The New Széchenyi Plan

More than a year ago I devoted a whole post to Count István Széchenyi, "the greatest Hungarian," as his political opponent Lajos Kossuth called him. In it, I said a few words about Viktor Orbán's brainchild, the Széchenyi Plan. I indicated then that the "success" of the Plan was more psychological than anything else. Fidesz is known for its excellent communication techniques. Fidesz politicians appreciate the persuasive powers of Madison Avenue more than most and have never skimped on their advertising budget. As a result, I'll bet, there are few adults in Hungary who haven't heard about the famous Széchenyi Plan which was supposed to make Hungary one of the most prosperous nations in Europe. After Fidesz lost the elections the plan was discontinued.

The real story is slightly less glamorous, at least as related by politicians and economists who are more critical of the first Fidesz government and its accomplishments.

I heard a long interview with István Csillag (SZDSZ), minister in charge of the economy in Péter Medgyessy's government, who, as a successor to György Matolcsy, has all the details of plan number one at his fingertips. After all, he took over the ministry that was in charge of the original Széchenyi Plan. Csillag readily admits that the plan made a positive impact, not so much in economic terms as psychologically. The amount of money handed out was relatively small. Moreover, the funds allocated for disbursement among small- and middle-sized enterprises had been in the system before, but not under one umbrella. Enterprising businessmen could apply for grants, but they had to find their way among various ministries that handled these grants.

So the amount of the money to be disbursed remained the same. What didn't was the amount spent on advertising. While in prior years the ministries spent about 200 million forints on advertising, Matolcsy's ministry spent four billion forints just in the first year of the plan's existence on a massive advertising campaign. This propaganda worked. First, it instilled the illusion of new government largesse. More positively, it raised the self-confidence of smaller Hungarian entrepreneurs who were more willing to try their luck applying for a grant.

At this point Hungary had a budget designed for two years. During this period the government spent about 700 billion forints as part of the Széchenyi Plan. However, only a fraction of this amount actually went to small and middle-sized businesses. Several road construction projects circling larger cities like Pápa and Győr were financed from this fund. Since there was no competition all that money went to one company, Vegyépszer, close to Fidesz's heart. Vegyépszer ended up with a hefty 350 billion forints as a result of work on road construction during this period. It was also from this fund that the widening of the road between Székesfehérvár and Budapest was financed, to the tune of another 50-60 billion. The plan also financed the ever increasing subsidies to the agricultural sector, and that was also a fairly large chunk of change, about 100-150 billion. In brief, out of the 700 billion forints only about 150 billion went to the business sector.

Not even all of that amount went to small businesses. About 40 billion was spent on investments necessary to entice foreign companies to Hungary. From the remaining 110 billion available for small businesses (which amounts to a measly 16% of the plan's grants) tourism was favored; according to Csillag, about 20 billion forints was spent on that sector. However, the amount of money received by individual companies or projects was very small. In the first year about 2,000-3,000 tourism businesses received grants. In the second year this number doubled. Yet the money allocated to tourism remained the same.

However modest its economic impact, the psychological effect of the propaganda campaign was lasting. To this day the Széchenyi Plan has a certain aura about it.

As far as I can see, the New Széchenyi Plan looks like a rerun. No new sources of funding will be available. Fidesz just gave a new name to an already existing program, the New Hungary Development Plan financed by monies coming from Brussels. There might be some reshuffling of projects, but if the Hungarian government wants to use money currently allocated and approved, for example, for a cultural project to, let's say, building a spa, it will have to ask the permission of the European Union to make the change. How charitable the EU will feel toward Hungary in the next few months is hard to tell. Moreover, if Viktor Orbán insists on his own agenda about deficit reduction, the subsidies might not be approved at all.