Economic reform, allocative effiency and terms of trade

It has widely been agreed that the distorted price system is one of the causes of inefficient ecooomic decisions in centrally planned economies. The paper investigates the possible effect of a price reform on the allocation of resources in a situation where micro-efficiency remains unchanged. Foreign trade and endogenously induced terms-of-trade changes are focal points ín the multisectoral applied general equilibrium analysis. Special attention is paid to some methodological problems connected to the representation of foreign trade in such models. The adoption of Armington's assumption leads to an export demand function and this in turn gives rise to the question of optimal export structure, different from the equilibrium one-an aspect so far neglected in the related literature. The results show, that the applied model allows for a more flexible handling of the overspecialization problem, than the linear programming models. It also becomes evident that the use of export demand functions brings unwanted terms-of-trade changes into the model, to be avoided by a suitable reformulation of the model. The analysis also suggests, that a price reform alone does not significantly increase global economic efficiency. Thus the effect of an economic reform on micro-efficiency appears to be a more crucial factor. The author raises in conclusion some rather general questions related to the foreign trade practice of small open economies.

A kínai reformfolyamat politikai gazdaságtani logikája (The politico-economic logic of the Chinese reform process)

Kína az elmúlt több mint három évtizedben szegény, elmaradott országból a világgazdaság egyik legfontosabb szereplője lett. Szocialista rendszerét egy sajátos kapitalista rendszer váltotta fel, miközben politikai struktúrája lényegében változatlan maradt. A folyamatok során a vezetés mindvégig ügyelt arra, hogy a kommunista párt egyeduralmát semmi se veszélyeztethesse, ugyanakkor megfelelő források álljanak rendelkezésre hatalma megtartásához. A tanulmány a kínai reformfolyamatot politikai gazdaságtani szempontból vizsgálja, különös figyelmet szentelve az intézményi változásoknak. Bemutatja, milyen okok és tényezők álltak a reformok elindításának hátterében, milyen változások következtek be a szereplők érdekviszonyaiban a reformok előrehaladtával, és mire lehet számítani a reformok jövőjét illetően. Úgy tűnik, hogy a jelenlegi rendszer érdekviszonyai a reformok folytatása ellen hatnak, ellehetetlenítve a piacgazdaság intézményrendszerének további kiépítését. A járadékok és privilégiumok az elitet abban sem teszik érdekeltté, hogy komolyabb politikai reformokat hajtson végre, így a kialakuló csapdahelyzet megakadályozza az átmenet kiteljesedését. ____ In the last three decades China has risen from being a poor and underdeveloped country to being one of the most important players in the world economy. Its planned economy has been replaced by a capitalist system, but its political structure has remained essentially unchanged. The leaders during the reform process have sought constantly to avert dangers to the rule of the Communist Party and gain access to valuable resources that allow power to be retained. The study approaches the Chinese reform process from a politico-economic point of view, focusing primarily on institutional changes. It reveals the main factors behind the various phases of reform, the constantly changing interests of the players, and the possible future of the process. It seems that under the current authoritarian regime, there are vested interests working against a continuation of the reforms and precluding full establishment of the institutional framework of a market economy. The elite is also deterred from implementing serious political reforms by the current rents and privileges. This leads to a trap that prevents completion of the transition process.

Market reform and state paternalism in Hungary: a path-dependent approach

Hungary is one of the worst-hit countries of the current financial crisis in Central and Eastern Europe. The deteriorating economic performance of the country is, however, not a recent phenomenon. A relatively high ratio of redistribution, a high and persistent public deficit and accelerated indebtedness characterised the country not just in the last couple of years but also well before the transformation, which also continued in the postsocialist years. The gradualist success of the country – which dates back to at least 1968 – in the field of liberalisation, marketisation and privatisation was accompanied by a constant overspending in the general government. The paper attempts to explore the reasons behind policymakers’ impotence to reform public finances. By providing a path-dependent explanation, it argues that both communist and postcommunist governments used the general budget as a buffer to compensate losers of economic reforms, especially microeconomic restructuring. The ever-widening circle of net benefiters of welfare provisions paid from the general budget, however, has made it simply unrealistic to implement sizeable fiscal adjustment, putting the country onto a deteriorating path of economic development.

Market reform and fiscal laxity in Communist and post-Communist Hungary: A path-dependent approach

Purpose – The purpose of this paper is to present a conceptual framework in order to analyse and understand the twin developments of successful microeconomic reform on the one hand and failed macroeconomic stabilisation attempts on the other hand in Hungary. The case study also attempts to explore the reasons why Hungarian policymakers were willing to initiate reforms in the micro sphere, but were reluctant to initiate major changes in public finances both before and after the regime change of 1989/1990. Design/methodology/approach – The paper applies a path-dependent approach by carefully analysing Hungary's Communist and post-Communist economic development. The study restricts itself to a positive analysis but normative statements can also be drawn accordingly. Findings – The study demonstrates that the recent deteriorating economic performance of Hungary is not a recent phenomenon. By providing a path-dependent explanation, it argues that both Communist and post-Communist governments used the general budget as a buffer to compensate the losers of economic reforms, especially microeconomic restructuring. The gradualist success of the country – which dates back to at least 1968 – in the field of liberalisation, marketisation and privatisation was accompanied by a constant overspending in the general government. Practical implications – Hungary has been one of the worst-hit countries of the 2008/2009 financial crisis, not just in Central and Eastern Europe but in the whole world. The capacity and opportunity for strengthening international investors' confidence is, however, not without doubts. The current deterioration is deeply rooted in failed past macroeconomic management. The dissolution of fiscal laxity and state paternalism in a broader context requires, therefore, an all-encompassing reform of the general government, which may trigger serious challenges to the political regime as well. Originality/value – The study aims to show that a relatively high ratio of redistribution, a high and persistent public deficit and an accelerated indebtedness are not recent phenomena in Hungary. In fact, these trends characterised the country well before the transformation of 1989/1990, and have continued in the post-socialist years, too. To explain such a phenomenon, the study argues that in the last couple of decades the hardening of the budget constraint of firms have come at the cost of maintaining the soft budget constraint of the state.

A magyar gazdaságpolitika dilemmái = Dilemmas of the Hungarian economic policy

A cikk a magyar gazdaságpolitika dilemmáit helyezi szélesebb közgazdasági perspektívába, a stabilizációs programcsomag intézkedéseiből kiindulva. Elemzi azokat az összefüggéseket, amelyek a posztszocialista átmenet három súlyosan nyomasztó feladata: a külső egyensúly és belső pénzügyi egyensúly javítása, valamint a tartós növekedés feltételeinek megteremtése között állnak fenn. A jelen pillanatban a külső egyensúly jól érzékelhető javítása a legsürgősebb; a rövid távú intézkedéseknek elsősorban ennek a feladatnak a szolgálatában kell állniuk. Sajnálatos, hogy az azonnali intézkedések csomagja mindeddig nem ágyazódott be egy meggyőző közép­ és hosszú távú reformtervbe. A cikk végül a gazdasági stabilizáció politikai feltételeit elemzi, és a társadalmi összefogás és önmérséklet jelentőségét hangsúlyozza. / === / The article examines the dilemmas of the Hungarian economic policy, placing it into a wider economic perspective and setting out from the measures prescribed stabilization program. The author analyses the interrelations among the three gravely distressing tasks of the post­socialist transition: improvement of the external balances and domestic financial equilibrium, and creation of the conditions of sustainable growth. For the moment, a well perceptible improvement of the external equilibrium is the most urgent task; the short­term measures have to serve first of all this purpose. Unfortunately, the package of short­term measures has not yet been embedded into a convincing medium and long­term reform program. Finally, the article analyses the political conditions of economic stabilization and emphasesizes the importance of joining the social forces and of self restraint.

Rules-based economic governance in the European Union: A reappraisal of national fiscal rules.

The economic and financial crisis of 2007/2009 has posed unexpected challenges on both the global and the regional level. Besides the US, the EU has been the most severely hit by the current economic crisis. The financial and banking crisis on the one hand and the sovereign debt crisis on the other hand have clearly shown that without a bold, constructive and systematic change of the economic governance structure of the Union, not just the sustainability of the monetary zone but also the viability of the whole European integration process can be seriously undermined. The current crisis is, however, only a symptom, which made all those contradictions overt that were already heavily embedded in the system. Right from the very beginning, the deficit and the debt rules of the Maastricht Treaty and the Stability and Growth Pact have proved to be controversial cornerstones in the fiscal governance framework of the European Economic and Monetary Union (EMU). Yet, member states of the EU (both within and outside of the EMU) have shown an immense interest in adopting numerical constraints on the domestic level without hesitation. The main argument for the introduction of national fiscal rules was mostly to strengthen the accountability and credibility of national fiscal policy-making. The paper, however, claims that a relatively large portion of national rules were adopted only after the start of deceleration of the debt-to-GDP ratios. Accordingly, national rules were hardly the sole triggering factors of maintaining fiscal discipline; rather, they served as the key elements of a comprehensive reform package of public budgeting. It can be safely argued, therefore, that countries decide to adopt fiscal rules because they want to explicitly signal their strong commitment to fiscal discipline. In other words, it is not fiscal rules per se what matter in delivering fiscal stability but a strong political commitment.

Bevezetés a Központosítás és piaci reform című kötethez = Introduction to the volume Centralization and Market Reform

Az alábbi írás Kornai János életműsorozata közeljövőben megjelenő harmadik kötetének bevezetője alapján készült. (A sorozat első kötete, A hiány és második kötete, A szocialista rendszer 2012-ben jelent meg.) Ritkán fordul elő, hogy életművét rendszerezve, egy szerző maga veszi tételesen sorra írásait, tárja fel az írások megszületésének körülményeit, és elemzi őket több évtized távlatából. Kornai János életműsorozatának összeállításakor erre a rendkívüli feladatra vállalkozott. A kötetben megjelenő 22 íráshoz fűzött gondolatainak közlésekor mai szemmel veszi górcső alá az egy kivételével a rendszerváltás előtt írt cikkeit, valamint 1956-ban írott első könyvét, A túlzott központosítást. Az írásokat rendszerező bevezető a központosításra és a piaci reformra összpontosítja a figyelmet - e témakörről bebizonyosodott, hogy korai még csupán a közgazdaságtani elmélettörténet fejezeteként számon tartani. A kötetben megjelenő írások egy része közvetlenül kapcsolódik a magyar gazdaság tapasztalataihoz, másik része pedig elméleti jellegű. Ennek megfelelően az itt közölt bevezetés is foglalkozik mind a magyar gazdaságtörténet máig is figyelemre méltó és tanulságos gyakorlati problémáival, mind pedig a szocializmust és a kapitalizmust, a centralizált és decentralizált formákat összehasonlító általános elméletekkel. ______ This piece forms the introduction to the forthcoming third volume of János Kor-nai s life s work series reissued in Hungarian. (The first and second volumes, Economics of Shortage and The Political Economy of the Socialist System, ap-peared in 2012.) It is rare for an author to arrange his own life s work, taking his writings item by item, presenting the circumstances in which they arose, and ana-lysing them decades later. His thoughts on the twenty-two writings in the volume, at the time of republication, involve scrutinizing with present-day eyes articles written, with one exception, before the change of system, along with his first book, Overcentralization, written in 1956. The introduction that systematizes these fo-cuses on centralization and on market reform - events show it is still too soon to see these subjects simply as a chapter in the theoretical history of economics. Some of the articles draw directly on experiences with the Hungarian economy, while others have a theoretical nature. So the introduction also deals both with practical problems of Hungarian economic history that remain notable and instructive, and with comparative general theories of socialism and capitalism and centralized and decentralized forms.

Tradition, innovation and reform in local development. Conference proceedings

Understanding Local Development as the interaction of a complex mosaic of measures, resources and actors requires having an interdisciplinary perspective.‘Local’ means small-scale, focused, and within reach - one would suggest -, while comparing or understanding inter-regional dynamics (putting what we mean by ‘locality’ on the global map) is what brings into sight traits, which can be treated as universal, typical or individual. The sections of the conference tackled this kaleidoscope of themes that has evolved around tradition, innovation and reform, with roots in both academia and policy-making connected to entrepreneurship, governance, economic and social structure, the labor market and human capital.