Impacts of the Crisis on the FDI-Led Development Model in Hungary: Emergence of Economic Patriotism or Shift from the Competition State to Patronage? Miklós Szanyi (IWE, Hungary)

The 2008–2009 crisis generated much criticism concerning the efficacy of policies favouring global markets and multinational business. Economic patriotism became widespread, and Hungary has been active in implementing corresponding new policies. This chapter analyses these steps from a theoretical viewpoint and also shows the immediate (mostly negative) impacts on the economy and institutions. The application of selective advantage and disadvantage measures were aimed not only at the improvement of selected Hungarian firms’ competitive positions against multinational business, but also tried to split the concerted actions of the latter business segment. Some of the negatively affected firms sold their Hungarian branches, but most of them remained albeit they reduced activity. The selective disadvantage measures (taxes and levies on selected foreign firms, unfavourable changes in regulation) caused significant changes in market structure, but they also triggered EU competition procedures. Most harmful was the negative impact on market institutions, the decline of the rule of law in the country. The discussion is wrapped up with suggestions as to how the perceived problems with multinational business could be managed with market conforming policy tools.

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