Today is a special day. This is the 3,000th post to appear on Hungarian Spectrum. I wrote my maiden piece on June 27, 2007.
♦ ♦ ♦
A couple of days ago an article appeared in Bloomberg about a protest by “a group of prominent economists at the Hungarian Academy of Sciences concerning the Hungarian National Bank’s educational programs.” The criticism was directed at foundations set up to support the teaching of “alternative” economics.
In order to understand what this is all about, we have to go back to August 2014 when it came to light that the Hungarian National Bank had embarked on the purchase of valuable properties in Budapest and elsewhere: a castle-hotel for the pleasure of the employees of the bank and perhaps the most expensive office building in Budapest, the eight-story Eiffel Palace for €57.5 million. In addition, the National Bank set aside €28 million for the purchase of art works that included Titian’s “Mary with Child and Saint Paul.”
These purchases are nothing compared to the €700 million earmarked by the Hungarian National Bank from its profits for foundations to support the teaching of economics, outside of the regular channels of higher education. The Bank set up five such foundations named after Pallas Athena, the goddess of wisdom, courage, inspiration, civilization, law and justice, just warfare, mathematics, strength, strategy, the arts, crafts, and skill. A perfect description of Hungary today! The amount the National Bank allocated to teach economics is one and a half times more than the Hungarian government spends a year on higher education.
In August 2014 Matolcsy made the following announcement: “We are creating a faculty of economics and finance at Kecskemét College, a faculty of finance in Marosvásárhely/Târgu Mureș (Romania), a doctoral school in the Buda Castle, and an intermediate financial training center in Pest.” The reason? “The already obsolete doctrines and mistakes of the neo-liberal school of economics continue to dominate Hungarian education in economics and finance.”
It is these five foundations that the Academy’s Committee on Economics finds objectionable. The Committee summarized its objections under nine headings. They consider the sum the National Bank spent on the Pallas Athena foundations public money. Hence it should be under the jurisdiction of the government, specifically the undersecretary responsible for higher education. There is no outside control of the foundations, and their activities and spending lack transparency.
These foundations, as was clearly stated when they were established, promulgate one specific economic dogma. This violates the principle of academic freedom and endangers the autonomy of the institutions that are supported by these foundations. The new institutions generously endowed by the Pallas Athena foundations will create asymmetry and tension. These new programs don’t have to meet the requirements of the Hungarian Accreditation Committee. These new “universities” will also have a negative impact on the currently functioning Ph.D. programs. The Hungarian National Bank boasts the “largest Ph.D. program” in the country even though it doesn’t have a graduate school. The foundations try to attract students by offering them stipends that surpass the salaries of associate professors with decades of teaching experience and academic achievements. In one of the institutions chosen to offer the Hungarian National Bank’s program, they accepted 62 Ph.D. candidates in a rather minor subfield of economics.
György Matolcsy’s reaction to the Academy’s committee was belligerent. “The Hungarian National Bank rejects the untrue statements by the Academy’s Committee on Economics and will take the necessary legal steps.” Instead of refuting the allegedly untrue accusations, Matolcsy attacked some of the members of the committee. He specifically mentioned those who have been publicly critical of the Hungarian National Bank. He singled out Péter Mihályi, who as editor of Acta Oeconomica receives a financial contribution from the National Bank; Lajos Bokros, who criticized the nationalization of the Budapest Stock Exchange; and Júlia Király, former vice-president of the Hungarian National Bank, who considered the bank’s loan program for small- and medium-size businesses economically harmful. Of course, he didn’t mention Attila Chickán, also a member of the committee, who served as finance minister in Viktor Orbán’s first government. Moreover, as far as I know, there are thirty economists on the committee. Surely, they couldn’t all have been critics of Matolcsy and his bank because he would definitely have mentioned them.
I might add that Transparency International Magyarország has been trying for more than a year to find answers to the Pallas Athena foundations’ finances. The managing director of TI has been bombarding the National Bank with inquiries about these mysterious foundations, to no avail. Világgazdaság, a Hungarian daily newspaper that focuses on the economy, eventually went to court to receive information about the foundations. The court ruled in favor of Világgazdaság, but that didn’t inspire Matolcsy to give details of the financial dealings of three of his foundations: Domus Animae, Domus Concordiae, and Domus Scientiae. These foundations are supposed to finance building construction for the future “economic universities.” Matolcsy claims that “the money [used for these foundations] has nothing to do with the budget. The taxpayers didn’t have to pay an extra penny for them. The central bank is spending its own money, which was created by profit made on two-week deposits.”
Matolcsy’s shady dealings serve several purposes. One is to take public money from the common budget and hide it for who knows what purpose. At the same time he is strangling academic freedom by building “alternative institutions” unfettered by public scrutiny. Since Matolcsy thinks that mainstream economists in the country–and that means practically all respected experts–are wrong, and since he cannot get rid of them, he will build parallel economics departments that will teach his unorthodox economic theories. Just as the Orbán government needs an alternative Holocaust Museum, an alternative academy of artists, and an alternative historical institute, it also needs a new set of economists who will be the high priests of unorthodoxy.