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Creating Competition by Bargaining. Demonopolisation and State Aid during Transition

State redistribution maintaining a soft budget constraint and a centralised organisational system for companies were some of the essential characteristics of the centrally planned economy. Transition may have been expected to strengthen competition alongside private ownership. The large companies, created artificially at an earlier period, should have split up and redistribution diminished as a distortion of competition. In contrast to this, everyday life at the turn of the millennium in this country echoes with the news of monopolistic tricks and large mergers. We are also informed of redistribution plans and schemes outbidding each other, not to mention the promises of European Union subsidies.
Have the structural foundations for competition really remained weak in Hungary? What kind of economic and social interests are preserving subsidies as a narcotic, and what sort of forces are causing the cyclical nature of redistribution? Can competitiveness be strengthened in the long run at the expense of competition? Besides the theoretical framework and analyses of socio-economic dilemmas, this book offers the Reader a colourful palette of government decisions and actual company cases. It assembles the mosaics of successes and encoded failures by using personal conversations and articles from the daily press, considered to be an archive of contemporary history.

Akadémia Publishing House 2003

Budapest Transport Company: from a large socialist enterprise to a market oriented company

(Experiments, results and drawbacks)

Public transport in large cities is a problem all over the world, for passengers, politicians running the city, and experts organising the network. What kind of structural features cause these difficulties? Where did the service provider and the company owner seek a way out? What results have there these steps achieved and what drawbacks have they faced? As well as information available to the public, the answers are based on an analysis of company documents and the experience gained as a participating observer or in some cases as a participant in decision making. Having analysed the attempts at transformation, the stabilisation and reorganisation schemes over the last ten years, the study has drawn the conclusion that the attempts have not resulted in long-term solutions. The most important result is that the attempt itself was made, partly because various representatives of the owner and the company management have thoroughly considered the reasons for the difficulties and their direct and long-term consequences. On the other hand, even the restricted result of the attempts is a result. It has become clear that no breakthrough can be expected from the changes implemented so far. If the owner and the company wish to provide a permanent, long-term solution to the now chronic problems, they must take more decisive action than they have so far.

In: A Budapest-modell, Egy liberális várospolitikai kísérlet, Szerk. Pallai Katalin, Nyílt Társadalom Intézet Alapítvány (The Budapest model. A liberal urban policy experiment. Ed. Katalin Pallai, Foundation of Open Society Institute) 2003, pp. 257-282

Living memories of the past?

A new wave of redistribution at the turn of the millennium

Redistribution within the economy and state aid for companies have recently become an important field of economic policy once again. The lens of the daily press is deceptive, however: we are not facing a brand new issue. Redistribution has been a constant companion of economic transition. This article examines the phenomenon of focusing on Hungarian private enterprises as a distinctive feature of the new wave beginning at the turn of the millennium. It presents the varied methods and the ideologies and driving forces behind them. According to the final conclusion, the best subsidy would be to decrease subsidies, and instead to modify general economic conditions in a way favourable to business players.

Competitio 2003, volume 2, pp. 83-104

Ownership and Corporate Governance in the Hungarian Large Enterprise Sector

Privatization of the post-socialist economies, including the transfer of state assets to other proprietors, new start ups and green field investments has produced a wide variety of ownership structures in Central and Eastern Europe. One of the main question discussed in recent years concerns the basic characteristics of the post-socialist ownership. Are the new structures peculiar as compared to recent Western market economies, as several researchers argue (Stark 1996, Earle and Estrin 1997, Andreff 1998)? Is the dominant form some kind of recombinant property, i.e. a mixture of state and private ownership, dominated by inter-organizational (corporate) shareholders (Stark 1996, Stark and Kemény 1997)? Or we face a model of managerial capitalism, as Szelényi-Eyal-Townsley (1996) suggest?
This paper analyses the Hungarian case that seems to be rather special in comparison to other post-socialist countries - but not peculiar in comparison to some other market economies. We will argue that the basic features of the ownership structure in big enterprise sector are not dominated by specific institutional solutions. If there are some specific features, they include mainly quantitative aspects (like the concentration of assets, outputs and ownership positions, the predominance of foreign investors) instead of qualitative ones.

In: Corporate Governance in a Changing Economic and Political Environment: Trajectories of Institutional Change, Michal Federowicz, Ruth V. Aguilera eds., Palgrave MacMillan, New York, 2003. 170-194.

Redistribution instead of privatization

The fate of the state assets between 1998 and 2001

The government has lacked a clear privatization policy since the summer of 1998. Retrospective analysis, based on official publications and press statements from the central asset management authority and conversations with other participants of the process, suggests that earlier trends have altered in many respects since the parliamentary elections in 1998. The assets of State Holding Company (SHC) have increased instead of decreasing. SHC has consumed rather than increased public funds and its main activity has become extra-budgetary redistribution of state revenues. The author assumes this does not derive from any comprehensive, secret plan. The strongly centralized decisions have been driven by short-term political interests, by creative interpretations of several experiments, and in some cases by constraints or by their absence. The events and their results in the field of state asset management reflect well the ideas and behavior patterns of the government, also applied in other economic and political areas.

Közgazdasági Szemle ? Economic Review, XLVIII. évf., 2001. September pp. 726 - 744.

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