Analysis - Hungary's Current Problems


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Kiemelesek tolem.
<TABLE class=MsoNormalTable style="mso-cellspacing: 0in; mso-padding-alt: 0in 0in 0in 0in" cellSpacing=0 cellPadding=0 border=0><TBODY><TR style="mso-yfti-irow: 0; mso-yfti-firstrow: yes; mso-yfti-lastrow: yes"><TD style="BORDER-RIGHT: #e0dfe3; PADDING-RIGHT: 0in; BORDER-TOP: #e0dfe3; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: #e0dfe3; PADDING-TOP: 0in; BORDER-BOTTOM: #e0dfe3; BACKGROUND-COLOR: transparent" vAlign=top>Summer of Discontent

John Horvath 27.08.2006
It's not just the weather which has people burning in

At the beginning of this month, the first phase of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com
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<ST1:pHungary</ST1:p</st1:country-region>'s austerity measures came into force. Energy and utility prices all rose, and consumer prices have all been creeping up little by little as well. Yet this is only a taste of things to come. The more painful parts will come toward the end of the year, that is, after the municipal elections which are slated for the beginning of October.

Still, politicians are already feeling the heat, as the newly elected government's popularity dropped significantly in recent polls. Nevertheless, the government had to do something: the EU and foreign investors have been waiting to see how <st1:country-region w:st="on">Hungary</st1:country-region> would tackle its enormous debt and bring its economy in line with the rest of <ST1:pEurope</ST1:p. A deadline for the beginning of September was given for a concrete plan, also known as the Convergence Program, and after years of stalling the government could stall no longer.

Even so, it's quite apparent to most observers that what the Hungarian government has planned and implemented so far is merely cosmetic. Like everything else in this is small Central and Eastern European country, everything appears fragmented, rushed, and ad hoc. What had been expected was a mid to long term plan for dealing with <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region>'s economic woes; instead, it has become increasingly clear that the measures being put into place are for the short term only. In other words, rather than planning for the next few years, the plans thus far seem to address problems on a year by year basis.
At this stage, what is of concern is that the government, as with past governments, is not tackling the problem at its source. <st1:country-region w:st="on">Hungary</st1:country-region> is struggling with an enormous debt, the highest Europe</ST1:p, as well as rising inflation and a falling GDP. Unless something drastic isn't done soon, warn experts, the Hungarian economy could collapse. Not only this, but the chances of <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> joining the eurozone between 2010 and 2013 is fading fast. As if to add insult to injury, other new members states from the region, which prior to the fall of communism were behind Hungary in economic terms, are set to soon join the eurozone.

The Hungarian Way
After taking power in May the new Hungarian government announced an array of "reforms" and austerity measures in order to try and reinvigorate the economy and win over investor confidence -- and the approval of financial eurocrats <st1:City w:st="on">Brussels</ST1:p</st1:City>. To this extent, it has only been a limited success. Most foreign observers no longer trust the Hungarian government; they are waiting for concrete action, and not soothing words.

Yet while the government has worked hard this time round to increase revenue by raising taxes, it has done little on the other side in terms of cutting expenses. Where it has cut expenses, however, is in the area of throwing people out of work from the public sector and to cut social services.

While such moves are generally greeted by the business community, which is always looking for ways to bring down costs so as to raise profits, the problem <st1:country-region w:st="on">Hungary </ST1:p</st1:country-region>has not so much to do with fiscal waste within the public sector, but the waste incurred by government practice. For example, <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region>'s massive highway building program has, for the past decade and a half, sapped enormous sums from the budget. This, despite the fact that official EU policy for the past number of years has been to move the transport of goods and people "from the roads to the rivers and rails". Not only this, but the cost of these highways are the most expensive Europe</ST1:p, surpassing western countries. For instance, the cost to build a highway in <st1:country-region w:st="on">Switzerland</st1:country-region>, where there are mountains and a number of other natural obstacles, are cheaper than <st1:country-region w:st="on">Hungary</ST1:p</st1:country-region> which is relatively flat and with few such natural obstacles.

This form of fiscal waste, unfortunately, can be witnessed at all levels of government. Recently, <st1:City w:st="on"><ST1:pBudapest</ST1:p</st1:City> had purchased a new type of tram from Siemens which required the line it was to travel on to be renovated entirely -- including the tracks, platform, and electricity grid. In the end, the trams failed to work properly and are undergoing maintenance. The official statement from Siemens was that the trams were ok when they were delivered; the problem only started when it began taking passengers.

This aside, the question remains: why did <st1:City w:st="on"><ST1:pBudapest</ST1:p</st1:City> need a new tram while the money could have been used more wisely elsewhere to maintain the existing network. Moreover, the city now has four different types of trams: the traditional Hungarian ones (which have been running for decades without any problem), slightly newer ones purchased from the now defunct Czechoslovakia, a few purchased from the city of Hannover at the end of Expo 2000, and the infamous Siemens tram. Like everything else within the country, the <st1:City w:st="on"><ST1:pBudapest</ST1:p</st1:City> tram fiasco not only exemplifies fiscal waste, but what appears to be the Hungarian way: fragmentation and last minute improvisation.

Aside from this, while the government fails to address these and other such problems of fiscal waste, the way in which it proposes to generate revenue is also quite imbalanced. The "reforms" being introduced put most of the burden on consumers as well as small and micro enterprises. Meanwhile, large corporations continue to get away without paying their fair share. The irony is that while the quality of goods and services are at a level well below other countries within <ST1:pEurope</ST1:p, the profits of major companies are among the highest. Hungarian banks, for example, are one of the most profitable in <ST1:pEurope, yet the services provided by these banks are among the most expensive and, in general, very sloppy.

A Sick Idea
It is quite clear that many of the reforms proposed by the government have little or nothing to do with tackling problems which are endemic to the country. Rather, they are merely Lisbon Agenda reforms in disguise. No where can this be seen best than in the health reforms being put forward by the government.

As with education and other sectors, the country's ailing health system is being tackled simply via the balance sheet, without any attempt to look at the root causes behind the figures. A so-called Green Book, which outlines the government's proposals for reforms in the health sector, has thus far been a vain attempt at responsive government to the painful "reforms" being proposed.

Many of the proposals which have been put forward call for the introduction of various user fees. One such user fee is a "visit fee" where patients will have to now pay for each visit to the doctor. Ironically, <st1:country-region w:st="on">Slovakia</st1:country-region> was looked upon as an example of a country which had introduced progressive reforms in the health care sector, ones that <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> needed to emulate. The visit fee was often touted as a prime example. However, after a massive, long, and crippling strike among health professionals, coupled with the formation of a new government in <st1:country-region w:st="on">Slovakia</st1:country-region>, <st1:City w:st="on"><ST1:pBratislava</ST1:p</st1:City> has since admitted that its health reforms were in error and that it was now scrapping the visit fee, among other things. <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region>, meanwhile, continues to believe that such reforms are needed and is pressing ahead anyway.

There is no question that <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> health sector is overburdened and that the country can't afford to be constantly pumping huge amounts of money into the sector. Yet, like many other problems within the country, the solution is not simply financial, that is, slashing budgets and reallocating resources. Indeed, the main solution to the problem with health care in <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> appears to be socio-cultural rather than fiscal.

Without doubt, <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> is a sick society. It has the lowest life expectancy in Western and <ST1:pCentral Europe</ST1:p for most adult age-sex groupings, especially for males aged 40-60 years. In 1996 life expectancy at birth was 66.1 for men and 74.7 for women, little different from the figures for 2000, which are 66.3 for men and 75.2 for women. The comparable figures for the EU, meanwhile, are 74.2 (men) and 80.8 (women).

The problem with the health sector in <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> is that there is little or no focus on prevention. Instead, emphasis is placed on suppressing the symptoms and not treating the underlying problem. It should come as little surprise, therefore, that the average Hungarian takes five types of medication a day, mostly over-the-counter drugs.

Many of the health concerns that Hungarian society is presently facing has to do with a question of lifestyle. Most believe that the hustle and hurry world of neurotic consumerism is what democracy is all about. Also, thanks to the influx of fast foods and the corporate influence of junk foods in the schools, obesity has become a major problem among the young.

Whereas in other countries, such as <st1:country-region w:st="on">Canada</st1:country-region>, governments spend a sizable amount of money on education and advertising for healthy lifestyles and alternatives, such campaigns in <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> are invisible. Meanwhile, neo-liberalist education policies which deem lexical knowledge as not important to the learning process, similarly regard physical education and other such subjects as not an integral part of the educational process, and have thus been cut back -- or even cut out altogether.

It is quite clear that when it comes to the health of society, consecutive Hungarian governments have been content with leaving everything in the hands of Big Pharma and related industries. Privatisation is the ultimate goal, and already multinationals are lining up ready to take what they can get.

At this stage what is needed is not less but more money pumped into the health sector in terms of preventive action, progressive education policies, and stricter controls on certain industries (e.g., the food industry, in particular junk food companies) so that people won't become sick in the first place. With less sick people demanding health services, less money would then be need to be pumped into a sector bursting at the seams.

Dictatorial Tendencies
Among these and the other myriad problems the country is facing, it's <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region>'s democratic deficit that is perhaps the greatest stumbling block to genuine reform. Unfortunately, as with the country's budget deficit, this shortfall appears to be increasing as times goes on.

The structure of the new Hungarian government, elected in May of this year, is an example of this worrying trend. Whereas democracy is generally based on a balance of power diffused at levels, the structure of the present government is just the opposite: power has been concentrated in one area. The rationale for this is that the country is going through some difficult times, so for the sake of efficiency the process of making decisions and carrying them out requires a centralisation of power.

The prime minister's special council is a case in point. While this group of former politicians and influential business leaders officially "advise" the prime minister and assist in the formation of policy, it in fact operates as a shadow government. Council members are appointed by the prime minister personally, and thus are not accountable to either the public nor parliament. Meanwhile, government ministers must adhere to the plans and policies developed by the council. In other words, government ministers are just puppets who merely carry out decisions already taken on their behalf.

Aside from the structure of the present government, what is equally worrying is the personal attitude and conduct of the prime minister himself. Ferenc Gyurcsany, a former leader of the Communist Youth movement and unrepentant communist turned neo-liberalist businessman, has no patience for opposition, as is apparent in his outbursts in parliament and public pronouncements.

In addition to this, the cynicism on the part of the prime minister is such that he has no problem with lying and admitting to it. For instance, over the past few months Gyurcsany was unperturbed at having to abruptly tell voters that much of what he said during the campaign was inflated, and was mainly for the sake of winning the election. Likewise, shortly after winning the election he boasted that he already had a plan for dealing with Hungary's grave situation, and with his electoral success he would be able to quickly implement it; subsequently, it has become quite obvious that there was no plan, and the one now being put into place has taken months to only partially implement.

An even more recent and striking example of the condescending attitude on the part of the Hungarian prime minister came at the end of July. Then, as the government was putting on the final touches to its reform program, Gyurcsany gave a televised six minute speech trying to sell to the public the necessity of the reforms he was introducing, some of which would start at the beginning of August, as with the rise in energy prices. After the speech, he then went off to take his summer holiday, despite the fact that the Convergence Program needs to be ready by the end of August.

Unfortunately, such attitudes are not unique to Gyurcsany. Peter Medgyessy, his predecessor, did the same shortly before he was replaced in a palace coup. During the economic crisis which hit the Hungarian government in December 2003, Medgyessy was away on vacation <st1:country-region w:st="on">Thailand</ST1:p</st1:country-region>. Instead of cutting his holiday short and rush back to <st1:City w:st="on"><ST1:pBudapest</ST1:p</st1:City> to take control of the situation, he simply arranged for a change of finance ministers by phone. What made the whole affair more comical was that the newly appointed finance minister, Tibor Draskovics, was in <ST1:pAfrica</ST1:p at the time, also on holiday.

At first glance, it would appear that Gyurcsany is a walking contradiction: on the one hand he speaks of social justice and proudly lays emphasis on his communist past (albeit he his careful not to spell it out), whilst on the other he spews out neo-liberalist jargon and is representative of a new breed of Central and Eastern European entrepreneur -- the commissar turned capitalist. Although such a profile may strike Western observers as alien and somewhat schizophrenic, in reality Gyurcsany epitomises a new form of Stalinism, one that is actually quite familiar when viewed through the prism of a corporatist culture. Indeed, it's obvious to Gyurcsany and those like him that the only way in which to run a society is to run it as if it were a corporation.

Along these lines, it should come as no surprise that the so-called reforms and policies being implemented by the Hungarian government adhere strictly to corporatist principles, with little or no regard for non-fiscal aspects. Lip service is paid to social justice and any other non-monetary aspects
which may affect the bottom line.

At the same time, a style of management has been introduced which is nothing more than management by terror. It exhibits itself at all levels -- social, political, and economic. Thus, everyone within this corporatist society lives under the continuing threat of dismissal without warning, while job losses seem to occur on a random basis.

The leadership of the government is commensurate with this style of management. Although Gyurcsany may set ambitious targets based on intuition, he seldom listens to advice or admits that he has made a mistake. Meanwhile, he has surrounded himself with an entourage of sycophants who pass on his management style down the line, subjecting their own subordinates to the same kind of bullying.

The end result of all this is that Hungary Inc. presently operates in a terror-laden miasma of politicking, backstabbing, misrepresentation of personal achievement, and the sophisticated management and "communication" of company news. It differs little from the techniques and principles of classical Stalinism, only in this case the firing squad is replaced by instant dismissal.

Nevertheless, it's a hierarchical society administered by fear, in which those at the top lack for nothing and are not accountable to those under their authority. Few in this hierarchy enjoy the security of tenure. The main reason why this modern corporatist form of Stalinism appears so distant from the classical form is that even the most ruthless style of corporate management hasn't extended the principles of hire and fire to include a bullet to the back of the head -- at least not yet.

Out with the tanks, in with the banks
Prior to the end of communism, most people had a fair amount of assets, including money in the bank, some kind of property, etc. What was lacking then were consumer goods. With the fall of communism, the floodgates of consumer capitalism were opened. In turn, these assets were washed away, often by either hook or by crook. Toward the end of the century, in order to maintain and even increase consumption levels, access to credit was eased, to the extent that many found themselves suddenly wallowing in debt. In Central and <ST1:pEastern Europe</ST1:p, Hungarians are the most likely to buy on credit rather than save for a purchase.

In all this time, successive Hungarian governments had done little in terms of education or legislation in order to warn people of the dangers. Considering that the transition from a command economy to a market economy is fraught with hidden pitfalls, especially for an inexperienced population unaccustomed to the "rules of the game" (when and where they exist), this should have been one of the top priorities in the first few years of post communism. Not only was this lacking, but the government itself actually played an ignominious role in aiding and abetting the corporations responsible for market abuse. Meanwhile, a privatisation process that can only be called state robbery (not long ago the General Accounting Office admitted that some two-thirds of state assets simply disappeared by various means) and corporate welfare in the form of tax breaks, preferential treatment, and even low-cost loans to investors fueled this financial bonanza.

All this, in addition to the debts and fiscal wastage inherited from the communist regime, has now made <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region>'s fiscal position untenable. Indeed, because of EU oversight, the creative bookkeeping practices of the past years can no longer be applied, adding to the government's woes. A case in point was when the government failed to include the cost of its highway construction projects in its budget last year. When this oversight was pointed out by <st1:City w:st="on">Brussels</st1:City>, the response in <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> was simply that the EU has another way of accounting. Since then, however, the Hungarian government has been careful to make sure it has adhered to the rules of this "other way" of accounting.

The end result of all this is that a large segment of the population has found itself in debt, and with the planned austerity measures their situation will only worsen. Indeed, for many the future looks quite precarious.

Yet although having swindled many of their life savings and assets in a little over a decade and a half, corporate capitalists are still not satisfied. The banks have moved in, taking over various construction projects and virtually dictating the way in which the country is to be developed -- both in urban areas such as Budapest and rural areas, namely within small towns and villages.

In conjunction with this, any remaining assets that individuals may have is slowly but surely being appropriated. Deutsche Bank, for example, is now heavily engaged in a program intent on taking the last remaining assets that many Hungarians have -- their homes. Through a slick propaganda campaign targeted at seniors (which make up around a third of the population), the bank offers cash and a regular supplement for expenses in return for their homes. Seniors stay in their homes until their death, however the program is specifically crafted so that the bank ultimately gets the property at a fraction of the cost.

Moreover, while there may be nothing technically wrong with this program, the main problem with it is how it's advertised. On many occasions, the bank tries to propagate itself as providing a social service, when in fact it's simply a shrewd business arrangement.

What all this entails is that instead of passing on assets to family members or relatives, these assets eventually end up in the hands of corporations. Future generations, in turn, will soon find that the rug has been pulled out from underneath them; what the government hasn't already sold or leased for their entire lifetime during the privatisation process, their own families had sold in order to live a life in which there was no tomorrow. Either way, they will bear the burden of such fiscal recklessness.

Ghosts of the Past?
In a properly functioning democracy, how the Hungarian government had acted in the past, the way it conducts itself in the present, and what it plans to do in the future would have all been met by massive protests. In <st1:country-region w:st="on"><ST1:pFrance</ST1:p</st1:country-region>, for example, when the government attempted to implement similar piecemeal Lisbon-style "reforms", the country came to a standstill and all segments of society stood shoulder to shoulder in solidarity. In <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region>, such form of solidarity is clearly lacking. This is because in many countries of the former East Bloc worker movements are fragmented; there is little or no form of solidarity among different sectors. Sadly, a "now it's their turn" mentality seems to prevail.

As a result, employers and the government have been able to use a policy of divide and conquer. What is more, union officials are often corrupt and susceptible to bribery; most are under the influence of one political side or the other. A clear example of this was during a union protest in July over the Hungarian government's reform proposals. Then, a prominent union leader was offered a well paid government job as a way to counter the protest. It worked: the union leader promptly accepted the position, and simply left the demonstration which he had initially helped to organise.

Although the Hungarian workers movement is fragmented and solidarity is lacking, a number of large-scale protests have nonetheless been planned for September. A massive student protest against tuition fees and other education reforms will be held, and several labour unions have also decided to hold rallies and demonstrations around the same time. Additionally, a ruling on a petition to the constitution court submitted by various labour unions and NGOs over the legality of some of the government's proposals is expected. This ruling could yet derail the full implementation of the government's reform package, thereby plunging the country into a crisis vis-a-vis eurocrats in <st1:City w:st="on"><ST1:pBrussels</ST1:p</st1:City>.

Many are thus predicting some sort of trouble for the government in the coming few weeks. Indeed, rumors have been circulating that the authorities are already preparing for next month through the extra training of riot police and by the planned deployment of mounted police throughout <st1:City w:st="on"><ST1:pBudapest</ST1:p</st1:City>.

But the troubles the government is about to face are much deeper than this. The exclusive focus on economic issues masks the other major problems <st1:country-region w:st="on"><ST1:pHungary</ST1:p</st1:country-region> is now facing -- globalisation, demographic change, racism and sexism, corruption, and a democratic deficit. Instead of tackling these problems (in conjunction with the economy) as part of a long term objective, Hungarian politicians on all sides of the political spectrum have shown that they are all mainly concerned with managing four-year cycles. In other words, consecutive Hungarian governments simply hop from election to election, and thus are afraid to implement long-term policies, preferring to adopt instead solutions that can guarantee some sort of short-term gain.

Still, anything can happen between now and September. Ironically, looking back fifty years, the Hungarian Revolution itself began in a similar fashion, with a student march and protest. Admittedly, the circumstances between then and now are quite different. Nonetheless, it was the government's refusal to listen to the people and the brutal reaction of the police which then quickly turned ferment into rebellion.

Oldal tetejére