Louis Proyect lnp3 at
Thu Jun 22 08:47:35 MDT 2000


Hungary: the darker side of capitalist restoration

Hungary put in a GDP growth of 6.8% in the first quarter of the year 2000
and expects a rate of growth of 5-5.5% by the end of the year. These are
impressive figures, which any visitor seeing signs of a building boom, lots
of new cars on the streets and a well-dressed, well-fed population would
quickly confirm. Is the advent of capitalism bringing the horn of plenty to
Hungary or is the picture somewhat less straight forward?

First of all it is interesting to note that the lion's share of the 6.8%
figure comes from industry, both manufacturing and assembling. Industry
grew by 20.7% in the first quarter. The traditionally strong agricultural
sector, however, is struggling. Both meat production and cereals are
declining and the number employed in agriculture has dropped below 300,000
for the first time since records began. Prices paid to producers are at an
all time low and farmers are now out blocking the main roads protesting
about the withdrawal of subsidies, the embezzlement of monies earmarked for
them by the Ministry and the slow progress towards cheap loans they were

The dissolution of large scale agriculture in the last 10 years is showing
its effects. The drain of people to the towns is accelerated by the loss of
traditional markets, indebtedness, bankruptcy and the final closure of the
few collectivised farms left.

All the 'gung ho' ministers, including the Prime Minister, should remind
themselves that when food goes beyond a certain price or starts becoming
scarce, Hungarians start thinking of revolutions. The odd history lesson
here might be helpful.

Looking at industry, detailed figures are not yet available as to which
sectors are the chief contributors to the 20.7% growth in the first
quarter, but it is without doubt fuelled by foreign firms making and
assembling goods in Hungary and immediately exporting them. While the boom
in Western Europe keeps going, Hungary is producing amazing growth figures.
Jurgen D. Hoffmann, Managing Director of Audi Hungary, quoted in
'Nepszabadsag' on 2nd June 2000, praised the conditions in Hungary which
made Audi invest 1.6 billion Deutschmarks so far and are contributing to a
further investment of 650 millions on a new engine plant and a Research and
Development Centre. He quotes good logistics (his plant is near the
Austrian border), a skilled labour force, a flexible production structure
and low wages as well as good economic indicators and stability as his main
reasons for the increase in investment.

The world revolution in IT has also affected Hungary and all IT firms
(mainly software) have experienced growths of 20-25%. The OECD, however,
has recently warned that there are dangers of overheating in the economy
due to a too fast rate of growth, a faster than expected rate of growth in
the balance of payments deficit and a slowing down of the decrease in
inflation. The captains of Hungarian industry as well as the bourgeois
politicians all play this down using some of the most cynical arguments I
have ever seen. One argument is, of course, quite true. The real fuel of
all this growth is Western demand for goods produced by foreign firms that
will leave very little effect on the Hungarian economy, apart from
providing employment, as the goods get exported straight away. Extreme
short-sightedness is prevalent amongst these gentlemen who seem to think
that the boom will go on forever.

Investment is still growing, although the rate is slowing down. If you look
at the first quarters of the last 3 years, growth was 12.1% in 1998, 6.4%
in 1999 and 7% this year. This should be a warning sign for anyone with
eyes to see.

Akar Laszlo, Managing Director of GKI, an economics research firm, quoted
in 'Nepszabadsag', 2nd June 2000, feels that all exports and tourism
receipts more than adequately finance imports at the moment and that
domestic Hungarian consumption is unlikely to fuel inflation as wages are
kept low. One could add that this cynical comment is made even more true by
pensions also growing very slowly and the increase of the minimum monthly
wage to 40,000 forints (100 GBP) being delayed.

This last point highlights the plight of those living in the real economy
in Hungary who are either un or underemployed, for whom the figure of 6.8%
growth is only a number bandied about by people who drive Mercedes and live
on a different social and economic planet from them.

At a recent workers' festival, the MSZP (Hungarian Socialist Party) and the
MSZOSZ (Hungarian TUC) announced a plan for closer co-operation to
highlight the plight of workers in the country. As the Socialists form the
main opposition in Parliament, the MSZOSZ hopes to benefit from this closer
co-operation. At a joint press conference a study was presented which
established that "Both blue and white collar workers now find themselves in
a previously never heard of position of vulnerability in the work place. In
order to obtain or keep their employment, many workers accept degrading and
very detrimental contracts." According to the report approximately 40% of
all employees in today's Hungary fall outside employment legislation.
Between 1990 and 1993, 1,665,000 jobs and those who held them
"disappeared". These people ultimately fell into 3 groups: 1 Those who
tried to make it on their own and became self-employed. 2 Those numbering
at least 300,000 who were retired early. 3 And the bulk of this number, who
were from the countryside and became victims of the "restructuring" of

According to this report, the expected social explosion has not happened
partially because of families living on previous savings, but mostly
because of explosion of the black market. The latter prevails in all
spheres, encroaching even on regular employment where an ever increasing
proportion of wages is "cash in hand" so that the employer avoids tax and
insurance payments. Personally, I would also add a fourth group, those who
descended into crime and have got by it ever since. Crime figures have
experienced an explosion in the last 10 years, and it is believed that the
true figure exceeds the recorded one 10 fold.

MSZOSZ and several of its constituent unions are putting wage claims on the
table at the moment, claiming - quite rightly - that if the economy is
growing at 6.8%, workers should see some of that too. Presently the average
growth of incomes lags badly behind profits at 1.2% per annum. Teachers and
other public service workers are talking to the Government at the moment,
while industrial wages are also very low. The glorious fighting traditions
of the Hungarian Trade Unions of the past have been lost during 40 years of
Stalinism and the new workforce of the 21st century capitalist Hungary is
still learning.

The growing and blatantly obvious inequalities grate badly on ordinary
people. Schools are being closed, teachers made unemployed, the Health
Service is subjected to cash limits, working hours are extended and
holidays shortened. The long term prospects for the nouveau riche nascent
Hungarian bourgeoisie is not as rosy as they think. Their economy is so
dependent on the boom in the West that they might get a few surprises when
it ends. As the saying goes: "When the US sneezes, Europe catches cold, but
Eastern Europe will likely get pneumonia!" The top, thin veneer of
prosperity even today is underlayed by poverty, worsening working
conditions and growing frustration. With the end of the boom in the West,
the reality of what it is to be a third or fourth rate client state of
Germany and the US will dawn on Hungary's new masters.

It is then up to workers, the youth, town and country folk alike to reclaim
their economy and their country for themselves and run it for need not
profit. The last 10 years may have re-established capitalism in Hungary and
other parts of Eastern Europe. However, its gravediggers are still here and
their latent power is stronger than ever.

Julianna Grant, Budapest June 2000

Louis Proyect

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