Hungary in turmoil
The executive orders President Obama can issue without the advice and consent of Congress highlight an efficiency in the American system of government. Of course, the system has its drawbacks, never more evident than in the last months of the Nixon administration. Then we sighed and sighed: the country could have moved beyond this political crisis so much faster in a parliamentary system. It would have been highly unlikely that parliament would have given a vote of confidence to Prime Minister Nixon. The whole thing could have been over in no time as opposed to the months of agony.
But the parliamentary system can sometimes stand in the way of change. In Hungary it is especially cumbersome because of critical issues that require a two-thirds majority to sign into law. Perhaps behind the introduction and acceptance of these parliamentary rules was a certain naiveté that prevailed at the time of the regime change in 1989 and 1990. As long as there was a common enemy, the communist one-party system, the opposition seemed to be a pretty solid bloc. Yes, there were differences, everybody knew that. SZDSZ supported capitalism while MDF warmed up an old idea from the 1930s that tried to find a third road between capitalism and socialism. SZDSZ said there was "no third road." But otherwise, their hatred of the Kádár regime was stronger than their dislike of each other.
Once the old regime disappeared, cracks appeared in the wall of the opposition. Furthermore, fissures appeared within the parties themselves. This was especially true of MDF that together with the Smallholders and the Christian Democrats formed a coalition. Within two years there appeared a radical, anticapitalist, anti-western, and antisemitic faction within MDF that threatened the very existence of the party. Moreover, the more liberal conservative prime minister was reluctant to get rid of István Csurka, a playwright who was leading the radicals. He was reluctant because he was afraid, not without reason, that the majority of the party faithful would follow Csurka. Apparently at one point he called the membership of MDF a "terrible lot." Eventually Csurka was removed but MDF was in ruin.
Meanwhile MSZP, which had a very poor showing at the 1990 elections, was gaining in the polls because the Kádár regime looked better and better as the economic situation deteriorated. One and a half million people lost their jobs. SZDSZ, MSZP and, yes, Fidesz formed a bloc on the liberal left while MDF, the Christian Democrats, Smallholders and the radical MIÉP gathered on the right. The antagonism between the two sides intensified as years went by even as alliances shifted–most notably, of course, as Fidesz moved from left to right. Since 2002, when Fidesz unexpectedly lost the elections, there has been open warfare.
Gyurcsány has tried several times to engage Orbán in dialogue but Orbán steadfastly refuses. He wants to distance himself from any policy that brings hardship to the Hungarian people and wants to place the burden of the economic crisis on the shoulders of the current government. Fidesz has a two-pronged attack–to oppose every austerity measure and to demand tax cuts. Who wouldn't vote for someone whose platform was to put more money into the pockets of every Hungarian? (Well, perhaps not those of the prime minister.)
And then there's the drivel directed against the IMF loan. The latest attack comes from István Balsai, minister of justice in the Antall government now a Fidesz member, according to whom the decision to apply for and then accept the IMF and ECB loans needed parliamentary approval. Of course, it didn't. Moreover, can you imagine what could have happened while parliament discussed the necessity and conditions of the loan? Hungary could have gone belly up. Balsai's latest is that the government might have to sell the Holy Crown, the Parliament, and the Paks Atomic Plant because these are all collateral for the loan. Apparently that is utter nonsense.
As for the government's answers to the crisis, there is a lot of criticism and not only from opposition quarters. Lately more and more people, even friends of the government, complain about the lack of a comprehensive plan. The problem is that in extraordinary times ordinary planning breaks down. It's easy to plan a vacation, somewhat more difficult to plan a wedding. But how does one plan an economic program when the pieces keep moving? Just think of the way the American rescue plan TARP (Troubled Assets Relief Program) has kept shifting; there's just no solid ground under it. We can only hope it's not sitting atop quicksand or a fault line.
We have another five days before the extraordinary session of parliament convenes to discuss the crisis. MSZP has already prepared a program, the details of which are still not known. As far as I know SZDSZ and MDF have also submitted proposals. That leaves Fidesz. We will see what happens in the next few days.
Leave a Reply
If Gyurcsany is clueless and he needs the help of FIDESZ, he could just step down and let someone with a brain take over.
He would have been impeached years ago as president in the USA. Obviously our system is completely dysfunctional, crooks can stay as long as they wish.
Op: “If Gyurcsany is clueless and he needs the help of FIDESZ, he could just step down and let someone with a brain take over.”
Your knowledge of the functioning of a government in a democracy is so shallow that one shouldn’t really comment on your hairbrain ideas.
“The problem is that in extraordinary times ordinary planning breaks down”.
You’re absolutely right, of course. I think there are other dimensions to this, one is the issue of expertise. Economics in Hungary has been about the market, because of its institutional development in the late socialist period, supporting reform, and then given the demands of the transition. Given that ensuring the free play of market forces was seen for so long as a panacea, it is hard to envisage what to do in circumstances of complete market failure. You can’t leave this one to the market, because that will lead to a process of economic involution …..
Then there is the international dimension. Hungary is a small country and economy and even with the best economic policy (which it certainly hasn’t had in a while), it would be affected. On an international scale one hopes that the US administration with its talented economic team will get to work on the crisis soon. As far as the EU is concerned – I don’t think they have grasped the scale of the crisis, and I think they still have unrealistic views of what will ensure development in Central and Eastern Europe (balanced budgets, open markets, with a bit of help with infrastructure will solve all the problems).
Mark: “As far as the EU is concerned – I don’t think they have grasped the scale of the crisis, and I think they still have unrealistic views”
I share your worries.
Mark you say *** “”The problem is that in extraordinary times ordinary planning breaks down”.”
What you say is true. The problem is that until the true nature and size of the crisis is understood and how it came about is properly understood then any solution tends to be a treatment of the symptoms rather than a cure. Once we understand the root causes of the crisis we will then understand how to cure it. It is all too easy to blame it on ‘greed’ and capitalism or what ever. Something else has happened what it is I do not know.
In some respects the crisis is reminiscent of the Wall Street crash of 1929 which some say had it’s beginnings in the failure of a small Romanian bank earlier in the year. It only affected some 1% of the US people but its effect on the world was devastating. Its effects were only corrected to some extent by “Breton Woods”
One thing is certain something has vanished from the world’s financial system that is TRUST. No one trusts any one any more and funds (money) have simply ‘dried up’. Once trust is lost it may take many 100s of years to rebuild. At the risk of rattling the bars on Mr Ricsi’s cage one of the earliest examples of this form of this trust I know of was between the Jews. There is in the archives of the town where I once lived a note to the fact that “Received from Aaron (the Jew) the sum of 8 silver pennies being the one years rental on the property called the ‘Bird Cage’ from one William of Swine –pig- Hill at present upon a pilgrimage”. What this meant that William who lived at (a still existing farm called now Swan Hall) had used the Jewish community to forward money to the town for property he rented in the town. The date was 1238 AD. This shows TRUST! By the way the Bird Cage (a public house) was still there and was still selling beer in November 2003. This was the last time I saw it. Once trust of this type is lost it is very difficult to re-build.
The problem seems to have started in the late 1970s in the Construction Industry where major builders discovered that they could use their suppliers’ as their bankers by the simple expedient of delaying payment to their smaller suppliers. This idea seems to have spread so much so that a wood yard I had a small interest in went out of business owed millions by a very large furniture maker who later compounded his debt with receivers for 1/10th of that amount. No Mr Risci the furniture firm was owned by a large German international company and there was not so much as one Jew any where in sight.
As we learned “Never mind whose fault it is How the “!**&%^” do we fix it?”
Professor and Mr Mark how do we fix it?
How do we fix it?
It seems to me that the problem at global level is caused by the breakdown in the relationships that have driven growth worldwide since the early 1990s. There are three elements I’d identify:
1. Large companies were encouraged to relocate across national borders to take advantage of new communications technologies to cut their costs.
2. Developing countries – “emerging markets” – were encouraged to grow by restraining demand, attracting investment from these companies, and to catch-up through exports.
3. As jobs disappeared in wealthier countries the demand was replaced by “financialization” and its consequences. Capital inflows into states like the UK and US inflated the value of currencies, stocks, and asset prices, especially housing. Furthermore they created cheap money which could be lent to consumers against higher asset prices – low interest rates increased the absolute ammounts people could borrow, thus creating the demand that could absorb exported goods.
What is happening is the whole of these relationships are unravelling. How?
1. Consumers in the US,UK, Ireland, Spain were highly indebted, thus making them vulnerable to small movements in interest rates, while interest rates were the primary means that inflation was controlled. From 2004-5, we began to see the end of the low inflation climate in the world economy – creeping interest rate rises through to 2007 meant that many consumers found their debts unaffordable, eventually creating falling house prices, and large scale losses among lenders.
2. The consequence has been a generalized collapse in demand both exacerbating the problems of financial institutions and reducing world trade.
3. Banks have a problem of solvency and there is a tightening of credit conditions, which exacerbates the problems of businesses and households, and thus on demand and investment.
4. Countries dependent on export face a substantial contraction in their markets.
As you can see, not many people are yet addressing the causes of the crisis, but dealing with some of its aspects (generally the crisis in the financial sector) in isolation from its other elements. Some governments believe that the pre-2007 situation can be resurrected – given that the financial sector faces (a) severe downsizing, and (b) there will a considerable extension of state control over banks, simply because of the political consequences of the credit contraction will be unacceptable to governments, this isn’t going to happen.
The key is some mechanism for much more active management of trade on a global level, i.e. no-one should be able to become as dependent on exports as China or Germany. Equally, no-one should be able to become as indebted as the US or the UK. Acheiving this will not be easy, as a number of governments have to see that their current economic policies are not in their interests (I see signs that in its own way the Obama administration understands the problem; Germany realizes that there is a problem, but doesn’t know what it is, and China either doesn’t grasp, or the damage to its own economy is not yet sufficient for it to consider change). To make this work there needs to be quite considerable reform of international institutions, and there will need to be broad agreement between a large number of countries.
This is put very simply. Don’t hold your breath for the end just yet ….