“We ruined our country together”

/ 2008.07.31., csütörtök 14:00 /

In our column Face to Face, we asked Professor László Bogár, an economist known for his anti-globalisation views, and Péter Heim, chief executive of Aegon Hungary Fund Management, who is pro-globalisation (ex officio), to take part in a friendly discussion. The topic was as follows: is it because of globalisation that Hungary is in its present situation?

BOGÁR: Global capitalism is a fatal mode of existence. The essence of it is: if something is profitable, then it must be continued. Even if you realize that in the long run, it is causing more damage to nature or society. The economics prevailing nowadays comes to the aid of this idea with the concept of external cost, according to which certain costs are outside the business management of the entrepreneur. In other words: it brutally erodes natural resources and pours back the polluting end-product in the same way. So the activity it pursues is extremely costly, only it is transferred to others. Although in this world order, it is improper to mention such costs.

HEIM: No it isn't. This is the direction in which global economics is heading, for example towards developing environmentally-friendly energy sources. It's true that it isn't ideology-based, it's because it has become impossible to ensure prosperity; over the past eight years, the price of oil has increased six-fold, today it costs 125 dollars a barrel.

BOGÁR: Then I could mention those who employ ten-year-old children for a ten-hour working day and pay them a dollar a day. Then with complete ease, they throw this generation - which will also become obsolete - right back into the given society. Or if the oil companies and tobacco companies had to pay for the hospitalisation costs of eight thousand new lung-cancer patients a year, their billion-dollar-profits might actually be less.

HEIM: That is a fact, but let's make it clear: partly due to globalisation, the standard of living today is higher than it was one hundred years ago, what's more, global capitalism has flooded the developing world, and it is rather the latter that has profited from it.

BOGÁR: Peter, I think this is a very strong statement, especially if we consider how the process started. History of the past few hundred years was all about how the West dominated the whole world, and how it took away an awful amount of (natural) resources from the non-West, sometimes very brutally. Just think of the way the first joint-stock company, the East India Company, founded by London merchants in 1600, operated, or think of how China was fleeced.

HEIM: Where does that come into the picture? What we refer to today as globalisation started in the 1960's.

BOGÁR: Its most recent chapter started then. Capitalism has been global since the moment it was born. I need only refer to the medieval rule of the Medicis and the Fuggers.

HEIM: We could just as well go all the way back to Atticus. For during the Roman Empire he created what the Fuggers did later.

BOGÁR: That is true. In the course of the history of man, there have been several attempts at developing global capitalism. One of them was undoubtedly the period of the Roman Empire. The trouble was that it expanded beyond the borders that could have been controlled with the given technology of that period.

HEIM: Primarily, the fall of the Roman Empire can be attributed to demographic reasons.

BOGÁR: That's true, and the symptoms are similar today to those that great empires, based on capitalism, usually show in the final phase. Similarly, the West today is in a natural, social - demographic - and cultural crisis. The ruthless exploitation it has been pursuing may well be the cause of its eventual fall: in the two-hundred-year period between 1860 and 2060, it is using all the gas and oil that took two hundred million years to be formed.

HEIM: My original profession is geology, so I would just like to remind you - it is by no means certain that we shall run out of oil.

BOGÁR: Sorry, but more and more of it must be used for the production of one barrel.

HEIM: Of course. That is why the world economy will probably switch from fossil energy sources to something else. For example, Boone Pickens, who made his fortune from oil, is now building wind turbines in America. The next twenty-five years will be about wind power. This is where the West can break out, as there is oil in Brazil, the Middle-East and Russia. Never before in the history of world economy have we seen such a thing: those who were previously trying to catch up have now become the creditors of the developed world. The American banks have no money, neither has the state, so they go begging to China (for money). That is why I said the developing world has profited the most from globalisation. The developed world thought that as the size of the cake increased, so would its own slice grow. Well, it's not growing at the same rate.

BOGÁR: Ill-got, ill-spent. Global capitalism was conceived in a sea of filth and blood. For 1500 years, until the end of the 18th century, China provided a greater part of the world's production than the West did. It was us that made China dirt-poor.

HEIM: It is a fact that while they have always comprised one quarter of the world's population, today they provide only ten percent of production, compared to the forty percent that they used to provide for centuries. It is also a fact that from the nineteenth century, they were unable to adapt to the new challenges, but there is no point in mystifying the East. The size of Chinese forests shrank to half their original size not in the last one hundred years, but between 1300 and 1800. China exploited nature just like we did.


BOGÁR: But they never thought of colonizing Europe, although they could easily have done so. China had gunpowder, weapons, and a fleet three hundred years before we did, but this sort of brutality does not exist in Indian or Chinese culture. They strive for harmony, sustainability, as opposed to Western capitalism, which is narrow-minded, unsustainable immediacy.

HEIM: I think this picture you're painting of the West is false. It's as if the essence of it is causing damage. The Scandinavian states, for example, which also belong to the West, are able to maintain their balance in the global world. Of course, in regions where the state is weak, the shoots of globalisation can easily grow wild.

BOGÁR: It's just that the global superpower has no interest in there being a strong state: you can see from the triple slogan of the Washington consensus - "liberalise, deregulate, privatise", that it is against the state.

HEIM: You've misunderstood something. A well-built-up state is like black pepper. It's small, but has strength. At the moment, the Hungarian state is large, but weak. We look fine in indicators of quantity. There are lots of teachers, for example. But there are too many bad teachers. There are a lot of universities. But one out of every four should be closed, and the money should be given to the other three. The reforms can only be carried out successfully if three-fourths of society profits from them. The greatest problem with the adjustment-craze of the past two and a half years is that there are a lot more who suffer, and only very few actually profit from it. It should be the task of the Hungarian state to ensure the quality of public education, public safety and legal security. Instead, there is only one thing that the state is strong in at the moment; deducting taxes. That's the trouble, not globalisation.

BOGÁR: It's not the only problem, surely? Who do you think the Hungarian state belongs to?

HEIM: It belongs to us.

BOGÁR: While eighty percent of the profit produced here goes to two dozen multinational companies?

HEIM: Eighty percent of the profit that is demonstrable. Only about sixty percent of the real profit, though. Small enterprises do not declare their profit. They give themselves "tax concessions", while the state offers them to the multinational companies.

BOGÁR: Alright, let it be sixty percent, then. Even so, the interests of two dozen large companies define what happens in Hungary today. For this, you need a state that is willing to collaborate and act according to their interests. And in the past twenty years, the Hungarian state has collaborated a lot more than the neighbouring states have.

HEIM: That's true. They could not be torn apart like we could. The multinationals were allowed to enter Poland, but they were forced to compete. We didn't force them into that. So we can't say globalisation is responsible for the present situation. It is the Hungarian elite that got us here. Or how can you explain the fact that the multinational companies were not as successful elsewhere as they were here?

BOGÁR: The reason for that is there is no Alliance of Free Democrats elsewhere. Of course, the other parties are collaborates, too, but the Free Democrats are the organisers, they are the chemically pure manifestation of the global power concentration, which has adopted as its programme that there should be no representation of interest, and according to which we should guess every single thought of the global arch-power, and obey its every wish.

HEIM: The entire Hungarian elite are responsible for what has happened in the past twenty years. That's approximately fifty thousand people, including you and me. We ruined our country together. We always accepted everything that they dictated, and then we wanted to alleviate the situation with the help of aid. That is how the monster that we call the Hungarian state was born. We should be examining the direction in which the world is heading, and where we want this nation to go. We're not even asking the question, and then we're surprised that we have the wrong answers. We're building gas power plants, when everyone in the developed world is thinking about renewable energy. We have great assets: arable land, abundant water bases, geothermic energy, but we are unable to make use of them, or our intellectual capacities - and this has nothing to do with globalisation.

BOGÁR: The elite are the absolute winner of the past twenty years. Why should it want to change this comfortable situation? Nothing comes out of nothing, though. We have to realize that change has a price, and sad as it may be, only the winners have the means to pay for it.

HEIM: So you think the only beneficiaries of the past twenty years are today's rich. I believe that those who receive annuities, disability pensions, those who do not have to work also belong to this group. For years and years now, the proportion of active versus inactive is getting worse. This must be changed.

BOGÁR: I accept that, although our human capital is in an incredibly bad state. A large proportion is truly unfit for work. In the twenty years between 1970 and 1990, the average yields more than doubled...fine. However, they obtained these results by using fifteen times as much fuel and forty times the amount of chemicals. At the same time, the number of middle-aged males in rural areas who died of cancer increased five-fold. Nowhere in the world did anything like this happen, except here in Hungary.

HEIM: It is a fact that even compared to the neighbouring countries, our health indicators are fifteen percent worse. And this isn't good, not even for the elite of the economy. Today they see that there is no fit workforce, and that one forint's worth of investment only gives two forints in ten years. It was possible for quite a while to sponge off the state, but today there is hardly anything worth pouncing on, or perhaps the money coming from the European Union? So finally, part of the elite is starting to realize where this mentality has got us twenty years later.

BOGÁR: So you admit that the design thought up at the time of the change of the regime needs to be revised.

HEIM: Alongside the acceptance of globalisation, as we cannot really change that. We could be the beneficiaries of globalisation, not just the victims of it. Provided we have a good leadership, of course.


Péter Heim

-  Born in Budapest in 1970.
- Graduated in 1996 from the Budapest University of Economics, but started working as an analyst of macro economy and the money market for OTP Broker a year earlier. Later on, he became the leading economist of Hypo-Securities Hungária.
- In 2000 and again in 2002, he was elected as the most sophisticated investor of government securities, until 2004, he was board member of the Association of Hungarian Investment Funds and Asset Management Companies.
- Until the summer of 2004, he was the leading economist of Aegon Hungary General Insurance Company Ltd., since then, he has been working as the CEO of Aegon Hungary Fund Management Company and as director of investments for Central and Eastern Europe.

László Bogár

- Born in Miskolc in 1951.
- He graduated from the foreign trade department of Karl Marx University of Economics in 1973. He has been a university professor since 1986 and Candidate of Science in political science from 1991.
- Between 1987 and 1996 he was a member of the Hungarian Democratic Forum (MDF), from 1990 to 1994, he was the political under-secretary of the Ministry of International Economic Relations.
- During the Orbán-government, he was the political under-secretary of the Prime Minister's Office, and member of the premier's economic advisory board.


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