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BUDAPEST -- A decade ago Hungarians, still under the communist regime, began to dismantle the barriers along the Austrian border -- in effect starting a political chain reaction which like falling dominoes soon went through Berlin, Prague, Bucharest and ultimately Moscow. Freedom proved contagious. Now a decade after the collapse of the Soviet imperium in Central Europe, countries are still struggling to emerge from both the rubble and stagnation of the former socialist systems.
Hungary was fortunate from the beginning -- geographical proximity to Western Europe, a stable government, and competitive wages enticed foreign investors from the USA and Western Europe. Total direct foreign investment since 1989 has been $20 billion with a clear presence of all the big international firms from General Electric and IBM to German carmaker VW-Audi.
As the period of privatization ends however, the new focus for investments goes from the major multinationals to small and medium sized firms according to Marianne Csakvari of the Economics Ministry. She adds that Hungary needs $1.5 billion annually in joint venture foreign investment to keep pace with targeted growth rates. Likewise, the budding Budapest Stock Market is emerging as a serious player in Central Europe.
Despite the painful transition from a socialist to a market economy, Hungarian GDP growth rates have indeed been impressive with 1998 growth standing at 5 percent with 3 percent expected for 1999. Per capita income stands a $4,500 one of the highest in Central Europe and five times its nearest rival among the twelve states of the former Soviet Union. Unemployment remains static at 10 percent.
Since the collapse of the old regime, Hungary has evolved from a "Lowest common denominator" socialist society where enforced uniformity and entrenched envy slogged along, to a enterprise-driven market economy where rewards and pitfalls prevail. Through work, one can profit -- or lose -- but genuine choices exist.
Many foreign media however continue to view Hungary's former "goulash communism" through the golden haze of history -- this is to say rationalizing that since the 1970's when Hungary was more open than the other East Bloc states permitting a seemingly more prosperous economic system, that times were somehow better.
Indeed Hungary was supported by massive infusions of American, German and Japanese loans which in effect subsidized the socialist regime. Today Hungary still struggles with the undertow of $22 billion in debt; the people are still paying for the spending spree of the People's Republic.
During the old days, it took fifteen years to get a private telephone, which cost virtually nothing. Today one has a phone in a few days -- but it's expensive. Mobile phones are commonplace too. Similarly one had to wait a few years for an East Bloc auto which was inexpensive in cost but truly cheap in quality; today you demand the make, model, and color of a western car -- delivered in a few days -- but costly.
One of the reasons for the initial collapse of GDP in the early years was the disappearance of the Soviet market which through a type of Marxist mercantile system, offered secure trade. When the USSR collapsed, overnight Hungarian firms were without markets and workers without jobs. Transition was difficult as products often lacked the quality which would make them competitive in Western Europe.
Today trading patterns have gone round robin with nearly three quarters of exports to the European Union (EU) and a piddling 5 percent to Russia. Germany remains Hungary's largest trading partner. Now that Hungary has been admitted to NATO, Budapest's center-right government of Prime Minister Viktor Orban aims for admission into the exclusive European Union (EU).
Hungary heads the list for new EU candidates, a truly remarkable feat given the state of its economy a decade ago. The formal admission likely after 2002. On Christmas day 1000, St. Stephen Hungary's first Christian King, established the Hungarian nation- state. Hungary's full commercial and political integration within Europe indeed fulfills a dream for the new millenium.
John J. Metzler is a U.N. correspondent covering diplomatic and defense issues who writes weekly for World Tribune.com.
