Four characteristic features (Development in Hungary from the aspect of political economy)
Part One

János Kornai

The article, consisting of two parts, emphasizes four characteristic features of the Hungarian reform process and the post­socialist transformation, which, uninterruptedly, characterized the development over the last thirty years, even after the systemic change in the political sphere. These were: priority of the material welfare of the population, a strong, paternalistic welfare state, the gradual progress of the reform process and the transition, as well as political calmness. The stabilization programme, announced on March 12,1995, may imply - if it materializes - a shift away from these characteristics. The article investigates, from the aspect of political economy, why the four characteristic features had developed, how they affected each other and what were their advantageous and disadvantageous impacts. Setting out from the impacts of the 1956 revolution, the first part gives an overview of political history and then analyses the priority of today's welfare, security and calm as well as the accumulation of societal debt and, finally, the economic and political impacts of the stabilization programme.

Fiscal illusions, decision theory, and public sector reform

László Csontos

Reforming the public sector in Hungary implies a fundamental restructuring and reduction of government expenditures. Not surprisingly, attempts at radical reform were vehemently opposed by groups that would be adversely affected by the proposed measures. It is more than puzzling, however, that even potential beneficiaries reject the idea of curtailing the fiscal responsibilities of the state. The paper argues that this paradox can be explained by the fiscal illusions of voters and by an "anomaly" of rational decision making, known as status quo eiect or loss aversion in the literature.

Optimal growth revisited

András Simonovits

The present paper deals with the problem of optimal growth with finite horizon. The starting point is Harrod and Domar's growth modell with constant capital­output ratio, but the investment ratio can change continuously within certain bounds. It is assumed that the objective function (to be maximized) is the discounted integral of the instantaneous utility function, which in turn is an increasing and strictly concave function of the instantaneous consumption. The innovation of the paper is the assumption of time­invariant inelastic intertempotal substitutability. This assumption is not only a better approximation but eliminates those paradoxes which led TINBERGEN [1960] to reject his own results. It also undermines the relevance of SHELL [1967], VIRÁG [1969], TAKAYAMA [1974], and KOVÁCS-VIRÁG [1981] where a policy first only invest later only consume was found to be optimal.

Dilemmas of the Hungarian economy in the nineties: foreign investments, balance of payments, amortization of debts

László Árva

In the early nineties it seemed as if the growing inflow of foreign direct investment, the receipts from tourism and the trade surplus or at least its balanced state allowed the fulfilment of the debt service and that Hungary could increase her foreign exchange reserves in the course of the decade even in excess of the debt service and reduce the net stock of external debt. As reflected by facts, these expectations proved to be too optimistic. The author investigates the individual items of the balance of payments in order to find out how the external balance of the country could be improved even until the investments started to bear fruit and thus the balance of trade can show a more favourable balance.

Comments on the study by Balázs Hámori: The economy of mental infatuation

István Magyari Beck

The author sets out from the thesis that the model developed by Balázs Hámori for the explanation of the sects may be generalized. At the same time, he criticizes the study because the reasonings about the exclusion of stowaways do not provide explanation precisely for the fact towards which the analysis had originally been directed, namely, for the substance of the salvation goods "expropriated" by the members of the purblind, extremist sects. (The original article was published in the September,1995 issue of this periodical.)

Subcontracting in the manufacturing industry

Zoltán Román

The article, based on a survey and study prepared for the Ministry of Industry and Trade, deals with subcontracting as a special form of interorganizational relationship of growing importance. While previously in most market economies its major role was to provide additional capacities, from the seventies specialization has become the driving force and in the eighties subcontracting means the core of new types of production systems. The lean production idea increased the weight, rohile globalization the geographical radius of subcontracting significantly. Most of the subcontractors belongs to the SME (small and medium sized enterprise) sector but many large enterprises are also engaged in fulfilling large volumes of such tasks. The article presents the main characteristics of subcontracting in the manufacturing industry of the Hungarian economy in transition, and formulates recommendations for strengthening subcontractors, subcontracting systems, adapting international experiences. In order to become as much as possible lasting, appreciated partners, taking part also in R&D activities, competitiveness and innovativeness of the Hungarian subcontractors should be upgraded.