The tasks of the developing state and the accomplishment of the democratic transition

Attila Ágh

Public Finance Quarterly, 2007, vol. 52, issue 3-4, 475-487

Abstract: From the historic perspective of democratic transition, two major waves of institutional reforms can be discerned. In Hungary, the first reform wave came in the late 1980s; as a result, the adaptive “Hungarian model” (entailing early political and economic opening and accelerated privatization) evolved, which brought about a decade-long considerable headstart for Hungary in the field of competitiveness. At the outset of the democratic transition, the first reform wave established the general framework for a democratic state, yet it failed to go any further, and thus created two structural defects in the political system. The new democratic institutional system became, on the one hand, asymmetric and, on the other hand, fragmented. The highly developed macro-policy (that is, its high-level “institutionalisation”) was in stark contrast with the “underdeveloped” state of institutionalisation at the middle- and micro-levels. This asymmetry conserved excessive state power and, at the same time, the political system got fragmented into rival institutions that were not organically interlinked and/or even partially overlapped each other's competences. Furthermore, this twofold deficit led to a chronic and an acute lack of coordination, which brought about serious problems in the course of preparation for accession to the EU. Therefore, the launch of a second wave of reforms became imperative. Albeit the second, catching-up wave of reform started in the mid-1990s and the beginning of each governmental cycle sees yet another try, the reform wave was blocked repeatedly and produced partial results only. On the whole, the second reform wave failed to fulfil its mission, that is, the full-scale establishment of a modern and efficient democratic institutional system. The second reform wave yielded certain partial results, yet it finally failed to come about. Consequently, international competitiveness started to decrease in the in the second half of the 1990s. This process entailed the preservation of the dualistic and heterogeneous nature of the socio-political system. On the one hand, the “dualistic” institutional system was preserved, because although the municipal sector was separated from public administration, no comprehensive reform was implemented in the local government sphere (especially in terms of financial decentralisation or the full-scale establishment of the NUTS system). Consequently, regional municipality units became highly dependent on state administration.

Date: 2007
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