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Public intervention needed to boost economy

October 27th, 2012

A leading anti-liberal economist calls for active public involvement in the economy, instead of restrictions “demanded by the IMF and the EU”. She claims that no growth is possible without government intervention.

In Magyar Nemzet, economist Magdolna Csath maintains that the steep decline in Hungary’s economic potential in the 1990s was due to a wave of excessive and hasty privatization. Csath, a former member of the far-right MIÉP party, contends that foreign investors who snapped up Hungarian firms for a low price and corrupt Socialist elites who capitalized on selling public property were the only beneficiaries. Csath points out that several leading American scholars from both the left and the right have recently criticized neoliberal doctrines and the Washington consensus, as followed by Hungarian policy makers after the 1990 regime change.

Hungary needs to improve its economic output in order to overcome the crisis, but Csath believes this is impossible without the active involvement of the state, since Hungarians have no capital to invest, while foreign investors are only interested in cheap unskilled labour and short-term profits.

Most importantly, the Hungarian government should invest in education, Csath recommends. She notes that without investment in human capital no economic growth is likely. This implies, however, that the government should resist “pressure coming from the IMF and the EU demanding austerity,” Csath suggests.

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