We fell behind, we are falling behind

Schraad_Tischler_Generationengerechtigkeit-150x188The future belongs to those countries that are open to predictable social, political, and economic reforms.
This is the message of the recently published study of the Bertelsmann Foundation (Bertelsmann Stiftung) – one of the biggest social-political workshops in the world, financed by the Bertelsmann holding company – which has attracted great attention.

Forty-one OECD and EU member states were compared based on their ability to react to political and financial events, their preparedness to future challenges, and the quality of their governance.
Daniel Schraad-Tischler, who is the Senior Analyst of the study’s research group says to alapblog.hu that they proved that the more open and decentralized a state is, the more efficiently, future-oriented, and successfully it operates. Poland, the three Baltic countries, Romania, Slovakia, the Scandinavian states, and Germany are excellent examples of this.
The governance sustainability of Hungary has radically weakened in the past years according to any rankings. The centralization and the advanced economic role of the state have contributed to the development of the image of an unpredictable, untransparent, and unreliable country. This attitude has led to the weakening of the state and the widening of differences between social groups. In the meantime, the quality of governance and the internal and external perception of our Central-Eastern European neighbors have improved. They became more decentralized, liberal, transparent, and predictable.

Zentai Péter: Many Hungarians will find the country comparison of the Bertelsmann Foundation deeply unfair and offensive. They will question its professionalism…

Daniel Schraad-Tischler: We are happy for any dispute. It is an honor, if any expert, politician, government, or head of state – of any country concerned – points out the potential mistakes of our analyses and conclusions.
We compared the performance of 41 EU and OECD (Organization for Economic Co-operation and Development) member states or governments from 140 policy aspects in order to assess their preparedness to certain future challenges. Beside that hundred forty aspects, we included publicly available data of the OECD, the IMF, the World Bank, the UN, the European Union, and other international professional organizations in the country analyses, the case studies, and the ranking.

In the light of this, your study shows that Hungary has ended up at the bottom of almost all of the lists…

In terms of the natural environment, the ecological situation, your country achieved a good result; it was ranked 15 out of 41.
However, the relatively good performance in the environmental policy was only enough to slightly improve Hungary’s overall score. At social sustainability, the country took thirty sixth place, at economic policy, thirty ninth.

The balance of payment including the trade balance of Hungary, however, turned out to be absolutely positive. Inflation has dropped dramatically. Not many countries can claim the same.

Almost all of the countries in question have improved their balance in the past four years. Also, there are no problems with inflation anywhere. Those states that were previously lagging behind Hungary, now, put their economies on a higher growth path by seemingly permanently recovering them.
These latter circumstances are much more important than the balance of payment or inflation rate in terms of future orientation and quality and sustainability of governance.
In the case of Hungary, the current economic, financial results are not due to structural reforms. They have been achieved by overwhelming certain economic sectors and large swathes of the populations. At the same time, narrow, privileged groups have been disproportionately and pointlessly rewarded based on technical, political aspects.

So, you say that it is a Hungarian specialty?

Southern European is, in general, delaying the introduction of structural reforms. There are a number of other countries where poverty has grown and the gap between the upper and lower classes has expanded (the number of low-income people has significantly increased in most of the 41 countries considered). Where, however, labor market, educational, health care and social reforms are consistently carried out, improvements seem to be permanent and sustainable.

These reforms can be introduced only in the most advantageous and richest countries because they have to tackle potentially less social tension, have huge reserves, and are able to make temporary sacrifices.  The companies and banks of these countries have expanded both domestically and internationally, especially, in economies that fell behind. There are Scandinavian, Swiss, German, and Austrian banks all over Eastern and Southern Europe.

10 to 14 years ago, Sweden and Germany were hit by severe crisis – Germany was even called the “Sick Man of Europe”. They were lagging behind in the rankings at that time. Germany’s current performance seems particularly brilliant because we are talking about a large country, a population of 80 million people. Still, it was able to make it to the top, even though the “best” countries have typically smaller, more homogeneous economies: Austria, Switzerland, Denmark, or the Netherlands. These states can be governed more easily. The fact that they can get the society approve the reforms necessary to social, economic, financial, and ecological sustainable development proves the high quality of politics of Germany – and the other well-performing countries.

Do you think that the religious, cultural traditions play an important role, too? Protestantism is a common feature of the most successful ones…

We have not done any research on this. Probably, it would have misled us because Austria or the best performing German states – Bayern, Baden-Württemberg – are catholic. Not to mention Poland. Poland has significantly moved toward in every ranking, as well as, the Baltic countries. Estonia, for instance, has outstripped a number of traditionally rich countries. So did Poland. Poland is also a big economy (40 million people) and its politics is more complicated than that of the Baltic countries. And still

And still? What is their secret?

In Poland, Tusk prime minister’s two terms has successfully consolidated the democracy and the rule of law. Poland appears to most of the Western decision makers as an example to follow, a potential leader of Europe.
Romania and Slovakia also seem to follow this Polish political and economic model. These societies stabilized their economies much more quickly than Western countries did after the crisis.
Right now, all other members of the Visegrad Group (Slovakia, Czech Republic, Poland, and Hungary) lead before Hungary. Compared to the research from 4 years ago, out of the 41 countries concerned, Hungary’s overall performance has worsened the most.
The reason might be that Hungary, unlike the others, is centralizing. It is the only country in the region, where the state is not a regulator but the major player in the economy. Thus, the rule of law and the institutions supporting it are weakening.
The governance system becomes more and more corrupt, less and less transparent. As a result, the investors are worried and the domestic and foreign market players become distrustful of the country. The conditions for economic growth are not provided.
The foreign political, economic image of Hungary is that the country is an unpredictable place because the politics and the governance are unpredictable and unreliable. If Hungary wants to further increase the role of the state, the probability of introducing structural reforms – which would ensure long-term growth – is shrinking. The message is: Hungary will fall more and more behind as it becomes less predictable and the investors and partner governments will be scared off.


Picture: www.tozsdeforum.hu