Dr Magdolna Csath
Dateline 5th October 2006
Hungary has been a member of the European Union since the 1st of May 2004. Now, after the second year of membership, the economy is in poor shape, the unemployment rate is continuously rising, especially among the young: now every fifth young person freshly out of school is unable to find a job. The small and medium sized businesses are going out of business by the thousands, and the small farmers are unable to stand the unfair competition of the much better supported farmers of the original 15 member countries. (This is just one aspect of the unequal treaties which Eastern European, predominantly agricultural, nations signed to join the EU. Long before they even signed up to a less favourable subsidy regime than Western European member states enjoyed, the latter had, through eastern privatisation acquired much of their best land and industrial assets – ed)
Oversubsidized, cheap and poor quality food, often hazardous for health, pours into the Hungarian market, kicking out domestic producers who are underfinanced and undersupported. According to the latest Institute for Management Development, (Lausanne, Switzerland) report Hungary slipped down on the competitiveness list of nations surveyed by 11 positions from 2002 to 2006. (This debunks the myth that the EU has “improved” the new Eastern European mebers states -ed)
Full membership with unequal rights.
In striking contrast with all the original laws and values of the EU the 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 the Hungarians in reverse. The majority of the original EU member countries seriously constrain the free movement of workers and services from the East. What is more unfair though is that almost every country encourages the emigration of highly skilled Hungarian professionals. Belgium for example decided that migrant architechts, accountants, engineers, nurses, doctors and IT specialists are more than welcome to come to work in Belgium. IT specialists can also easily settle down in Germany. (This is proof beyond doubt that the whole “integration” of the Eastern countries is nothing more than cherry picking from a controlled colonial area – an imperialist venture for the failed corporatism of the Franco-German axis and a fatal blow to the economic and political freedoms of countries so recently part of the Soviet yoke – ed)
This is actually a deliberate brain drain: people trained in Hungary will in this way strengthen the economies of the developed Western European countries, while Hungary is being deprived of the only strength she has: the talents and the valuable human capital. As a consequence of this tendency there are already dangerous shortages of professionals in Hungary, for example in the hospitals. (Needless to say with 600,000 workers from Poland, Latvia and Lithuania etc the United Kingdom has done more than any country to denude those countries of their workforce. There are now massive shortages of skilled and unskilled workers in those countries – ed) I myself experienced a sad case a few weeks ago. An elderly gentleman died of heart attack. He was taken into the hospital because of the signs of a potential heart problem, 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 overwork seeing patients die who could have been saved if enough doctors had been available. The situation will further deteriorate, when the older generation of doctors retire and in the meantime, the young ones leave the country. Hungarians will this way have poorer and poorer chances for preserving their health or recovering from diseases.
But young engineers, economists and other professionals are also forced to leave the country, because there are very few professional jobs available. 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 they are only concerned about finding the best ways of squeezing out the most from the employees, who have little chances to work elsewhere. Foreign companies still come to Hungary for the cheap and reliable workforce, and the unprecedented support they can get from the Hungarian government in forms of tax holidays, direct support and the access to EU funds. At the same time the workers’ rights are not protected and the unions are weak: anything and everything can be done against the workers, as unemployment is high and their movement to other EU countries is seriously blocked. There is no way out of this vitious circle.
Service providers are also made uncompetitive because of the unequal conditions. Just two examples to illustrate the problem. A taxi driver from Sopron, a town on 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. In 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 USA, it is not allowed to send its own bus to pick up them at Swechat airport in Austria – which is much closer to Sopron than the Budapest airport is. Instead it has to hire a much more expensive Austrian bus. On the other hand it is natural for the Austrian businesses to offer any type of service in Hungary. These are two real life examples to illustrate the unfair business environment, which contributes to the deteriorating competitiveness of Hungarian businesses, and – consequently – to the loss of jobs.
While artificial rules prohibit businesses capitalising on the opportunities of the membership, no transition period was granted to prepare for the new EU regulations. This is also a major cause of problems for the Hungarian businesses. Let me illustrate this with an example. Dry cleaners used to apply a cleansing material which was available from Hungarian producers. After entering the EU new regulations obliged them to change this material for a different one, which is only available abroad – in the original EU member states – for a much higher price. Furthermore this material can not 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 the following: the Hungarian material was not environmentally friendly enough. The dry cleaners however explained the situation differently: they believed 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. In many cases large companies can pollute the environment without being seriously questioned and scrutinised by EU authorities. The consequences of the quickly imposed EU regulations in the circles of small and medium sized businesses have been cruel: those businesses which did not have the money for the necessary additional investments had to close down.
Original promises.
Before joining the EU there was no objective information available about the potential threats of the membership. I tried to get some financial support to publish a guide for the Hungarian small and medium sized enterprises to help them better prepare for EU membership. The organization in charge of informing the society about the opportunities and threats of the membership replied to my request for financial support the following way: “we can not finance negative campaigns”. (Note that this is precisely the kind of EU propaganda finance which has disfigured “information” in the rest of Europe for decades. Positive aspects of EU information are financed with the billions at the EU’s disposal while the truth is censored. Welcome to Brave New World, Hungary! – ed)
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 the membership. It is almost certain, that better prepared SME-s would have had a better chance for survival. Instead there was a heavy, positively biased campaign before the referendum. 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 will be able to do so! Critical or sceptical voices were brutally suppressed: there was no space and time for any serious professional debate about the consequences of EU membership. In spite of the untrue and manipulated campaign few people showed up and voted positively on the membership. All in all only 38% of those having the right to vote participated and voted for EU membership. (This comes from a 45.6% participation rate, and an 84% “yes” vote)
Recent developments.
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 democrats government the budget deficit has risen to more than 10 percent of GDP. The debt level has surpassed 60 percent of the GDP. The coalition in order to win the election lied deliberately (the recent demonstrations against the Government in Budapest were because the Social Democrat Prime Minister admitted he lied, indeed he seemed, in true euro- federalist tradition, proud of it – ed) about the economic situation of the country by saying that the economy is in best possible state, it is rapidly and dynamically developing. Then after winning the election the government put together an austerity package and prepared a convergence program to demonstrate for the EU leaders its determinition to quickly decrease the budget deficit.
But there has been no serious discussions about what has happened, on what the money was spent, and why it is the population which has to pay for the poor public management. The coalition again suppressed any professional opinion by announcing that “the only possible and best alternative” is the harsh austerity package, which increases the burdens on the people and the SMEs, but not on the global companies and the banks. (Like the other liberated countries of Eastern Europe who have entered the EU prison naively hoping for democracy and capitalism, Hungary is learning the lessons of the opposite – dictatorship and unmitigated corporatism – ed.)
Also the government is creating chaos in the education and health sector by denying the necessary resources from these fields. The hospitals are pushed to be privatized, medicine trade is being liberalized, students have to pay for education and patients for all the treatments including minor ones. In a poor country like Hungary these decisions will greatly increase the gap between the rich and the poor. The liberalization can be understood in these circumstances the following way: all those who are poor are free to die, and those who cannot afford to pay for education have the right to remain uneducated, and go to work at the assembly lines of the global companies operating in Hungary.
This is the plan which was accepted by the EU. By accepting the convergence program the EU accepted the lies, the unethical behaviour, the “one alternative”, dictatorial austerity and convergence package without considering their social and political consequences. The population of Hungary is already protesting against this illegitimate situation which has been caused by the corrupt, amoral government, which – by the acceptance of the convergence package – was legitimised by the EU leaders. This is now another proof for the people of Hungary: the EU does not care about values and people. It only cares about the interests of big business and politicians.
Consequences and future problems.
There are many research findings which conclude by saying that the recent enlargement was nothing but an attempt by the original member states to acquire additional resources: markets, cheap labour kept for a while artificially immobile and therefore inexpensive locally, businesses which are made uncompetitive by the forced EU laws and therefore available for acquisitions on the cheap, tax holidays, cheap and fertile land and young talented people to save the education costs at home in the developed countries. A British report actually talked about “neo-colonisation” of the “East” by the “West” . As a matter of fact there are more and more signs which reinforce this opinion. People open up their eyes and what they see is that “the king is naked”!
But what will be the consequences of this situation for the future of the European Union? Short-termism has never helped a country or a region to build sustainable competitiveness. The development of the EU economy has already slowed down and the social problems are on the rise. The social capital is weakening: the citizens do not trust the leaders of the EU, neither the “old members” nor the “new ones”. And now we can experience the moral deficit in the EU as well. The EU stands by the corrupt, incompetent politicians instead of listening to the people and trying to push the government to exercise correctness, objectivity and high quality professionalism in diagnosing the real problems, before pushing a “one-alternative therapy” on the country from outside and above.
The also EU should follow its own original rules and offer equal rights and treatments to the people and businesses of the newly entered countries. Also it should be seriously concerned about the increasing discontent of the people of the new member countries, and instead of paying lip-service to democratic principles by sending the EU Commissioner in charge of “more democracy” around to meet the representatives of the political class and a few selected organisations, it should rather seriously try to improve the people’s quality of life, for example through offering more insights and involvement in the European decision making processes.
It is time not only to preach but also practice the idea that the only successful strategy for Europe is to build a skilled and educated worforce, not through exploiting the resources of the new member states, but rather through involving and empowering the population of these countries to fully participate in and gain from the process. But this is not going to be possible by supporting local politicians who are unethical, cynical and who lack competence and leadership capabilities to create strategies for problem solving and development, and are incapable of energising the population.
The Prime Minister of Hungary announced a short time ago, that he and his government only had ideas about what to do in the present situation for a few days ahead. The only “strategy” he believes in is that the people of Hungary have to work like “drudges” in the future. Right now this is the “strategy” for developing the country, improving its competitiveness and the living standards of the society supported by the EU. Is the EU really serious about creating skills, retaining human capital and improving the social conditions in the new member countries including Hungary? Or does it just see Hungary and the other new EU member states as colonies to be exploited and drained of their human, physical and technological resources?
Dr.Magdolna Csath, Professor of Management and Economics, Doctor of the Hungarian Academy of Sciences. (Saint Stephan’s University in Gödöllo, and the International Studies Centre of the Corvinus University, Budapest)
