Friday, April 07, 2006

For real afficionados, here is a very lengthy, though I hope intermittently amusing, report of my trip to Hungary.

Have a nice weekend


Hungarians are the gloomiest people in central Europe, until you suggest that they trade places with anyone else. A friend of mine writes from New York, recommending people to see “in my tortured homeland”. He is not joking. Hungarian gloom has a special acidic, self-obsessed quallity to it. But the special agony of dismemberment and defeat is only part of the story. Even worst is being lumped together with anyone else, as “eastern European” or even worse “Balkan”. The surefire way to get Hungarians sounding patriotic and cheerful is to ask them if they would like to emulate Slovakia, their much poorer, but reform-thirsty northern neighbour. What they like is a nice comparison with Austria, where they can sink back into their self-indulgent gloom.

I am visiting Hungary to find out three things. How is the election (in April) is being fought. What’s happening to the economy. And how is society changing. Hungary was the freeest and most sophisticated of all the Warsaw Pact countries in the 1970s and 1980s. There was repression, and there were political prisoners, but the Communist motto was “He who is not against us is with us”. That left plenty of room for low-key dissent—the kind based on a raised eyebrow, a bent rule, and an unsaid word, rather than a shipyard strike or demonstration broken up by riot police. In the 1980s I used to visit Hungary to meet east Germans—meeting them in their country was difficult and costly for me, and dangerous for them. Hungary then felt rather like a mildly repressive version of Yugoslavia. There you were safe if you didn’t criticise Tito directly. In Hungary you were safe so long as you didn’t mention Imre Nagy, the leader of the 1956 uprising, or the Soviet Union whose tanks crushed it.

“Reform” may have a nice resonance to western ears, but in much of post-communist Europe, and particularly in Hungary, it stands for pain and uncertainty, particularly price rises. Hungarians started off in the early 1990s with a burst of vigorous reform, privatising most state-owned industries more or less cleanly. Then, to everyone’s surprise, the same commies who had dismantled the old system, only lightly relabelled, came back to power in 1994. They sooon hit the buffers with a nasty financial crisis, but thereafter governed soundly. Foreign investment, particularly from the German car industry, boomed.

But in 1998 the rightwing won again, in the form of Viktor Orban, the youthful and charismatic leader of Fidesz. I remember Fidesz as the brave and idealistic Young Democrats, who were the most attractive counter-cultural opposition to the greyness of communist rule. Their most famous poster in 1990 showed Honecker and Brezhnev kissing (and seemingly snogging). It embodied the gruesome kitsch of Soviet-era diplomacy.

Since then Fidesz has moved sharply to the right, ditched its liberal identity and found a conservative one, losing a bunch of “real” (ie lefty) liberals in the process. To general surprise, and despite a colossal spending spree, Fidesz lost the 2002 elections. The lefty liberals teamed up with the ex-commies and formed the government which is now standing for reelection.

But with a difference. That government spent its first two years in an unashamed attempt to reward its supporters for voting for it: “I can understand why they made these idiotic promises, but not why they kept them” says a finance minister from a nearby country. But the prime minister of that government turned out to have been a secret police informer in the communist era, and even in Hungary’s exceptionally forgiving political culture that was too much to swallow. In came Ferenc Gyurcsany, a wealthy tycoon who combines capitalist credentials with close family links to the old regime.

Against him, and neck and neck in the polls, is Mr Orban, who has returned from a mammoth three-year sulk to try to win power back for Fidesz. Orban is the sort of politician that The Economist would like to love: a freemarket anti-communist liberal with robust political skills. But there are doubts about his democratic credentials. His opponents demonise him as a cynical populist willing to play the most dangerous of cards—revanchist, anti-semitic, demagogic. It’s true that his government managed to fall out with most of Hungary’s neighbours (though it did get the country ready for Nato in 2002, and EU membership in 2004. In turn, Orban and his supporters demonise the incumbent government: crooked commie turncoats who have bankrupted the country and will do anything to stay in power.

By the end of the visit, I am equally fed up with both parties. But at the start, I am favourably disposed to Orban. That’s partly because I have a soft spot for people who were anti-communist back in the old days. I remember in 1988 going to Budapest and laying flowers on Imre Nagy’s grave. He had recently been reinterred from his anonymous plot at the corner of the cemetery—a sign that Hungarians could begin to commemorate the trauma of the crushing of the 1956 uprising. But to my surprise my friends in Fidesz—including, I think, the young Orban—were scornful and teased me. “Why waste flowers on a dead communist?”. That set me thinking, as I still do, about redemption. Can you have a reform communist any more than you can have a reform Nazi.

The nice things about Budapest are the food and the architecture. The bad thing is the language. I have been struggling with Hungarian, intermittently, since the mid 1980s. I think have had (and lost) three, or possibly four, copies of “Colloquial Hungarian” all well thumbed in their early chapters and pristine in the later ones. Hungarian is the Mount Everest of post-communist languages: if you speak one Slavonic language you can learn the other with a bit of effort. German helps with Czech; add Polish and German and Russian to a bit of Latin and Greek and you have Lithuanian. Romanian sounds like a drunk person speaking Italian (and no doubt to Romanian speakers Italian sounds like drunk person speaking Romanian). But Hungarian… there are 14 cases, with bewitchingly lovely names like the “adessive”. The vocabulary is huge, and the grammar intricate. I am not even in the foothills, despite knowing a bit of Estonian (which is as distantly related to Hungarian as English is to Persian). Anywhere else I can more or less manage to read the papers and understand the news. But not here.

So I spend the flight alternately reading IMF and OECD reports about the Hungarian economy (which make gloomy reading, even in the polite bureaucratic tone that these august bodies use), and looking with increasing frustration at my Hungarian phrasebook and grammar. Every now and again a word leaps comfortingly from the page: Haz is house. Szabad must be from Svoboda, which means freedom in a lot of Slavonic languages. Uj is new, which is like the Estonian Uus. But I not going to progress beyond sub-kindergarten level unless the Economist kindly gives me six months off. And even that would not be enough. I haven’t felt so helpless since Afghanistan.

We arrive (I’m with a colleague) and head straight for the Fidesz campaign headquarters. These are rather mystifying: there is no sign on the door, although there is a gigantic wall drape over several stories of the outside of the building which is all but invisible as the street is so narrow. We are too early, and the reception, monoglot to a man, are very confused. This is one of the striking things about Hungary. I have never found an office in Poland in recent years, even in the boonies, where the receptionist can’t at least manage a few functional pleasantries in English. But Hungary, which is a smaller country (and therefore should be more multilingual) simply doesn’t do foreign languages. We were looking for a ministry and the sign outside said it was the “Otastasi” ministry. Whatever that might be.

Hungary doesn’t do a lot of other things either. In Romania, taxis have little printers that spit out receipts in two seconds. In Hungary, they are all written out, laboriously, by hand with carbon paper. Very few shops and businesses bother to advertise their web addresses.

We wait, and then a phonecall comes. The Leader is delayed, and offers a five o’clock slot instead. Luckily, that’s free (I always leave three or four gaps when I’m planning a trip). Everyone is gratified that we don’t kick up a fuss. Fidesz gets a tough deal from the local and foreign press, who tend to treat Orban as if he was a closet anti-semite and nationalist. By contrast we are at pains to show we are going to fair, and they like us for it.

But the overwhelming impression at the Fidesz headquarters is that all the noisy populism of the campaign is just for show. This party is not really economically protectionist or interventionist. “We are a continental Christian Democrat party with central European characteristics” says one person. I take it that these characteristics are chiefly a loathing of communism. Nor does it really like making expensive spending promises. “This is just for the election. What will happen once we win is very different,” someone murmurs off the record. That’s encouraging if you just worry about outcomes, but depressing if you think that politicians in a democracy should keep their promises.

Our next stop is with a friend of mine who has been living in Budapest for years. He speaks impeccable Hungarian, which leaves me feeling envious. He is also one of the few westerners living here who doesn’t demonise Fidesz—indeed he thinks that Orban is going to win, on the grounds that Hungarians have never reelected a government so far. That’s actually one of the remarkable things about post-communism: nobody gets reelected. Whether you reform or not, the voters chuck you out. There is only, I think, one exception to this rule and that is Slovakia, where the first reformist government, that displaced the thuggish pro-Russian Vladimir Meciar, was reeleected—but it too is facing defeat now in the elections due in the summer.

Our friend is interestingly dismissive of the lefty liberals: “very tolerant until you disagree with them”. Orban is gutsy and has a point about media bias against him. I’m interested in this. Fidesz are furious with the foreign press, who they think give Gyurcsany an easy ride. But the party does itself no favours by its prickliness. When Gyurcsany’s propaganda people used a sentence (wrenched out of context) from an FT article, saying that Hungarians were living better than ever, Fidesz said that this was because the FT had been bribed by the government. Unsurprisingly the FT regarded this as libellous, and Fidesz rather grudgingly retracted. But one senior Fidesz figure wrote a formal letter of complaint to the Economist, complaining that we wrote about Fidesz’s silliness, but not the government’s far worse sleaze and dirty tricks.

He may have a point. But the Fidesz campaign has been full of gaffes. They hacked into the Gyurcsany campaign computer, but left a clue. They also seem to let their party fax machine be used by newspapers that are supposedly quite independent. “A coincidence” they claimed, prompting a television interviewer to ask sarcastically if any member of the public could walk in off the street and use their fax machine.

I was rather looking forward to some proper Hungarian food, but this restaurant is Hungarian-Italian, which means it serves Italian food, but cooked the Hungarian way and in colossal quantities. Also everyone apart from us is smoking. And the service is very slow. We gulp down our coffee and head for a meeting with a Fidesz-related economist.

This is rather fun. He is an unabashed Laffer curve enthusiast, who wants to rescue Hungary’s dreadful public finances (the government deficit is probably a stonking 10% in reality) by cutting taxes. That, he says, will raise revenue.

He reckons Hungary has two economies. One is the private sector which is prospering, the other is the laggard public sector which is inefficient, bloated and spendthrift. Since late 2000 when Gyurcsany took over, he says, relishing the words, we have a “catalogue of disasters and a string of scandals”. It’s true that the last Fidesz government, at least at the beginning, was rather fiscally conservative but they blew that in the pre-election spending spree (and still lost). However, the debt-to-GDP ration was a comfortable 53%. Now it is 61%. That’s too high for Hungary to join the euro in 2010, which it is nominally pledged to do (if the weather is fine, the harvest is good, nobody is on holiday on the time and there’s a full moon, I add mentally). Corruption is worse (measured by the Transparency International Corruption Perception Index, which I regard as largely bogus, but never mind).

He wants four things.

One: is a flat tax (rate to be decided, but between 16% and 19%).
Two: huge reform of the public sector
Three: a brand new national economic development plan perhaps sponsored by the EU which will invest in infrastructure, small business etc
Four: fight corruption “because it spoils everything”.

This programme, he reckons, with a swoosh of wishful thinking, will take 18 months, bringing the 2010 euro target back in sight. I like number one, which has worked well everywhere it has been tried. It is increasingly hard for the opponents of flat taxes to claim that they are a lunatic economic gimmick, when in every country they have been used the tax base has widened, and tax revenues, investment and GDP have grown. You can try to make a counterfactual case that these countries would have done just as well or even better with a “mature” [complicated] tax system, but it’s hard to see why. He notes that in 1995 Hungary halved the corporate tax rate from 36 to 18 % and tax revenues doubled. He reckons that the “grey” (ie illegal) economy accounts for 1/3 of GDP. So cut taxes, and that goes legal, GDP shoots up, there will be 200,000 new jobs, and tax revenues will rocket.

The rest of the programme is pretty much moonshine. Big reforms of the public sector are the standard policy of every reformist government from Estonia to Moldova. The question is how to do it. It’s very difficult. Even Estonia, which started 15 years ago, has only been a partial success. It requires the right computers and software, the right political leadership, the right bureaucrats and public support. And if you have all that, you probably don’t have much of a problem to start with.

The national economic plan has a nice dirigiste ring to it, and might appeal to the voters. But I have never heard of a national plan working as planned. They are almost always counterproductive. The best thing the government can do is stay out of wealth creation and concentrate on a really good legal environment with quick clean courts, sensible rules, and no cartels. The idea that the government should take money from successful businesses and try to hand it out more sensibly than banks would always strikes me as far-fetched. But I am just a swivel-eyed Hayekian looney.

Fighting corruption is another fine idea. But it is very difficult to do. Romania is managing thanks to huge external pressure and frenzied political support. But I doubt it will last even there. The best way to fight corruption is to have honest bureaucrats and politicians, and public-spirited businesses and citizens who kick up a stink when asked for a bribe. But then you don’t have much corruption to fight.

The big hole is that there’s no mention of cutting spending. He replies that this is all in the plan: 200,000 “redundant” public sector jobs will go. I wonder if that’s a widely-known bit of their programme.

I am a bit bored by the triteness, but pleased by his examples from other countries. Slovakia has got it right on foreign investment and taxation, Ireland and Finland on industrial policy; Scandinavia on education, Spain on tourism.

We finish on energy security. Yes to a new nuclear power station (again, I doubt that’s in the election programme) but the real priority is cutting wasteful consumption of energy.

Comparing his basically sensible if rather shallow and optimistic reformist agenda with Orban’s speeches is quite interesting. Orban has railed against “luxury profits”, criticised the current government for depending too heavily on foreign investment; and threatened to renationalise Budapest airport, which has just been sold to a British investor. I ask politely how this can be squared with what we’ve just heard. “Oh that’s just for the election” he says, looking entirely unbothered. “I am looking forward to after we win”.

Hmm. We then go off to see Orban himself, in his large office in the Buda hills. There’s a bit of wait, during which we have two slightly surreal interventions. First, I am called by a tabloid newspaper wanting me, with great urgency, to write 2000 words, for a vast fee, about why Putin is a new Stalin. It’s possible, so long as I do it between midnight and bedtime. The peg is the anniversary of Khrushchev’s secret speech. I love this sort of commission. You write something, a bit more lurid than you usually would, and then they don’t run it. But they pay all the same.

As I’m mentally brushing off my Putin cliches, we get another phone call. I’ve been trying for two weeks to arrange an interview with Gyurcsany, and received a rather puzzling series of brush-offs. He had promised an interview this time last year (though why any post-communist prime minister should need any persuading to talk to the world's most important newsweekly is another story: in other countries they are begging to speak to me, not vice versa).

Anyway, I have sent a series of increasingly cross and disappointed e-mails, first to the government, and then to the Socialist (Gyurcsany party) offices, with no results. Suddenly, the phone goes and it is a very apologetic-sounding spin doctor from the prime minister’s office, oozing apologies. He will see us tonight and see what can be done tomorrow.

Then Orban bounces in, dynamic, confident, charming, casually dressed. He recognises me, but we can’t agree where it was we met. In these situations I always say firmly that we must have met at something in Oxford. Most people in international politics have been to Oxford at some point, and this works well—he reckons it was a meeting of the Liberal International in 1997. I am sure that’s not true but never mind. (I should say that I learnt this trick from my father, an Oxford don whose many ex-pupils recognise him more easily than he does them. He says firmly “We last saw each other in the Broad”, which is a large street in central Oxford. This always brings a delighted affirmation. Funny thing, memory).

Orban makes no bones about being a populist. “My mission in politics is to speak in an understandable way about even the most complicated issues. . The content is serious, the way I express it is popular. I am trying to send my messages to everybody in a way that they will understand.”

I reckon that Fidesz and Orban is actually trying to ride three horses at once. It has its core voters, who are conservative, market-minded, patriotic, pro-family, Euro-atlanticists. I call that CDU Viktor, after the German party. Then it needs to hoover up any stray voters on the radical right, by banging on about Hungarianness, the iniquities of foreign capital and delivering nasty coded messages about Jews. That’s FPÖ Viktor, after the radical right (and, coincidentally, ex-liberal) Austrian party. Thirdly, it is trying to attract voters from the other side, the poor and dispossessed who have done rather badly under both reform and four years of millionaire-socialism. For that he makes expensive promises about higher pensions, social solidarity, fresh starts in life etc and denounces “luxury profits”. That’s SPD Viktor.

This would be a tricky task for a brilliantly-run western party, and it is a tall order for Fidesz which is run by a very small group of people round Orban who don’t seem terribly well organised. Orban starts off in FPÖ mode, laying into the government for being unpatriotic. “They don't trust the internal forces of Hungary, they are always looking for solutions from outside, and neglect the energies inside.” I find that rather dispiriting. Surely the whole point about being a small country is that you can flexibly adopt all the best ideas from elsewhere—improve and adapt them, sure, but why try to reinvent the wheel? But he claims that foreign investment and the EU “leave far less space for Hungarian companies, educating people, utilising our cultural heritage that has economnic force, eg engineering.” I have heard of the “lump of labour” fallacy, that there is only so much work and it must be shared out fairly. But this is even pottier: “the lump of ideas”fallacy—a kind of intellectual protectionism that would shelter bad Hungarian ideas from good foreign ones. If the foreign ideas were worse than the local ones, after all, there would be no problem because nobody would adopt them.

He carries on, still in FPÖ mode: “There must be a place where Hungarians are most important and that is Hungary”. I am not sure about this at all. I can see that countries need to privilege their languages and cultures (which is why I passionately defend the Estonian and Latvian language laws, for all their flaws and quirks). But what does it mean for the government to make the indigenous population “the most important”? Surely the whole point of the EU is that we compete and trade on the basis of merit, not local preference. He's not impressed. “Just like France for the French.”

That’s a killer argument. France and Italy (and Greece for that matter) make it very hard to lecture post-communist countries about bad government, pig-headed defence of national interest, and so on.

Then we get on to the ticklish question of privatisation. “We will reverse it if it is possible.We have to study the contract.” says Mr Orban, switching into SPD mode. That’s a bit cleverer. He can bang the anti-foreigner drum now during the election, claiming that the airport was sold cheaply, or corruptly, or whatever. And after the election he can say “very sorry, the lawyers say that our hands are tied”. A bit like Tony Blair’s government did with rail privatisation.

He continues in CDU mode, on the “two economies” theme, which I like. The region is full of companies that are internationally competitive, mostly foreign-owned but with an increasing number of local ones. And they have to operate amid public services and bureaucracy that is miles away from world-class. But then he comes back to FPÖ and the covert protectionist theme. “The tax system is good for foreigners and bad for locals. Government favours foreign investors rather than creating equal conditions.” I think that’s misguided. Foreign investors bring knowhow and money. They are likely to compete hard with local companies. And that’s good: it raises standards. I can’t think of any country that got poor because it had too much foreign investment.

However Mr Orban redeems himself in CDU mode when we move onto reform of bureaucracy. “Estonia is probably the model. They have been very successful with technical modernisation, e-governnment. In Hungary it is ridiculously bad”. Now we’re talking. Having spent a lot of the past 15 years banging on about Estonia to people who are mostly unbelieving, bored or plain ignorant, it’s deeply gratifying when other people start citing Estonia back to me as a place to learn from.
But he doesn’t quite share his adviser’s appetite for sacking bureaucrats “Hungary’s problem is not the number of bureaucrats but the number of inefficient regulations. We have to identify all unnecessary regulations and delete them and then it will be visible how many bureaucrats are unnecessary.”

I ask about flat tax. He likes it, so long as it is not quite flat. There must be special allowances (not benefits, he insists) for families with children (he has five).

He carries on in high CDU mode with a nice-sounding idea about rebranding Hungary as a really business-friendly location. “a country where you find less bureaucracy, which has a pro-business government and lower taxes. ‘If you want to run a good business in Europe, then the best place is Hungary’”.

That’s magnificently inconsistent with what he said before, but never mind.

Then we swing back into FPO mode on the subject of Hungarian minorities outside the country. This is a very tricky issue. In short, most of Hungary’s neighbours have unhappy historical memories of domination by Hungary, in the days when it was half of the Hapsburg empire. Slovaks, for example, will say readily if inaccurately, that they were treated as “second-class citizens” by the Hungarians. Now they are the top dogs, and the Hungarians have to get used to it.

Actually, relations are pretty good. Hungarian parties are in government in Romania and Slovakia. There are some tensions in Voivodina, a bit of Serbia with 100,000-plus Hungarians. And the hapless Hungarians of Ukraine are very poor. But nobody’s killing each other, or even shaking fists. One school of thought says that Hungary should behave very delicately, not raising even the ghost of territorial claims or special status, but just concentrating on preserving Hungarian life, language and culture in these “lost territories”. But Mr Orban sees it quite differently. “Hungarians are the only ethnic group in the Carpathian basin not entiled to dual citizenship.”

That’s true, but I can’t think of a quicker way to annoy the Slovaks and the Romanians to start handing out Hungarian passports to a large chunk of their citizens. He continues, raising the subject of the Benes decrees, and my jaw drops. These were the very harsh measures taken by post-war Czechoslovakia (before, incidentally, the Communist putsch of 1948) which deported hundreds of thousands of Germans and Hungarians. When I discuss the interview later with an assistant, I am told this bit was meant to be off-the-record, so I will honour that, rather reluctantly.

But I am left flabbergasted by what he says. One of the worst bits of the last Orban government was that he seemed set on quarrelling with everyone in the neighbourhood. This government’s strongest suit is it’s foreign non-policy: it is friends with everyone. So why bang the old drum again, even in private? Everyone in Central Europe has a grudge against their neighbours about something. If you ask for financial compensation from them, they may ask it from you.

On that, we leave, and head into the centre for a meeting with a Personage Famous in Hungary (PFiH for short). I can’t name him because it wouldn’t be fair. But he is very clever, and was a very good minister in a difficult time, and knows lots of economics. We are a bit late and there is no sign of PFiH in the horrid little bar that he has suggested meeting in. I ask the barmaid if she has seen him (he’s highly recognisable and a household name: it would be a bit like asking someone in a coffee bar near Harvard square whether Larry Summers has been there in the past few minutes). There’s a blank, rude stare. No she doesn’t speak English, or any other language. I try in Hungarian. Still a blank stare. Perhaps I have used the adessive case wrongly, or my vowel harmony is adrift. Luckily the people in the café speak English, and say he hasn’t been there. We wait, and wait. Suddenly I see a familiar figure going down the street. I run out and shout “Mr PFiH!, hellooo”. He turns round looking rather cross, but then becomes apologetic. He thought our meeting was next week.

So we go to another, much nicer bar, and I order Unicum which is always a treat, and we get into a detailed discussion about macro-imbalances in the economy. Trying not to be too technical, the problem is that Hungary’s growth is fuelled by debt. The government is borrowing huge amounts, and so are private households. It is quite normal for people to take out loans in Swiss francs or Euros, not just for mortgages but even to finance things like cars or televisions. This is terribly risky. Foreign money is flowing into Hungary because investors believe that the government will sort out public finances, and join the euro. If that comes into doubt, then the foreign money will go swooshing out, and the forint will collapse, interest rates will have to go up, businesses will find borrowing more expensive and will cut investment, jobs and pay. So a lot of people will find that just as they are becoming poorer, their foreign-currency loans have become a lot more expensive. So they will have to work extra hard to pay them back, and cut back on other spending, deepening the recession.

Will that happen? PFiH says “If I say that it will, then it will. So I am not saying so publicly. But it may well do”. He is not a man plagued by doubt or modesty. He thinks both main parties are “idiots”. The government has done nothing but spend, and Orban’s lot are talking nonsense.

We hurry off to our next meeting, with the spin doctor. It starts well: he is very apologetic. Someone, somewhere in Gyurcsany’s office has clearly blundered badly. I rub in a bit that we have just had a most interesting meeting with Orban. More apologies. He is going to try to fix someone important up tomorrow. But soon the atmosphere gets prickly. I certainly don’t meant be rude, but when I try a couple of mild jokes and put alternative interpretations on the facts, he gets cross. He insists that Fidesz is anti-semitic. I point out that it has some senior Jewish figures. Are they the ones in charge of the anti-semitic propaganda? He huffs and puffs. “You really shouldn’t believe all this propaganda from Fidesz. I would expect more insight and analysis from a journal of your reputation”. Things get even stickier when we get to a restaurant. I order a very nice bottle of wine. He sips a coke. I ask what the model is for this government elsewhere in post-communist Europe. None. We like Hungarian solutions to Hungarian problems. So he’s prickly and xenophobic. Perhaps he should go and work for Orban, I wonder, but luckily don’t say. Our spin-doctor professes to be an uber-Blairite. If so he has clearly modelled himself on Alastair Campbell.

I ask him what the the outgoing government’s single biggest achievement is. He comes up with the surprisingly feeble answer of a reform to higher education that makes it fit the socalled Bologna model. I know what he means because I used to be the Economist’s education correspondent, but I doubt one Hungarian in a thousand would know or care. (It is going over to a British-style system of a three- year bachelor’s degree, two year master’s and three-year doctorate.). But it certainly is not the sort of reform that would kickstart an ailing post-communist higher education system. When I point this out he gets cross, and says that the real achievement of the government is that it is now in a position to get reelected. I suppose that is true, given that after the first two years it was on the verge of collapse, and Mr Gyurcsany has some claim to be carrying out a Blairite modernisation. But it is a bit thin, particularly given the absymal performance on controlling public spending.

After a bit I get fed up with his prickliness and confront it. I’m just doing my job, I point out, exploring the pros and cons of his arguments. He backs off, rather sulkily, and then leaves. I’m puzzled. I had expected this sort of behaviour from Fidesz, not from the government. But in fact Fidesz has been charming and helpful, and it is the government that has been obstructive, and now rude.

We have dinner with another foreigner who loathes Orban and has a very soft spot for the liberals, Gyurcsany’s small coalition partner. I argue that it’s actually a sign of success that Hungary has a stable party system with two-and-a-bit parties, That’s considerably better than Germany, Austria or Italy, let alone any post-communist country. Of course I am not saying that the fewer parties the better, but I do think it is a good idea to have clearly defined chunks of the political spectrum. Except of course that in Hungary the two-party system consists of a supposedly centre-left outfit that is run by a millionaire Blairite with pro-business policies, though backed by a bunch of reluctant and uncomprehending old grey ex-commies. The supposedly right-of-centre outfit is flirting with strident economic nationalism and extravagant social protection.

One interesting fact from the “real”, ie non-political, world pops up. The Lubavitch Jewish community, who are a kind of Opus Dei of the Jewish world, are trying to persuade the government to allow Jews to define themselves as an ethnic minority. That is hotly opposed by many Hungarian Jews who have been insisting for more than a century that they are just as Hungarian as any other Hungarian. If this goes through, it will be a gift to the anti-semites, who will feel confirmed in their belief that the Jews are not proper Hungarians, but potential traitors like the (tiny) Slovak minority or just unwelcome intruders like the (huge) Roma/Gypsy minority.

I go back to the hotel and bang out 2000 words on Putin and Stalin. I am rather tired, having got up at 0400 in order to go to the airport. But one of these articles every month adds up to a hefty contribution towards my quixotic quest to match my parents’ heroism in educating their children properly on a middle-class salary. It is easy to write tabloid prose when you are slightly drunk and rather tired, because the normal inhibitions about exaggeration are gone.

I get up at 0600 to go to the market, which I remember as a paradise of smells and sights. But it is very disappointing: sterile, and with all the prices suspiciously similar, and high. I manage to get some honey, some gooseliver (flinching at the thought of the poor goose), turn down the caviar, and load up on salami, sausage and paprika.

Then we have breakfast with a friend of mine who runs an accounting outsourcing company. Her big problem is the labour shortage: the university graduates are not very good, and increasingly scarce. A year ago she would get 100 cvs in response to an advert. Now it is about 15. And they are not very good. It is very hard to get people to move house in Hungary. Tax and bureaucracy are better in Slovakia (where her company also operates). But she loathes Orban.

Then we go to a western embassy, and have one of those highly informative off-the-record talks which make perfect sense at the time, but are alarmingly elusive when you try to recall them afterwards. Nobody really knows what Orban really thinks, is the main message. What he likes is power, and he’s not too choosy about how he gets it. The media is very bad—except for a weekly called HVG which models itself on the Economist. How flattering.

The spindoctor, despite his prickles, has come up with a Very Important Government Figure (VIGF). We discuss the upcoming Putin visit. Amazingly, Putin is going to bow his head at the memorial to the victims of the 1956 uprising. He compares this in significance to Brandt kneeling at the Warsaw Ghetto memorial. I remember rather uneasily that my just-filed tabloid piece is about how Putin’s regime ominously echoes Stalin’s. Putin is also returning a library looted from a Protestant theological college by the Red Army. It has been stored in Nizhny Novgorod (no doubt a centre of study of Hungarian 17th century theological literature). Now the Hungarians are paying $400,000 to the Russians for “storage”. But they are getting the books back. Nobody else in the region has managed that. One up to Gyurcsany.

I’m beginning to agree that both parties are as bad as each other. Both parties say privately that when they are elected they will reform public services, control public finances, and be sensible. The government says this mutedly in public too. But the government’s record gives little reason to trust them, and Fidesz’s silly and sometimes inflammatory rhetoric means that there is little reason to trust them either. And both parties are doing nothing to make Hungarians take democracy very seroiously. Rather like in communism, where there was an aphorism “we pretend to work and they pretend to pay us” now the motto of post-communist politics is “we pretend to make promises and you pretend to believe them”

The VIGF is smooth and has a huge and complicated wristwatch. I wonder how he can afford it on his salary. He smokes throughout the meeting, but does ask us first if we mind. He gives rather a better account of the past four years and lists the government’s achievements as follows.

1) Health care-- individual insurance accounts are basis for future reform after elections. That’s true but as they are all paper based, and impossible to check, there is no incentive for people to come out of the black economy and get their contributions up to date.
2) Vocational training. Big mismatch with needs of industry, we are trying to bring these close. Plus law on higher education (bologna). Er yes, but there is no real progress here, it’s just talk
3) Code of conduct in public administration which reforms procedures. Er yes. But having new rules doesn’t work if the people and structures are all wrong. He says that institutional reform will come outside the election “We plan much more decisive measures after the election.” In other words: when I ask him what he’s done, his answer is what he’s going to do.

He admits that the previous ex-communist government focussed on eliminating injustices rather than reforms, and also blames the opposition for blocking sensible laws that needed to be passed by a two-thirds majority. He doesn’t contest the idea that public finances are the biggest challenge. “The PM mentions it constantly”. So that is principle number two of Hungarian Blairism. Because we talk about it, we will do something.

After the election, he says, more than 100 bills will be presented to parliament “to reform state in a decisive way”. I am increasingly unconvinced by this, and plead for specifics. He gives three priorities.

1) Reform of public administration (yawn)
2) Health care reform, probably with a single insurance fund and competing providers. That is a refreshing change from Orban who says that health care is not a business and doesn’t need competition.
3) Education reform, promoting knowledge-based industries with high value-added, plus skills to make Hungary financial and logistical hub. And Tourism--especially the medical kind,. It sounds fine, but every country in the region says that a) it is at the crossroads of Europe and b) wants to develop knowledge-based industries. I am rather shocked when he says that only 20% of students study natural and life sciences. He comes out with a typically meaningless target: Hungary wants to be among 10 top countries in the world for natural and life sciences by 2010.

I find all this rather maddening. The way to reform higher education is to open it up, to have a mixed economy with private, public, and foreign providers, all competing in a fairly liberal environment. No country I visit seems to want to compete in the global higher education business—they all see universities as an adjunct to their industrial policies.

Then we go to the economics minister, Janos Koka. He’s a wealthy independent businessman who managed to sell his company, an internet service provider, to foreign investors who bankrupted it. So he bought it back, restored it to health and then sold it again. His main job in the government is promoting efficiency, and to my pleasure he spontaneously mentions Estonia as the e-government model (and Singapore and more generally Scandinavia). However, I am more pleased when people do this having actually been there and studied it, which he hasn’t. I get the impression that Estonia is rather like Silicon Valley—a place that people talk about approvingly without actually knowing what makes it tick.

He makes complete sense, in a liberal, market-friendly, high-tech sort of way. Someone says that he is the minister for Yuppies, and that sounds about right. Sadly, Hungary doesn’t have many Yuppies. His team of modernisers, brought in from the private sector, numbers 20 in a ministry of 600. He has some modest successes to talk about, in streamlining road-construction, centralising snow plough procurement and so on. “There are huge holes where the system is leaking money and I want to close them”. He describes rather amusingly how scared some officials are of the transparency, measurability, flexibility and reliability that IT brings.

He strongly supports a flat tax, and reckons it will come in no later than January 2009.

So how would I vote if I was a Hungarian? Sentiment says Orban. It is thanks to people like him that we have an election at all. I bet Gyurcsany, as onetime head of the young communist league, didn’t lie awake at night worrying about multiparty systems, civil society, and getting the Soviet troops out of Hungary. And by the remarkably elastic standards of Hungarian political life, he’s not behaving that badly. But voting for Orban requires two leaps of faith. One that he will dump his SPD and FPÖ side, and return to the CDU. The other that he will not muck up Hungary’s neighbourhood relations again. That’s a stretch.

But Gyurcsany requires a leap of faith too. He has done very little constructive during the past 18 months. Will he really be different with four years ahead. My colleague, wisely, reckons that the right approach is to look at it like Italy: neither party is really going to grapple with the real problem, of underperformance and mounting long-term demographic and financial disasters. That’s a real reason for Hungarians to be gloomy. And on that note, we head to the airport.

1 comment:

Cicero said...

I wise old banker once said to me that you should never ever lend money to a
country with green in its flag. He pointed out Brazil (the then current
market basket case) However, Hungary was also mentioned- in the 1970s and
1980's, as you recall, they had run up insane ammounts of debt which
ultimately had to be addressed by a write down and the stringencies of the
Bokros-Suranyi shock therapy.

Sounds like you tend to agree with my view that Hungary today looks very
much like Italy only worse.

(Incidently, as far as Europe is concerned the problem (green flag)
countries are an interesting mixture: Portugal, Ireland, Italy, Hungary,
Bulgaria, Cyprus and Lithuania (and the Lukashenka rag used for Belarus -but
not the real White-Red-White flag). Most Arab and African countries are also
a no-no too...)