The moral deadlock in Hungary and the EU's answer
23.10.06 @ 08:29
Hungary is now in the second year of EU membership and it has little to show for it. The economy is in poor shape and the unemployment rate is continuously rising, especially among the youth with every fifth young person unable to find a job.
SMEs are going out of business by the thousand, and small farmers are unable to withstand the unfair competition of the much better-supported farmers of the original 15 member countries.
Over-subsidized, cheap and poor quality food, often hazardous for health, pours into the Hungarian market, trampling domestic producers who are under-financed and under-supported.
According to the latest report by the Swiss-based Institute for Management, Hungary between 2002 and 2006 slipped 11 places down a list of nations surveyed for competitiveness.
In striking contrast to all the original laws and values of the EU, free movement of people and services only works in one direction.
Anybody can come and work or start any kind of business in Hungary, but this is not the case for Hungarians. The majority of the original EU member countries seriously constrain the free movement of workers and services from the East.
Brain drain encouraged
But what is particularly unfair is that almost every country encourages the migration of highly skilled professionals. Architects, accountants, engineers, nurses, doctors and IT specialists are more than welcome to come and work in the majority of the original member states, among them Belgium.
IT specialists can also easily settle in Germany. This is actually a deliberate process of brain drain. People trained in Hungary are now strengthening the economies of the developed Western European countries, while Hungary is being deprived of the only strength it has: valuable human capital.
As a consequence of this tendency, there are already dangerous shortages of professionals in Hungary, for example in the hospitals. I myself experienced a sad case a few weeks ago.
An elderly gentleman died of a heart attack. He was taken into hospital when the heart problem became apparent but because all the operating rooms were busy, all the doctors were working, and no beds were available, the family was asked to come back the next morning.
During the night, however, the man died. I hear similar stories very often from doctors, who are tired of the long hours and not being able to save lives that could be saved if enough doctors were available.
Young engineers, economists and other professionals are also forced to leave the country, because there are very few professional jobs available.
The taxi driver example
This means it is quite typical that the leadership positions of the foreign-owned companies are filled with expatriates, who know nothing about the local environment and culture, and are only concerned about finding the best ways of squeezing out the most from employees, who have little chances to work elsewhere.
While foreign companies come to Hungary for its cheap and reliable workforce and the unstinting support they get from the Hungarian government, workers' rights are not protected and the unions are weak.
Service providers are also made uncompetitive because of the unequal conditions. Two examples well illustrate this problem. A taxi driver from Sopron, a town at the border with Austria is allowed to take a Hungarian to Austria, but has to return unoccupied even if there are Austrian customers who would like to come to Hungary with him.
By contrast, Austrian taxi drivers have full freedom to do any kind of business in Hungary. Or if a hotel in Sopron has a group of guests coming, for example, from the US, it may not send its own bus to pick up them at Swechat airport - which is much closer to Sopron than Budapest airport is – instead it has to hire a much more expensive Austrian bus.
Another factor that creates problems is that there has been no transition period for Hungarian businesses to adapt to EU regulations.
Another example: Dry cleaners used to apply a cleansing material which was available from Hungarian producers. After entering the EU, they were obliged to change this material for a different one, which is only available abroad – in the original member countries – for a much higher price. Furthermore, this material cannot be used in the machines here, so the dry-cleaners had to buy new ones, only available from the original member countries.
The argument for all these complications was that Hungarian material was not environmentally friendly enough. But the dry cleaners believe that the entire regulation was about nothing but gaining additional markets for companies from the original EU member countries.
This is a quite acceptable explanation, as otherwise the EU is not that sensitive about environmental protection in the new member states at all.
No objective information
Before joining the EU there was no objective information available about the potential threats of membership.
I tried to get some financial support to publish a guide for Hungarian small and medium sized enterprises to help them better prepare for membership. The organization in charge of informing society about the opportunities and threats of membership answered my request by saying "we cannot finance negative campaigns".
That was quite an odd answer as it would have been much better for the country if people and businesses had been better prepared to cope with the problems of membership.
The politicians and the media promised blue skies, tremendous opportunities, a lot of money, jobs and improving living standards. One big campaign billboard actually suggested that anyone interested in opening a coffee house in Vienna would be able to do so!
Critical or sceptical voices were brutally oppressed: there was no space and time for any serious professional debate about the consequences of membership. In spite of the untrue and manipulated campaign few people showed up and voted positively for membership – just 38% participated in the vote.
Corrupt government given EU boost
To solve the complicated political and economic problems of the country, the EU has chosen the worst possible solution by supporting the present corrupt Hungarian government by accepting its "convergence package".
During the four year of the present socialist-free democrat government, the budget deficit has risen to more than 10 percent of GDP while the debt level has surpassed 60 percent of GDP.
In order to win the election, the coalition lied deliberately about the economic situation. Then, after winning the election, the government put together an austerity package and prepared a convergence programme to demonstrate to EU leaders its determination to quickly decrease the budget deficit.
The population of Hungary is already protesting against this illegitimate situation which - through the acceptance of the convergence package – has been legitimatised by EU leaders.
This is now more proof for Hungarians that the EU does not care about values and people, it only cares about the interests of big business and politicians.
What will be the consequences of this situation for the future of the European Union?
A short-term outlook has never helped a country or a region to build sustainable competitiveness. The development of the EU economy has already slowed down and social problems are on the rise.
In short, the EU should follow its own original rules and offer equal rights and treatment to the people and businesses of the recently joined countries.
Also, it should be seriously concerned about the increasing discontent among citizens in the new member countries. Instead of paying lip service to democratic principles by sending the commissioner in charge of "more democracy" around to meet some representatives of the political class and a few selected organisations, it should rather focus on improving people's quality of life.
This could be done by offering more insights and involvement into the European decision making processes.
It would also be useful to consider the new member country citizens and not only the ruling politicians to be partners.
It is time not only to preach but also to practice the idea that the only successful strategy for Europe is to build a knowledge-based economy, not through exploiting the resources of new member states, but rather through involving and empowering the population of these countries so they can fully participate in and gain from the process.
This would at least go some way to showing that the EU actually means what it says when it talks about creating knowledge societies in member states and improving social conditions across the bloc.
Dr. Magdolna Csath, Professor of Management and Economics, Doctor of the Hungarian Academy of Sciences. (Saint Stephan's University in Godolloo, and the International Studies Centre of the Corvinus University, Budapest)