A nice note, from some new friends in Hungary (in particular, Katie, a UNC-CH grad in 1982; what a small world: GO HEELS!). Katie had seen a piece I had written for EconLib, and said, "I loved this article!! I forwarded it on to a number of people, and they too raved about it. It looks like you focus mostly on domestic issues, but in fact your ideas are very relevant to other parts of the world as well. We happen to be part of a group of militant free-marketeers working in Central and Eastern Europe, for whom your article was very relevant."
Katie sends a link to a piece written by Katie and her husband at the Institute for Transitional Democracy and International Security (which they co-direct).
The problem, over and above everything else, is that Hungarians have not entirely given up their belief in socialism. Too many Hungarians still accept its moral compromises. Too many still accept that violations of law or ethics or personal integrity are acceptable it if serves the greater good. And even more importantly far, far too many still accept the false promises of socialism. The Hungarian government has been overspending for decades. In the 1980s, its overspending was covered by foreign direct investment and foreign borrowing. In the 1990s, its overspending was covered by income from privatization of state property, more foreign borrowing, and high taxation. But now the resources are exhausted, as are the Hungarian people. Hungarians are taxed as much as they possibly can be. So an austerity package that mostly promises to tax them further is not the solution. Indeed, many analysts have said that higher taxes will only push even more people to find ways of not declaring their income as well as further dampen competitiveness and suppress incentive for individuals and businesses to be productive and profitable. Therefore, higher taxes will not lead to growth, which is what Hungary needs above all else. The only way Hungary can again become an economically vibrant nation, rather than one mired in its own debt, is if the government stops consuming so much of the country’s assets and resources, and removes such fetters on productivity as excessive reporting requirements, bureaucratization, and excessive taxation.
To Katie, and friends: What you are doing is a lot harder, and what you are writing is a lot better, than my stuff. Good luck to you, and to ITDIS!