From command to market economy in Hungary under the guidance of the IMF / Pongrác Nagy.

Format:

Book

Author/Creator:

Nagy, Pongrác.

Language:

English

Subjects (All):

Structural adjustment (Economic policy).

Hungary--Economic policy--1989-.

Hungary.

Economic policy.

Hungary--Economic conditions--1989-.

Economic conditions.

International Monetary Fund.

Structural adjustment (Economic policy)--Hungary.

Post-communism--Hungary.

Post-communism.

Physical Description:

xxv, 335 pages : illustrations, map ; 25 cm

Place of Publication:

Budapest : Akadémiai Kiadó, [2003]

Summary:

Hungary's transition from a command to a market economy, in which it followed the prescriptions of the IMF, the World Bank, and other institutions of the Washington Consensus was marked by depression, unemployment, and pauperization. The author describes, in basic economic language, the economic policies and assumptions dominant during the transition period (1990-1996), concluding that the misery they caused was "avoidable, unnecessary, and superfluous." Distributed in the US by ISBS. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com)

Contents:

Communist - Socialist 3

Market vs. Command Economy 4

Part 1 Domestic and International Environment 7

1. The Intellectual Environment 9

Domestic Environment 9

The Legacy of Socialism 10

Respect for Authority 10

Dogmas, Ideology and Taboos 10

Political Loyalty 12

Quality of Economic Studies 12

Lack of Economic Debate 13

Economic Programmes 13

Ignorance of the Public 14

Parliament 15

Special Hungarian Characteristics 15

Illusions 15

Neglect of Self-interest 16

The Means is the End 16

Want of Thoroughness 16

International Environment 17

Monetarism 17

Globalization 19

Economic Globalization 20

Capital Flows 20

Speculative Short-term Capital Flows 21

Multi-national Corporations 23

Economic Globalization in Hungary During the Transition Period 25

Globalization and the Transition 25

Economic Developments due to Globalization 25

2. Guides of Transition: The IMF 29

A Short History 29

1945-1971: A Success Story 29

Causes of Collapse of the Bretton Woods System: Dollar Outflow 29

Rules of the Game: Politically too Costly 30

Hot Money 30

1971-1982: Job-hunting 31

From 1982: Important Tasks - Questionable Performance 33

Management of the International Debt Crisis 33

Dimensions of the International Debt Crisis 34

Performance of the IMF in Managing the Crisis 35

Guiding the Transformation of the Central and East-European Economies 41

Crisis Management 42

Shortcomings of the International Monetary Fund 42

History of Hungary's Relationship with the IMF 1982-1998 45

How the IMF Directed Economic Policies in Hungary 50

Secrecy, Gossip, Huge Public Debt 50

Massimo Russo's Letter 50

3. Guides of Transition: The World Bank 57

The World Bank Seen from Hungary 57

The World Bank in Hungary 1982-2001 58

Brief History 58

1982-1989: the Early Years 58

1990-1998: The Transition Period 60

From 1998: Assisting the Preparation of EU Accession 60

Assessment of World Bank Activities in Hungary 61

The SAPRI Project 62

Self-criticism by the World Bank 62

Fundamental Policy Error 63

Public Health Reform 64

Education 64

Family Allowances 64

Social Policy, in General 64

Criticism by NGOs 65

Privatization 65

Public Utilities 65

Pension Reform 65

Responsibility of the World Bank 66

Executive Summary: a Eulogy 66

The State of the Hungarian Economy in 1989 and in 1996 69

State of the Economy in 1989 69

Assessment of the 1989 Economic Situation by the IMF 71

Aims, Methods and Instruments of Economic Policy 72

Consequences of Applied Policies 73

Part 2 Aims of Hungary's Economic Policy During the Transition Period 75

4. Bringing Inflation Under Control 77

The Nature of Price Rises and Inflation in A Transition Economy 77

Price Increases, Inflation and Anti-Inflationary Policies in Hungary 78

The Price Level during the Communist Era 78

1988-1992 79

1993-1996 81

From September 1996 83

5. The Servicing of the External Debt 87

Technicalities about Hungary's External Debt 87

Emergence and Proportions of the External Debt 88

The Process of Indebtedness 88

Historical Background 88

First Wave of Increasing Indebtedness: 1974-1979 89

Consolidation: 1980-1984 91

Second wave of Increasing Indebtedness: 1985-1987 92

One of the Most Heavily Indebted Countries in the World 93

The External Debt Policy of the Hungarian Government 97

Tactics 97

Arguments Against Debt-relief 98

"Disastrous Consequences" 98

"We will lose our creditworthiness" 99

Deterrent to Foreign Direct Investment 101

The Example of Poland 103

"Immediate Increase of the Debt Burden" 105

"Poland's Example Cannot be Followed" 107

"One Cannot Negotiate with Thousands of Creditors" 107

"Hungary is too Small to Matter" 109

"We would Lose the Backing of the IMF" 109

"The Burden of Debt is Decreasing" 110

"It would be Immoral" 110

"Pacta Sunt Servanda" 111

"It Would be Unfair" 111

Hungarian "Panache" 111

"The Debt-relief has to be Offered by the Creditors" 112

"We have Missed a Unique Opportunity" 112

"It has to be Taken off the Agenda" 112

Policy Promoted by the IMF 113

Debt-relief: Standard International Practice 114

Economic Policy Determined by Debt-Servicing Obligations 114

The Debt Trap 114

Restriction in Order to meet Debt-servicing Obligations 116

Four Periods 116

1990-1992: Interest Payments and Resource Outflow 116

1993-1995: Increasing Indebtedness 118

Worsening of the Balance of Payments 118

Comparison with Mexico 118

1988 118

1994 120

Deteriorating Creditworthiness 120

Costs of the Deterioration of Creditworthiness 123

The Extra Costs of Holding Supplementary Reserves 123

1996-1997: Net Debt Repayments: Why? How? 127

1998-2000: Increasing Debt, Debt Trap, but Improving Debt Indicators 129

Structure, Quality and Management of Hungary's External Debt 131

Structure by Type of Borrower 131

Burden of the Debt, Debt-servicing Ability 133

Quality of the Debt 135

Quality of Debt-management 138

Complete Success 139

The Price of Success 140

Appendix to Chapter 5 Quality of the Data Supplied by the National Bank of Hungary 142

Gaps 142

Oversupply of Data 143

Errors 144

Delays 145

The English of the NBH 146

6. Joining the European Union 151

Short History of the Relations 152

The Association Agreement 152

Official Application and EU Procrastination 153

Preparation of Accession 155

The Maastricht Criteria 155

The PHARE-programme 156

1990-1998 156

The New Orientation 157

Other Pre-accession Programmes 157

Successes and Shortcomings of the European Union 161

Success Story 161

Shortcomings 162

Monetarism 162

Common Agricultural Policy 163

Bureaucracy 164

Corruption 166

Absence of Long-term Economic Strategy 166

The Question of Hungary's Accession

Cost-Benefit Analysis 167

Acceleration of Economic Growth? 167

Industry-by-Industry Analysis 168

The Loss of Sovereignty, in General 168

No Debate, no Cost-benefit Analysis 171

Part 3 Instruments of Countercyclical Policies 173

7. Monetary Policy 1989-1999 175

The Hungarian Banking Sector 175

Short History 175

Main Characteristics 176

Methods and Instruments of Monetary Policy 178

Credit Rationing: January 1990-September 1993 179

Use of Market-conform Policy Instruments: September 1993 Onward 181

Capital Inflows 181

Sterilization 184

Costs to the Taxpayer 188

Credit Supply to the Hungarian Economy 1990-1999 189

Four Periods 189

Severe Credit Restriction: January 1990-December 1993 189

Relaxation: January 1994-April 1995 189

Renewed Monetary Stringency: May 1995-August 1996 191

Abundant Credit Supply: September 1996 Onward 191

Summary

January 1990-August 1996 193

8. Fiscal Policy and Government Debt 195

The Hungarian Budget 195

Countercyclical Fiscal Policy 199

Growth of the Public Debt 200

Origin of the Debt 201

Debt Consolidation 202

Debt Conversion 203

Other Factors Contributing to the Increase of Government Debt

the Debt Trap 206

Proportions of the Debt 208

Decline of Government Expenditure 211

Systemic Change and Globalization 211

Increased Interest Payments 213

Real Expenditure on Human Infrastructure 214

9. Incomes Policy 221

Cyclical vs.

Structural Incomes Policy 221

Countercyclical Incomes Policy 221

It is Possible in Hungary 221

How and By How Much Incomes were Lowered 224

Structural Incomes Policy 226

Income Reallocation from Low- to High-income Groups Publicly Announced 226

Reallocation through Cyclical Incomes Policy 226

The Tax System and the Moderation of Income Inequalities 227

Government Expenditure and the Moderation of Income Inequalities 229

Proportions of Income Reallocation 232

10. Exchange Rate Policy 237

Part 4 Consequences of Economic Policies 241

11. External Equilibrium 243

Characteristics of Hungary's Balance of Payments 243

Four Periods of Hungary's Current Balance of Payments 243

1990, 1991, 1992: Equilibrium 243

1993, 1994: Unsustainable Deficits 244

1995-1996: Measures to Moderate the Deficit 248

Main Features of the Bokros Package 249

Restriction of Demand 249

Improvement of the Competitive Position 250

Stimulation of Supply: Accelerated Privatization 250

From 1997: Sustainable Deficits 251

12. Employment 255

Technical Progress vs. Employment 255

Employment Policy in Hungary 1990-1999 257

Uncritical Adoption of the Western Model 257

"Slimming" and Redundancy due to the Depression 257

Employment vs. Unemployment 258

Jobs Lost through Slimming Down and Due to Depression 259

Increase in Productivity in Order to Increase Profits 261

Characteristics of Unemployment 263

Labour Statistics in Hungary 263

Decreasing Unemployment? 264

Characteristics of the Unemployed Population 264

Depressed vs. Slimmed but Recovering Industries 268

Depressed Areas 270

Dealing with Unemployment 272

Pension, State Support, Support within the Family 272

The Outlook 274

Appendix 1 to Chapter 12 Criminality in Hungary During the Transition Period 275

Appendix 2 to Chapter 12 The Housing Situation in Hungary 1945-2000 277

13. Sustainable Growth 281

Decline instead of Growth 281

Proportions of the Crisis 282

Unprecedented in Hungary 282

The Crisis by Economic Sector 283

By Uses of GDP 285

Loss of 3-year GDP 285

Falling Even More Behind Europe 287

Explanations for the Crisis 289

Transformational Recession? 289

Transformation in Central and Eastern Europe and in China 290

Official Explanations 293

Real Cause of the Crisis: Wrong Economic Policies 294

Smaller Policy Errors 294

Industry 294

Agriculture 295

The Main Cause of the Crisis 301

Lasting Consequences of Misguided Economic Policies 303

Lasting Consequences of IMF-inspired Policies 303

Social 303

Economic 303

Lasting Consequences of Made-in-Hungary Policies 303

Fundamental Problems of the Hungarian Economy 304

Corruption 304

Dishonesty in Business 305

Bureaucracy 306

Whither Hungary? 309

Hungary 1920-1999 311

1920-1944: the Horthy Regime

Hungary in the 2nd World War 311

1945-1947 Democratic Interlude 313

1947-1956: Sovietization, Terror, Revolution 314

1956-1988: the Kadar Regime 318

1989: Year of the Transition 323

Chronology of the Transition Period 1990-1999 324.

Notes:

Includes bibliographical references and index.

ISBN:

9630579685

OCLC:

53032109