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Difference between revisions of "Hungary"
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==Economy of Hungary== | ==Economy of Hungary== | ||
*Overview | |||
Historically, prior to World War II, Hungary was mostly agrarian. Beginning in 1948, a forced industrialization policy based on the Soviet pattern changed the economic character of the country. A centrally planned economy was introduced, and millions of new jobs were created in industry (notably for women) and, later, in services. This was accomplished largely through a policy of forced accumulation; keeping wages low and the prices of consumer goods (as opposed to staples) high made it possible for more people to be employed, and, because consumer goods were beyond their means, most Hungarians put more of their earnings in savings, which became available for use by the government. In the process, the proportion of the population employed in agriculture declined from more than half to about one-eighth by the 1990s, while the industrial workforce grew to nearly one-third of the economically active population by the late 1980s. Since that time, it has been the service sector that has increased significantly. | |||
Although Soviet-type economic modernization generated rapid growth, it was based on an early 20th-century structural pattern and on outdated technology. The heavy industries of iron, steel, and engineering were given the highest priority, while modern infrastructure, services, and communication were neglected. New technologies and high-tech industries were underdeveloped and further hampered by Western restrictions (the Coordinating Committee for Multilateral Export Controls) on the export of modern technology to the Soviet bloc. | |||
In response to stagnating rates of economic growth, the government introduced the New Economic Mechanism (NEM) in 1968. The NEM implemented market-style reforms to rationalize the behaviour of Hungary’s state-owned enterprises, and it also allowed for the emergence of privately owned businesses. By the end of the 1980s, one-third of the gross domestic product (GDP)—nearly three-fifths of services and more than three-fourths of construction—was being generated by private business. The Hungarian economy, however, failed to meet the challenge of the world economic crisis after 1973. The dramatic price increases for oil and modern technology created a large external trade deficit, which led to increasing foreign indebtedness. Growth slowed down and inflation rose, leading to a period of stagflation. | |||
After 1989 Hungary’s nascent market and parliamentary systems inherited a crisis-ridden economy with an enormous external debt and noncompetitive export sectors. Hungary turned to the world market and restructured its foreign trade, but market competition, together with a sudden and radical opening of the country and the abolition of state subsidies, led to further economic decline. Agriculture was drastically affected and declined by half. A large portion of the iron, steel, and engineering sectors, especially in northeastern Hungary, collapsed. Industrial output and GDP decreased by 30 percent and 25 percent, respectively. Unemployment, previously nonexistent, rose to 14 percent in the early 1990s but declined after 1994. | |||
By the mid-1990s the economy was again growing, but only moderately. Inflation peaked in 1991 and remained high, at more than 20 percent annually, before dropping to under 10 percent by the early 21st century. As a consequence of unavoidable austerity measures that included the elimination of many welfare institutions, most of the population lost its previous security. In the first several years after the fall of communism, the number of people living below the subsistence level doubled, but it stabilized by the early 21st century. Observers also noted the emergence of a sector of long-term poor, a majority of whom were Roma. | |||
Despite these obstacles, adjustment to the world economy was evident by the turn of the 21st century. Hungary’s liberal foreign investment regime attracted more than half of the entire foreign direct investment in central and eastern Europe in the first half of the 1990s. Modernization of telecommunications also began, and new industries (e.g., automobile manufacturing) emerged. Significantly, nearly one million small-scale, mostly family-owned enterprises were established by the early 21st century. State ownership of businesses declined to roughly one-fifth. Another important contributor to economic growth has been a flourishing tourist industry. | |||
*Agriculture | |||
Agriculture’s role in the Hungarian economy declined steadily in the generations following World War II, dropping from half of the GDP in the immediate postwar period to only 4 percent of the GDP by 2005. Nevertheless, agriculture remains important, and Hungary is virtually self-sufficient in food production. The Hungarian climate is favourable for agriculture, and half of the country’s land is arable; about one-fifth is covered by woods. About one-tenth of the country’s total area is under permanent cultivation. Agriculture accounted for nearly one-fourth of Hungarian exports before the economic transition of the 1990s, during which animal stocks decreased by one-third and agricultural output and exports declined by half. | |||
After the initial period of collectivization (1948–61), Hungarian cooperatives incorporated private farming. Private plots constituted roughly one-eighth of a cooperative’s land and produced about one-third of the country’s agricultural output. One-fifth of Hungarian farmland belonged to state farms. Since 1990 the land has been reprivatized. Some among the elderly agricultural population have remained in reorganized collective farms; however, private farms are the norm. | |||
Cereals, primarily wheat and corn (maize), are the country’s most important crops. Other major crops are sugar beets, potatoes, sunflower seeds, and fruits (notably apples, grapes, and plums). Viticulture, found in the Northern Mountains region, is also significant. Cattle, sheep, pigs, and poultry are raised in Hungary, but, in response to the government’s efforts to combat overproduction of animal products, substantial reductions in livestock occurred in the 1990s. | |||
*Resources and power | |||
The most important natural endowments of Hungary, particularly in its western and central areas, are its fertile soil and abundant water resources—notably Lake Balaton, a major asset for tourism. Fossil fuel resources are relatively modest. High-quality anthracite (hard coal) is extracted only at Komló, and lignite (brown coal) is mined in the Northern Mountains (notably at Ózd) and in Transdanubia (at Tatabánya). Coal once satisfied half of Hungary’s energy requirements; it now represents less than one-third of energy production. | |||
Oil and natural gas were discovered in the late 1930s in Transdanubia and during the decades following World War II at several localities in the Great Alföld, especially near Szeged. Their share of energy production increased from one-third to one-half between 1970 and 2000; however, Hungary is able to meet only a fraction of its oil requirements with domestic resources. | |||
The country’s only significant mineral resources are bauxite—of which Hungary has some of the richest deposits in Europe—manganese, in the Bakony Mountains, and the undeveloped copper and zinc resources at Recsk. Extraction of various metal-bearing ores increased significantly in postwar Hungary, but iron ore is no longer mined. Other minerals that are found include mercury, lead, uranium, perlite, molybdenum, diatomite, kaolin, bentonite, zeolite, and dolomite. | |||
*Manufacturing | |||
As a result of the policy of forced industrialization under the communist government, industry experienced an exceptionally high growth rate until the late 1980s, by which time it constituted about two-fifths of GDP. Mining and metallurgy, as well as the chemical and engineering industries, grew in leaps and bounds as the preferred sectors of Hungary’s planned economy. Indeed, half of industrial output was produced by these three sectors. Lacking modern technology and infrastructure, however, Hungarian industry was not prepared to compete in the global economy after the collapse of state socialism. During the first half of the 1990s, industrial employment dropped to one-fourth of the economically active population. Total output declined by nearly one-third, with output in the mining, metallurgy, and engineering industries decreasing by half. During the 1990s, engineering output dropped from nearly one-third to roughly one-fifth of the total. | |||
As industry and the Hungarian economy in general underwent restructuring and modernization during the early 1990s (including the implementation of privatization and the improvement of the quality of goods and services), some industries adapted more successfully to new conditions. Among the industries that regressed least and showed the first signs of growth were the food, tobacco, and wood and paper industries. Of Hungary’s traditionally strong sectors, the chemical industry showed the greatest resilience, demonstrating growth again by the mid-1990s after experiencing a large drop in production early in the decade. | |||
Partly through foreign investment, the machine industry (another important component of the economy) also showed signs of improvement by the mid-1990s. A number of newer industries, including the production and repair of telecommunications equipment and the automobile industry, also showed significant growth. | |||
Between 1950 and 1990, electric power consumption in Hungary increased 10-fold, and by the 1990s more than one-third of industrial output was produced by the energy sector. In the early 21st century, three-fifths of energy consumption was derived from thermal plants burning hydrocarbons (a majority of which were imported). There are several thousand miles of oil and natural gas pipelines. Nuclear power accounted for nearly two-fifths of Hungary’s energy production, with plans for further expansion. A small percentage of power generation consisted of hydroelectricity and geothermal alternatives. | |||
*Finance | |||
Under the Soviet-style, single-tier banking system, the National Bank both issued money and monopolized the financing of the entire Hungarian economy. Beginning in 1987, Hungary moved toward a market-oriented, two-tier system in which the National Bank remained the bank of issue but in which commercial banks were established. Foreign investment was permitted, and “consortium” (partly foreign-owned) banks were formed. In 1990 a stock exchange was established. | |||
In the 1990s, in the postcommunist period, the reform process continued with the founding of private banks, the sale of shares in state-owned banks (though most banks remained state-owned), and the enactment of a law that guaranteed the independence of the National Bank. The currency (forint) also became entirely convertible for business. By the turn of the 21st century, with a dramatic increase in foreign investment and in the number of commercial banks, the Hungarian banking system had been almost completely privatized. In 1986 the state-operated insurance system was split into two separate companies, and by the following decade more than a dozen insurance companies were in operation. | |||
*Trade | |||
Hungary was a charter member of the Comecon (Council for Mutual Economic Assistance; 1949–91). Under its aegis, trade was conducted between the countries of the Soviet bloc on the basis of specialized production, fixed prices, and barter. The Soviet Union was Hungary’s most important trading partner, but, in the late 1980s and early ’90s, as Hungary became increasingly involved in the global market, less than half of the country’s trade remained with Comecon. Unprepared for the competitiveness of global market forces, Hungary accrued a large trade deficit that was covered by foreign loans. In the process the country became heavily indebted and had to use much of its export earnings for repayment. | |||
Nevertheless, by the mid-1990s three-fourths of Hungary’s trade was with market economies. Germany became Hungary’s most important trading partner, followed by Austria, France, Italy, and the United States. Meanwhile, the proportion of Hungary’s imports from the component countries of the former Soviet Union fell from a peak of more than one-fifth in the early 1990s to less than one-tenth at the turn of the 21st century, by which point Hungarian exports to those countries had become negligible. In 1996 Hungary joined the Organisation for Economic Co-operation and Development (OECD), and in 2004 it became a full member of the European Union (EU). | |||
In the early 21st century, machinery and transport equipment were both Hungary’s leading import (comprising three-fifths of the total imports) and its leading export (comprising one-half of all exports). In particular, the country’s principal trade goods were telecommunications equipment, electrical machinery, power-generating machinery, road vehicles, and office machines and computers. | |||
*Services | |||
Throughout the last decade of the 20th century, the service sector’s portion of Hungary’s GDP rose at an annual average rate of about 0.5 percent. By the early 2000s, services accounted for almost two-thirds of GDP and of the workforce. Tourism played a big role in this development as Hungary became an increasingly popular destination for travelers, especially those from Austria, Croatia, Germany, Montenegro, Romania, Serbia, Slovakia, and Ukraine, most of whom arrived by car. There is also significant tourism via low-cost air carriers from western Europe, as well as from the United States, Canada, and Australia. | |||
*Labour and taxation | |||
The Soviet-style Central Council of Hungarian Trade Unions was reorganized in 1988 as the National Confederation of Hungarian Trade Unions. It remains the largest trade union in Hungary, with some 40 organizations under its umbrella at the start of the 21st century. It is joined by the Association of Hungarian Free Trade Unions, Democratic Confederation of Free Trade Unions, Forum for the Cooperation of Trade Unions, and Autonomous Trade Union Confederation. | |||
*Transportation and telecommunications | |||
Railways have long been the centre of Hungary’s transportation system. By World War I the country had a modern network that was among the densest in Europe, and it continued to expand regularly until the late 1970s, with electrification beginning in the previous decade. When industrial production declined during the transition to a market economy, rail transport of goods dropped sharply, accompanied by significant cutbacks in government subsidies that contributed to the deterioration of the railway infrastructure. By the end of the 20th century, however, the EU had begun funding rail network improvements, as well as roadway projects. | |||
In the postcommunist era, road haulage has made up an increasing percentage of the overall transport of goods. Buses were once the main form of travel for passenger transportation, but the number of privately owned automobiles grew rapidly after the early 1980s. This growth skyrocketed following the end of the communist regime. Between 1989 and 1996, an additional 1.5 million cars were added to Hungarian roads, the majority of them Western-made. During this same period, the portion of Eastern-made cars declined rapidly. | |||
Road construction and upgrading increased significantly in the early 21st century, with the building of expressways (motorways) radiating out from Budapest toward Vienna, Croatia, Serbia, Romania, and Ukraine. | |||
The Danube River, the country’s only important transportation waterway, was historically used for international shipping, via the free port of Csepel. However, as a result of the destruction of bridges in the former Yugoslavia during the intervention by NATO (North Atlantic Treaty Organization) in the Kosovo conflict in 1999, much of the shipping came to a sudden halt. The Hungarian merchant fleet nearly vanished, reduced from about 200 vessels in 1994 to only 1 in 1999. | |||
International air travel passes through airports at Budapest (opened in 1986 and expanded in 1999) and Siófox (opened in 1989). Regional passenger air traffic services Budapest, Nyíregyháza, Debrecen, Szeged, Pécs, Szombathely, and Győr. Malév Hungarian Airlines, the national carrier, was founded in 1946. | |||
At the start of the 21st century, more than half the population of Hungary were cellular telephone users. Televisions and radios were plentiful, and use of personal computers and the Internet was growing. | |||
==Government and Society of Hungary== | ==Government and Society of Hungary== | ||
==Culture Life of Hungary== | ==Culture Life of Hungary== | ||