Welcome by the Chief in Editorial Board

The English special issues of the journal of social sciences Polgári Szemle endeavour to provide scholarly assessments of economic and social developments in Hungary and of the country’s history, and to explore its relationship to the rest of the world, with special focus on European identity and our relations with the European Union. For this reason the editorial board has rightly placed a study penned by academician Gábor Hamza about Robert Schuman’s intellectual oeuvre and relations with Hungary first in this 3rd English special issue in Volume 15.

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In 2019, now more than a decade after the global economic crisis of 2008–2009, it is appropriate to look back on the events of the period, which was one with a major bearing on economic history. The complex challenges emerging in the aftermath of the global economic crisis and the answers given to them remain fundamental determinants of our daily lives to this day. Moreover, as on a number of occasions in the course of history, the economic crisis also challenged the dominant trends in connection with the development of economics as a science. The very first and perhaps the most important reference point in the debates was the way in which to manage the crisis.

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The State Audit Office of Hungary (SAO) conducts audit of more than 800 organization, (which can be public institution, municipalities, state and/or municipality owned enterprises, foundations and non-state service providers) on the efficiency, effectiveness and the regulation of the usage of public funds in accordance with good governance. In addition, SAO has an important role for analyzing and assessing the budgetary risk and shortcomings, with this action it also supports the stability of Hungary. The SAO not only supports good governance by conducting audit and providing “guide”, but also leading by example and functioning as a role model for institutions using public funds.

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Starting from the macro processes of the national economy and public finances the article examines three economic-public finance turnarounds in Hungary: the improvement of financial stability, the sustainability of the outstanding economic growth and the improvement of efficiency to be achieved and in all of this the role of rule-based budgeting. It shall introduce the regulatory and institutional solutions of the latter i.e. how this service, as a logical consequence of a framework, became a useful part of the financial policy by implementing its rules and – as an annual realisation of the above – a useful part of the budgeting practice. The article reaches the conclusion that it was unavoidable to “elevate” the major stipulations of the rule-based budgeting and the rules of the guarantee-like operation of the institution guarding over the implementation of these rules in the Fundamental Law of Hungary in 2011 to thus strengthen budgetary responsibility. Additionally, the article is dealing with the relations of the Hungarian and EU regulations, the main characteristic features of the work of the Fiscal Council, the FC’s recommendations made during the past nine years and the effects of the said recommendations.

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Financial supervision, including banking supervision, has evolved over the last hundred years in terms of both its institutional system and its methodology and approach. The biggest impact on development was caused by various economic crises and scandals at certain financial institutions. In order to be able to mitigate the impact of financial crises on the banking system and to detect and deal with banks’ problems in a timely manner, financial institutions must be subject to continuous supervision. The most recent era in Hungarian banking supervision began on 1 October 2013, when the Magyar Nemzeti Bank took over the role of the Hungarian Financial Supervisory Authority, thereby integrating micro-prudential supervision into the Hungarian central bank. Renewal can be identified throughout the set of instruments for Hungarian supervision, including continuous supervision and investigation methodologies. The entire set of instruments is characterised by a change of approaches, i.e. the reactive, “retrospective risk management” approach has been replaced by a proactive approach. As technology develops, it has become possible for the Supervisory Authority to use solutions that enable it to be present in the life of an institution without interfering with its business. In addition, the spread of digital channels has dramatically changed the financial habits of people and institutions. Information technology is becoming indispensable in more and more areas of life. Managing and monitoring the inherent risks is a major challenge that requires innovative solutions. The only constant is change. This paper presents a detailed overview of the latest supervisory developments and regulations.

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The two-tier banking system was (newly) born in Hungary in 1987. The advent of political changes arrived when the over-indebted country had been left without reserves, and nearly went bankrupt. From such a difficult position a functioning banking system had to be built up after the first free elections held in 1990. During the second term, between 1994 and 1998, most of the Hungarian banks were privatised (after consolidation of the individual banks during the first government with the help of government bonds.) In the third cycle there appeared to be too many banks in the country, and most of them were below the optimum. In the period between 2002 and 2010, banks flourished and created a credit boom based on foreign currency. Following the international financial crisis this led to great troubles. The forint was devaluated against the Swiss franc, and numerous clients became insolvent and lost their homes. The government elected in 2010 made efforts at resolving the situation to help citizens by programmes including several steps. Banks were required to take part in this effort by paying special taxes and for a time this cut back on their profitability. The last three governments since 2010 modified the deconcentrated banking structure and repurchased some of the previously privatised banks. In 2013 the government set the goal of increasing the share of Hungarian-owned banks to above 50%, which was achieved in 2019. The profitability of banks has recovered, and their capital position is now strong. The National Bank of Hungary fulfils the supervisory function. Through its monetary policy, unorthodox measures and credit programmes, it helps the smooth functioning of the sector and thus the financing of Hungarian SME’s.

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Business associations in government ownership attend to significant public duties. Their activities, the quality, efficiency and fruitfulness of their business management have a considerable impact on the quality of life, security, health and welfare of the population using their services and contribute to the responsible management of public funds. In other words, the reasonable, compliant and effective operation of businesses operating in public interest is one of the most important social objectives. The State Audit Office’s contribution includes its audits, analyses, studies, consultancy to management systems, performed on the basis of the Hungarian National Assembly’s authorisation given in a resolution, and its support to training executives in the field of public finances. The article presents their valuegenerating utilisation.

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The Hungarian economy has been bearing the mark of disadvantage in development due to a late state organisation (at the end of the 10th century) and late rise of the middle classes (second half of the 19th century). The process was made really “vibrant” after the relatively rapid spread of market relations that followed the termination of the feudal production method and social order in the middle of the 19th century, the losses of World Wars I and II and then the nationalisations corresponding to the spirit of the age in Eastern Europe. Between 1947 and the 1980’s, state ownership predominated, and then after four decades, the entire system was nearly completely knocked down: this meant the privatisation of collectively owned assets, including radical changes in companies’ ownership and management positions. After laying the foundations of the new public finance regime adopted in 2010, the government’s regulatory, control and business management achieved its full potential. However, the “time travel” made in this study and overarching more than one and a half centuries also sheds light on the fact that capitalism was built and rebuilt, and to an even greater extent, private ownership was torn down with the state’s active participation, and moreover, with its inevitable intervention, which is another unique feature of Central and Eastern Europe, and more specifically Hungary. This study discusses the successive relays (periods) in the mentioned one and a half centuries, with special focus on the procedures that took place in direct state (proprietary) and indirect regulation, in order to provide a scholarly background to the state’s current involvement, particularly the prioritisation of companies in community ownership. Consequently, this lends relevance to outlining the 19th-century building of capitalism, market socialism and the 21st-century proactive, state-managed economic policy in Hungary, and especially to discussing the logic of the operation of companies that can be considered as the fundamental aggregates of production and to tackle the economic policy governing corporate management.

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Management of government debt in Hungary is a particularly important task, as the country has a relatively high level of debt above 70 per cent of GDP, despite its declining trend in recent years. The same indicator is lower in the other Visegrád countries, in Czechia, Poland and Slovakia, it is between 32 and 49 per cent. Since 2010, the Hungarian Government Debt Management Agency has also placed considerable emphasis on making public debt financing more secure and has achieved significant results. In terms of managing public debt, three types of risk factors are distinguished and are called ‘original sins’ in the economic literature. The first one is indebtedness in foreign currency, the second one is short-term indebtedness, and the third one is indebtedness to foreigner investors. This study examines the effects of these three risk factors from a theoretical point of view. The evaluation of these risk aspects between 2010 and 2018 in Hungary is also presented in comparison to Czechia, Poland and Slovakia. The results obtained suggest that at present Hungary and Slovakia are in a better position than directly after the crisis in two parameters, and Czechia has improved in one, while Poland has increased its risk exposure in all the three criteria.

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To boost economy, it is essential to enhance the research and development performance of secondary and tertiary educational institutions, which can contribute to increased performance in the whole profit and non-profit sphere. This can in turn help improve national economic performance (GDP). In our view, it is also worth examining education and competitiveness at the regional level. With a view to achieving strategic objectives aimed at boosting Hungarian economic performance, special attention must be paid to improving research and development regionally in the future. Competitiveness of the national economy can be viewed as the synthesis of regional competitiveness. There is a need for the reinvention of the whole structure, as well as the structural, methodological and financing background of vocational training, the adaptation of international best practices, not only for the sake of convergence in underdeveloped areas and regions lagging behind, but also for improving the competitiveness of the national economy. Looking at Hungary’s innovation system, it can be concluded that based on the indicators used by the WEF the country is behind the EU average. Corporate innovation capacity is poor; the majority of businesses still base their production on cheap labour and cannot or will not innovate. However, in order to become a knowledge-based society in the future, Hungary needs increased investment (financial investment and a paradigm shift) in the areas of education and innovation.

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The regime that emerged with the peace treaties concluded after World War I chopped up the Kingdom of Hungary and rewarded its neighbours, helping them to establish themselves on the basis of the principle of national self-determination, by giving them two-thirds of Hungary’s areas and one-third of its Hungarian-speaking population. During the settlement that followed World War II, the great powers repeatedly forced this shocking decision upon Hungarians drifted to the losing side. This essay sums up the causes and events of this difficult-to-survive historical traumatism and its adverse impacts on the Central European region, in retrospect after more than a century.

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In this paper the classical rule of law, born in the 19th century, is compared to the current post-modern rule of law through the opinion of the author and of the relevant international experts. The paper focuses on nation states’ sovereignty, the settlement of jurisprudential problems between the European Union and its Member States, the elimination of anomalies in the post-modern rule of law, as an ultimate guarantee, the constitutional courts of nation states and the Conference of European Constitutional Courts.

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After the clearing of the nation of legal cultures the author shows the european legal families and legal cultures. After the examination of historical characteristics of hungarian legal cultures he deals with the possibilities and limits of approximation of the EU legal systems and cultures. Finally the paper analysis the impact of EU membership on the hungarian legal cultures.

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The study deals with the second codification wave similar to and following the first codification period of labor and public service law after the change of regime in 19921993, which took place because contrary to the previous left-liberal government policy, a very different, right-wing civilian government came to power in the parliamentary elections of 2010. The article in the previous English volume showed in detail only the employment and public service legislation of 1992-1993, while the second codification of 2011-2012 relating to these two fields of law was only outlined. In this writing we give a more profound critical analysis of the re-codification of employment and public service law in 2012 and the subsequent amendments. Our study covers both individual labor and public service law, as well as employment and public service law relations in both the fields of labor law and public service law.

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The authors have elaborated a model to correct the false demographic message of the current pension scheme, as the latter suggests that a stable pension scheme can be maintained without having children. In this model, parents are entitled to a pension supplement for their jobholder children. In order to finance this scheme, an appropriated child-to-parent pension fund is proposed: a specified part of jobholder children’s tax payments are contributed to it, and when their parents reach the specified age, their pensions are supplemented from this fund. Following the income and outflow of payments by the various generations, the proposed pension fund would thus create a kind of a generational finance within public finances. With the adoption of the child-to-parent pension element, the generational approach becomes part of both family budgets and public finances. The expression “child-to-parent” lends a symbolic power to the particular amounts, as it suggests that children represent a coverage value. According to our calculations, already the partial enforcement of the generational budget approach we propose will result in a 3 to 4 percentage point economic growth in the next few decades.

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This study provides a brief outline of a pension scheme based on human capital, an idea that stems from understanding that pay-as-you-go (PAYG) pension schemes should be based on the recognition of parenting, as they distribute the yield of investments into human capital. The fact that this is not the case explains the numerous problems inherent the scheme. Similarly to a Ponzi scheme, the promises and options offered by the pension scheme are increasingly divergent: promises are becoming increasingly inflated, while options are diminishing. The system outlined below would resolve these problems. Parenting and the pension scheme are intrinsically interrelated: the former can only be made economically profitable through the latter, as evidenced by the prevailing method applied throughout most of global history, which was only made redundant in modern times.

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The natural fertility rate directly expresses the reproductive capabilities of a country. Typically, the value of this indicator is considerably lower in the economically developed part of the world than in less developed countries. However, in terms of fertility rates, developed countries are not completely homogenous either, at least in an analysis of changes in time series. Through the example of various EU Member States, this study aims to pick the economic and policy factors that may trigger improvement in the fertility rate. Apart from a few countries, it is a common problem in the surveyed states that population growth is insufficient for ensuring reproduction. Paradoxically, population decline and ageing is a problem in those countries and regions of the world where the material, economic and welfare conditions are the most favourable. It is also important to demonstrate globally detectable correlations between fertility rates and the standard of living. The aim of this study is to highlight the specific social and economic indicators with the most beneficial and most adverse impacts on developments in fertility rates. An important finding of the study is that having children is essentially not an economic, much rather a cultural matter that is closely related to the concept of responsibility, and in addition, economic stability or a balanced income distribution may increase the fertility rate. Overall, decrease in the intensity of childbearing can be considered as a legitimate concomitant of societies with advanced economies. In the study references are made to other variables that may shift the unfavourable demographic trends in a more favourable direction in the developed world.

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Cultural heritage is an integral part of Hungarian music education. Folk traditions and folk songs are taught in every school, from the capital city to the smallest villages. Thousands of songs were collected by Zoltán Kodály and Béla Bartók, who adopted them in their classical compositions. With this they earned fame for Hungarian folk music and traditions. Zoltán Kodály also composed a series of music reading materials, mainly based on folk songs, which is currently used on all levels of Hungarian music education. Not only the Kodály concept, but the Táncház-method was also selected in the Register of Good Safeguarding Practices of UNESCO Cultural Heritage. In our digital age, the net-generation, unlike the previous student populations, can have different habits, which is the reason why students’ music skills were tested with technology-based methods and tools. They are surrounded by popular media; however, the value that folk tradition offers should be inevitable in their education. The findings of our research provides input for the educational system about Hungarian students’s music literacy, and their familiarity with its various elements, especially with certain components of their cultural heritage.

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In the last months of 2018, every weekend tens of thousands of people demonstrated on the streets in France. The main reason of the demonstrations was the rising petrol prices and its environmental tax that the government wanted to raise according to the 2014 law. The French example shows that in many cases the measures against the climate change can provoke a very deep resistance from a major part of the society; meanwhile the global climate change became a bigger and bigger danger for humanity. In the first part of my publication, I will shortly examine how the climate change became an important issue globally in the last 20 years; and how environmental pollution and the related climate change have become an important research subject in the economy and the answers the scholars gave for these challenges. In the second part I will show the toolkit the fiscal policy disposes to mitigate the climate change, and finally I will examine why and how the monetary policy and the financial system must be involved in the fight against climate change.

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In recent decades demand for and the supply of sustainable tourism related to national parks have increased. Environment-friendly tourism plays an increasingly significant role in the travel habits of the Hungarian population. Hungary has a lot to offer in eco-tourism. Its nature tourism destinations include national parks, on the one hand, and geographical regions, nature parks and geoparks maintained by voluntary civil society organisations. In order to meet the needs of green tourists, centres and nature trails are created and guided tours are organised. Eco-tourism plays an important role in Hungarian tourism and based on the revenues, expenditures and visitor turnovers in natural parks, its importance is increasing in all areas. Support programmes represent vital financial resources in the development of tourism. Several forms of support are available in Hungary to contribute to improvement in different areas. This is a study of the importance, classification and accounting of tourism development grants.

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The conceptual framework of CSAs in Hungary is evolving in line with the international standards; however, there is a certain delay in conceptualising these actions into a strategic framework in private sector organisations. There seems to be a distinction between for-profit and non-profit stakeholders; the former are characterised by corporate social responsibility initiatives, whilst the latter rely on the sustainability of these initiatives. The author is aware of the fact that these phenomena are likely due to the country being an emerging economy in Europe, and argues that, in a broader context, social actions, if remaining segregated, are insufficient to solve civil society problems. With consideration to social needs (poverty and social inclusion), the arguments for the appropriate targeting and sustainability of CSAs are emphatic, and a shift towards a more strategic concept of social investment is essential. In this perspective, the author argues for the significance of knowledge transfer (i.e. from consultancy partners to civil organisations, or between for-profit organisations) in encouraging networking and increasing the forms of employee community engagement. At the end of the paper, the placing of a project (sign-language distant service to help disa-bled/deaf persons) into a sustainable and financially sound framework is described.

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Ever since the dawn of history, humans have always needed energy, used it in a gradually growing number of fields and found new forms to meet their ever increasing demand. It is no exaggeration to claim that in the absence of energy, the very means of subsistence would cease to exist for today’s urbanised society. Nothing would function without electricity: neither the control systems run by IT tools, nor the core and auxiliary equipment of the fundamental supply and care systems. In the absence of electricity, water and natural gas supply would stop, ventilation systems would become inoperable, transport and traffic would shut down, and in the absence of illumination, everything would go dark, buildings would not be heated and cooled, both industrial and agricultural production would stop, the supply of drinking water and food would become unfeasible, communication and security systems would become inoperable, and law enforcement could not attend to their duties either. In other words, the absence of energy would lead to an economic and social disaster. After a description of climate change, the article gives a glimpse of the energy policy of the European Union, and outlines the main pillars of Hungary’s new energy strategy.

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Since the spread of mobile Internet, knowledge is being restructured in our minds, because we have access to the entire knowledge of the world. During the last decade, the values that define learned people seem to be changing rapidly. Classical knowledge regarding national historical, geographical and cultural values seems to vanish from the mind of the young generation (the Z one, born after 1996) and new values belonging to the online environment are gradually replacing them. The results of this change can easily be experienced in higher education, where students seem to have forgotten nearly everything they have learnt in primary and secondary school about their national heritage. This article tries to shed light on the consequences of this ongoing process, and explains the importance of national identity in shaping creativity and innovation. Also, it tries to explain the need to reshape the methodology used in primary and secondary education and to reconsider the national values in our decades of dramatically rapid change in the structure of knowledge.

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Car-sharing companies’ key argument is the heavily advertised sustainability element in their operation, which can partially be confirmed; however, this study sheds light on the importance of the connection between sustainability reports and financial statements. In order to gain more confidence and provide objective support to voluntary sustainable reports, the key question is if it possible to reconcile these statements to their financial performance and their assets and liabilities. In light of recent market changes in Hungary and the expansion of German car-sharing companies, this is an increasingly important question. Additionally, the study also addresses the significant 2019 market change in Hungary after the penetration of the car-sharing service based in Germany. The reviewed sustainability reports contain insufficient information to be reconciled to financial statements. Additionally, the aspects related to sustainability are recognised through the parent entities’ books under environmental liabilities. Each of the reviewed companies considers itself as “the most sustainable entity” in the given segment, which raises serious doubts regarding the reliability of the information. From the perspectives of the basic analysis and profitability, the German companies reported better results than the Hungarian ones; besides, in Hungary, the service providers applied different fleet-financing models and used leases or purchase transactions. The reviewed car-sharing companies seem to operate on profit rather than a sustainability basis. Although these services do contribute to a more sustainable future, without proper alignment, the real impacts cannot be validated or traced back to the relevant financial statements. The lack of transparency, as an example of climate-related consequences, could have a significant effect on the companies’ performance, and this may be vital and relevant information for investors.

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The book entitled Audit: Means of Sustainable Good Governance by László Domokos was published in December 2019 by the Akadémiai Kiadó, and it is a practical description of the role supreme audit institutions play in achieving social welfare through the establishment of the well-managed state. The book introduces many important ideas and provides guidance in a comprehensive manner.

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The purpose of this study is no more than to give a brief summary of the history of business organisations in public ownership in Hungary along the logic of a recently published large monography. Using the method of descriptive historical approach, facts are established as a result of a kind of syncretistic literature overview. As a basic idea, with a view to the “Sitz im Leben” approach, the evolution of public business organisations may be compared to the development of public finances, and should be managed embedded in the latter, similarly to the economy, which always functions embedded in the society.

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The “illegal” youth movements that evolved in District XI of Budapest in the 1950’s set the objective of preserving the values of the “old tradition” the socialists wished to change: those of the middle-class culture and heritage of Europe. Giving a glance of the activities of these communities, the hidden life of the church, hiking built on scout traditions and the state power’s reprisals, the authors’ picture and analysis of the period may be of wide interest.

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Following its 2015 release by Éghajlat Publishing, the collection of interviews with three leading Hungarian intellectuals, Mihály Patai, László Parragh and Csaba Lentner, sharing their ideas of the world and, more specifically, of Hungary’s 21st-century perspectives, was also published in English in 2019. The thinkers portrayed in the book recall their ex-periences obtained during the period of socialist economy, their personal calling, the events of the nearly three decades that followed the collapse of the soviet bloc, including transition to a market economy, and of the last nearly one decade since the 2007–2008 crisis, especially the new Hungarian economic and social policy model in the making since the 2010 change of government. The book was published by Éghajlat, with support from the National Bank of Hungary, and includes a foreword by Academician László Palkovics, Minister for Innovation and Technology, edited by Lajos Péter Kovács and Klára Lengyel and proofread in English by the late Dr Roger G. Roe, who has, unfortunately, deceased since then.

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The study analyses the centuries-old process of the codification of private law (civil law) in Hungary. The author believes that the Roman law tradition in Hungary survived at both a legislative and a theoretical level. Romanist (mainly German Pandectist) influence can be observed in various draft civil codes of the country. The first Hungarian Civil Code, promulgated in 1959 and put into effect in 1960, was a socialist-style civil code. The procedure of harmonisation with the law in Europe influenced the new (second) Hungarian Civil Code promulgated in 2013.

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Thomas Molnar, a Hungarian Catholic emigé, was a well known fugure in the American conservative movement. In spite of the warm welcome of his works criticizing leftism, he stayed at the margin of this movement. Molnar never accepted the fusionism, he was critical concerning free market, and he openly refused many presuppositions of the Anglo-Saxon liberal democracy. He transported elements of the French Catholic conservative thinking into the US like the attraction to monarchical authority and hierarchy. For him the idea of time-tested tradition was hardly important, when he used the notion of tradition he referd to its perennialist meaning. The paper argues that his criticism of (political) modernity was form by the Pascendi dominici gregis.

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The term ‘groupthink’, coined by Irving L. Janis in 1972 is a phenomenon that is one of the worst factors distorting decisions. Groupthink evolves under peculiar antecedent conditions (or pre-requisites) and shows specific symptoms when in action. In this article, these conditions and symptoms are reviewed, examples are given from global history to demonstrate its adverse impacts and the management of the phenomenon is illustrated by positive examples. Then an attempt is made at proving that the rise and fall of foreign currency lending, perhaps the largest economic disaster in post-communist Hungary, can be traced back to the phenomenon called groupthink.

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This article analyses the most important aspect of learning housekeeping and of eating habits, the basis of individual experience, young people’s independent income in 3 regions populated by Hungarians: Budapest, the neighbourhood of Tatabánya and Slovakia. The study reveals that in all three geographical regions, the allowance giving habits of parents are less supportive in developing children’s ability to learn basic economy, and at the same time hinder the evolution of health-conscious eating habits, too.

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The 2007–2008 global financial crisis exposed the problems arising from systemic risk management on a micro- and a macro-economic level. This period was particularly challenging for the entire economic system of individual countries, including all the participants of economy. Post-crisis changes require appropriate awareness and financial determination and an adequate level of financial literacy of market operators. When it comes to financial literacy, innovation should be mentioned, since the parallel development of these two factors has a favourable impact on economic stability and on the competitiveness of a country. Overall, the level of financial literacy and the capacity for innovation have an influence on the stability, growth potential and competitiveness of enterprises and of the entire national economy. Therefore, improving financial literacy is in priority national interest, and as such, it must be at the centre of attention at all times.

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