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

The title of the last part of Peter Rona's series of articles that appeared in Népszava (September 4, 2008) is "About taxes in grey and black." The reference here is to the grey and black economy of Hungary that is estimated to be about twenty percent of the GDP. That is twice as high as in western countries.

On the whole, Rona is sympathetic to Ferenc Gyurcsány's attempt to think about the country's future by "outlining the contours of ideas concerning the future of the Hungarian economy and society." The relatively small space devoted to questions of taxation is not the most important part of this "nice little essay" because changes in taxation are only a means toward achieving certain goals and not the goals themselves. However, in the current political situation and in a country where political culture is rather low, analysts concentrate on the proposed tax reform rather than on Gyurcsány's larger vision. In fact, spokesmen of both Fidesz and SZDSZ complain that they don't know what to make of this essay. Why does a prime minister write studies? It's not his business. The chief spokesman for Fidesz, the young and brash Péter Szijjártó, makes sure that every time he mentions the "Compact" he adds, "in a paid advertisement" the prime minister said this or that. Of course, we know why this essay appeared as a supplement to Népszabadság, but we hear the phrase "in a paid advertisement" at least five times a day. As for SZDSZ, Rona obviously doesn't have a very high opinion of János Kóka who in an article that appeared about a week ago, also in Népszabadság, said:  "Only ever increasing material gain makes life bearable." Rona comments: What can one expect from a party whose leading politician utters such a crass judgment about life?

Very briefly summarized, Rona thinks that the "Compact" is "a modest and well thought out" profile of policies that should be pursued in the next three or four years. Getting rid of the grey and black market economy is important but, as he suggested in an earlier part of his article, it is not a question of morality but "an economic phenomenon." As he pointed out earlier, there are pluses and minuses to this house cleaning. On balance Rona thinks that the benefits will outweigh the harm (for instance, that some small businesses will have to close). Lowering payroll taxes will increase employment, but Rona would have liked even greater cuts. As for competitiveness he doesn't think that Gyurcsány's proposals will make a difference given the structure of the Hungarian economy, i.e. the large share of multinational companies who are heavily subsidized.  Finally, given the not so rosy global economic situation and Hungary's heavy reliance on exports, it would be advisable to stimulate internal demand through investment and/or consumption. Large investments, according to Rona, are unlikely given the restrictions imposed on Hungary by the convergence program. Consumption could be stimulated, but this is risky with the still relatively high inflation rate.

And a final note to all this. Given the intransigence of SZDSZ's top brass (the three stooges: Gábor Fodor, Gábor Horn, and József Gulyás) it is possible that nothing will come of Gyurcsány's "nice little essay." Right now the noisier part of SZDSZ's leadership doesn't even want to talk about Gyurcsány's ideas. They are demanding his head. The pessimistic types are certain that Gyurcsány will have to resign, that SZDSZ will succeed in installing a "government of experts" that will last only a few months. Then there will be early elections and Viktor Orbán will be the prime minister of Hungary with a large majority. The more optimistic types (and they are very few) think that SZDSZ is not as unified as these three gentlemen would like us to believe. The next few days will tell.

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Odin's lost eye
I like Mr Rona conclusions, but I am worried about his ideas of stimulating the economy too early. It is more important to control inflation, as it is the thief of peoples’ efforts. Professor As to those you have called “the three stooges (Gábor Fodor, Gábor Horn, and József Gulyás)”. All three of them put together do not have the intellectual abilities of one of the originals (Larry, Moe etc). At first I thought their intransigence was just a bargaining counter, but now I am not so sure. I think they have a lemming like desire to precipitate a sort of Hungarian ‘Gotterdammerung’, which begins with the destruction of Mr Gyurcsány followed by the destruction of their own party, the demise of democracy with the installation of an ‘All Highest’ etc. They do this in the hopes that they will escape the ‘Wrath to Come’ from FIDESZ. Some parts of which will make that fiasco the László Rajk Show Trial seem like a Sunday school tea party. Retribution will be based on the idea that ‘an accusation is proof’ and ‘what I say three times must be true’ (Lewis Carroll The Hunting of the Snark). The only hope for SZDSZ… Read more »