What we know about the current Hungarian situation

In a way I would prefer to continue my short biography of Ferenc Gyurcsány. But I have the feeling that my readers would prefer to hear about current events and short-term predictions rather than the 1980s and Gyurcsány's student years in Pécs. (I'll return to that on a slow news day.)

I'm trying to avoid passing along every rumor that reaches the ears of a third-rate reporter and then is sold as hot news. Most of these stories sound unlikely if not outright unbelievable. The reporters also seem to have a penchant for trying to create panic by outlining scenarios that all predict the certain failure of a smooth transition from Gyurcsány to Bajnai. Both SZDSZ and MSZP are fractured (true enough), so there won't be the necessary votes for Bajnai to become prime minister of Hungary (wrong). The problem with this scenario is that we know the exact number of SZDSZ members who voted against Bajnai. I reported on that yesterday. We also know that out of about 120 members of the MSZP caucus present at the Sunday meeting only four abstained and one didn't vote. Even without the members of MDF who, by all indications, will support the constructive vote of no confidence Bajnai should be fine. So what's the problem? One has the feeling that Hungarian journalists love chaos and trouble. Then perhaps they can write more riveting articles about the impending doom.

Since I'm not trying to sell papers or write episodes of The Perils of Pauline, let me outline briefly the pieces of information that seem credible. (1) Ferenc Gyurcsány decided to resign as party leader when it became obvious that the candidate for the post of prime minister would come from the inside. Two names were mentioned, the first a member of MSZP and the second politically unaffiliated--József Gráf, minister of agriculture, and Gordon Bajnai. If Gráf were to become the candidate Gyurcsány would resign because in his opinion the posts of prime minister and head of the party should be held by the same socialist politician. In Bajnai's case he would resign because they are close friends; if he remained the leader of the party it would look as if he were the puppetmaster and the new prime minister the puppet. (2) Currently there are two serious contenders for the post of chairman of MSZP: Ildikó Lendvai and Péter Kiss. But the field keeps widening. Imre Szekeres, minister of defense, is another frequently mentioned possibility. Kiss says he would accept the nomination but suggests Lendvai. Lendvai says that she would rather stay on as head of the MSZP parliamentary delegation. She claims that she is no good at administration. Next Sunday the nominating congress will have to make its decision. (3) For me the most interesting piece of news today was János Veres's revelation that Bajnai's austerity program is practically the same as the one he and his ministry worked out at the end of January and suggested for immediate acceptance. At that point he didn't get the nod from either the cabinet or the parliamentary caucus. In fact, Veres claims that he had already outlined his plan last summer at an MSZP retreat at Dobogókő. Not only did his plan get rejected only to resurface with a new advocate heading a new government, but it seems almost certain that he will be replaced as minister of finance. A new government, an old/new economic plan, a new minister of finance. (4) According to information the media received (which might just be part of the rumor mill) Bajnai is already talking about personnel changes in the cabinet; at least five people will be leaving.

And finally. What will Ferenc Gyurcsány do once he's no longer prime minister and head of the party? He made it clear that he is committed to continuing his political career. Although he said that he will remain a member of parliament, surely being an ordinary back bencher is not exactly Gyurcsány's style. One conceivable scenario was that if Ildikó Lendvai becomes chairman of the party then Gyurcsány could head the caucus. But no. Gyurcsány rejected that as well. He did, however, mention a position he would like to occupy: heading the Táncsics Mihály Alapítvány, the theoretical think tank of the socialist party. Here I'm speculating, but let me suggest what Gyurcsány has in mind. He is planning to work on making MSZP a truly social democratic party that would meet the challenges of the twenty-first century. A party of which he would be the logical head.

Comments

[whoever]

I enjoy reading this blog and I feel it adds to knowledge of Hungarian politics.

But you seem pre-occupied with the same names, and transfixed by the often rather dull personalities involved. Gyurcsany- self-made man - more interesting than most. But who would be interested in long biography of, say, Istvan Hiller, Meszterhazy, Lendvai or Laszlo Kovacs? These people are apparatchiks.

The historical equivalent is that of gossip in the Royal Court - it's not journalism with a basis in the real world.

I'm going to make an assertion here. The MSZP isn't going to be re-invigorated by Gyurcsany as a social democratic party, as Gyurcsany has a limited and somewhat mistaken understanding of what a social democratic party actually is, in its entirety. Not only that, but PES parties in the EU are in crisis. The only ones succeeding are those with elements of populism (Fico) or with enough savvy (Zapatero). Gyurcsany, despite what you write, has two left feet when it comes to politics. He's clumsy and unoriginal - and I have to add - he's still one of the more capable MSZP politicians!

He won't be able to revivive them on his own, because his foundation is almost totally surrounded by reverential silence in the party. There isn't the spark of actual debate and constructive policy that would help him move forward. This has always been his problem - the vacuum surrounding him.

If I had to describe Feri's politics I'd say they were more "liberal conservative" - as I'm sure he does not seriously support the traditional ethics or institutions of social democracy.

Without a basis in society, organisations which connect to Hungarian people, and which are popularly supported and subscribed to, Gyurcsany cannot proceed and have that crucial link with the "real world". And his unproductive period in office will hold his neck up like a lead weight.

In the real world, outside your MSZP bubble, Hungarian society and the institutions upon which it depends will continue to atrophy, and the environmental and social degradation continues to increase- as day by day, the Third World edges just that little bit nearer.

[Gábor]

I won't be so sure that journalistic pieces highly unbelievable at the fist sight has no serious factual background in this case. They are only distorted ones, because what we saw in the Hungarian press these days - first of all in the electronic one - is nothing else than the classical deliberate manipulation, sometimes unintentionally from the author him/herself. As I tried to outline elswhere (even though only as a possible "narrative") this was the case already at the beginning of March after the informal EU summit. I have the extraordinary situation to have first hand accounts from many of the events covered in the press through those hysterical pieces and I can compare the two. I'm convinced that especially Hírszerző publishes manipualtive articles on what happened in Mszp bodies and the priamry suspect is Szekeres behind these actions. The core is always factual (conflict in the caucus session, conflict in the presidency etc.) but the bad guy is always Gyurcsány, portrayed as a maniac of power, who - astonishingly - always confronted with Szekeres or his allies. He surely felt himself as party chairman Saturday evening, but in three days he has to face serious contenders.(Szekeres seems to be an able manipulator, he can even sell stories abroad that he has real chance to become NATO General Secretary...)

As Hírszerző is the mouthpiece of Szekeres one can make the hypothesis that last fall, when the SZDSZ was eager to bring down Gyurcsány and they distributed the story that they are acting in concordance with Gyurcsány's enemies among socialists, it was the case, Szekeres very probably involved. But in the light of this hypothesis last weeks farce has to be reevaluated and it was certainly not only the result of the unpreparedness of Gyurcsány's staff, but high level sabotage, and the press coverage was well prepared.

Otherwise Veres tried to use Index to strengthen his position last week, the surfacing of the austerity plans set up in the finance ministry was surely part of a manouver to ensure a position in the new cabinet. Meanwhile the Reform Alliance clearly simply bought some journalists, I would suppose at a bargain price, maybe they are only delighted to have dinner with such extraordinary "experts" as Péter Heim or Krisztián Orbán. (The latter considers Sándor Eckhart's works on economic history as reliable and not as they are: a "salabakter"!)

As for Gyurcsány's future, his more or less successful counteractions show that he has following in the party and therfore a slight chance to return, although not soon. He would need to be first of all "European" and make a reflection period, critically reassesing not only his politics, but his ideas. He should not be dragged into the mud of self-pity, nor allowed himself to be led by only his anger on his enemies. He should look after the after the political and ideological lessons. I don't think that his third way ideas will be sustainable, as third way is not a success even in the West, and a complete failure in the East. The crisis would offer him the possibility of a credible and viable reevaluation, but he should be more open to new ideas and find new contacts among younger, leftist intellectuals. And he should be more open to the idea that te problems of the east - as they are common ones and not national - and not only those of the crisis, but the long term ones, can only be resolved according to leftist principles if it is a soultion on a European level and not a national one.

[Mark]

Gábor: "And he should be more open to the idea that the problems of the east - as they are common ones and not national - and not only those of the crisis, but the long term ones, can only be resolved according to leftist principles if it is a soultion on a European level and not a national one."

As I've said before the "third way" in a country like the UK was never really - despite the rather shallow books of Giddens - a political programme. It was really about allowing a Labour government the political space to consolidate the post-Thatcher neo-liberal order after a period of some pretty shocking election defeats (the most traumatic of which was the unexpected one in 1992, when a "minimum" social democratic programme failed at the ballot box in the midst of recession). Therefore it had three core elements - (1) no change in the "Thatcherism lite" economic and social policies pursued by John Major, (2) the manipulation of the intellectual left through social liberalism and several symbolic cultural measures, and (3) the manipulation of the working class vote through the adoption of right-wing populist rhetoric and policies on immigration and law-and-order. Its German variant was even insubstantial.

But whether "leftism" is a solution depends on what "leftism" means. I have a feeling that most of the "left" in the MSZP would analyze the problems in something like the following way. One, catch-up with the west for Hungary is impossible because of its "peripheral" position in the world economy. Secondly, though they may not say this openly they would regard the transition to capitalism as a "mistake", and would only grudingly accept the existence of market relations. Thirdly, they would seek to "compensate" the population for their low living standards by offering them a high degree of redistribution through a bloated state. If this is what is meant by "leftism" then this is a complete dead end, and if anything only offers a means of managing - and not very reliably - Hungary's social and economic decline. It is a recipe for a poorer society, whose young and educated go abroad in search of opportunities, and society at home becomes older, iller, and the environment less pleasant.

If, however, "leftism" means addressing directly the fundamental problems of low labour participation and the poverty and social exclusion to which it is tied this is an entirely different matter. The weakness of the liberal solutions to this problem is that they regard it as simply a problem of a lack of market incentives to search for work - i.e. to many social benefits, and would argue that if these were cut back or their operation made for punitive the difficulties of worklessness in poor regions of the country would be solved. Such a diagnosis is obvious nonsense, and I would argue that the explosion of (not very effective social spending) is a symptom, not a cause of this problem. But tackling it requires building political support to take on vested interests - middle class taxpayers would need to pay more than they do now for the measures required to combat poverty and low skills to make people more employable; pensioners would have to accept a lower level of support; and the various business-financial interests would need to be stood up to.

Intellectuals are not going to be much help here. One of the sicknesses of Hungary's democracy is the shallowness of its roots among the population. In the 1990s the parties were intellectual clubs, and because of their reliance on the class identity of intellectuals were hostile to deeper political participation because it would mean them having to share power with others. Increasingly, this has been replaced with commercialized media populism. It seems to me that without a broad movement based on people, who in the terminology of an earlier age "live from wages and salaries", that actually is capable of sustaining prolonged political action for better working conditions, wages, social provision etc. than there will be no space for leftist politics. Sadly I'm not sure that many "leftist intellectuals", who are closeted away in Budapest, have too much direct experience or interest in the people who "live from wages and salaries".

[Gábor]

Its an interesting reaction as it has nothing to do with the quote from my earlier one. :)

I meant that in the long run I see no possibility to deal with such fundamental problems like the population ageing and decline and the sustainability of the social systems on national level. (Ok, immigration is a possible choice but neither in Hungary nor in many CEE countries would the population easily accept it, whether I personally like the idea or not.) And not only these processes are problems, but the integration of Europe as well. As traditional social systems are based on the assumption that the new generations carrying the burden of caring for the older ones will remain at home the free migration of labor undermines it from a national perspective. I do not want to reverse the integrartion, quite the contrary, I would be eager to embrace a more federalist one as well.

As for the leftism in Hungary, I'm not a fun of traditional leftism even if I'm ready to buy some of their perceptions, for example the importance of the role played by these countries in the European or world economy. Not becasue it is a good basis for attacks on greedy capitalists (although sometimes it is flabbergasting how vulgar-marxist concepts were revived during the crisis, for example Demján argued that the state has to support not only productive people but rather only blue collar work and abolish everything else and I had suddenly remembered the term "komprádor burzsoá"), but because it lies at the heart of the fact how heavily they were hit by the crisis. Moreover, I'm not convinced of the possibility of an early catch up (as it was predicted or foretold by "experts", in 10-15 years and a unilinear process) but for me it do not means the necessity to return to dirigism or "kádárism". It's a sober reality to accept.

But I agree with your reasoning, the core of the problem - at least in the short term - the low rate of employment and the solution lies not in market mechanisms (i. e. presuming that the flexibility of the labor market is extremely high in Hungary, only amdinitsrative regulations constrain the otherwise very eager people from working, moreover I think that even the existence of a single labor market in Hungary is dubious), but a more balanced approach with many state incentives and creating the necessary demand for labor on the spot.

Why would I continously insist on the importance of an intellectual background? (While I'm again siding with your point reagrding a popular movement?)You could have ssen Gyurcsány in the last few weeks being trapped between his own ideas and a very agressive media environment presenting only those views you called obvious nonsense as unquestionable thruth of "experts" and "analysts". There was no singel contesting voice, no single counterargument for weeks, neither arguing in favor of a different approach, nor pointing out the ridiculos mistakes in the comaprisons with other countries or the obvious selfishness of Reform Alliance propsals. (If I were a populist I would make a tour around Hungary hammering those greedy brokers and capitalists, who for years condemned the foollish population not investing in hedge funds and stocks and like that and now, as they obviously lost a fortune with the crisis are only eager to get it back from poor pensioners and workers with minimal wages. :) ) I don't think that any popular movement is imaginable without an intellectual turn - not reviving outdated ideas but crtically assessing the crisis and its consequences, putting the question, how it will reshape the world economy, whether solutions desigend for an earlier environment will still be sutiable, developing ideas fro long term problems and thinking of the possibilities offered by Europe as an entity etc.. Many of these ideas would seem at the first sight utopical, I know. But at least they could be fresh and maybe sometimes intriguing. Intellectual background won't substitute for a popular movement, I know, but maybe it is a precondition for its success. (Maybe I'm just selfish as well, as I think it is a possibility for younger generations to surface. :) )

[whoever]

Gábor: "And he should be more open to the idea that the problems of the east - as they are common ones and not national - and not only those of the crisis, but the long term ones, can only be resolved according to leftist principles if it is a soultion on a European level and not a national one."

I agreed with much of what you said, but not this. At a local level, as in the housing block or street, you live in, up to the municipal level, and then to regional level, and then at the national level, there are a thousand things that can be done to improve peoples lives. Some cost money, others don't. Others, such as social enterprises, generate money. Picking up litter is a very simple one - leftist in that it implies that land use is shared in common. One thing about the new LMP party which is promising, is they make the link between land use, localism and participation - and they're keen to join the dots.

Waiting for the EU to sort itself out is a mug's game, frankly. Even with the strong PES manifesto this time, the elections this June are set for a right-wing victory, on the basis of national politics alone. It's a shame, but shows the weakness of an EU-wide agenda on its own.

Any programme needs to be from the floorboards up, and there's no doubt in my mind that Gyurcsany's "Fabian" style of politics militates against this. As Mark says, there is a big problem with finding the people to do the donkey-work for the thankless tasks of re-organising the economy on a socially rewarding basis. I suspect no-one from the existing big parties is up to it.

[Mark]

whoever: "Waiting for the EU to sort itself out is a mug's game, frankly. Even with the strong PES manifesto this time, the elections this June are set for a right-wing victory, on the basis of national politics alone."

It is interesting. I wonder how many of those who will vote FIDESZ in June's EP elections, actually realize that by voting for the Hungarian representatives of the EPP they are supporting the spread of market principles across Europe!

Maybe the PES have a good sounding manifesto, but none of Europe's social democratic parties have been able to offer any more than a kind of soft-focus version of economic liberalism.

The EU is an imperfect vehicle for change. It is caught in something of an impasse. Euro-federalists long believed that market integration would unleash a logic of social integration that would lead to political integration. The economic success of the EU in creating a highly integrated market has resulted in a strange political failure, in which the logic of market integration has created a xenophobic, new right reaction. The power of this is not attested simply by the fact of the size of the support won by the populist right, but the extent to which other parties - especially social democrats have adopted the language of this populist right. Werner Faymann demands referenda as a condition for Austria's signature on new EU treaties, following Haider and Strache, while Gordon Brown speaks of "British jobs for British workers".

At the same time that integrated market has become a version of the world economy in minature with all its spectacular imbalances. As these implode, one would assume that the survival of the market area would demand much greater supra-national macro-economic co-ordination. Yet, the political dynamics unleashed make this impossible. Strache and his friends are busy already blaming "Eastern Europe" and its profligate borrowing for Austria's problems. Now, I'm sure that rationally the western European mainstream has no interest in a weakening of the European project, but given the gross absence of leadership in the big states, the logic of events is pushing Europe in this direction.

[Mark]

Gábor: "You could have ssen Gyurcsány in the last few weeks being trapped between his own ideas and a very agressive media environment presenting only those views you called obvious nonsense as unquestionable thruth of "experts" and "analysts"."

I take you point, though we have also seen more dissenting voices than usual, simply because it is fairly clear how disastrous the political and economic consequences of implementing the Reform Alliance's proposals would be.

I think the hijacking of the term "reform" which in English at least means to "make changes in (something) in order to improve it" (Oxford English Dictionary)is interesting. "Reform" has almost come to mean exclusively the opening up of every field of life to market forces. The lack of academic debate among economists is especially shocking, and the neo-liberal hold over the economics profession in Hungary is truly extraordinary.

[Eva S. Balogh]

Gábor: "I'm convinced that especially Hírszerző publishes manip ualtive articles on what happened in Mszp bodies and the priamry suspect is Szekeres behind these actions."

Hírszerző is something else. For at least the last two years the editorial board has been doing nothing else but undermining Gyurcsány. Every second day they predicted that here was the end of the prime minister's career. It was becoming so obvious that at one point I wrote to them and explained that this is not journalism. It is called something else. Needless to say that they didn't answer. Of course, I don't know whether Szekeres has anything to do with it or not but it's sure an ugly game.

[whoever]

It wouldn't be too hard to differentiate market-based reforms from people-based or social reforms, but it's all intended to portray anyone against the Onward March of Neo-Liberalism as stick-in-the-mud Clause IV diehards. And that reference to New Labour is quite deliberate, as we know that the top levels of New Labour and the MSZP were/are close. It's the cheesecutter technique where you define your enemies quickly before they can put their trousers on, and therefore try to ensure that the mainstream follows your lead.

I see many economists in Hungary as macho posers, with each trying to be more fundamentalist and reductive than the other. It's interesting that despite hosting the Vienna school of economics, Austria remains a very settled social democracy - certainly lots of xenophobia, but on the whole remaining consensual. Crude marketisation of entire societies is obviously for export only.

[Gábor]

Éva: "Hírszerző is something else. For at least the last two years the editorial board has been doing nothing else but undermining Gyurcsány."

I didn't mean that Hírszerző is a regular mouthpiece of Szekeres, but in this case he is feeding them with distorted information. Otherwise I would conclude that they are both bought by some mogul (by Hungarian standard, and I hope they are paid accordingly as well :) ) and delighted being sometimes in the company of "extraodrinary" people, as they think it elevates them as well. But even this state of affairs can't explain the anger in their publactions and short-tempered articles.

[Gábor]

Oh, and here is the news, probably unveiling the Reform Alliance's real character and substance, a selfish lobby group:
http://www.hirszerzo.hu/cikk.megszunik_a_reformszovetseg.103223.html
Poor Glatz, how eager he was while his name was circulated as candidate-candidate to set up the working group for social politics, and now the whole organization will cease to exist without finishing their work. :)

[Eva S. Balogh]

whoever:"I enjoy reading this blog and I feel it adds to knowledge of Hungarian politics.

"But you seem pre-occupied with the same names, and transfixed by the often rather dull personalities involved. Gyurcsany- self-made man - more interesting than most. But who would be interested in long biography of, say, Istvan Hiller, Meszterhazy, Lendvai or Laszlo Kovacs? These people are apparatchiks."

Did I give biographies of Hiller, Mesterházy, Lendvai or Kovács? I didn't. Hiller is not an aparatchik, by the way. He was a history professor turned politician. Mesterházy is too young to be a former aparatchik.

Preoccupied with the same characters? These are the people who are important in today's political life. Therefore, it would be very difficult to ignore them.

[whoever]

Eva, of course you can write about whoever you like. And I enjoy reading it. It's just that I wonder if many of the machinations have relevancy to what actually happens in the country. This is the same country where they needed 30 garbage trucks to shift dumped refuse from an estate in Miskolc. Where there is a massive and devastating pensions timebomb, when the millions in the grey economy retire and find themselves on a minimum pension.

The names you mention are important in today's political life, but may find themselves buried by tomorrow's events, having added little to the long-term development of Hungary. Beyond the EU, just what do the MSZP stand for, again? It's not socialism. Is it?

To be more partial than polite, none of them are especially capable of independent thought apart from Gyurcsany, and he's wrong most of the time anyway. I hold by my opinion in that they are apparatchiks in spirit, in the same way that for instance Robert Repassy is an apparatchik for Fidesz. Mesterhazy being a modern "machine politician" with a trendy beard and shiny smile, but for most people, nothing he does or says has any relevance whatsoever.

What we're talking about is a situation where Hungary's future, the future of our children, is threatened. Seriously under threat from a number of sources - urban decay, the far right, intolerance, pollution, lack of participation, climate change, lack of funding for essential services. And you are writing about a biology teacher-cum-failed prime minister from Papa. It's important - but not That Important.

[Mark]

whoever: "It's interesting that despite hosting the Vienna school of economics, Austria remains a very settled social democracy."

Perhaps this has something to do with their influence on the economic policy of inter-war years; indeed one of their number, Schumpeter was Minister of Finance for a brief period at the beginning of the First Republic. The general committment of the right-wing administration in inter-war Austria to liberal economic policies didn't have a very good end - think 1934, and the 1938. In the immediate postwar years, the ÖVP (the sucessor of the dominant Christian Socials of the inter-war years)did not return to pre-war economic liberalism until they were confined to opposition at the end of the 1970s, holding it responsible for the unemployment that had de-stabilized the political system.

There is a lesson there of sorts for Hungary now.

[isti]

First, I read this site often. While I find it informative and interesting, I also find the firm, unshakable pro-Gyurcsany/MSzP slant to be tiresome. So I really appreciate this refreshing exchange.

As a Canadian-born, liberal-minded person, I struggle with many of the very things you discuss and am constantly frustrated by the situation in Hungary. Among many things mentioned by whoever, Gabor and Mark, the following resonates with me:

Mark: “The lack of academic debate among economists is especially shocking, and the neo-liberal hold over the economics profession in Hungary is truly extraordinary”
Mark: “The weakness of the liberal solutions to this problem is that they regard it as simply a problem of a lack of market incentives to search for work - i.e. to many social benefits…”

I have compared, translated policies/website information from Hungarian leftist parties with those of leftist parties in Canada and found them to be startlingly discrepant. I have tried very hard to reconcile these differences but I cannot. My anecdotal evidence (i.e. discussions, general contacts etc...) would also suggest major differences, including that the general need for a social safety net of any kind is not a priority for the Left in Hungary.

There is blind political allegiance in Hungary (among Hungarians - often for generational reasons - and westerners who may automatically ally themselves). I’m sure politicians are as much to blame for their lack of “direct experience or interest in the people who live from wages and salaries.” This is an overarching threat.

Final question: Is there yet a viable Magyar Green Party?

[Eva S. Balogh]

Isti: "First, I read this site often. While I find it informative and interesting, I also find the firm, unshakable pro-Gyurcsany/MSzP slant to be tiresome"

It would be odd if I changed my views every second day. On the other hand, you're wrong: I don't have socialist sympathies. In fact, I find certain segments of MSZP outright responsible for the current problems of the party and the country. I don't even believe in the European type of welfare state. So, all in all, you're wrong about my political views. On the other hand, I find Fidesz and Viktor Orbán frightening and I would like to see an democratic alliance of MSZP, SZDSZ, and MDF against the far right.

[Mark]

isti: "the general need for a social safety net of any kind is not a priority for the Left in Hungary."

The real weakness of the left's position is that the state redistribution that exists in Hungary is not a safety net. It is the remainder of the state socialist social wage, which no-one has tried to transform seriously into a functioning welfare state (unlike Ėva I do support the principles on which European welfare states are founded and would argue that many in the USA, among them those refused reimbursement for medical treatment on grounds of prior health conditions, or those stuck in trailer parks across the south of the United States, would benefit if Obama were to suceed in introducing a properly functioning welfare state there). In Hungary, the problem is that this redistribution doesn't really solve the problems of the poorest, as those on middle or high incomes benefit disproportionately. Certainly the mechanisms of state redistribution require reform so that they lift the poorest out of their desperate situation, but this is normally not what is meant by reform. Instead the inadequacies of existing redistributionary arrangements are used rhetorically to support highly reactionary policies of restricting social citizenship for everybody. It has escaped the attention of the "economists" that this policy is not only socially catastrophic, but economically suicidal. After all, Hungary's low rate of labour participation is not unconnected to poor public health (especially among men), which is in large part a symptom of severe poverty. Contrary to the prescriptions of Bokros et al. I fail to see how Hungary's economic problems can be solved without serious social reform, backed with a major committment of public expenditure to tackle these problems. My fear is that the IMF, supported by the economists, and the domestic political elite between them are prioritising short-term financial pressures and are thus pursuing policies which will guarantee the destruction of the social fabric and create a situation from which the Hungarian economy will never recover. When faced with that concentrating on Viktor Orbán seems to me to be similarly short-termist and, I would maintain, by behaving as they are doing now, his opponents are guaranteeing something worse than that which they fear will actually happen!

[whoever]

Mark,
You are absolutely correct.

[Eva S. Balogh]

Mark: "(unlike Ėva I do support the principles on which European welfare states are founded and would argue that many in the USA, among them those refused reimbursement for medical treatment on grounds of prior health conditions"

Well, that's no good either. The ideal would be somewhere in the middle of the two. In some European countries it is simply not worth working anymore.

[Mark]

Ėva: "In some European countries it is simply not worth working anymore."

In which countries is this the case?

The social democratic model - and this is true in both the UK and Sweden - only makes transfer payments available to claimants if they "actively seek work". In both countries this means that claimants can be obliged to take training, to take jobs below the level of their qualification, or to take on subsidized work places as a condition of remaining eligible for state support. The notion that there is somehow a "right not to work" within the European welfare model is a myth.

In some states there is a problem that is misleading characterized "welfare dependency" that is in reality severe structural unemployment experienced by particular groups - this has been marked in France, some regions (the eastern ones) of Germany, and Italy (especially in the south). It is rather difficult to move people off long-term transfer payments if there are no jobs to move them into (and this is the problem in most of eastern and south-western Hungary too).

[Hank]

As I have Dutch and German family, I happen to know the situation in Holland very well, and I can assure you that the the situation there is very much that a lot of people just don't bother to work any more as getting benefits is much easier. Holland has a few hundred thousand unemployed, including builders etc, yet the country imports Poles and british to do simple work in buolding, agriculture etc, as Dutch unemployed are allowed to refuse that kind of work for which they are not trained. All this is slowly changing, but only slowly.

I agree with Eva, it is all about balance. Yes, a country needs a safety net. But the current system in Hungary is overly generous to many people who should not be entitled and are not the poorest of the poor, allowing jobs on the side, fake invalidity pensions, too early retirements, child care benefit to middle class and rich families, strategic child bearing etc etc.
The awfull state of health of the population has in my opinion first and foremost to do with the ridiculously bad eating habits (a question of sustained and good information) and the very low quality of doctors and hospitals in this country.
Yes, there is poverty which needs serious attention, but I dare to say that there is less poverty then there was before 1989.

Finally, I am fed up with all this neo-liberalism bashing. Yes, international finance got out of hand (mainly after the Clinton administration (!) decided that banks had to start financing home loans for low incomes and in turn allowed banks to do away with some old and tested safeguards against financial disaster). So yes, there is very much a need to regulate international financial markets much better (as the EU wants at the G20) and this should have been done years ago.
But that doesn't mean we now suddenly have to long back for the old state burocracy and the bad service of MÁV and Magyar Telcom, or shouldn't be pleased with a bit more market and efficiency in health care, education etc. It is all about balance: more market but at the same time good regulation and oversight.

[Eva S. Balogh]

Hank: "As I have Dutch and German family, I happen to know the situation in Holland very well, and I can assure you that the the situation there is very much that a lot of people just don't bother to work any more as getting benefits is much easier."

When Mark asked I wanted to say the Netherlands. Exactly. I read several articles about the situation there.

[Mark]

Hank: "As I have Dutch and German family, I happen to know the situation in Holland very well, and I can assure you that the the situation there is very much that a lot of people just don't bother to work any more as getting benefits is much easier."

What is your evidence, beyond anecdote?

The ILO statistics on labour force participation suggest that of those over 15 (this figure includes people beyond retirement age) 63.6% were active in the Netherlands, compared with 65.3% in the United States. If you look at the age distribution within the tables most of this 1.7% difference is due a significantly higher participation rate among the over 65s. So, there is no statistical evidence that the Dutch population are any less active in the labour market than the American.

[Mark]

If you want to check them I was using the 2007 figures.

[Mark]

Hank: "Finally, I am fed up with all this neo-liberalism bashing. Yes, international finance got out of hand (mainly after the Clinton administration (!) decided that banks had to start financing home loans for low incomes and in turn allowed banks to do away with some old and tested safeguards against financial disaster)."

I note with interest that you repeat the explanation for the US financial crisis used in the general election campaign by the defeated Republican candidate, Senator John McCain. I'd also note that such explanations were widely held to be politically self-serving at the time, and they don't even begin to skim the surface of the problems in the global economy.

I find it interesting that you attempt to use a false opposition to refute the charge that is made against neo-liberalism. If someone is not in favour of highly socially regressive policies, they must be in favour of an inefficient and suffocating state. Actually, I'm not against the use of market mechanisms even in areas like health care, where appropriate. I personally favour a mixed economy - a dynamic market, with a strong social state funded through progressive taxation.

But the questions are, what is the record of neo-liberal policies, and do they provide a viable solution to the current crisis in the Hungarian context?

The short answer to my first question, is that the record was pretty dismal if we look at what happened to GDP, living standards and employment in the period between 1989 and 2000 (we could argue about how far neo-liberal economic policies were abandoned after 2000). And the second answer is that they will exacerbate the current downturn, and damage Hungary's long-term growth prospects.

[Eva S. Balogh]

Mark: "What is your evidence, beyond anecdote?"

About welfare state and employment in the Netherlands. But you must admit that in Hungary this is definitely the case. Here is what Gordon Bajnai says in the "Political Manifesto": "A szociális rendszer jelenleg sok esetben a munkaerőpiactól való távolmaradásra ösztönöz." That is, the present system in many instances drive people away from seeking employment.

[Mark]

Ėva: "But you must admit that in Hungary this is definitely the case."

With due respect to Gordon Bajnai I think these kinds of analyses of low labour market participation are a good example of where a highly plausible dogma gets in the way of a serious analysis of the problem. I don't believe for a moment that if welfare payments were axed everyone would start working. I think they have an inverted notion of the causal relationship - dependence on welfare and low labour market participation are due to principally to a lack of employment, and it isn't the other way around.

Firstly, the system is a patchwork of various forms of assistance with highly fragmented administration, much of it in the hands - not of a national agency - but of local authorities, institutionally separate from the Labour Offices.

Secondly, by comparison with western European states (even when we adjust for the difference in GDP and income levels) Hungary's system is not generous, even relative to its income levels - of the larger European states at least France, Germany and the UK guarantee a minimum income through a means-tested benefit (Income Support in the UK, or Sozialhilfe in Germany)for all citizens who accept their obligations under the law (if unemployed to actively seek work, and to prove they are doing so fortnightly to an employment officer in the UK). Because of the way assistance is designed in Hungary, and its qualification criteria are drawn up it does not operate as a safety net in the way that it does in western Europe.

Thirdly, when an assistance system with lots of holes operates alongside a serious problem of long-term unemployment the result is predictable - administrators start informally relaxing the qualifications for those and related benefits; they begin to turn a blind eye to casual "black" work when it comes along; people are pushed onto other agencies budgets - helping people qualify for disability pensions is one way of doing this, because it means that cash-strapped local authorities don't have to find the social assistance moneys - they become someone elses' problem.

The solution as far as I'm concerned is proper integration of social welfare and labour market policy to promote employment. But we have to recognize that if this is to be done sucessfully it will not be a cheap option - the government will have to devote far greater resources than it does now. It requires several steps:

1. National, and not local administration of the assistance system.
2. Obligations placed on claimants and policed regularly by employment offices for those who are of the age to be active in the labour-market. I'd like to see everyone in receipt of assistance given their own case officer, forced to prepare a back to work plan, required as a condition of benefit to attend training courses, take subsidized jobs to gain experience etc. I would see this as a supportive relationship ideally, but one which has teeth behind it, i.e. there is really no right not to work.
3. In order to enforce these obligations they need to be embedded in a contract. The state's side of the contract is that - on the UK, French and German models - it provides a minimum income guarantee (not a comfortable one, and one that should be set significantly below the minimum wage, but one high enough to make it reasonable that claimants don't moonlight and take black work) to job seekers to replace the current model of locally provided social assistance.
4. And of course pro-employment macro-economic policies to create jobs.

It should be clear from these points why I regard the sorts of proposals that emerge from economists as so wrong headed. Yes, this would be costly to implement, but international evidence suggests it is the minimum that is needed if long-term problems of worklessness are to be addressed properly. And Hungary's problems in this area are very severe.

[whoever]

"a bit more market and efficiency in health care, education etc."

The casual association between "market" and "efficiency" is quite interesting. The idea that a "market" in healthcare would result in an efficient outcome for citizens is a brave assertion. The NHS was set up in the UK because the previous "market" system so obviously failed the majority of the population.

Whilst vigilance and solid auditing is always required to keep costs in check, the economies of scale have made the comprehensive health service in the UK something of a bargain compared to the US.

Market failure would be endemic for lower-income families in publicly provided goods such as healthcare or education, were a simple competition system involved. If there were a "market" and not simply a private monopoly, money which would be focused on care, would need to be directed to advertising. How is this more efficient?

And as for education, the mind boggles, that anyone could think that privatising the system could have any positive effects. I thought everyone simply "knew" that this would result in extreme social inequality followed by a wider collapse - and that is why, even now, no country wants to go through this hari-kari in the name of neo-liberal boulderdash.

[Gábor]

I agree with Mark that it is rather daring to take Bajnai's statement as evidence or proof of anything. (The more because he is far from being an expert of labour market.) It is a pet of so called economists that people are busy to live on social assistance payments because they can earn more than with work, but the whole theoretical construction is flawed, either because it assumes that a single labor market in Hungary exists, or because they are realying on debateable evidence in the form of analogies from neighbouring conutries prooving the idea that lower tax rates will bring hundreds of thousands in jobs. This is a good example of the problems with market-centered theories based on the concept of rational behavior. As they are relying on the latter, they have to find soemthing explaining low employment rate using this premise and the logical conclusion is that they can earn more as it is rational not to work for less. And if there is rare evidence support this (as it is the case), the worse for the evidence. Anyway social scientists can easily be condemend as not using mathematical models etc. Or simply not taken into consideration.

[Eva S. Balogh]

Gábor: "I agree with Mark that it is rather daring to take Bajnai's statement as evidence or proof of anything. (The more because he is far from being an expert of labour market.)"

But Gábor and Mark, Bajnai simply says what almost everybody claims in Hungary. I happen to quote his claim simply because I was working on Bajnai's "Manifesto" and it happened to be in front of me.

[Gábor]

Éva:"Bajnai simply says what almost everybody claims in Hungary"

Actually it is not true, even not among economists, not to speak of representatives of other social sciences. (Sociologists, anthropologists, social workers on the spot etc.) Bajnai's opinion may be a majority one among economists. (I would rather call them "analysts", please take a look at the interesting article today at portfolio.hu regarding the state debt and what basic computing mistake those experts, who proudly claims that the simple solution for low employment is to lower taxes and public spending because of what you emphasisezd, had made. Otherwise yesterdays Néoszabadság published an op-ed from András Vígvári, a researcher at the Állami Számvevőszék, he also expressed his doubts.) But it does not necessarily means that they are right, especially as this view is rarely supported by empirical studies, thy prefer to present analogies of flat tax rate countries in CEE. The only problem is with this approach that according to Eurostat data the employment rates soared up in those countries after the EU accession, when pratcically the labor market of the west was opened. (Either for working legally or illegally.) And there is a strong empirical evidence that millions from CEE went to those countries in order to work there, leaving holes in the labor market at home. It is not a coincidence that in the last years those countries were characterized by labor shortage and as a consequence a raise in wages far over the productivity, making the workforce more and more expensive. But for example Hungarian workforce usually lacks this kind if mobility, for many reasons, I won't discuss here. And it is highly dubious that modifications in social services payments could achieve it simply.

[Eva S. Balogh]

Gábor: "Actually it is not true, even not among economists, not to speak of representatives of other social sciences. (Sociologists, anthropologists, social workers on the spot etc.) Bajnai's opinion may be a majority one among economists"

Oh, I know that sociologists, Zsuzsa Ferge and others, don't agree but normally if the aid is substantial enough then the person rather takes it instead of working for about the same amount of money. One example is the American "aid to dependent children" legislation that created total havoc in black society. If a mother was single she could stay at home and receive financial help. The more children the higher the payment. The result was devastating: black women didn't get married or if they were married the husband "disappeared" in a great hurry and the number of children kept growing. In certain families this went on for generations. Well intentioned idea--very bad results.

[Mark]

Éva:"Bajnai simply says what almost everybody claims in Hungary"

Bajnai is about to attempt to implement a programme which will not only further weaken the long-term growth prospects of the economy, but will most likely push the political system beyond the point of collapse.

I don't doubt that there is a conventional wisdom, but the question is whether this is correct, or not. I think it has two weaknesses. The first is that it relies on theoretical assumptions about unemployment being a product of benefits preventing labour finding its natural clearing price. It is the translation of a theory and rests on no empirical evidence or analysis of what actually happens in Hungary (or anywhere else). It is about as valid as a statement about economic reality, as an advocate of central planning trying to argue that if only the National Planning Office had the right targets, then a socialist economy could prove its superiority over a capitalist one!

Furthermore it is an astonishingly provincial argument and is based on complete ignorance of the lessons of the international experience of welfare reform and active labour market policies. If people are making decisions which will potentially have life-and-death consequences for the most vulnerable members of society, I would expect them to demonstrate some knowledge of this experience. To attack the most vulnerable in society based on adherence of abstract theoretical models - things we used to call ideologies - is downright immoral, and as they are all intelligent adults, they should know better.

[Mark]

Éva:"Oh, I know that sociologists, Zsuzsa Ferge and others, don't agree but normally if the aid is substantial enough then the person rather takes it instead of working for about the same amount of money."

As I've said in another context - if you can prove to me that this is what is happening in Hungary, and is the cause of low labour market participation, with reference to evidence then I will accept your point. But the evidence very clearly points to a different conclusion.

[Eva S. Balogh]

Mark: "if you can prove to me that this is what is happening in Hungary, and is the cause of low labour market participation, with reference to evidence then I will accept your point."

I don't think that this is what I said. But perhaps you will agree that there are fewer people don't work in reality than on paper. Thus the low figures are somewhat misleading. People get all sorts of financial help (for example, disability payments) and at the same time they work illegally. Most economists claim that one third of the total GDP is somewhere in that grey area. And most of these people receive some aid. But of course, most of the people who can't find work is because of lack of education and skill.

[Mark]

Ėva: "But perhaps you will agree that there are fewer people don't work in reality than on paper."

Let's go through the points.

Clearly skills and education levels are a problem with the group outside the labour market, and certainly improving these - upgrading skills - is fundamental to any programme for boosting employment. However, I spent alot of time in the 1990s in a number of ex-industrial communities and one of the striking things was that any serious re-training effort among those who lost jobs in restructured enterprises was almost completely absent. Adult and continuing education is incredibly deficient in Hungary, compared with almost anywhere in western Europe (and this is especially so in the areas that are most deprived). Creating the training programmes and education is going to require huge ammounts of public investment which will have to be led by the state. Secondly, if you are training someone for work that is not immediately available, then they have to have access to an income sufficient to cover their needs (the long-term unemployed have little access to private resources). Thirdly, and this is why I don't agree with your point that the lack of education and skill is "the reason" why the unemployed cannot find work, is the issue of identifying what one is training and educating the unemployed for. Ultimately they need to be trained for jobs that are available and can be supported by the market - the problem at its most fundamental is that there is a shortage of such jobs, and that has to be addressed.

Certainly the issue of disability pensions needs to be addressed, but Hungary's problem in this regard is a local variant of a general European problem, whereby countries suffering long-term unemployment have placed the unemployed on disability benefits to make cosmetic improvements to their unemployment figures (the Thatcher government in the UK did this in the 1980s). The solution to this is to review those decision through the introduction of proper eligibility tests, and the creation of a proper, functioning benefits regime to support people to get back into work for those who fail the tests.

As far as the "black economy" is concerned, we can bandy figures around but no-one reliably can precidely indicate its share of GDP. However, international experience would lead us to suggest that the "black economy" is disproportionately concentrated in those regions where the legal economy is also strong (Budapest and Pest county especially), and the groups that are excluded from the "black economy" are similar to those excluded from the informal one. Therefore it would surprise me if including illegal activity in the figures significantly modified the low labour market participation figures.

I don't agree that "fewer people don't work in reality than on paper". I think this is wishful thinking. Everything I see suggests a huge problem of hidden unemployment and under-employment, particularly concentrated in the rural east, north, and south-west of the country. And indeed there is no evidence that I can find about the links between black work and the claiming of social assistance. In fact many of the opinions that are tossed around in this discussion and represented as "fact" rest on no factual basis whatsoever - in this sense this discussion is not so dismilar to our earlier one about "gypsy/Roma crime", where the established prejudices of wealthy taxpayers who are overrepresented in the media about their poorer and less fortunate compatriots tends to shape the terms of the debate.