Fair play

How the corruption influences the young generation in Hungary?

Since 2010 new structures and priorities have emerged, transforming the Hungarian business sector. While the short-term outlook for 2017 is deemed to be rather positive, the mid- and long term economic unsustainability is highly risky for the continuous relapse of competitiveness. There are numerous examples (for example regarding strategic agreements with companies or the tailor-made public procurement procedures), that the government have openly discriminated among businesses upon their political loyalty building an economic system in which rent-seeking, and its subtype, corruption distorts the market economy. The combination of state capture and such crony capitalism has led to the deterioration of institutional performance. In the business sector representatives’ opinion, the regulatory environment in Hungary is unpredictable, while investors face a huge administrative burden.

The decision-makers’ isolation diminishes accountability as only those can influence the government who “stand close enough”; ordinary people feel that they have no impact. On the institutional level the business sector experts have lost their faith in the public prosecution service for the body has had problems with taking a clear stance in high level corruption cases with political connotations for the last 25 years. On the social level, according to the experts there is no willingness or faith in controlling power or making it accountable as there is no faith in controlling one’s own life. Despite the chain of measures to cover decisions and public money expenditure, the demand for government transparency is increasing among younger people as they have socialized on the internet where “no one can hide” and grew up aware of the fact that actions can have immediate consequences.

In addition to the macroeconomic problems, the considerable regulatory burden on the private sector is also an imminent risk for corruption and graft. The government’s emphasis on solving economic problems or enforcing its own interests through laws is seen as unnecessary and a means only to protect its favored allies. The result is an overregulated system in which state law covers procedures and markets, which could sufficiently operate without any intervention. Crony capitalism in Hungary provides wide-ranging power for the government over the business sector, limits open competition, and enables undue influence.

Perception of Corruption in Hungary

The elimination of control institutions from Hungarian public life has increased corruption risks significantly. According to Transparency International’s Corruption Perception Index (CPI)[1] Hungary is deemed to be moderately corrupt in a worldwide comparison, reaching 48 points in 2016 on a scale from 0 (‘very corrupt’) to 100 (‘clean and non-corrupt’), which is 3 points less when compared to the country’s score in the previous year. With this performance, Hungary ranked 57th among 176 countries assessed. The perception of Hungary’s ranking on anticorruption performance has dropped in Central Eastern Europe among countries that have joined the European Union since 2004. By 2016, Hungary’s rank dropped to the bottom of the group, being followed only by Bulgaria and Romania.

State Capture and Institutional Performance

According to Transparency International, corruption in Hungary reached the institutional level by 2008, which was demonstrated by repeated and regular abuses of power for private gains by both the central and local governments. After 2010, however, parallel to the major setback to the rule of law and to democratic principles, the nature of corruption has changed as it has become more centralized. Hungary has become vulnerable to a special kind of ‘state capture’, i.e. in which parties and politicians, in an informal network with oligarchs, re-politicize the state in pursuit of a political monopoly (World Bank 2000; Burai-Hack 2011; Innes 2014). Powerful oligarchs either outwit the government or, more frequently, are in symbiosis with influential public decision-makers, allowing them to extract public money from the system through intentionally designed and professionally managed channels (Jancsics-Jávor 2012). In the Hungarian system of state capture and crony capitalism, corruption has become a specific form of rent-seeking, while money-making does not depend on market performance, but rather upon political connections. As mentioned beforehand, Hungarian economic actors are in a number of sectors prone to seek the grace of the government instead of competing in a regulated market providing grounds for the elite’s abuse of power for their private interests.

The combination of state capture and crony capitalism has also led to the deterioration of institutional performance. In business sector representatives’ opinion, the regulatory environment in Hungary has become unpredictable, and investors face a huge administrative burden. That was illustrated by the survey of the World Economic Forum[2], which concluded that Hungarian state institutions’ transparency and anticorruption performance was particularly worrisome. While Hungary was the 28th most competitive economy in the world in 2001, it only ranked 69th on the competitiveness list in 2016. The perception of public institutions reflecting the level of accountability and transparency within the public sector is exceptionally bad: from 26th place in 2001 the country slipped to 114th by 2016. Hungarian businessmen indicated regulatory uncertainty and corruption as the main obstacles to running a successful business.

How Young People View Corruption

TI Hungary has conducted a survey[3] in 2016 among young people about their perceptions on corruption in Hungary. Though most young respondents who took part in the research were still students or rather worked as employees, they were very aware of the possibilities and obstacles and had firm ideas about their own potential regarding business activities. Most of them were not keen on starting their own companies. They considered corruption a serious obstacle and a ‘cost’ to reckon with, e.g. when the required permission from the authorities concerned. Their assumptions were based upon their previous experiences. They have listed several cases when they had faced different forms of corruption including informal payments in the health care sector, bribes given to security guards to allow entering events, prefixed public procurement procedures with previously decided winners both on central and local level of public administration, examples of nepotism with whole families working in public bodies, payments to pass driving license exams as well as police officers and public transport controllers to avoid fines.

[1] https://transparency.hu/en/adatok-a-korrupciorol/korrupcio-erzekelesi-index/cpi-2016/

[2] https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1

[3] https://transparency.hu/en/news/perception-of-corruption-and-media-consumption-of-young-people/