The Political Economy of Hungary by Adam Fabry

Author:Adam Fabry
Language: eng
Format: epub
ISBN: 9783030105945
Publisher: Springer International Publishing

Poland

68,180

32.6

30.7

61,427

2,273

36.2

Romania

17,495

6.0

9.1

18,009

938

27.0

Slovakia

17,606

5.8

9.3

14,501

5,209

51.9

Slovenia

4,580

1.6

2.3

4,962

3,799

22.4

Sources: Csaba (Csaba, 2000); Myant and Drahokoupil (M. R. Myant & Drahokoupil, 2011, p. 279); UNCTAD (UNCTAD, 2005, p. 308)

aFigures for Czech Republic and Slovakia are for the period 1993–2004. Figures for Estonia, Latvia, Lithuania, and Slovenia are for the period 1992–2004

The inflow of foreign capital brought drastic changes to the Hungarian economy. On the one hand, it contributed to a rapid reorientation of Hungary’s foreign trade, away from the former Soviet bloc economies towards the EU. Between 1989 and 1991, the share of Hungarian exports going to Soviet bloc economies contracted from 41 to 19 percent of GDP, while the share of exports going to the Organisation for Economic Co-operation and Development (OECD) economies increased to 70 percent of GDP (Jeffries, 1993, p. 428). These levels became entrenched in the following decade: by 2003 approximately 84 percent of Hungary’s trade was with ‘non-transition economies’ (EBRD, 2004, p. 136). On the other hand, the arrival of foreign capital brought new manufacturing activities and techniques that had hitherto been non-existent or underdeveloped in Hungary, while the proportion of low-technology industries declined significantly (Gács, 2003, p. 143; Szalavetz, 2005, p. 6). One notable example was the car manufacturing industry, where Hungary became the regional poster boy, with three global car manufacturers—Audi, Opel, and Suzuki—establishing car assembly plants in the 1990s. As a result of these changes, the car industry transformed into one of the pillars of the Hungarian economy. By 2007, revenues from the sector amounted to € 15.4 billion (more than 15 percent of GDP), while the industry provided jobs for around 110,000 workers (ACEA, 2008; Ernst & Young, 2013). The largest investor was Audi, which constructed the largest engine manufacturing plant in Europe (third largest in the world) in Győr, north-western Hungary (investing more than € 3.3 billion until 2007) (HITD, 2007).

In some cases, the arrival of foreign capital also benefited domestic capitalists. One example was VIDEOTON, a model of Hungarian electronics production under state capitalism , which, following privatisation and restructuring in the early 1990s, established itself as one of the 40 largest electronic manufacturing services providers in the world by the early 2000s, supplying MNCs, such as Audi, Bosch, and Siemens, with manufacturing products and engineering services from its nine different locations in Hungary, as well as one location each in Bulgaria (Stara Zagora) and Ukraine (Mukachevo) (‘The MMI Top 50 for 2017’, 2017; VIDEOTON, 2017). The secret behind its success was bluntly summarised by co-CEO Ottó Sinkó: ‘[d]ownsize radically, stop developing new products, and focus on labour-intensive manufacturing to serve a hungry crop of multinational investors’ (Radosevic & Yoruk, 2001, p. 7). As Bohle and Greskovits (2006, p. 14) noted, ‘Such services facilitate what TNCs [transnational corporations] and their foreign suppliers consider crucial to operate efficiently in Hungary: flexibility. Such arrangements can produce at minor fixed costs and flexibly react to market changes.’ While workers bear the burden of ‘flexibility’ through precarious forms of employment, this business model proved highly rewarding for the company and its top management.

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