Tag Archives: László Csaba

Conservative economists on Hungary’s prospects

It was exactly a year ago that I wrote about the “József Eötvös Group,” organized by a number of conservative economists and legal scholars. In the choice of its name, the group honors József Eötvös (1813-1871), who was minister of education in 1848 and again between 1867 and 1871. Eötvös, along with Ferenc Deák and István Széchenyi, is one of the few admirable nineteenth-century Hungarian politicians whose moderating influence was eventually overshadowed by nationalist politicians with little wisdom.

Eötvös was a writer of some renown who joined the turbulent political life of the 1840s. One of his political aims was the reform of the inhuman conditions of Hungarian prisons. He also worked on the theoretical foundations of a future Hungarian parliamentary system and made sure that it became part of the program of the opposition. He served briefly as minister of education in the Batthyány government (March-October 1848). When, after the Compromise of 1867, he became minister of education again, he was at last able to put his ideas into practice. In the first few months parliament passed his bill for the emancipation of the Jews. A short while later, he completed a reform of the Hungarian school system. Finally, the Nationality Law of 1868 became the law of the land, which was a liberal document at the time.

Robert A. Kann in his monumental book A History of the Habsburg Empire, 1526-1918, called Eötvös an enlightened man and added that “had Eötvös’s and Deák’s spirit prevailed, the Hungarian treatment of national groups might not have been inferior to that administered by the Austrian authorities.” Today we would call him a liberal conservative. He is a perfect fit for those liberal-conservative intellectuals who want to offer an alternative to Viktor Orbán’s populism. Interestingly, liberal members of MSZP turned to Ferenc Deák as their idol and established the Ferenc Deák Circle. The two groups are not that far apart ideologically.

The Eötvös Group holds regular open meetings on defined topics. A year ago, when I reported on one of the group’s meetings, the theme was the nature of Viktor Orbán’s system. The key speaker was András Körösényi, a political scientist, who described Fidesz’s world as a political system based on Viktor Orbán’s “oligarchic interests.” It doesn’t really matter where Orbán’s critics come from: their ideas are quite similar. For instance, the liberal Bálint Magyar describes the same phenomenon as a mafia state.

Source: index.hu

This time the topic was the sorry state of the Hungarian economy. While the government is in the midst of a campaign to sell the idea that the economy is booming, the two economists who delivered lectures at the meeting, Tamás Mellár and László Csaba, painted a different, quite grim picture.

It is perhaps telling that while a year ago only a handful of people were interested in the group’s lectures and discussions, this time the place was packed. In fact, extra chairs had to be added, and even then some people had to stand.

Tamás Mellár told his audience that ever since the 1970s for every 1% in economic growth 2.5% of funding has been needed. Thus, between 2001 and 2010, a 17% economic growth required 34% in additional funding. The situation became worse between 2010 and 2015 when, to achieve 10% economic growth, the country needed 35% in additional resources. Most of this came from the European Union, but some of the money came from the nationalization of the private pension plans, loans, and depletion of some of the foreign currency reserves of the Hungarian National Bank. That cannot go on, Mellár declared.

What does Mellár suggest after the removal of the Orbán government? As far as economic measures are concerned, a new government will have to abolish the flat tax introduced by the Orbán government and replace it with a progressive income tax. He would also introduce a wealth or equity tax on the total value of personal assets over a certain limit, which would be one possible way of recapturing some of the public wealth stolen by Orbán’s oligarchs. Instead of forced industrialization, the government should pay attention to new technologies, new business solutions, education, and research. But in order to see any change, Hungarians must break out of the apathy that currently exists in the country. “Now there is no Russian pressure anymore. This time we ourselves caused all this trouble, and we must be the ones who get us out of it.”

Although the government’s predictions for next year are optimistic, László Csaba sees little hope for the expected great economic growth. Interest rates in the United States will most likely rise, and who knows what Donald Trump will be up to. Meanwhile, there is the refugee crisis, populism, low economic growth in Europe, the Russian-Ukrainian conflict, slowing emerging markets, and unpredictable oil prices. One cannot count on European Union subsidies forever. Hungary must rely on itself.

He is convinced that “without comprehensive reform of the education system there is no hope.” The government should leave higher education alone. Instead of constantly reorganizing colleges and universities, the government should concentrate on kindergartens and elementary schools because these are the crucial years where students’ futures are decided. As far as the government’s economic predictions promising high growth are concerned, “they are completely unfounded.” Hungarian GDP at the moment, calculated in U.S. dollars, still hasn’t reached its 2008 level. This is worrisome even if it includes the fact that the forint is now weaker against the dollar. “We don’t have enough capital, we don’t have enough manpower, we spend too little on research and development, and the external environment is not favorable. In fact, the only increase we can expect is an increase in debt.” As for the government propaganda regarding recent tax reductions, it is a sham because for each tax cut there are many new increases elsewhere. “There is a feeling of hopelessness in the country.” He concluded his talk with a Seneca quotation: “If one does not know to which port one is sailing, no wind is favorable.”

Still, there are some hopeful signs. The Momentum Movement’s introductory meeting was filled with interested people. The young organizers urged the audience to ask them questions about their political plans. On the very first day the activists gathered 10,000 signatures of the mandatory 138,000 and by now they reached almost 40,000. People have been standing in line to add their names to the list. The government seems to be taken aback; they didn’t expect such an enthusiastic reception to an anti-Olympics drive. Therefore, attacks on the group began in earnest in the many government-financed newspapers and internet news sites. Since the topic of the Eötvös Group’s next gathering will be “Do we need an Olympics?” pestisrácok naturally discovered a close connection between the learned economists and the young political hopefuls, which apparently does exist. All in all, one can see some early signs of a societal awakening.

January 22, 2017

The Hungarian media and the Greek crisis

On January 27, a day after the victory of Alexis Tsipras’s Syriza party, Hungarian foreign minister Péter Szijjártó, who happened to be in Ankara, expressed his hope that “within the shortest possible time there will be effective and pragmatic cooperation” between Hungary and Greece because “there are many important international challenges which must be handled together.” Magyar Nemzet, then still the faithful mouthpiece of the Orbán government, immediately responded with a pro-Syriza editorial: “It was enough. This was the message the Greeks sent to their corrupt government.” The fact that Syriza was a “Trotskyist, Maoist, socialist and communist” party didn’t bother Magyar Nemzet because, according to Gábor Stier, the paper’s pro-Russian foreign policy editor, Syriza was no longer as radical as it used to be.

A few days later Anna Szabó, another editor, although she expressed her fear that the new government would not be able to solve Greece’s problems, kept fingers crossed for them. After all, Alix Tsipras is doing now what Viktor Orbán did in 2010. Both said “no” to austerity. As for the state of the two economies, Szabó discovered great similarities: the previous Greek governments were as corrupt as the Gyurcsány and Bajnai governments: both cheated and falsified data. Austerity, forced on Hungary after 2008 by the European Union and the International Monetary Fund, if continued after 2014 would have led Hungary to bankruptcy just as the same policy led Greece to its current troubles.

The Hungarian government signaled a willingness to have close relations with Greece. At the end of March Szijjártó talked with one of the undersecretaries of the Greek foreign ministry about increased trade relations and discussed the possibility of getting EU financial assistance for a highway and railroad connecting Athens and Budapest.

The Hungarian liberal and socialist media was anything but enthusiastic about the Greek developments. Only a few “true believers,” like Gáspár Miklós Tamás (TGM), broke ranks. “We resolutely and enthusiastically support Syriza without paying attention to the transparent lies of the ridiculous Hungarian press,” he announced. TGM didn’t reveal who these “we” were. Given the strength of the Hungarian far left, he was maybe talking on behalf of a handful of people. And indeed. According to their website, on March 13, 2015 eleven people established the Balpárt (Left Party), which “considers the examples of the Greek Syriza, the German Die Linke, and the Portuguese Blocco its guiding principles.” The last article about Greece to appear on its website, on July 6, was titled: “Today Athens, Tomorrow Budapest!” The author of the article was the chairman of the party, Szilárd Kalmár, a social worker. The article was subsequently translated into English and published in the Hungarian Free Press (Ottawa).

In addition to this far-left group, there are a couple of economists who have been supportive of the Greek position. Foremost among them is Zoltán Pogátsa, a professor of economics at the University of Western Hungary. Pogátsa has his own website on which he has published several articles about the Greek situation. In his estimate the blame for the crisis clearly falls on the European Union and the other creditors, and he accuses the European Union of abandoning everyman in favor of bankers and capitalists. Interestingly enough, an editorial in the right-wing Válasz also shows great sympathy for the Greek position and practically takes over the arguments of one of Pogátsa’s articles on an English-language Greek site called SigmaLive. In this article Pogátsa explains why the “dear Slovaks, Lithuanians, Latvians, and Slovenes” must show solidarity with the Greek people although they might be a great deal poorer than the Greeks.

The other economist who takes a more sympathetic view of the Greek position is Péter Róna, an American-Hungarian economist and investment banker, who is politically close to the anti-capitalist, anti-globalist LMP. In his opinion, all the troubles Greece is experiencing today stem from the introduction of the euro. His argument is that the introduction of a common currency in countries or states with less developed economies necessarily lead to their further economic deterioration. Therefore, Róna, in an article published in Népszabadság today, thinks that Greece should leave the eurozone, the creditors should write off at least half of Greece’s debt, and for the rest there should be at least a ten-year moratorium. In addition, over the next three to five years Greece should receive about 60 billion euros. Róna seems to forget about Greek corruption, graft, and a general reluctance to pay taxes.

So, this is the sum total of pro-Syriza voices in Hungary. The rest, including socialist and liberal commentators, are less than sympathetic. In an editorial in yesterday’s Népszabadság the author compares the Greek situation today to the earlier troubles of Portugal, Spain, and Cyprus–countries which followed the advice of the international financial institutions and in short order saved their economies. But in Greece people refuse to face facts and admit their mistakes. The Greek government doesn’t dare tell the people that “for the current crisis not only the foreigners are responsible.” The Greek people must change their ways.

Péter Techet in HVG is even less polite. The title of his opinion piece is “Solidarity but not with the Greeks.” Techet complains about the European left, which wants to help Greece where the salaries are three times higher than in the former Soviet satellite countries, but which ignores the millions who live in poverty in the eastern periphery of the Union. Syriza’s far-left politics repel him, and he finds the government’s cooperation with the far-right as well as Syriza’s nationalism and “aggression against Macedonia” unacceptable. He, like Róna except for different reasons, thinks that Greece should leave the eurozone before it drags the whole Union into economic chaos.

The red flags at the Acropolis made a negative impression in Hungary

The red flags at the Acropolis made a negative impression in Hungary

Magyar Nemzet reported that Syriza’s followers attacked journalists who were, in their opinion, not supportive enough of the “No” answer. Some of these journalists talk about “a march toward Stalinism” in Greece under Syriza rule. In the same paper a long interview appeared with László Csaba, a professor of economics, who was also very critical of Greek politicians’ handling of the economy in the last decade or so. He pointed out that the black market economy in Greece amounts to a staggering 40% of the GDP. He places the blame largely on the Greek political leadership.

Attila Ara-Kovács in his recent editorial in Magyar Narancs called Syriza “unacceptable,” a sentiment most Hungarian commentators share. In Hungary, only a handful of far-left people representing practically nobody are taking the side of Alexis Tsipras and Syriza.

The Hungarian scene: From economics to parochial schools

It is hard to pick just one topic to discuss today because too many important events have taken place lately.

The biggest bombshell yesterday was the final word on the Hungarian economy’s performance in 2012, which turned out to be worse than expected.  Hungary is still in recession, with the country’s GDP shrinking by another 1.7%. Hungary is the worst performing economy in the region and it doesn’t look as if there will be any change in the trend. After all, in the last quarter the economy performed even worse: the GDP decreased by 2.7% year on year.

The government blames the sluggish economy of the European Union and last year’s drought for the dismal numbers.  György Matolcsy naturally predicted that next year the Hungarian economy will be booming, and in his weekly essay for Heti Válasz he said that in twenty years Hungary will catch up to the living standards of the Scandinavian countries. He loves long term predictions, perhaps because he stumbles when trying to deal with the next few months. The brand new budget for 2013 will have to be readjusted because of the Hungarian government’s ill-advised purchase of E.ON. It is almost certain that new taxes will be levied either on businesses or on consumers in order to balance the books. And new taxes will put further pressure on growth. I may also add to that bad news another growth killer: the cost of agricultural products grew by 18.1%  in December year on year and by 15.4% during 2012. All in all,  Hungary has had the worst performing economy in the whole region in the last three years.

Yet Viktor Orbán goes on with his success stories. Every Friday morning we learn that all is in order. This time the story is that “five indicators in the Hungarian economy are all right; there is only one which is not and that is growth.” Naturally, receiving relatively high amounts of money per capita from the European Union is also a sign of Viktor Orbán’s political genius. As he repeats time and again, after Latvia Hungary received the most money per capita. But that is not something one ought to be proud of. It actually means that, after Latvia, Hungary is the country in which the economic problems are the greatest within the European Union.

It is hard to know when Fidesz supporters will realize that something is very wrong with the economic policy of the Orbán government. Even conservative economists, including Zsigmond Járai and László Csaba, are critical of György Matolcsy, and yet it doesn’t look as if Orbán is planning to get rid of him although naturally MSZP is demanding his resignation. At least Orbán announced this morning that he doesn’t plan any changes in his cabinet. But almost everybody is convinced that Matolcsy will be appointed the next governor of the Hungarian National Bank and that Mihály Varga, until now minister in charge of the nonexistent negotiations with the IMF, will replace him. Skeptics claim that nothing will change even if Varga takes over because the orders come from the prime minister, who seems to be an economic illiterate.

On the level of undersecretaries, on the other hand, there were changes in the last few days. Zoltán Balog decided to get rid of some people who were giving him headaches one way or the other. He dismissed László L. Simon, undersecretary for cultural affairs, admitting that he couldn’t work with the man. Rózsa Hoffmann was demoted, although my feeling is that Balog wouldn’t have minded parting with her. According to rumors Orbán saved Hoffmann’s skin, most likely not because of his personal feelings for this schoolmarm but because her dismissal would have created trouble between himself and his loyal supporters in the Christian Democratic parliamentary caucus. So, she relinquished all duties connected to higher education; she will be in charge only of elementary and high school education.

Orbán and Balog decided to pick István Klinghammer, former president of ELTE, to replace her because they were hoping that he would, because of his experience with university students, be able to find the right tone in negotiating with the rebellious students. However, I very much doubt that Klinghammer’s dictatorial style and his apparent disdain of the students will endear him to this bright young crowd. Because of his age (72) he spent almost his whole life in the Rákosi and the Kádár regimes, and his educational philosophy seems to reflect those days when Hungarian universities were no more than extensions of high schools. Hoffmann is seven years younger than Klinghammer, but she is also of that generation. These people reject anything considered to be progressive educational thinking. Klinghammer thinks that there are far too many young people going to the university and that they study Mickey Mouse subjects. He was against the Bologna system (B.A., M.A., Ph.D. sequence) and I’d bet that, if he could, he would return Hungarian higher education to those good old days when, in his and Hoffmann’s opinion, Hungarian education was the best in the world.

And while we are on the subject of education and Zoltán Balog’s ministry, let me touch on something that made my blood boil this morning when I read the report about what happened in an elementary school in Balatonfüred that had been taken over by the Hungarian Reformed Church. Let’s keep in mind that Zoltán Balog is a Hungarian Reformed minister. According to the article, two teachers were dismissed from the school because “they did not pray with sufficient devotion.” Mind you, the Hungarian Reformed Church promised at the time of the takeover of the school that there would be no discrimination on the basis of religious affiliation. Now, however, the Hungarian Reformed minister in Balatonfüred referred those who complained about the dismissal to §44 of the Hungarian Reformed Public Education Law that makes it a teacher’s duty to help the students become committed members of their church and country. In addition, the students should become believers. When the parents wanted to know what the two teachers had done wrong, they were told that “they behaved strangely.”

Devotion

Devotion

The officials of the Hungarian Reformed Church obviously lied when they promised religion-neutral education to all children. And the naive parents didn’t read the Hungarian Reformed Public Education Law. All this while the school is entirely financed by the Hungarian state. On all the taxpayers’ money, including the atheists’.

At least before the nationalization of schools in 1948 parochial schools were maintained by the churches and by tuition fees. Then it was crystal clear that in a parochial school there would be a large dose of religious indoctrination in addition to the compulsory subjects. In theory children of “other faiths” were left alone. They didn’t have to attend church services or the religious instruction offered in school. But in the school I had to attend out of necessity for two years the nuns made it quite clear that non-Catholics were simply tolerated and handled differently from the Catholics, who were in the great majority.

Churches certainly can have their own schools, but they should also finance them. Parents who think that their children would benefit from attending parochial school should pay for the privilege. And before parents are misled, as it seems the parents of this elementary school in Balatonfüred were, they should read all the paragraphs of the parochial schools’ public education laws. Very carefully. In this case, I’d bet a good number would change their minds.

HUNGARY AND THE EUROZONE

 

For years most Hungarian economists have considered joining the Eurozone to be an absolute priority. Even Fidesz politicians criticized the socialist-liberal governments for conducting an economic policy that made joining at an early date impossible. High inflation and too great a deficit were the culprits. However, after 2006 the Gyurcsány and Bajnai governments made a valiant effort to reduce the deficit, and Gordon Bajnai shortly before the end of his term predicted that if the government holds down the deficit for the next three years the Hungarian forint might be replaced by the euro on January 1, 2014. Such a move would solve the problem of the sometimes wildly fluctuating forint and would greatly help the situation of those who are indebted in euros or in Swiss francs.

Because Fidesz seemed so eager to join the Eurozone while the party was in opposition, it was somewhat of a surprise that on Saturday Viktor Orbán announced that “the introduction of the euro is unimaginable before 2020.” In connection with the Eurozone countries holding regular meetings he informed his audience that “Hungary and the Hungarian presidency is not opposed to joint conferences and joint decisions,” but it seems that he doesn’t want anything to do with them. This man’s megalomania knows no limits. On what basis would it even be conceivable for the Hungarian presidency to oppose or approve joint decisions of the Eurozone countries? I’m afraid Orbán as usual thinks that he really is the president of the European Union, a total misunderstanding of the rotating presidency.

Orbán went on to describe in the most pessimistic terms the very hard times ahead for the European Union; it was for this reason that the decision was made to hold regular economic consultations of the Eurozone countries. According to him the necessity of these regular meetings indicates that “the rescue of the euro demands special decisions.” A French-German suggestion would have the Eurozone countries introduce uniform taxation, adjust the retirement age to 67, and each country would have to include constitutional limits on its deficit. In Orbán’s interpretation “the leaders of the seventeen countries decided that solving the Eurozone’s crisis cannot be done within the framework of the twenty-seven countries” currently members of the European Union and therefore “the decision was made that they alone would try to solve the problems with unusual methods.”

Hungary, it seems, doesn’t want to have anything to do with the seventeen Eurozone countries and their unusual methods, but he added that this doesn’t mean the break-up of the European Union. “The ship must be strengthened, made safer, and modernized before the waves arrive.” According to Orbán the member states sail together but each country must strengthen its own boat, and it is up to the individual countries to make sure that they remain afloat. His and Matolcsy’s job is to strengthen the ship of Hungary.

Orbán justified the decision to postpone joining the Eurozone by emphasizing that Hungary cannot adhere to a unified tax code because in that case “it would lose its competitive edge.” The true explanation most likely lies elsewhere. For example, unwarranted tax cuts that without the extra levies on mostly foreign companies and the “nationalization” of private pension funds would leave a huge gap in the budget. I suspect that Orbán wouldn’t want the European Union to have a larger role in Hungary’s fiscal and monetary matters. But for his “freedom” he may be sacrificing the country’s future.

Most economists consider the introduction of the euro an absolute necessity. László Csaba, who before the elections had been very critical of the Gyurcsány and Bajnai governments, seems to be coming to the conclusion that Orbán’s and Matolcsy’s so-called economic policies are disastrous. A few days ago in an interview Csaba, who was apparently asked to be one of the four new members of the Monetary Council of the Hungarian National Bank, announced that “an upright man” couldn’t possibly accept the job. He is staying on as a professor at the Central European University. He is among those who urge the introduction of the euro as soon as possible. Some people point to the Czech Republic’s decision to remain outside of the zone as an example to follow, but as Csaba noted Hungary’s interest rate is currently 6% while the Czech rate is about the same as that of the Eurozone.

The current Hungarian government’s economic policy is based on the hope that sometime in the future because of the tax cuts a spectacular economic growth will take place and thus Hungary will be in a better economic position at the time of its entering the eurozone. But first of all, only György Matolcsy and Viktor Orbán seem to believe in the spectacular growth that is in the offing. Most others, including the IMF or even the European Union’s “finance minister,” think otherwise.

The Hungarian critics who voiced their opinion on Orbán’s announcement about the 2020 deadline fear that by not being a member of the “inner circle” of the European Union Hungary will in fact fall even farther behind the better developed west. Péter Balázs, former foreign minister, recalled the French economist and politician Jacques Delors’s theory that within the EU concentric circles might come into being. The Eurozone countries would be in the first circle; in the second those close to joining; and in the third “the laggards.” Hungary can easily end up in the last category if it doesn’t introduce the euro for another ten years.