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«György Jenei Working Paper No. 67 December 2009 b B A M B AMBERG E CONOMIC R ESEARCH GROUP k k* BERG Working Paper Series on Government and Growth ...»

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A Post-accession Crisis?

Political Developments and Public Sector Modernization

in Hungary

György Jenei

Working Paper No. 67

December 2009











BERG Working Paper Series

on Government and Growth Bamberg Economic Research Group on Government and Growth Bamberg University Feldkirchenstraße 21 D-96045 Bamberg Telefax: (0951) 863 5547 Telephone: (0951) 863 2547 E-mail: public-finance@uni-bamberg.de http://www.uni-bamberg.de/vwl-fiwi/forschung/berg/ ISBN 978-3-931052-75-1 Reihenherausgeber: BERG Heinz-Dieter Wenzel Redaktion Felix Stübben∗ ∗ felix.stuebben@uni-bamberg.de A Post-accession Crisis?

Political Developments and Public Sector Modernization in Hungary György Jenei Professor, Department of Public Policy and Management, Faculty of Economics, Corvinus University, Budapest 1o93. Budapest. Fővám- tér 8 TEL: +36-1-4825032 Fax: + 36-1-482-5033 E-mail: gyorgy.jenei@uni-corvinus.hu Abstract The paper examines the relationship between the political system and the public administration modernization in the Hungarian transition. Its intention is to point out that there are various shortcuts and bottlenecks of the Hungarian modernization and the cumulative impacts of these deficiencies have caused characteristic difference of the Hungarian modernization trajectory from the typical Western trajectories.

Keywords Hungarian incomplete modernization trajectory; phases of modernization and their international contexts; politization; Neo-patrimonialism versus Neo-weberian synthesis;

JEL classification: H11, H83 2 György Jenei A Post-accession Crisis? Political Developments and Public Sector Modernization in Hungary 1 Introduction In Hungary we experienced and still experience an incomplete trajectory. In the first stage a legal-institutional framework was set up of a Rechtsstaat with deficiencies in the practice. In the second stage from the three different contracts – which are the core of the modernization process in the EU countries (contractual based relationship between the regulative and service delivery function; contracting out for the involvement of private enterprises and civil society organizations in the service provision; Citizen’s Charter for the legitimation of the reform steps in the society) – only contracting out has applied in the Hungarian practice. Citizens have been not empowered and even now no Citizen’s Charter can be seen on the horizon.

In the third stage the administrative principles of the European Administrative Space (EAS) have been introduced but in an unbalanced way and the requirements of the increase of economic competitiveness were only partially implemented. These external requirements of the EU could be accomplished only with deficiencies, because when Hungary entered the EU cumulative deficiencies could be experienced in the public administration modernization.

By now – in the stage of a desired consolidation – the crucial issue is that which type of state will be consolidated: a Neo-Weberian or a Neo-patrimonial state?

It is evident that the transition from command to market economy and from totalitarian state to a pluralist state, multiparty democracy is not only a transition in itself but rather a long process of transformation and it requires essential reforms in the basic functions and institutions of the state (König, 1992), and it requires the emergence or re-emergence of a civil society as well.

First of all we have to make a clear distinction between transition and transformation. The term “transition” refers to the beginning and the completion of a historical process. In that sense the CEE countries have had a starting point, a party-state or a state-party system and in the coming 30-40 years they should manage a perfection of a market economy system and liberal democracy.

The term “transformation” covers the essential changes in the economy, society, and politics in the process. These transformation and transition processes have emerged on various historical background. There were differences in the starting point of the transition among the CEE countries and these differences have been deepened in the course of transition.

4 György Jenei It means that you can find on one edge of the continuum functioning market economies and liberal democracies while on the other edge of the continuum liberal democracy is not a realexisting system but an instrument for the international legitimation of political systems which is more an enlightened absolutism than a liberal democracy. The relationship among them can be characterised as a “diverging convergence”.

It is the reason why the Hungarian experiments have to be carefully applied to all CEE countries. Perhaps the reform and modernization processes of the new EU member and accession states from the region are more or less similar to the Hungarian pattern. For the other countries in the region this pattern is less relevant and in a few cases the development of liberal democracy would threaten the political stability in these countries.

In Hungary it is convenient to break up the process of administrative reform into various phases. Three phases are distinguished from each other: the first lasting from 1989 to 1994, the second from 1995 to 2003, and the third from 2004 to the present time.

2 The first phase of modernization and its international context (1989In the first period the basic task was the creation of a strong legal state. But the task was not so simple because in the European tradition there were three different Rechtsstaat models.

According to Walter Kirkert the basic difference between the Napoleonic and German models is the following: “The Napoleonic state model, in which the nation state is united and the state serves the general interest, the administration is centralised, hierarchical, uniform, accountable and controlled, and state officials are highly trained and qualified, and organised in professional ‘corps’, also formed the foundation of Mediterranean states like Italy, Spain and Portugal. The German Rechtsstaat tradition can be recognised in countries like Austria. The main difference between the legalistic Napoleonic and the German Rechtsstaat model is that the Prussian state formation was not based on a revolutionary abolishment of monarchy by the bourgeoisie, but on the hegemony of the Prussian elite, in particular the ‘Iron Chancellor’, Bismarck. The nineteenth-century German idea of Rechtsstaat meant that the sovereign was to be bound by laws and rules, which were to be equally and fairly applied to all state subjects, and that judges and administrators, were to be neutral. Contrary to the French principe de legalité, in which the law is the expression of the volonté générale, of the people (Ziller, 2003), A Post-accession Crisis? Political Developments and Public Sector Modernization in Hungary in Prussia and Habsburg Austria the emperors remained in absolute power. Parliamentary democracy was only established in Germany after the First World War (Kickert, 2008. p. 5-6).

The third model is the liberal constitutional Rechtsstaat established in the twentieth century in many West-European countries. According to Kickert “The establishment of the Rechtsstaat also marked the beginning of modern professional bureaucracy. State officials transformed from personal servants of the king into servants of the impersonal state. They became properly educated and trained professionals with the proper expertise, they fulfilled an official, formally described task, held a formal and protected life-long position, with regular salary and pension.

The ideal-type of bureaucracy (Weber, 1922) was born (Kickert, 2008. p. 6).

What type of Rechtsstaat model was established in Hungary? The Napoleonic model can be excluded because the authoritarian system was not abolished on a revolutionary way. The Hungarian ambition and intention was to create a liberal constitutional Rechtsstaat based on the primacy of the law. Legal sources should be the basis of administrative actions implemented by a modern professional bureaucracy. In spite of the fact that Hungary followed the German Rechtsstaat model in the period of the Austro-Hungarian Monarchy there were no attempts for its renewal (Hajnal-Jenei, 2008. p. 211-212). By now it turned out that serious deficiencies are in the implementation of the Rechtsstaat model. Rechtsstaat requires the separation of the there basic power branches; the legislative, executive and judicial institutions.

In Hungary the separation of judiciary from the two other power branches is not completed even by now.

The courts are influenced by the executive on different ways; for instance in their agenda setting and for slowing down judicial process. The extent and the forms of arbitrary actions is also an Achilles heel of the system. Politicians and bureaucrats are not demarcated in the commitment of bribery and corruption. Sometimes elected politicians are the initiator.

Sometimes it is a bottom up corruption when low level civil servant must give a certain share for their principal. But top-town corruption also occurs quite frequently when top level civil servants have to buy silence of the others. In Hungary one kilometre highway costs the double amount of money than in Croatia. However it is well-known that Hungarian highways are built on the great Hungarian plain and the Croatian highways are built in hilly regions. The corruption connected to public procurement and later on to PPP contracts proves that the autonomy of the public administration is limited and it is dependent from the leaders of the political parties.

6 György Jenei Further on democracy employs police and armed forces to guarantee internal and external security. But just recently Hungarian citizens could observe and experience arbitrary actions of the police and other law enforcement bodies in the limitation of their basic freedom rights (freedom of speech, right of assembly). The way how Rechtsstaat was established in Hungary had a controversial impact to the autonomy of public administration. In the beginning autonomy was decreased, even limited arguing that the bureaucracy served the previous authoritarian power. But bureaucracy played a controversial role in the crisis of the previous political system. In the first place it really was the executive part of the power, but on the other hand, based on its increasing autonomy, acted independently from the party system. This independence was declared in a critical phase of the transition in May 1989 and it was the main guarantee for a peaceful and consensus-based Hungarian transition.

After 1990 the new political parties not only restricted the autonomy of the public administration, but also politicized the activities of the bureaucracy. The result of the impact of the new parties was a decrease in the professionalism of bureaucracy.

It means that the legal-rational principle of the Weberian theory on bureaucracy was only partly accomplished. It turned out that no imitation of any Western models is possible, because of the impact of the Byzantine historical heritage. It resulted in that the legalinstitutional framework was set up, but the political behaviour was not adequate to the framework and it caused serious deficiencies.

3 The second phase of modernization and its international context (1995- 2003)

Democratic legitimacy has two components: legal certainty and efficiency. The main issue in the first phase was to create legal certainty and the first phase was not completed when the second phase had to begin. The increase of the performance level of the economy and the public sector became an external requirement of Europeanization. The improvement of infrastructure, the quality of public services, and the performance of public administration became key long-term factors of economic recovery and modernization.

Institutional capacity building became the core requirement, and public management reforms were the answers to the challenge. According to the typology of Pollitt-Bouckaert (PollittBouckaert, 2002) public management reforms in Hungary had begun on the modernising trajectory in 1990. In the mid-1990s a shift has begun from the modernising because of the A Post-accession Crisis? Political Developments and Public Sector Modernization in Hungary weakness of the legal state. Then the accession to the European Union produced an external constraint to reinforce legalism, and strengthen effectiveness at the same time. The cumulative deficiencies were confronted with new waves external requirements and the result was a somehow chaotic situation.

Hungary has had an incomplete trajectory in an international perspective. From the three different contracts (contractual based relationship between the regulative and service delivery functions; contracting out for quality improvement; Citizen’s Charter) only contracting out is applied in the Hungarian practice. The steering and rowing functions were not uncoupled. The day to day actions of the public agencies were not based on contracts between regulation and service provision. Only a performance appraisal system has been prepared without creating the opportunity for a correct performance measurement.

The consequence was that public agencies could not compete in the poorly regulated market of service delivery with private enterprises. No transparent mechanisms of accountability were built up for civil monitoring. Citizens were not empowered. No Citizen’s Charter could and can be seen on the horizon.

The state monopoly is being replaced with private monopoly. In a county (where the ruling coalition has majority in the county assembly) the hospitals have been contracted out. There are four hospitals in the county. Three of them are already in the hands of a private firm. (In this “private firm” leading officials from the government are interested in investments.) This firm has made a bid for the fourth hospital with the support of the county assembly. The capital of the county – where the hospital is located – resists. Let us suppose that the private firm will win and control the fourth hospital as well. Who will compete with whom? How can the public control them? Will the regulative power of the government be efficient?

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