The global crisis and possible paths of Hungary's economic development

László Práger

Public Finance Quarterly, 2009, vol. 54, issue 1, 25-33

Abstract: The global economic crisis, which became prominently visible in 2008 is of a global nature in several senses of the word; it has various dimensions. The US mortgage crisis is, on the one hand, a part of it and, on the other hand, a factor that revealed it. Yet there is a correlation that lies much deeper, namely, a tension that results from an excessive divergence or split between the real economy and speculative financial flows. That tension was coupled with indebtedness that had become universal and affected countries, companies, local governments and individuals alike. This, on the one hand, further increased the gap between the cash flowing in the world and the actual production or the level of material goods; on the other hand, it made the four groups dependent on banks and, at the same time, made their creditors depend on them, and, finally, made banks depend on each other within the framework of the financial world. The crisis is global in terms of geographical dimensions, as well. In the first years of the 21st century it cannot happen otherwise. In a globalised world, where borders have ceased to exist, economic processes can spread without borders: the crisis, which had started in the US, spread all around the world. In the global crisis, Hungary needs to find a new path of development: not only a pace of development that is increasing, but, at the same time, those internal economic and social structures that prove to be more favourable than the previous ones. It is not that the crisis spread to Hungary. After the democratic transition, the Hungarian internal market became international; almost half of our gross production and more than two thirds of our foreign trade is produced by transnational companies that had established themselves in Hungary. Undoubtedly, the global crisis opened a new chapter in the process of defining Hungary's path of development. The crisis, on the one hand, made changes inevitable, and, on the other hand, accelerated their pace. Yet the crisis in itself may conceal the erroneous paths and inefficiencies of Hungary's internal development temporarily, or may serve as a warning sign that gives information on the weak points of our post-transition development of almost two decades.

Date: 2009
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