Interview with Peter Mihalyi

The economist Peter Mihalyi has called for "drastic, shocking" reforms in his new book. Why is the Hungarian Economy Poorly? calls for reform of the family support system and discusses the problems facing very small companies.

hvg.hu: Andras Simor recently wrote that the country's welfare system was no longer functioning. He suggested that as a "well-off person", his words lacked credibility. Did the same thought occur to you as you wrote this book?

P.M.: There is a division of labour in society. If a general sends the privates forward in battle, he knows very well that more privates will die than officers. But that's the only way armies can work. Politicians and economists tell others what to do, often taking decisions on other people's behalf. It's true that leadership is paired with power and prestige. At the same time, it motivates other people to get into positions of leadership. That's how the world moves forward.

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hvg.hu: But people who have never got beyond a high school education aren't going to become decision-takers - and they may not even get a job. You still say that it's not worth spending billions on job creation programmes.

P.M.: Our economic system is unable to employ this uneducated mass, however much we'd like it to. That's why I say we shouldn't be basing our economic policy on them, hoping they all find jobs. They won't. Our aim must be to stop producing an uneducated stratum. Nowadays, 20 per cent of people who finished high school are functionally illiterate. We should spend a lot of money on basic education - taking that money from higher education if necessary.

hvg.hu: You'd also cut back on the family support system - people shouldn't stay at home with their children for three years, you say.

P.M.: Weeping psychologists tell us on the radio that if mothers don't stay at home for three years with their children, those children will be emotionally stunted. In a letter to the editor, a reader of one of the dailies complains that her husband doesn't earn enough to let her stay at home with their children. You can't have both. How unfair it would be if fathers earned more than single men or fathers whose children had already grown up? If a woman wants to return to work after two children and six years, companies no longer want to employ her, or for such a small wage that it's not worth her while to do so. Three years is too long.

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hvg.hu: Welfare spending accounts for 65 per cent of budgetary spending. This is unsustainable, most agree. What is the right percentage?

P.M.: Less than that. There are lots of measures which would be hard to withdraw, but we can stop extending them. Housing support for example. It has meant we have helped hundreds of thousands of people to build houses in places where there is no work. They are the prisoners of their own, mortgaged property. We should encourage them to move, to commute. We should subsidise transport, roads and season tickets. They should head off in search of work.

hvg.hu: You're not taken with small and medium enterprises either - you want to make life difficult for them so they disappear as soon as possible.

P.M.: Politicians everywhere like to support SMEs. But Hungary hardly has any SMEs, just micro-companies - and lots of them. You can't monitor 1m companies. I really think we need to make life harder for those companies so they disappear. We don't want even more micro-companies, we want real small companies of 50 to 100 employees. We want to strengthen private companies, making them more concentrated.

hvg.hu: Nor are you crazy about tax and contributions cuts. Why?

P.M.: We need the cuts, but they won't solve the problems by themselves. It's not true that if we change the tax system all our troubles will be behind us. Our welfare state means not only that there are lots of different kinds of tax but that there are restrictions in the system which are designed for a more advanced stage of development. Rules to make sacking people more difficult, and rules on environmental protection and labour rights are all justified on themselves, but we have to realise that they are appropriate to an economy more advanced than ours. Recently, authorities looked at bureaux de change and discovered that the two square metres in which their employees work are inadequate. It's clear that working in such a place for 30 years would be damaging to people's health, but we all know that most people work there for just a few months, or a couple of years at most. A larger working space would cost twice as much.