Corruption and the Hungarian economy

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.

From left to right: Mihály Kupa, Péter Ákos Bod, István Csillag, and Attila Chickán

From left to right: Mihály Kupa, Péter Ákos Bod, István Csillag, and Attila Chickán

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.

January 28, 2016
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January 29, 2016 1:30 am

Many years ago, Orbán announced that he, personally, IS Hungary!

With such an assertion, he might then confuse the increasingly robust economy of his own pockets and those of his friends and family, with the \”robust economy\” he claims Hungary is enjoying.

January 29, 2016 8:16 am

Sure looks like Hungary is his \’household\’. For the macroeconomics of its society apparently follows the microeconomics of a house in Felcsut.

Corruption, arrogance and ignorance are all part of the kleptocratic \’redistribution\’ going on in the country. If one pays attention, maybe that great soul-sucking sound swirling all around that would get to be heard. Morally, the country flies on a different plane of ethics. Istvan must be rolling over in his grave.

Corruption is real bad since it deflates enterprise towards the aggrandizement of the few completely ripping off the electorate and population of the nation and their quest for better livelihoods. Amassing gold in the guise of patriotism and nationalism is an abject way to run a country. Hungary indeed has caught the Russian \’disease\’. And kleptos stick together.

Not sure if we are witnessing the onward and perhaps inexorable dissolution of a European country but there\’s plenty to see in all that is contributing to it. It\’s right in front of everybody\’s eyes. For it follows …. \’A szemek nem hazudnak\’ .

January 29, 2016 2:08 am
I think that the issue is not so much that the government is not making any attempt to remedy the situation, but that the items listed by Attila Chickán are actually deliberate government policy. In other words, it is deliberate government policy to: 1. NOT have stable institutions (that’s why they rigged the constitution, so they can arbitrarily muck about with institutions at will); 2. NOT to invest in human capital (that’s why the education system is not just catastrophically underfunded, but actively engaged in rehabilitating in the minds of children and teenagers retrogade fascist and irredentist tropes from the Horthy era); 3. ACTIVELY FOSTER a Balkan culture of corruption (as the prime means for capital accumulation in the hands of a new class of mafia capitalists in Hungary). These are totally counterproductive policies designed to foster the solely survival of the unfittest. Reminds me of the person sitting high up in a tree busily chopping down the branch on which s/he is sitting. As to Soros, long may he live and prosper . . . . It is pathetic how the Hungarian government is eternally making him the bogey-man at the root of all evil befalling ever-suffering, sainted Hungary.… Read more »
January 29, 2016 2:11 am

Correction/should be:

These are totally counterproductive policies designed to foster solely the survival of the unfittest.

January 29, 2016 3:16 am

Budapest Beacon: OLAF says Hungary misappropriated $9.7 million worth of anti-fraud funds

What else is there to say? The Hungarian government embezzled EU funds whose purpose was to fight corruption.

January 29, 2016 4:09 am

“The Hungarian government embezzled EU funds whose purpose was to fight corruption.”

This is a splendid example fit for a treatise on New Logic.

January 30, 2016 9:18 am


Eva’s dedication and hard work including the contributors – including your valuable comments – deserve to be considered.

Sentroopa-Santra posted this five days ago:

“Sentrooppa-SantraJanuary 24, 2016 11:45 am

Speaking of corruption: according to
( ) the European Anti-Fraud office OLAF suspects Hungarian anti-corruption officials of stealing EU subsidies which were meant for funding anti-corruption measures. This piece of news was promptly reposted by the satirical “news” site Hírcsárda on its FB page…

January 29, 2016 7:50 am
OT At last a truly wonderful and very positive piece of news from Hungary. On Wednesday, January 27, The Federation of Hungarian Jewish Congregations (MAZSIHISZ), in association with the Hungarian Academy of Sciences (MTA), the Eötvös Lóránd University (ELTE), the Pázmány Péter Catholic University (PPKE), the Károli Gáspár Calvinist University (KGRE) and the Budapest University of Jewish Studies (OR-ZSE) held a day long academic memorial conference in the ceremonial great hall of MTA, on the first anniversary of the passing of Prof. Dr. József Schweitzer, the late Neolog Chief Rabbi of Hungary, Rector (President) of OR-ZSE, a giant Jewish studies scholar, a wonderful humanitarian and promoter of ecumenical reconciliation between Jews and Christians, and in general a scholar and minister of religion not only widely respected, but beloved by all who knew him. The conference featured not just fond memorial talks by both clergy and academics, but scholarly presentations on Old Testament Studies, Hebraist Studies and Hungarian Jewish Studies by the crème de la crème of the academic and intellectual who-is-who in these fields in Hungarian Catholicism, Calvinism and Neolog Judaism. Also present were Ilan Mor, the Israeli Ambassador to Hungary and Csaba Latorczay, the Undersecretary for Special Affairs, representing… Read more »
January 29, 2016 9:48 am

Thanks for posting this. As I am always interested in religious/theological affairs I will try to go through and take what I can from it. It is very encouraging to see that ‘ecumenical’ spirit occurring among the participants.

January 29, 2016 8:54 am

The EU Commission is aware of the corruption in Hungary, Bulgaria, and elsewhere of cohesion funds and other development funds. As long as the transportation links to the core developed nations of the EU for just in time production processes and agricultural products continue to show improvement the critical objective is being achieved regardless of the corruption within various nations. The excellent article Novak from the Beacon in its details reveals that the EU cares only after the fact about this corruption, in this sense it is similar to how US development funds in Afghanistan were embezzled and misused see

January 30, 2016 4:00 am
I think that it is a bit of a stretch to claim that EU funded Hungarian road system improvements to enable Hungary to export more of what it is actually capable of producing is actually part of a deliberate conspiracy by core EU countries to mercilessly exploit the people of ever suffering, sainted Hungary. I think that the logic of this claim is back to front, conflating consequence with cause. After all, would it be better for Hungary not to be able to improve its road system with the help of generous injections of large dollops of EU grants? Or should the EU funds be rather invested in projects other than national infrastructure? If so, in what exactly? And what sort of logic is that improved roads are to be blamed for the inability of Hungary to produce high end, high value added products and services for profitable sale in core EU countries? It seems to me that Hungary is lucky enough to be able to export its low end, low value added products a little cheaper as a result of a better road system built by generous grants from Brussels. The end of the day the reason why Hungary… Read more »
January 29, 2016 3:15 pm

“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.”

Dear Eva – TI’s index measures the “perception” of corruption, not corruption itself (which would be impossible to measure accurately). While I have little doubt that corruption is a huge problem in Hungary, the index is simply a survey of social scientists.

January 29, 2016 3:46 pm

A bit OT:
Funny how wp now handles user names/nicks.

Pibroch = Alex Kuli?

Bálint = amabalint (That\’s obvious however – I don\’t assume we have a troll here …)

And I\’m still a guest – though wp says I\’m logged in – and I can edit my comment, strange …

January 29, 2016 5:03 pm

I simply gave up worrying about WordPress, and quite content to remain just a guest without ability to edit.

My username was previously Mike Balint, which I changed to ambalint when the new system was introduced not long ago.

Then my registration with WordPress failed to work and ambalint was rejected as a member username, so I switched across to Bálint as a newer guest username.

However, a few days ago ambalint came back with a vengeance, and Bálint began to be rejected.

So now I am back to ambalint, even as a guest, like it or not.

Go figure . . . .

January 29, 2016 9:57 pm

Wofli – Before you call me a troll – Pibroch was a handle I used to use on Disques. I decided to start using my real name about one year ago because my job no longer prohibits me from commenting on sites. For some reason, WP changes it back to Pibroch and does not give me any choice in the matter, even when I log in as a guest.

Reality Check
Reality Check
January 29, 2016 4:44 pm

Before commenting you should take time to look into the methodology. It is not simply a survey of social scientists. It includes expert opinions from business leaders, economists, business surveys, etc. Since the methodology is consistent over years, it serves as an index of how corruption changes over time.

In addition, it seems to align with what any business person knows – corruption is low in Nordic countries, western Europe, and in north America and tends to be higher in less developed nations. You might argue that Hungary is a few ranks higher or lower, but I doubt anyone would seriously argue that the ranking would be off by more than 5% or so.

The methodology is not perfect, but to be dismissive by saying it is SIMPLY a survey of social scientists is misleading and I think an attempt to discredit.

You can find more detailed reports of specific instances of corruption here (in Hungarian)

January 29, 2016 5:09 pm

You are right.

And in any case, it is not a survey OF social scientists, but a survey BY social scientists.

After all, those surveyed are not social scientists, but a statistically valid sample of key actors in the world of business.

January 29, 2016 10:14 pm

TI lists its data sources on its website. TI also stresses that the index is a survey of the “perception” of courruption, not corruption itself.

The groups that TI surveys are the following. I’d say it’s difficult to argue that the people who work at these organizations are not social scientists, but if that’s what people want to do, they may be my guest.

1. African Development Bank Governance Ratings 2014
2. Bertelsmann Foundation Sustainable Governance Indicators 2015
3. Bertelsmann Foundation Transformation Index 2016
4. Economist Intelligence Unit Country Risk Ratings 2015
5. Freedom House Nations in Transit 2015
6. Global Insight Country Risk Ratings 2014
7. IMD World Competitiveness Yearbook 2015
8. Political and Economic Risk Consultancy Asian Intelligence 2015
9. Political Risk Services International Country Risk Guide 2015
10. World Bank – Country Policy and Institutional Assessment 2014
11. World Economic Forum Executive Opinion Survey (EOS) 2015
12. World Justice Project Rule of Law Index 2015

January 30, 2016 3:47 am

All these organisations may spare their efforts. The corruption in Hungary is of such magnitude that it cannot be hidden. Only the false documents purporting to prove the legality of what is going on are hidden as state secrets for 30 years. In the meantime the marvellous results of the corruption are documented all over the internet. Examples are the rags to riches histories of the prime minister’s family and friends and the ”sale” of state owned land. The Fidesz land grab is probably more extensive than the initial Arpad land grab, and it will progress similarly if not stopped. Legitimate non-Fidesz land owners may be the next to be robbed in order to satisfy the appetite for land of the prime minister’s entourage.

January 30, 2016 4:31 am
Yes, these are all agencies that do surveys. The real issue however is who they actually survey on what, and how valid is their survey methodology. In relation to corruption around the world, if they survey mostly business people actually impacted by corrupt practices in various countries and their survey methodologies are sound, I see nothing wrong with Transparency International utilizing some of the products of these various other agencies in producing their own report. The process only becomes a reflecting hall of mirrors if the social scientists at TI had no actual hard empirical evidence in hand in the form of field survey results obtained by themselves or by these other agencies, but would only be sitting around some board room table senselessly consulting each other and representatives of those other agencies in a complete data vacuum, without the slightest reference to any actual empirically and statistically valid data collected in the field. That however I do not believe to be actually the case, because if it were, it would quickly become public knowledge, as a result of which TI would instantly loose all credibility with their clients. But if this was indeed the case, then you would of… Read more »