Foreword

This centennial book covers the last hundred years of Hungary’s economic history. The purpose of our analyses is twofold. On the centenary of the externally imposed Trianon Peace Treaty, the Magyar Nemzeti Bank commemorates one of the most painful moments in Hungarian history. We also believe that the lessons from all of Hungary’s previous crises can be useful in the current global pandemic situation and in the corresponding global economic crisis. We can learn from mistakes and we must constantly build on virtues. Moreover, there are numerous past episodes that are worth studying.

If the ten decades behind us were to be characterised by a single term, “continuous resumption” could best describe the situation. In addition to internal economic developments and economic policy decisions, our country’s history has been shaped at least as much by waves of tectonic geopolitical movements or by recurring shocks in the world economy.

Apart from rare periods, the Hungarian economy was unable to enjoy such a stable and secure environment that, for most of the 20th century, characterised Western Europe or the quickly emerging Asian countries. Since 1920, Hungary has suffered the pains of the tragic, externally imposed Trianon Peace Treaty, the horrors of World War II, oppression by communist state power that lasted for nearly half a century, and the period of the liberating regime change that nevertheless created considerable economic uncertainty. All of these events set Hungary’s development back for many years, and thus, the long-standing desire to converge to Western European living standards remained a mere dream.

In addition to wars and decades of political repression, recurring global economic crises and domestic economic policy mistakes hampered Hungary’s convergence. As the country financed its development mostly from mounting external indebtedness, Hungary’s growth model was long characterised by a choice between growth and balance. In the absence of a modernising economy and improving competitiveness, convergence opportunities often very quickly fell by the wayside as the winds of the world economy changed. It is no coincidence that the Great Depression of 19291933, the oil price explosions of the 1970s and the financial crisis of 2008-2009 all had serious consequences.

In the summer of 2020 we are again in the first phase of a restoration period after a world wide crisis. The big challenge ahead of us is to overcome the Covid-19 pandemic. For the first time in the last 100 years, we can tackle the problems after an exceptionally expceptionally successful decade that has fostered economic growth while also maintaining equilibrium. At the same time, this successful decade also led to a widespread prosperity in Hungarian society. The current task is again to tackle the crisis with a growth model that can ensure Hungary’s continuous convergence in the decades after the coronavirus.

We can learn a lot from the economic history of the last hundred years in this regard. Our history books often contains hidden answers for current problems. Dr Mandeep Rai’s book (The Values Compass) published in recent months tries to characterise each country with a single attribute. It is instructive that the author emphasises the word “competitiveness” in the case of Hungary. According to her assessment, the memory of the serious and painful treaty that has existed in Hungarian society since 1920 has created energies affecting all areas of life. Of these energies, it is the willingness to compete that has been behind the exceptional Hungarian successes in the fields of sport, gastronomy, arts or even sciences over the last hundred years. We do have values that we also need to build on, this time in the field of economy. On the other

hand, as the analyses in this book show, we have also made recurring mistakes that we should definitely avoid. This can be a new recipe for success. It is a huge challenge to write an economic history book covering a period that spans a whole century. Economic statistics are often incomplete, and the concept of prosperity has also changed over time. Our goal was to use the most comprehensive data from the last ten decades, to facilitate the comparison of the different periods’ results. We hope that both non-professional readers and professional economic analysts looking for more comprehensive data will find this approach satisfactory.