Hungary Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Hungary is a small, landlocked, central European country, capital Budapest, with a population of 10 million. Although its international economic reputation suffered in the first decade of the new century, it has established a positive image as a progressive post-communist state. The modern Hungarian state is a product of the defeat in World War I of the Austro-Hungarian Empire. Although Hungarian nationalists saw themselves as victims of Vienna, the creation of a dual monarchy in 1867 gave Budapest considerable power. It was not used wisely. Many other peoples within the larger Hungarian kingdom saw themselves as oppressed. The Treaty of Trianon much reduced the size of the new Hungary. The largest loss was the transfer of Transylvania to Romania. Inter-war Hungarian politics were reactionary and embittered, especially after the failure of the revolution in 1919. Hungary supported the Nazis during World War II. The country was liberated by the Red Army, and it became a communist state in 1948–49.

In 1956 a revolution, led as much by workers as by intellectuals, broke out. It was suppressed by Soviet forces. After several years of repression, the communist leadership under Janos Kadar made an attempt to compromise. Market-style “socialism” was created and the basis laid for more positive social provision and a more tolerant political atmosphere. This gave Hungary a special place in the communist bloc, which augured well for the country when the communist system collapsed in 1989–90.

Today the idea of restoring a greater Hungary is restricted to the fringes. But claims to a special Hungarian distinctiveness, whether in terms of the assertion that the state’s history goes back to the crowning of King Steven in 1000 a.d. or speculation about the uniqueness of the language, or other peculiarities remain, even if some scholars remain skeptical. Conflicts with Hungary’s neighbors have been removed, but a major issue remains with Slovakia over Hungarian opposition to a major hydroelectric dam project that is of enormous symbolic significance in Hungarian politics.

In the 1990s, Hungary was a relative success story. It had the highest per capita foreign direct investment (FDI) in the transition bloc and at one stage received around one-third of the FDI in the whole region. It still holds a prominent FDI position today. Budapest gained a reputation as a welcoming and modern European capital. Privatization was undertaken relatively rapidly.

Today agriculture plays a small part in the Hungarian economy, providing only 3 percent of output. Industry produces around 32 percent and services 66 percent of output. The leading industries are telecommunications equipment and electrical and other kinds of machinery. Hungarian trade was quickly refocused on the West in the 1990s, and today Germany, within the EU, is the dominant trading partner, with some 30 percent of imports and exports. However, Hungary still depends on energy imports from Russia.

But beneath the surface there were many difficulties. A black economy continues to be important, and Hungary has one of the lowest labor-force participation rates in the former Soviet bloc. There are serious regional inequalities, with a rust belt of decaying iron and steel, machinery, and ex-mining towns, while the local wealthy and foreigners have second homes on the shores of Lake Balaton in the west of the country. The country is 65 percent urban, with more prosperous Budapest looming disproportionately large.

Hungary quickly joined Western organizations, including NATO in 1999. The key focus, however, was European Union accession. This was gained in 2004, although the accession referendum produced an 84 percent yes vote on the basis of a turnout of only 46 percent. Hungary’s leaders have also looked to develop links with Washington. Hungary, along with Poland and the Czech Republic, gave prominent support, despite opposition at home, to the U.S. invasion of Iraq.

In recent years, Hungary’s reputation has suffered as its previously ailing neighbors like Slovakia began to recover. Gross domestic product growth has been less impressive and there have been concerns about both the current account deficit and the budget deficit. The government eventually responded to the latter by austerity measures that cut subsidies and raised taxes.

There is a tradition of political opposition and change. While some commentators attack Hungary’s relatively high corporate, income, and social security taxes, Hungarians tend to value the higher spending that results. So do many leading foreign companies. The higher level of productivity and style of life continues to be attractive. This includes the facility with English that marks the most educated (although it can be a misleading guide to the wider population). This reduces the tendency of FDI to relocate further east.

Bibliography:

Berend, Central and Eastern Europe, 1944–1993: Detour from the Periphery to the Periphery (Cambridge, 1999);
Hungarian National Statistics Office, portal.ksh.hu (cited March 2009);
“Hungary’s Economy: In a Mess,” Economist (n.8573, 2008);
Kenney, The Burdens of Freedom: Eastern Europe Since 1989 (Fernwood, 2006);
Organisation for Economic Co-operation and Development, Reforms for Stability and Sustainable Growth: An OECD Perspective on Hungary (Organisation for Economic Co-operation and Development, 2008);
Organización para la Cooperación y Desarrollo Económicos, Reforms for Stability and Sustainable Growth: An OECD Perspective on Hungary (Organisation for Economic Co-operation and Development, 2008);
Romsics, Hungary in the Twentieth Century (Corvina Osiris, 1999);
Beate Sissenich, Building States Without Society: European Union Enlargement and the Transfer of EU Social Policy to Poland and Hungary (Lexington Books, 2007);
István P. Székely and David M. G. Newbery, Hungary: An Economy in Transition (Cambridge University Press, 2008).

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