law abiding citizens. There is a great deal of truth in this. Just as in Rona's other two installments. But you'll will have to wait until tomorrow and the day after tomorrow. A real cliffhanger for policy wonks!

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the fear is to get another hungry one.who want to be rich yesterday.
there is a proverb it say .
the one who broke his own rules,is a ………..c …. i don’t want to say it

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hi guys … I really enjoyed reading this blog so interesting … congratulations for writing such quality material. I would love to receive more information about Peter Rona’s ideas on the Hungarian economy and society (I)

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I just didn´t know how the Hungary Constitucion was modificated, neither the he way it is right now. but just like Rona says: bad things still happened, so mayebe it needs a change even now

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Oxford where he received another degree in 1966. I couldn’t find details, but as far as I know he also has a law degree and was a member of the New York bar. That the reason why a I love Oxford college.


Hungary cannot pull itself out of this institutional mess, because the system will work primarily for its own survival before anything else..
Outside help and opinions, such as Mr.Rona’s are normally dismissed.
I personally experienced asking a vice major, lawyer, about Mr. Rona’s views, he responded: “Ah he, he has a confused mind..”
I am not sure how Hungary can be repaired after so much time under communist dictatorship and by the former political class is occupying the same power positions more or less with its networks almost intact, and extended into the economy too. Only time will tell if the system can repair itself..I personally have my doubts, or expect a very long time for that to succeed, after major social and political crises..Official ignorance and arrogance will certainly describe the process unfortunately..and a lot of social loss, before these corrupt institutions will slowly allow real changes..

John B. Rhinelander, 10 Cove Way, Gloucester, MA 01930, USA
John B. Rhinelander, 10 Cove Way, Gloucester, MA 01930, USA

I hired Peter Rona from a Washington, DC law firm to work in my Chief Counsel’s office of OFDI (Office of Foreign Direct Investments) in 1968. OFDI had been created by an Executive Order signed by President Johnson to counter a balance of payments crisis. He had been wounded in Budapest in the 1956 uprising put down by Soviet troops before he and his family escaped over the border to Austria. He received his law degree in the US, I believe from Columbia. After OFDI he moved to Schroder’s in New York City.City

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