THE POLITICAL ECONOMY OF TRANSITION SNAPSHOTS ON CONTEMPORARY HUNGARIAN POLITY AND ECONOMY

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1 THE POLITICAL ECONOMY OF TRANSITION SNAPSHOTS ON CONTEMPORARY HUNGARIAN POLITY AND ECONOMY

2-08/2/A/KMR-2009-0041 Course Material Developed by Department of Economics, Faculty of Social

2 THE POLITICAL ECONOMY OF TRANSITION SNAPSHOTS ON CONTEMPORARY HUNGARIAN POLITY AND ECONOMY Sponsored by a Grant TÁMOP /2/A/KMR Course Material Developed by Department of Economics, Faculty of Social Sciences, Eötvös Loránd University Budapest (ELTE) Department of Economics, Eötvös Loránd University Budapest Institute of Economics, Hungarian Academy of Sciences Balassi Kiadó, Budapest

4 ELTE Faculty of Social Sciences, Department of Economics THE POLITICAL ECONOMY OF TRANSITION SNAPSHOTS ON CONTEMPORARY HUNGARIAN POLITY AND ECONOMY Authors: Géza Törőcsik, Balázs Szepesi Supervised by Balázs Szepesi June 2011

5 THE POLITICAL ECONOMY OF TRANSITION SNAPSHOTS ON CONTEMPORARY HUNGARIAN POLITY AND ECONOMY Week 10 The context of economic development policy Géza Törőcsik, Balázs Szepesi

6 The context of economic development policy This lecture discusses How do Hungarian enterprises evaluate the activity of public authorities on the field of regulation and development funding How do different groups of companies utilize the public schemes offered for economic development What is the statistically observable effect of economic development policy grants

7 Literature Csite András Major Klára (2010) Az állam és a vállalkozások kapcsolatának néhány jellegzetessége Magyarországon. HÉTFA Kutatóintézet Bizalom és Vállalkozás műhelytanulmányok IV. esavallalkozasokkapcsolatanaknehanyjellegzet essegemagyarorszagonisbn.pdf

8 Entrepreneurs and policy

9 Standard approach Business environment (enforcement, regulation, administrative burdens) Access to finance Motivating innovation Improving access to global markets Reasoning: growth, jobs, flexibility

10 Business environment Doing Business, Good governance, competitiveness indices (GEM, IMD) Measuring administrative costs it is more than 10% in Hungary The ultimate story: DeSoto The other path

11 Access to finance Market building approach due to high transaction costs financial markets for SMEs cannot offer acceptable financial products Microcredit schemes peer group control Guarantee schemes public risk sharing

12 Innovation, markets Cooperation: industrial zones, clusters, cooperatives, local brands Information: courses, IT, databases, marketing support Infrastructure: telecommunication, incubation, development of business services

13 What is the goal? Doubts Economic, social or political motives? What is the problem? Undeveloped market, disfunctional public services, social cleavages? What is feasible? Breaking the equilibrium vs. muddling through? Against reality or in alliance with reality

14 What is the goal? Economic motives more growth Social motives independent leaders in the society, more active people, stable society with accessible mobilization channels Political motives building and maintaining support, breaking economic status quo, mangaing rent channels

15 What is the problem? Undeveloped market Market failures (scale, externality, information problems are present) Disfunctional public services Untrustworthy state, hostile tax system, public regimes motivating to hide into informal economy Social clevages Local economic norms are not compatible with market institutions, closed economic-social circles, lack of competitive skills for many people

16 What is feasible? Breaking the equilibrium Grand well planned projects that destabilizes status quo and opens the way for entrepreneural energies Reform shocks that shakes up behavioral patterns WHO HAS THE POWER TO REFORM? In alliance with reality Managing better bargains among stakeholders, small projects based on local native initiatives, accepting informal norms and building on them

THE POLITICAL ECONOMY OF TRANSITION SNAPSHOTS ON CONTEMPORARY HUNGARIAN POLITY AND ECONOMY

THE POLITICAL ECONOMY OF TRANSITION SNAPSHOTS ON CONTEMPORARY HUNGARIAN POLITY AND ECONOMY Sponsored by a Grant TÁMOP-4.1.2-08/2/A/KMR-2009-0041 Course Material Developed by Department of Economics, Faculty