Frigyes Solymosi, a professor of chemistry and member of the Hungarian Academy of Sciences, has been a longstanding conservative critic of Viktor Orbán’s undemocratic regime. For years he has been writing op/ed pieces in Népszabadság because Magyar Nemzet, when it was still a government mouthpiece, refused to publish his articles. His latest is titled “Where is the hot spot?” The current behavior of Hungarian society reminds him of something that happened in his lab years ago. They were studying some explosives that for a long time remained dormant. At some point, however, a “hot spot” developed within the explosive tablet, and boom! It made quite a mess of their lab.
Solymosi’s article lists some troubling signs in the Hungarian economy, the lack of technological advancement, the neglect of education and healthcare, and the growing exodus of the best and the brightest. They all point to a further deterioration of conditions in the country.
Along these lines today I’m focusing on a conference organized by Világgazdaság to deal with the question: “Is this sustained growth?” The Hungarian financial paper invited several finance or economic ministers from earlier years. Two of the participants served in the Antall government (1990-1993). Antall changed finance ministers three times. The first one lasted only a few months (May 24-December 19, 1990). Kupa lasted longer (December 20, 1990-February 11, 1993). I always enjoy listening to him when he is invited for an interview. He strikes me as knowledgeable and level-headed, and he has a wonderful sense of humor. The other participant from the Antall era was Péter Ákos Bod, who served as minister in charge of industry and trade for a short time, after which he became the chairman of the Hungarian National Bank. Attila Chikán represented the first Orbán government, in which he served as minister in charge of the economy (July 8, 1998-December 31, 1999). He was replaced by György Matolcsy, who has since become Viktor Orbán’s right hand. The only “liberal” economist present was István Csillag. He was minister in charge of the economy and transportation during the Medgyessy government.
All of the participants agreed that the government propaganda about the robust economy that will not only be sustained but steadily grow is just that. Propaganda. Whatever growth there is is due only to the subsidies received from the European Union. The growth the Hungarian economy is capable of producing on its own is about 1% per year.
The Orbán government likes to compare Hungarian economic growth to the EU average and boast, as he did recently in Mongolia, that Hungary, along with other East European countries, is the engine of the Union’s economic growth. But this is not really relevant. What one has to concentrate on is Hungary’s standing within the region. It should be compared to the neighboring countries: Poland, Slovakia, the Czech Republic, all of whose economies are growing faster than Hungary’s. Romania’s economic development still lags behind her western neighbor, but it is catching up.
According to István Csillag, “Hungary exists only as long as there is the European Union. If the EU ceases to exist, there will be no Hungary.” Of course, this statement is overly dramatic, but we know what Csillag has in mind. He said that even 2014, which was hailed as an unusually successful year with a 3.7% economic growth, still pales in comparison to 2004 when the Hungarian economy grew by 5% with a 7% additional expenditure compared to 2014’s 3.7% growth with an 8% additional expenditure.
György Matolcsy’s efforts at stimulating the economy met with general disapproval by all participants. Such stimulants look promising initially, but their end is usually “painful,” creating economic bubbles.
I left Attila Chickán’s contribution to last because his field of expertise is “competitiveness” and “productivity.” Hungarian productivity is half that of the European average, due primarily to the inefficiency of the institutional structure. For sustained growth a country needs stable institutions, investment in human capital, and a competitive market without corruption. The problem with the present Hungarian economy is that none of these conditions exists at the moment, and there are no signs that the government is making any attempt to remedy the situation.
And that leads us to Transparency International’s “Corruption Perceptions Index 2015,” published yesterday. While a number of countries in the region have improved significantly in the last few years–for example, Austria, the Czech Republic, and Slovakia, in 2015 Hungary’s standing dropped to 50th place out of 168 countries. In 2014 Hungary stood in 47th place among 175 countries, which means that corruption in the country has increased relative to the other countries studied.
The Hungarian government makes no effort to combat corruption, which ensures the further deterioration of the Hungarian economy. Fidesz and the government blithely ignore the problem and accuse Transparency International of bias because—hard to believe but true—George Soros has been supporting this global anti-corruption non-governmental body. The terse reaction of Fidesz to the news of Hungary’s poor performance was: “Transparency International, which is financed from Soros’s money, serves the immigration policy of George Soros. Transparency International’s goal is to exert political pressure on Hungary.”
Alas, that’s not the end of the bad news. More will come tomorrow.