GLOBAL PERSPECTIVES | KOMMUNIKATION GLOBAL - 01 | 2009

WINDOW ON EUROPE
'We Were Very Good Students of NEO-LIBERAL Ideology'
Zoltan Dujisin interviews Hungarian economist ANDRAS INOTAI
A region that has enthusiastically embraced free market economics since the collapse of state socialism is facing new socioeconomic
and political challenges. Dr. Andras Inotai, director-general of the Institute for World Economics of the Hungarian
Academy of Sciences, says countries of Central and Eastern Europe (CEE) that have not oriented themselves exclusively to the
West may have a better chance to adapt to a new economic reality.
IPS: How will the post-communist
countries in CEE react to the global
financial crisis?
Andras Inotai: There will be an
evolving macroeconomic crisis, with
the deepest depression since World
War II and a deceleration of growth
rates which in CEE were around 4 to
6 percent. This will have social implications
with losses in health and
pension funds and the stock exchange.
IPS: What are the causes of the
expected halt in economic growth?
AI: The crisis may hit individual
CEE economies differently. The
economies of the region had not only
different growth rates but also different
engines of growth. Domestic
consumption, investments and exports
were the three usual factors
for economic growth.
In south-eastern Europe the main
driving force was domestic consumption,
and the crisis will hit them
hardest. The Czech Republic, Slovakia,
Poland and Hungary were benefiting
from export growth and their
future depends on the main exports
markets, but Western Europe is the
largest market for these countries.
IPS: But Western Europe is going
into recession...
AI: The Czech Republic, Slovakia
and Poland are deeply integrated in
the German market, much more
than Hungary, therefore the German
recession will have a larger impact
for them.
It is important to see what will be
the answer from big car manufactur-
ing companies. They have more competitive subsidiaries in CEE, and if they cut
production the question is where. If German taxpayers give billions of euros to save
a car manufacturer, they won't want that money to go to the Slovak subsidiary,
even if it is more competitive.
IPS: Which social groups are more at risk in this crisis?
AI: Interestingly, not those employed by the private sector, but the public administration
and public services that remained state-owned enterprises, such as
railways, urban transportation and health sector. But the most dangerous consequence
of the crisis, particularly for Central Eastern Europe, could be an ideological
crisis.
IPS: What sort of ideological crisis?
AI: With a deep recession, declining income and higher unemployment, there is
fertile ground for populism, demagogy, nationalism and extremism, and in all countries
in the region you will find politicians who will gladly use this opportunity to
seize power by promising a country of honey and milk with no special sacrifice.
IPS: In Ukraine the internal political struggle has been postponed to face the crisis.
AI: This would be the reasonable answer to a crisis situation, to stop political and
ideological polarisation and join forces. But I am doubtful that many big political
parties are ready for this.
IPS: What difference can social cohesion make?
AI: A society with a high level of solidarity is more likely to avoid high costs in the
crisis. But if each social group starts playing against the other, and if the domestic
political environment becomes uncertain, we will only aggravate the situation,
particularly in CEE where divisions are strong.
IPS: Where should government support go? Many are speaking of aiding small and
medium enterprises (SME).
AI: Governments should do everything to avoid deepening the crisis, but the different
groups must understand they should take part of the burden for the crisis.
One area of government support is in physical infrastructure: railways, highways,
bridges, ports, environmental protection, where there are tasks that need to be
done, and now you can accelerate the process just to create new jobs for people.
These investments will become profitable, maybe not in the first year, but surely in
the future.
However, I fully disagree with plans to give money to those SMEs which are not and
will never be competitive; money could disappear in the pockets of so-called entrepreneurs
who are only directed by a tax cheating mentality and getting government
subsidies. We just cannot afford this luxury anymore. We must only give
money to those companies that prove to be competitive.
12 KOMMUNIKATION GLOBAL | JANUAR 2009