szerző:
Kovács Andrea (hvg.hu)

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.

Second page of the interview (Oldaltörés)

hvg.hu: In Hungary, it's not just the poor who feel they don't earn enough. You call this the "myth of underpayment".

P.M.:
Everyone thinks they aren't paid enough. In a country that is catching up this will always be a problem: why doesn't a Hungarian roadsweeper earn as much as a London roadsweeper, since they do the same work. Because London is in a richer country.

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hvg.hu: We've tried to copy various features of western healthcare systems for our reforms - but parliament has just abandoned the law on health insurance funds. You worked on designing the Free Democrats' healthcare proposals. Were you disappointed?

P.M.:
The government gave in - and that was a grave mistake. Of course, after so many bad decisions they had no more freedom of manoeuvre.

hvg.hu: You mean the pace of the reforms was badly chosen? You've called the social debate a "mad reform ritual", saying the reforms were conducted too slowly.

P.M.:
We inherited the institution of the social debate from socialism, when it was part of the law on legislative procedure. But that passage has been withdrawn. In a democracy, laws are discussed in Parliament. It was a mistake to debate the reforms in different forums - every organisation, every person had a different view. Who cares what the railwaymen's union said at a meeting nobody attended? Parliament should debate the issues - every other forum is irrelevant.

hvg.hu: But maybe those forums have a role in laying the ground for the decisions. What are you expecting to happen during the rest of this government's term in office?

P.M.:
Nothing until the autumn referendum. That will probably be a wash-out, creating a new psychological situation, when we can think things over anew.

hvg.hu: Another look at pensioners and pensions?

P.M.:
The mass of the retired includes many still earning an income, often at the same place of work from which they retired. That's unique in the world. This phenomenon is widespread, from constitutional court judges to police officers. The state is responsible for this, because they allowed it to happen out of short-term political interest.

Third page of the interview (Oldaltörés)

hvg.hu: You say reforms come in crisis situations. Do we need a Mohacs? Is Hungary not there yet?

P.M.:
We're getting there, but it hasn't yet happened. Most households don't feel they are in crisis, they're not behaving as if they were at least - there's no sign of them cutting consumption.

hvg.hu: The government fell over heatlhcare reform. Are your proposals, the ones you term drastic and shocking, realistic in these circumstances?

P.M.:
There are lots of possibilities, but for the moment it's most likely that nothing will happen. But the economy is a self-correcting mechanism - and a forced correction could be much moer painful than a planned reform. My book isn't a concrete programme for a particular party - it just says what needs to be done.

hvg.hu: So this isn't the liberal answer?

P.M.:
You often hear from politicians and experts that my and other people's proposals represent the "liberal" or "neoliberal" viewpoint. That's not true. It's just modern economics and analysis based on modern sociology. In other countries, these values are represented by Conservative parties. In economic terms, it's just a coincidence that the liberals are the ones who advocate solutions based on modern economics. What I'm saying is in the economic mainstream.

hvg.hu: Why do you dedicate your book to the sociologist Istvan Kemeny, who recently died?

P.M.:
Very early on he was explaining that reforming the welfare system was the greatest task of the regime change. Even then, in the mid-1990s, he was saying it, when everybody thought other things were more important, and nobody was thinking of looking at the welfare system. He made it clear that this would be the hardest task.

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