Tuesday, November 24, 2009

Prudent politician vs. Hungarian madness

One of the most typical accusation to the adress of the Hungarian politicains from the business elite that the political elite simply bargains long term advantages fro short term political ones. (The most recent one comes from the prime minister, Gordon Bajnai, who is not really a politician, but one of the experts - with current finance mininster, Péter Oszkó, who arrived with great plans into politics and administration and clearly had to realize that in the public administration best practices from business can be even outright failure...) This statment is usually supported by an argumentation, pointing out that other ECE political elites could have managed their countries better and were more focused on the long term. Well, after a deputy whip of the largest Polish government party told in an interview to Bloomber that his party is not ready to commit political suicide and make budget cuts until the elections in 2011 I think this refine construct could be forgotten. Ukraine is a complet mess, because politicians are not willing to committ the same suicie, Romania similarly, in Serbia - another recent candidate for overtaking Hungary in the self-flagellant and nationalist discourse - the number of pensioners is estimated to be higher at the end of the year as those working (a fact advertised by the largest and most professional Hungarian economic website, www.portfolio.hu as the only case in the region, even though it was already the case in Romania two or three years ago, although to admit it would have meant an abandonment of the idea of the Romanian miracle due to flat tax), and this series could be much longer. It is again a small but clear sign how self-focusing and how detached from realities can this supposedly expert thinking be...

(Oh, and it is not excluded that at the end Germany will experience something similar to Hungary's fate in the 2000s. The liberals in the new coalition are very insistent on their promised tax cuts - the justification is the same: lower taxes mean more employees and more income - while their partner(s) in this "natural" alliance are fighting against their ideas - not only against their proposed tax cuts and the realization of it, but privatization in the health insurance system etc. The conflict is clear and at least superficially not dissimilar to the internal conflict of the Gyurcsány-government in Hungary. Moreover, the tax cuts are a textbook example of redistribution from down to the middle and upper income categories. In the lower segment of income it will be offset by growing costs of public services - litter transportation, contribution to the costs of health care etc. That makes it an illusion or at least a dubious attempt - especially in ECE with relatively low income levels - that tax cuts will bring more purchase power, more demand for local services, consumption goods etc. As long as it had to be offset by spending cuts it will automatically lead to higher cost of public services and in case of low income levels this raise of expenditures will suck up the additional income. While those with a really high income won't really spend more on hair cuts as their hair won't grow faster due to more money....)

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