Tue Jan 8, 2019, 09:24 AM

Orbanomics (Or The Return Of National Economics)


According to the latest economic forecast of the European Commission – no friend of the Orbán government – Hungary’s annual economic growth should moderate (as in the rest of Europe) from 4.3% this year to 2.6% in 2020, inflation will remain low, and already remarkably low unemployment of 3.6% will continue to fall to 3.2%. Hungary’s public debt, which peaked at 80.7% in 2011, is projected to fall to 68.6% by 2020. The country maintains healthy budget and current account surpluses.

Compared to other Central European countries such as Poland and Czechia, Hungary has slightly underperformed in recent years in terms of GDP growth. Interestingly, Hungarians’ household debt has considerably declined in recent years, from over 40% of GDP in 2011 to under 20% today, while that of the Poles and Czechs has remained steady. This suggests the frugal finances of Hungarian consumers may have reduced domestic demand and thus growth.

Overall, it would seem that Hungary’s economic performance is well in line with that of the rest of Central Europe, notwithstanding the usual kvetching about the Orbán government’s corruption (although I am in no position to judge whether that is worse than the region’s usual mediocre-to-awful standards). All this suggests that national-populist regimes are economically viable, notwithstanding globalist complaints.

As in everything else, in “patriotic economics” there needs to be an Aristotelian happy mean. Having completely open economic borders means being vulnerable to every economic dysfunction and predatory practice in the rest of the world. Being completely closed means poverty and stagnation relative to the outside world.

With the triumph of the “Washington Consensus” (not to mention what ought to be called the “Brussels Consensus”) in the 1990s, the pendulum clearly swang too heavily in favor of open borders, particularly concerning the free movement of capital. The unlimited free movement of capital means that your economy is now distorted by whatever goes through the minds of the capital-holding investors, who are by no means “rationally omniscient,” but are as prone to fashions, prejudice, and panics as the rest of us. Hence, your economy is liable to get overheated due to excess investment (which, for the investing country, also means your banking sector could now collapse because of economic problems in another country) and international capital runs. If your consumers take loans in a foreign currency, they also risk ruining themselves if the national currency’s value declines significantly, for whatever reason.

In general, increased economic “interdependence” between countries means added complexity and fragility. If anything goes wrong anywhere, it means everything collapses everywhere. Simplicity and antifragility are your friends. Do you really want the global economy to be a game of Jenga?

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