Magyar Hírek, 1985 (38. évfolyam, 2-26. szám)

1985-08-22 / 17-18. szám

Attempting a comprehensive evaluation of the economic theory and the policy which has set in motion and inspired the changes in Hungary which were first put into practice in the late sixties, one has to bear in mind that the functioning and structure of the economy, its place in society are in socialism as well subjected to the inner revolution of the system and the changes in needs e.g. to the changes in the system, or the requirements and mechanics of a socialist society and economy that had reached a stage of ripeness. They are also subjected to the concrete endowments and situations of economic policy—natural resources, the operation standards of the economy, the existing economic and production structure, the place of the given economy in a world context, the dimensions of the country, the standards of education and morality of the people, etc.—and to the economic and technological changes that take place in the world as a whole, including the socialist countries.

It follows from the above that socialist evolution has varying models in space-time and that this must be so given the dynamic nature of the world.

This finding is not in conflict with the fact that some basic features and efforts of socialist economies are identical or similar in the various countries (this includes the ownership of property, full unemployment, the absence of exploitation, and way the goods of this world are distributed, etc.).

In this sense we make a difference between the models of economic development of the period of seizing power and of a socialist society at an advanced stage of development.

The economy of the period of transformation was an economy of shortage (shortage of capital, excessive expectations, the restriction of commodity, monetary, market and price relations, and lack of mobility, a rigid, centralized system of plan instructions) owing to the imbalance •caused by the neglect of individual and group interests, a quantitative and in kind approach and low performance in producing net income, slow technical progress, and the wasteful utilization of energy and raw materials, not to mention other reasons.

In this way, in the new situation (a period of intensive growth) the model of the period of transformation functioned poorly, at a time when the socio-political structure established itself firmly.

Economic reforms

The majority of the political leadership gave priority to the acceleration of economic progress, expressing a readiness to accept the political and social risks which accompany the transformation of the economic model.

Limited changes would not have made any sense since, without fundamental changes, the ancient model tends to reproduce itself.

The new economic policy of course had numerous conditions, of which I wish to emphasize two:

a) the coming about of a certain

* SUghtly abbreviated text of an address to the Budapest conference on Trade and Investment Opportunities organized by the International Herald Tribune, June 13—14, 1985.

JÓZSEF BOGNÁR:

Hungary's economic outlook in an international context

Professor József Bognár

PHOTO BY MTI

pluralism within the one-party system involving the advocates of reform and those of a bureaucratic attitude, with the qualitative and quantitative superiority of the former but an ability by both parties to make compromises,

b) progress by those in charge from a quantitative and qualitative aspect, promoting a mode differentiated approach to the problems.

The main objective of the reform was the enlisting of new resources of growth replacing such as had become exhausted and worn out. In the period of intensive growth these have been factors such as technical progress, innovation, the reduction of costs, a growth in profitability, a saving in energy and materials, as well as an extension of international economic relations. In the first period, during the control system based on plan instructions, only the composing of ihe national economic plan appeared as real work of a creative nature, while the other factors of economic activity appeared as merely carrying out orders. It is obvious however that the adjustment of the actors in the economy in keeping with their interests, as well as innovation in both technology and marketing, not to mention other activities, should also be accepted as being creative.

New resources

To help introduce the new resources of growth the following have been and continue to be necessary —recognition of individual and group interests,

—the systematic stimulation of the missing economic categories (commodity and money relations, the market, prices, credit, interests, bonds, etc.) in the economic sphere, —the distribution of incomes differentiated according to performance in the place of the egalitarian levelling which had earlier led to the withholding of performance,

—autonomous enterprises which themselves developed their productive and marketing activities in accordance with their interest in profits and their market potential,

—varied and flexible organizational forms adapted to the job to be done and technical progress (including all sorts of economic sectors and enterprise shown by individuals in a small way),

—a decentralization of economic activity, which furthers the satisfaction of demand and inhibits the formation of monopolies,

—the growing weight of the tertiary sector and of agriculture,

—the birth of new notions of foreign trade.

These economic reforms have been and are being introduced gradually and continuously. From the economic point of view it is obvious that the relaxation of a rigid system is accompanied by a danger of inflation even if growth is very rapid.

Foreign trade is the touchy point cf the present economic equilibrium, in other words the ability to export, but the rapid rise of production will not necessarily be accompanied by a growth in the ability to export, and on the other hand, in the present world economic situation the raising of exports meets the well-known difficulties.

A balance of forces

From the political point of view the

maintenance of a balance between the forces of reform and of bureaucracy is similarly decisive. The advocates of opposed views must be assured the freedom to explain them. It has also to be taken into consideration that the redistribution of power, that is of competencies of decision-making, and of income« produces tensions in every society. On the other hand, from the aspect of foreign policy, it is of decisive importance that Hungary should maintain the trust of her allies; although some of them argue a different position on the reform of the system of control and management.

It is obvious that the economic "reform triggers of numerous political and social changes. Of these I wish to refer to the following:

a) The decentralization of state power, which had grown overweigh in the period of social change in decision-making is not merely an economic issue.

b) In addition to executive power, the importance of legislative and judicial power is growing. Let me mention the new electoral system, the growing role of the committees of the National Assembly, the Constitutional Council, the growing role of regional agencies, including that of small communities, etc.

c) The strengthening of the role and autonomy of voluntary organizations, from the trades unions to professional associations, and their institutional inclusion in the reconciliation of interests and in the preparation of decisions of society-wide importance.

d) The growing cooption of theorists in the working out of various notions (earlier economics had been enlisted only in the rational implementation of decisions taken earlier, and its institutional co-operation in the forecasting of the medium and long-term problems and various world-wide trends.

e) The growing freedom of cultural life and artistic creation,

f) The acceptance of the judgement of the world market by the domestic economy, and changes in the resultant value system.

Foreign trade

The earlier foreign trade ideas were developed at a time wheu the economy played a secondary and subordinate role, the interdependence between the world economic factors and the global problems had not yet been noticed hereabouts, and an embargo was in force which made it impossible for the socialist countries to trade on the basis of he principle of mutual benefit.

At present the Hungarian economy and in essence the economies of the other socialist countries as well —recognize the world market as the judge of the worth and standard of their products. In the earlier period the worth of goods was established by the quantity and quality of labour they embodied later the competency of the domestic market was recognized and then afterwards the value judgement of the world market,

participate not only in the exchange of goods but also of technologies, services, research results, etc., and also strengthen their money and financing links (several socialist countries are already members of the IMF and of the World Bank),

—search for forms of ongoing cooperation, including joint ventures,

in this way they have become interested in the world business cycle,

consequently their economic progress has become more sensitive to external economic influences.

A foreign trade policy of this nature is appropriate for the mutual economic interests to slow cjown the consequences which may be caused by clashes of political interests. They may represent a countervailing power to factors causing tension. In the dangerous world in which we live, and are likely to live in the future, it is especially important that the economic interests should have this moderating and confidence-building role.

The international effect of th° Hungarian reform depends, of course on its success. An example and proof for this is the highly favourable appraisal of Hungarian farming in both the socialist and the developing countries. Most foreigners who visit Hungary to study the Hungarian reform concentrate on the methods promoting the rapid growth of agriculture.

I am wellsa-wai^ of the difficulties and complications, but we all hope that the functioning of the Hungarian model will be sucessful in the long run. Critical situations, dynamic periods and such as drag their feet cyclically succeed each other, but the renewal, thé spirit of innovation in the social and macroeconomic sense lives on; the economists, engineers and agriculturalists of today and tomorrow are already imbued by the way of thinking which finds expression in the reform. The reform in Hungary is the business of the nation as well. There are no final solutions in a dynamic world; consequently the ability for permanent renewal will ever be needed.

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