Democratic and Economic Development in Hungary

1. Democratic and Economic Development in Hungary brad hatch

2. History • Democratic development should not separated from its historical context • Following the 1956 October crisis, Hungary entered in a period of mild or moderate communism • determined to avoid the extremes of his predecessors Kadar remained a moderate by crafting a pragmatic policy of social recognition • supported neither radical democratization nor reactionary Stalinism (middle of the road socialism) • stated that “he who is not against us is with us” contrasts with other EE countries

3. Hist. cont. (63-89) • Hoped that the party would act as its own opposition party • some competition was permitted within the party • entered into a ‘dual compromise’ with workers and intellectuals • for intellectuals Kadar abandoned pol credentials as a means of vetting appointments to leadership positions • opposition parties permitted to mobilize in late 80’s • All important indicators of compromise and democratic leanings, which should have made the transition to democracy less abrupt.

4. The Road to Democracy • Increased popular interest for demo in late 1980’s • transition into market economy and democracy occurred gradually but systemically in late 80’s to mid 90’s • 89 National Assembly approved major const. changes • multi-party elections scheduled for 1989, but initially were sharp limits on party proliferation • Jan 1990 freedom of conscience law passed • first communist county in EE to implement demo reforms • first free vote was presidential referendum

5. Elections • Stability in governments is a significant characteristic of Hungarian democracy • Since end of Communism held three parliamentary elections, (1990, 94, 98) , contrast with 7 in Poland • 1990 election brought end to Communist rule in Hungary, victory went to the center-right Democratic Forum, winning more than 50% of seats. (moderates who called called for careful transition from socialism into free market economy) • Due to poor economic performance during that time (90-94), (such as the lack of privatization) Hungarians turned back to Communist party, now calling themselves Socialists • because of mixed electoral system they won 54% of seats in parl. with 39.92% of votes. Demo Forum only got 10% of the votes cast.

6. Economic reforms • The new PM, Horn(94-98), emphasized economic reforms, characterized by more foreign investment, savings, and closer links to the Western Europe • concentrated on creating a legal infrastructure to support private enterprise • 1995 finally passed privatization legislation, selling gov’t owned companies and state utilities. • In this respect, the party was pragmatic not ideologically bound • Since then economy performed very well, making a successful transition from a command economy to a free market system

7. Economic transition • Hungary has cultivated a business friendly environment, perhaps most friendly in the former Soviet eastern Bloc. • Foreign investment has been the engine of the economy • more U.S. investment than any other country in the region, as in the last 10a has attracted $22 billion in American investment • 1999 more than $550 million foreign investments attracted into Hungary, creating 9, 000 new jobs • WHY? • While other post-Soviet satellites worried about foreign investment infringing upon their sovereignty, it was regard by the elite's as party of a larger strategy of economic development • Attractive investment laws, and cheep labor, but has 8-10% UI

8. IPE • Recent est. of stock market as another way to invest in Hungary's economy • Working toward EU membership • Close eco. ties with Western Europe, 75% of foreign exports go to the EU • 4-5% annual growth rate since 1995 • yet, sill have much lower wages than other EU countries, • Income gap- economic development has benefited new class of entrepreneurs and businesspeople more than other segments of the population.

9. 1998 election • Despite eco successes the Socialists lost the 1998 general election • it underestimated the recent scandals which had marred the governing. period • Also, electoral system distortion contributed to their decline, • 1994- 32.99% of the votes = 54% of the seats (absolute majority) • 1998- 32.92% of the votes= 35% of the seats (second place) • League of Young Democrats (campaigning on crime and corruption) only obtained 29.5% of the popular vote, yet got 38% of the seats, enough to secure first place. • Despite having 3 different governing parties/coalitions following their first 3 free elections, the party system itself has been relatively stable • in contrast with other EE countries most of the parties in Parl now, were there already in 1990 • less effective parties (approx.4) than average of 7.7 in other EE countries

10. Democracy approximates a compromise-corporatist model of consolidation (Seleny) • Characterized by; • (1) low levels of political mobilization • Indicated by the deferential political culture; citizens are quite willing to permit the elite manage the affairs of the country (Political quiescence of Hungarian society) • very few strikes and demonstrations, for example in 1993 they only had 17 compared to 7362 in Poland • (even when held, they are generally resolved through compromise)

11. Compromise-corporatist model (cont.) • (2)high levels of elite consensus and bargaining • neo corporatist tendencies; economic and social policies are developed through consultation bet. Parties, gov’t, and National Council of Trade Unions. • Also, preference for compromise helps explain Hungarian courts prominent position in the pol system • 1994-1998 Socialist party had enough seats for an absolute majority but still formed a coalition with the Alliance of Free Democrats • (3) generally economist or pragmatic pol discourse • pols has been dominated by economic matters; gov’t, as demonstrated, took pragmatic actions during the transitional period.

12. Future • Consensus politics and elite negotiation (in combination with governmental and party stability) are indicators that seem to bode well for long term democratic consolidation and success • Perhaps the major challenge to this democratic model is that the citizenry take little interest in politics. Hungarians are not an engaged citizenry, indicated by 57% turnout during the 1998 elections. • Nevertheless, Hungary has made significant progress in developing into functional democracy over the last 10 years.