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Tuesday, October 28, 2008

Hungary is counting the cost of capitalism

This piece of mine appears in The First Post.

It was the ex-communist country that did everything the West and its neo-liberal economic 'experts' said it should do. It privatised vast swathes of its economy. It allowed free and unhindered access to Western multinationals. It filed up obediently to join Nato and the EU and employed Goldman Sachs to give advice on privatisation.

Now, after 20 years of free-market 'reforms', Hungary, together with the Ukraine, sees the results of its policies: an IMF bail-out.

Hungary's economic collapse gives a lie to the dominant narrative that eastern European countries have thrived since the sweeping political changes of 1989.

I lived and worked in Hungary during the 1990s and saw at first hand the way that the economic 'reforms' insisted upon by the IMF, the World Bank and the EU adversely affected the majority of the population.

Ten years on, and times are even tougher. On a recent visit to Hungary I was shocked by the increase in street beggars and the number of old people I saw searching for scraps in trash cans.

Away from the swanky new Budapest bars around Liszt Ferenc Ter and Vaci Ut which cater for foreign businessmen and home-grown yuppies, the capital has a shabbier, poorer look than it did a decade ago. The fall in living standards became even more apparent when I visited other towns and cities in the country.

The statistics paint a depressing picture. Last year, real wages in Hungary fell by seven per cent. The UN's Food and Agriculture Organisation has reported that 200,000 people in Hungary, including 20,000 children, are under-fed. One in five children are being brought up in poverty, while campaigners predict that recent price hikes of electricity and gas could push a further 3m people into poverty.

The truth is that Hungary, like the Ukraine, has gone backwards, and not forwards since the fall of communism. Even Viktor Orban, the staunchly anti-communist leader of the main conservative opposition party Fidesz, has conceded that for the majority, life was easier in the relatively liberal 'goulash' communism era of the 1970s and 80s.

Despite the selling-off of millions of pounds worth of state assets in the government's mass privatisation programme, Hungary's public finances remain in a poor state. The scale of corruption has been mind-boggling: Prime Minister Ferenc Gyurcsany (pictured above) - whose 'pro-reform' economic policies have been lauded in the West - has an estimated fortune of £10m, made from controversial privatisation deals in the early 1990s.

The new IMF loan, far from being the salvation that Hungary's political elite is claiming, is likely to make things even worse. The IMF is insisting the government pursues 'strong policies' to reduce its deficit - shorthand for yet more swingeing cuts in public spending. That would mean the final nail in the coffin for the country's chronically under-funded health service; my mother-in-law had to bring in her own toilet paper during a hospital stay this summer.

The IMF loan is also likely to mean the enforced privatisation of the few assets remaining in state ownership, regardless of widespread public opposition.

"What's the difference between communism and capitalism?" is the joke currently doing the rounds in Budapest. Answer: "Under communism we had a big government debt but we lived well. Under capitalism we have a big government debt but we don't live well."


robin carmody said...

The First Post is a UK website - so why "trash can"?

Just a minor point, but one that is directly relevant to the subject of the article.

DBC Reed said...

As regards the final joke about large government debt,it often appears that the whole neo-con experiment in social enginneering is meant merely to shift debt off the government onto the backs of the citizens.So where you could once in the UK go to a NHS dentist fairly easily, official pressure is now indirectly exerted to make you go private.The same things has happened in spades with housing.
So the total amount spent on the basics of health,housing, travel etc has gone up so the amount of disposable income left for more discretionary and sophisticated goods and services continues to decline.In other words privatising the necessities of life constricts the capitalist economy.Brilliant.

Neil Clark said...

Hi Robin,
you ask 'why trash can'? (and not rubbish bin') and all I can say is that it just came out that way. I just wrote 'trash can'. It came out naturally, it wasn't as if I first wrote rubbish bin and then changed it. Perhaps it shows just how strong a process Americanisation is. Or perhaps I've been reading/watching too much Ellery Queen of late.

dbc reed: good post.

robin carmody said...

I agree. Excellent post from DBC.

olching said...

A good article. I agree with the general trend you describe, but I would add a slight nuance: The post-communist period has been marked by both the disastrous social consequences you describe and superficial 'progress' otherwise. This includes the building of lots of shopping centres (or indeed for a really positive note better roads). The fact that nearly every district of Budapest has a Tesco (and a lot of provincial towns) is sold as a sign of progress and choice. This is why there hasn't really been widespread unrest despite the dreadful social conditions of the post-communist period.

It is of course also the case that some people are better off, and this is the crux. While most in the lower income bracket have faced real hardship, the urban socialites have enjoyed every minute of unfettered capitalism. However, it looks like this latest economic crisis is going to affect them, too. Perhaps it is this wide-scale meltdown that might usher in a sea change in Hungary, east-central Europe, and perhaps Europe as a whole. Hungary certainly deserves better.

Anonymous said...

'So where you could once in the UK go to a NHS dentist fairly easily, official pressure is now indirectly exerted to make you go private'

This is how the australian Medicare surcharge leverage works...people above $50000 in earnings, if they dont have private insurance are slugged with this surcharge...the idea was to force higher income people to go private:BUT over the years wages haev risen while the surcharge has quietly been left unchanged.....
Efforts to raise it are being blocked by the big business friendly liberal opposition.


KNaylor said...

Hungary is counting the cost of neo-liberal capitalism.

Even social democracy is compatible with a diverse economy in which capital is still essential.

It isn't a question of 'either-or'.

Just a state in which enough people have a say through a democratic process and the politicians care not always about money but the condition of the nation too.

Which dovetails with long term reforms as regards the infrastructure of Britain not cowardly short term greed and deby fuelled consumerism.

Anonymous said...

"It was the ex-communist country that did everything the West and its neo-liberal economic 'experts' said it should do."

Greetings from Hungary! First of all, I am astonished what a bunch of socialist, anti-capitalist, ignorant lie this whole article is. The economic policy of Hungary from 2001 until now has nothing to do with neo-liberalism. On the contrary, socialists have run out of our money because they are unable to comprehend basic mathematics, thus they are unable to do cost management. Why don't you leave your comfortable job and build socialism instead in North Korea? Which is contrary to your opinion is a true socialist country where the communist nightmare has come true. Good luck Sir in your further endeavors! As Lenin says: lifelong learning is very important. Europe does not need socialists everybody had enough of your isms and their inability to manage the economy!