Akadémia Kiadó

A Rocky Road: The Hungarian Economy in the Two Decades Preceding and the Two Decades Following Regime Change

Antal Stark's book is structured into four parts. The first and second section compare the Hungarian economy in the two decades before regime change around 1990 with the two decades that have passed since then. A wealth of statistical data and international comparisons accompany the analyses.

            The author explains the new economic management introduced in 1968, which simulated real market mechanisms, describes the conditions that led up to this innovation, and its stimulating effects on the economy despite the unfavourable domestic and international political environment. The first and especially the second hike in oil prices transformed the international environment and put an end to the successful development. Economic expansion came to an abrupt end, throwing off the economic balance and distorting the economic structure. These were the developments that compelled regime change, enabled by the dissolution of the Socialist camp.

            While regime change was politically well prepared, economic policy was not equipped for the fundamental transformation and led to an economic downturn of tragic proportions. A well-functioning, industrial-scale agriculture fell apart, major industrial and other firms were privatised in such a way that the number of active earners dropped from 5.2 million in 1989 to 4.3 million in 1996. Economic production fell while the national dept increased, forcing a consolidation through the significant reduction of government expenditure in 1995/96. The ensuing economic boom was short-lived. In 2001/02 the government launched into excessive spending. The country's dept swelled while its growth rate dropped steadily. By 2009 conditions had deteriorated dramatically compared with the other former Socialist countries. The so-called convergence program, whose aim was to restore the public budgetary balance, held out a hope for change.

            The third part of the book examines the sources and regional variations of economic growth in the two main periods. Between 1969 and 1989, the main source for growth were increasing improvements in technical efficiency and the expansion in the number of active earners. Between 1989 and 2007, technological improvements became the decisive drivers of economic growth, which had shrunk to one third its former capacity. In both periods, Central Hungary, with Budapest and Pest county, constituted the most rapid regions of growth, but while in 1968-1989 the disparity of the other regions had decreased, in 1989-2007 it grew.

            Part four deals with Hungarian economic conditions after 2007 and the effects of the world economic crisis. It describes and analyses the economic indicators for the national budget and government dept for 2008. It presents an economic forecast for 2009 and the resulting changes in the state budget. It discusses the analysis of the situation, the savings and tax reforms proposed by the elite group of experts that made up the so-called "Reform Alliance", and finally examines the possibilities and conditions for perking up the economy.

             A separate chapter discusses the distributions in the expenditure targets set down in the National Development Plan and the New Hungary Development Plan, and makes suggestions on how to use these more efficiently as sources for economic development. In conclusion, the book formulates a critique about managing social, real-estate and land resources and makes a proposal on how to make government asset management profitable.