I’ll take that as constructive criticism; I sometimes forget that there is a PM facility on the board.
Anyway, I’d like this thread to get back on track - Chris’ posts are interesting though I’m not sure if he has much more to say on this.
PPP-adjusted numbers don’t really have the exchange rate volatility problem.
Hungary’s economy being in a bad state can only be “flat-out not true” if you ignore every economic analysis of the country.
I’m not disagreeing with that, just that they’ve impoverished themselves over the last twenty years. If anything it’s the opposite.
Who cares about the state of Greek public finances? I mean they have to because it’ll reduce their future income, but it doesn’t explain the 10% unemployment.
This also applies to the US then, right? Our interest rate is zero, and it’s just barely maybe getting us out of the recession. Clearly we’re a basketcase.
ECB policy didn’t cause the financial collapse, but now that there is one, and Greece, Spain, and what have you are in serious shit, the ECB should be doing the same thing the US is also not doing - far more aggressive lowering of rates, inflation targeting, everything they can think of. Instead there’s this inexplicable worry about inflation.
At least in the US people are used to moving in response to this sort of thing.
I didn’t say they had become actually poorer, that would be a stupid thing to say. I said:
[Hungary] went from one of the richest countries in the former Warsaw Pact to one of the poorest
Slovakia, once Hungary’s poor neighbour, went from having a GDPPC that was 75% of Hungary’s to one that was 15% bigger. Slovakia is now in the Euro, it’s factories ship cheap Hungarian labour across the border, its population buy up Hungarian homes because they are cheaper, and come on big shopping trips here to buy up all the cheaper produce.
GDPPC doesn’t tell half the picture. If you earn the same money in country X as another man in country Y, you aren’t necessarily equal. If country X loses much of your taxes to corruption, inefficiency and paying debts, while country Y spends it all on developing the country, then the guy in country Y is obviously far better off. That’s pretty much the difference between lean Slovakia, and slovenly Hungary.
Perhaps if you lived in Hungary, and had spent some time travelling around the region, you would see what I’m talking about.
That in no way compares to Greece. For starters, the statement “end of WW2” should show that there’s a big time expectation of much smaller budgets in the future. Second, the US benefitted tremendously by being the only intact world economy.
Bondholders have little faith in Greece to make the necessary fiscal cutbacks or have the austerity be able to pay their debts. They’re going to rely on the rest of the EU to carry them for a while.
Trading inflation for unemployment is a poor trade. Inflation is much tougher to tame and doing so could (and has) caused new recessions.
Perhaps if you lived in Hungary, and had spent some time travelling around the region, you would see what I’m talking about.
Maybe! But the income data disagrees with you and shows Slovakia and Hungary in identical shape as of last year; neither is one of the poorest former Warsaw pact countries. Your claim was wrong. The financial crisis has hurt Hungary more, but that’s the last year, not the last 20.
Wahoo, I’m not claiming that the US and Greece were in identical shape, just that “here’s a couple deficit numbers” doesn’t explain Greece’s problem. And what possible inflation spiral is greece going to get with the huge demand shortfall and 10% unemployment they have?
Maybe! But the income data disagrees with you and shows Slovakia and Hungary in identical shape as of last year; neither is one of the poorest former Warsaw pact countries. Your claim was wrong. The financial crisis has hurt Hungary more, but that’s the last year, not the last 20.
Slovakia has gone from 75% of Hungary’s GDP to 115% of Hungary’s GDP since the end of Communism. To insist that Slovakia (now in the Euro) and Hungary (postponing Euro membership indefinitely) are in “identical shape” economically you would have to be literally stupid.
I might have been mistaken in stating that Hungary has become one of the poorest nations in the former Warsaw pact (at least in terms of GDP PC), but that was just a statement to illustrate how Hungary’s economy has nose-dived, while the likes of Slovakia have soared. Even countries with lower GPC PC than Hungary have far better economies. They know it, Hungarians know it, the world’s economists state this in analysis after analysis, but for some reason you think that this is nonsense because you had a quick look at a googled data set.
I can tell you from experience how inefficient the Hungarian government is. I have to fill out form after form in quadruplicate, by hand, often in their government offices. Once I had to take a morning off work in order to visit their office and sign a form, in quadruplicate and in person, that confirmed that my address was in fact 18/B V.1 and not, as they 18/B V that they had in their records. A pointless escapade, one they knew was pointless, as they’d sent a letter to that very address that successfully reached me to tell me that the address was wrong.
My Estonian girlfriend, on the other hand, interacts with her government almost completely electronically, which probably explains why Estonia manages a surplus in bad years, while Hungary runs up massive deficits. Hungary recently built half a road linking the country with Croatia. Despite building over a flat plain, and Croatia building multiple bridges and tunnels, Hungary spent twice as much.
Estonia and Hungary have almost equal GDP PC (despite Estonia being 75% of Hungary’s GPD in 1993), the cost of living is also almost identical, but I pay more in taxes, and most of my money is wasted, goes into corrupt projects, or is spent on repaying debts run up by previous mismanagement and corruption. Do you think that I am as equally well off as an Estonian earning the same amount of money?
Where on earth are you getting those numbers?
Do you think that I am as equally well off as an Estonian earning the same amount of money?
I have no idea, as I know virtually nothing about the countries but the public data series. You keep claiming things that are factually incorrect, though.
How about these numbers from your own source, starting in 1993 because that’s when they were all independent.
-----------------1993-------2009-----------%increase
Estonia----------5716-------18050-----------315%
Latvia-----------4639-------14304-----------308%
Poland-----------6210-------17989-----------289%
Slovakia---------7448-------21373-----------286%
Lithuania--------5997-------15803-----------263%
Romania---------5001-------11755-----------235%
Hungary---------8107-------18547-----------228%
Czech Republic-- 11127------24400-----------219%
Bulgaria--------- 5628-------11759-----------208%
Notice how every country is outstripping Hungary, except Bulgaria (who only joined the EU in 2007) and Czech Republic (who don’t care because they have by far the highest GPC PC). Using 2008 figures, before the Baltic states got hammered by Latvia’s catastrophic collapse, when both Lithuania and Estonia had greater GDP PC than Hungary, then Hungary’s economy would have looked even worse, and that’s just going on the extremely simplistic GDP PC analysis that you seem to prefer.
Let’s look at some more figures, public debt as a percentage of GDP.
DEBT in 2008 (relative to GDP)
Hungary 78.8%
Poland 41.6%
Slovakia 35%
Czech Republic 29.4%
Latvia 17%
Bulgaria 16.7%
Romania 14.1%
Lithuania 11.9%
Estonia 3.8%
And how about tax burden?
Tax Burden in 2009 (relative to GDP)
Hungary 37.3%
Czech Republic 36.3%
Bulgaria 34.4%
Poland 33.8%
Estonia 31.1%
Latvia 30.4%
Slovakia 29.5%
Romania 28.1%
Lithuania 20.9%
So Hungary has the highest debt, being paid for by the highest tax burden, with an economy that is growing more slowly than all but two countries, but oh no it’s not really in that bad a shape because Jason read the GDP PC PPP table of a website found on google.
The worst performers are the high tax, high corruption, big government countries that have failed to reform much since Communist times. The best performers are the low tax, low corruption, light governments that have gone through painful reforms since Communism. It’s unlikely that this pattern will change.
Jason: The seems to be pre-70’s economics. You can have inflation with a high unemployment rate. And the experience of the last 25 years in the US shows that the simplistic Philips curve is no longer accurate.
Notice how every country is outstripping Hungary…
What source? I don’t see the “Slovakia is richer” numbers you’re referring to here here. This is it, maybe? Slovakia at 10% higher.
Notice how every country is outstripping Hungary…
One, you’ll note in that data series Hungary went from 2/9 to 3/9. Second, you’d expect post-communist countries that are to some extent industrializing for the first time to have their incomes converge, with the poorest ones outstripping the growth rates of the richest ones. And a higher government percentage of GDP is bad…how, exactly? And has what to do with your argument that Hungary sucks?
…before the Baltic states got hammered by Latvia’s catastrophic collapse
Perhaps recent events like this could explain some of the recent economic performance differentials in Eastern Europe, rather than how annoyed you are when you have to fill out forms at government offices.
Wahoo, Greece has like 3% inflation.
There’s only one way to resolve this.
WTF? This is what the entire discussion is about! The Greeks are protesting and blaming Nazis because they are drowning in debt and need to cut public spending, not because they think their economy is doing very badly. Which, as we saw, isn’t actually true anyway. Greek GDP was indeed contracting during 2009 but that was in line with the European average.
I mean they have to because it’ll reduce their future income, but it doesn’t explain the 10% unemployment.
Nor does 10% unemployment explain anything that’s relevant to the discussion. 10% unemployment is not actually particularly high for Europe after the financial crisis. France was recently at 10%, Germany is at 8.7%. For Q3 2009, Greek unemployment was smack-dab between EU and euro-zone averages.
You didn’t know any of that, did you? You just googled one random number that you thought sounded scary, did you? Pardon me if I’m getting rude but your transparent rhetorical tactics really get quite annoying at this point. Just admit that you were wrong already, since you obviously didn’t know any of the relevant facts.
This also applies to the US then, right? Our interest rate is zero, and it’s just barely maybe getting us out of the recession. Clearly we’re a basketcase.
Or maybe interest rates just aren’t quite as closely correlated with economic recessions and recoveries as you like to think.
ECB policy didn’t cause the financial collapse
Well, let’s just note that you finally admit that…
but now that there is one, and Greece, Spain, and what have you are in serious shit, the ECB should be doing the same thing the US is also not doing - far more aggressive lowering of rates, inflation targeting, everything they can think of. Instead there’s this inexplicable worry about inflation.
At least in the US people are used to moving in response to this sort of thing.
WTF are you talking about? The ECB refinancing rate is at one percent and most of the euro-zone is already recovering!
What is this “far more aggressive lowering of rates”? Zero percent? That’s your grand idea where everything will magically become much better than at one percent? Except apparently it doesn’t, since you just said yourself that the Fed’s zero percent rate doesn’t help the American economy.
What is your idea of “inflation targeting” if it’s not adjusting interest rates? Where is an “inexplicable worry about inflation” other than inside your head? Who are the “US people” who are “moving in response”, and what exactly are they doing?
Frankly, you’re merely blurting out random talking points now that your conspiracy theory about a libertarian-controlled ECB ruining the Greek economy has collapsed in the face of facts. You’d spend your time more profitably if you reconsidered how much the political bloggers you trust so much actually know about… well, anything. And if you checked your facts before posting.
As I said, from your own source. Unfortunately your source seems to have bad data. That original list you used to prove how great Hungary’s economy is a mish-mash of data from different years, as can be seen from searching its more accurate database.
Slovakia has a much stronger economy than Hungary now. Everyone knows this, except you.
One, you’ll note in that data series Hungary went from 2/9 to 3/9. Second, you’d expect post-communist countries that are to some extent industrializing for the first time to have their incomes converge, with the poorest ones outstripping the growth rates of the richest ones. And a higher government percentage of GDP is bad…how, exactly? And has what to do with your argument that Hungary sucks?
Actually Hungary is behind Slovakia, so 3/8. And based on 2008 numbers, Hungary would have fallen from 2/8 to 5/8, with Poland and Latvia (once only half of Hungary’s GDPPC) just a few dollars behind. Sure the economic crisis changed those numbers a lot, and may continue to do so, but doesn’t that show how simply looking at the GDP PC as a measure of an economy’s strength is largely worthless?
You seem to be blindly defending Hungary out of a pro-Socialist anti-Libertarian bent, but you are looking at this in totally the wrong way. I share libertarian goals of light, efficient government, but I also support health care for all, social security nets and strong protections of employees. This isn’t an argument about government spending vs. non-government spending, this is an argument about bad government vs. good government.
Estonia isn’t some libertarian paradise. It might have a low tax burden relatively to other European nations, but it is still higher than in America. It still has free health care for all, a social security net, and it even manages to fund the theatre my girlfriend works for. They manage this because they reformed their government and made it more efficient. They’ve also made it easier for individuals and businesses to make money. Hungary hasn’t.
Reform is painful because a lot of people have to lose jobs. But these aren’t jobs that are giving anything to society. They are jobs like stamping paper for the sake of it, and having two people to sell you a metro ticket: one to take the money and the other to clip it. It’s also about cutting out all the inefficiencies, and that hurts because a lot of people have based their business on getting around government bullshit, like the Visa companies who will get you a Russian visa without the nightmare of paperwork.
It’s also painful because you have to cut spending because your debt snowballed through inefficiency. Hungary has a myriad of confusing benefits and tax breaks. You have 13th month bonuses for the unemployed and pensioners. You have free tickets for all kinds of different people, and a byzantine discount system for the metro (which you must negotiate an enormous amount of red tape to enjoy). Interestingly Hungarian businesses are very modern and efficient, they put a lot of German companies to shame in terms of customer service, but this only serves to put the government services in such sharp contrast.
Thankfully I don’t have to deal with them all that often, and when I do I usually just pay someone. That person will probably lose lots of money if Hungary reforms. That’s pain, but it’s necessary.
From the interview with Stefanos Manos (translated from czech):
Q: Can you point out the main cause of the deficit?
A: Years old habit of greek governments to buy voters by employing them.Typical young Greek desires to become state employee. Do you find that strange? He doesn’t. Because once he gets a job in public sector, he gets assurance. He will never get fired till retirement.
Q: This assurance comes from the first day on the job?
A: Sure. Formally, there is 6months of testing period, but after passing that they never fire anyone. So that a person that starts working for the state at 25 has 35 years of guaranteed paycheck ahead of them.And lifetime pension. When he dies, that pension is transfered to his wife. And if he has a nonwedded daughters, they will get pension too.
Q: When was the lifetime guarantee for state employees established?
A: That is a long time ago. It is even written in constitution. Of course in constitution there is a possibility to lose a job in public sector if the place is liquidated. But the places in public sector are never cancelled, and if they are, it is at a cost of immense compensation.
Q: What are the salaries like in public sector?
A: About 2.5 times larger than in private? How about yours?
Q:Our public salaries last year barely surpassed private ones.
A: Then you are still good, be glad.
…
Q:Is the amount of compensation money in public sector influenced by the private sector?
A: It is influenced. The law orders bussiness men to pay off the longtime employees with as many monthly salaries as how many years they were working in the company.Which is very generous by european standards.What compensation is ordered by law in Czech Republic?
Q: 3 montly salaries.
A: In Greece, longtime employees in private sector have to get 24 salaries. State employees find that to be too little, so somewhere they get 72 or even 100 monthly salaries.
…
my own probably very shitty translation, use google translate for the whole article if you want.
Socialism at its worst.
4.3 % of GDP goes to weapons, and right across the puddle there is another idiot nation using its wealth on worthless junk it doesn’t need.
I remember visiting Bulgaria, where when I got to talk to some locals, they blamed the Turkish invasion 2-300 years ago for their poor state, rather than 50 years of wannabe communism.
One of the things I like to do when people make claims that aren’t actually true is correct them. For example, this:
All the extra spending would achieve is to delay the pain. Hungary has been doing that for the last 20 years, which is why it went from one of the richest countries in the former Warsaw Pact to one of the poorest.
Basically, near as I can tell you think Hungary hasn’t moved out of post-communist unlike everyone else, and it hacks you off. Which is fine; I’ll take your word for it. But the stuff you’re saying to support it is flat out wrong before you even get to “…and that’s why they’re having such problems right now.” “Hungary took the financial crisis harder than everyone else due to long-term structural problems around post-communism” would at least be plausible.
More importantly, like Greece, without the global financial crisis Hungary would be just fine. What’s going on is a financial bubble collapse that leaves the prices way the hell out of wack in certain countries for a variety of reasons.
Is the Greek government a mess? Sure. Is that the cause of the problem? No. Would fixing the greek government overnight solve the problem? No; like Spain, they’re in trouble do to inflation rate/exchange rate issues.
Frankly, you’re merely blurting out random talking points now that your conspiracy theory about a libertarian-controlled ECB ruining the Greek economy has collapsed in the face of facts.
I’ll type slowly: libertarians have a comically silly theory about how business cycles work, but that’s a side point.
The euro central bank largely operates like the old German central bank - very inflation shy and wanting good government balance sheets. This has the downside of dampening its response to business cycles. When somewhere like Greece of Spain needs a really aggressive response, it doesn’t help it much; so to some extent, Greece’s problems are due to German decisions. None of the traditional responses to recessions are available: 1) They can’t lower interest rates. 2) They can’t change their exchange rate. 3) They can’t do much public spending, as their budget already sucks.
So their only option is 4) grinding deflation, austerity budget cuts, and sky-high unemployment for years.
Like the US, the central bank in Europe is being cautious, and basically throwing up its hands at zero percent and declaring “we give up”. There’s a variety of other things they could try; intentional inflation to get around the zero interest rate bound is one.
Flat out wrong like saying Slovakia has a stronger economy is “flat out wrong” in spite of every indicator, even your own, saying the opposite?
You haven’t corrected me about anything, really. You pointed out that according to 2009 figures Hungary is 3/8 relative to its neighbours in GDP PC, but by the same figures they were 5/8 when I came here in 2008, with both Poland and Latvia set to overtake them. At worst, I’m a little behind the times.
But the truth is that your simplistic GDP PC analysis of the economies of this region is woefully inadequate, but despite everything I’ve shown you to the contrary, you keep insisting Hungary’s economy is just fine relative to everyone else’s, and even better than Slovakia’s, despite everyone, even the Hungarians, knowing that to be “flat out wrong”.
Hungary’s economy has been falling behind the others for many reasons, but one clear reason is the mismanagement of the economy by successive governments, many of whom have clear links to the Communists who came before them. The corruption, nepotism and red tape is frustrating and a serious impediment for many Hungarians who just want to get on and make a good living for themselves.
This doesn’t “hack me off”, at least not seriously. It’s certainly not the reason I’m correcting you in your misunderstanding. I’m just amazed that you spout nonsense based on a cursory glance at some figures you found googling the Internet, even when your conclusion goes in the face of every analysis of the region I’ve ever read. Even to the point of stating that , because of your badly sourced list of GDP PC figures (contradicted by the site’s own database), Slovakia is actually poorer than Hungary.
Slovakia is the first Warsaw Pact country to join the Euro, Hungary has had to postpone joining the Euro indefinitely due to economic problems. Does not that simple fact alert you to the possibility that your figures are not correct, nor worthy of any kind of conclusive analysis?
I don’t understand what this Hungary side track is even about.
Jason, why do you think that Greece’s problems are due to inflation and the exchange rate? Those both seem like they are a long way from market ratings on government debt.
It’s not a German decision, Jason. Even if Germany has the loudest voice, it isn’t a German decision. Germany only makes less than a third of the Eurozone’s total GDP, and that’s its maximum influence. France has almost the same GDP, do you think the ECB just ignores what they say?
Estonia was in a worse situation that Greece, a situation not of their own making unlike Greece. They were washed over by an economic tsunami, and had even less options than Greece because they were tied into the Euro without the benefit of the currency stability that the Euro gives a nation. They even had to raise interest rates up to almost 10% just to protect the currency from devaluation.
And as they couldn’t devalue the currency to make themselves more competitive, they did what Greece could do as well: they cut wages across the board. Nobody liked it, not even my girlfriend, but instead of going out on strike, blaming the Russians and Nazis, the Estonians just got on with it. They recognised that they just had to take the pain in order to survive, and survive they did.
Estonia, despite the claims of Krugman that they would go the way of Argentina, are now almost certain to become the first former Soviet SSR to join the Euro, ahead of once more affluent nations like Hungary. It’s out of recession, it didn’t spend more than 3% of its GDP saving its economy, and the Tallinn stock exchange is racing away “up more than 47 per cent in 2009, has risen another 38 per cent in January.”
If other nations can do it, so can Greece; excuses and prevarications are not a good recipe for long-term financial stability.
Mike, from what I can tell Greece’s problem is that their debt is mostly foreign-owned (unlike, say, the US), and due to changes in the exchange rate and local labor costs they can’t handle the debt load anymore. Which triggers a self-reinforcing financial panic like the 1990s asian financial crisis.
Tim, Hungary’s economy is clearly in deep shit right now. What hasn’t happened, though, is 20-year decline; it appears the entirety of that is the last couple years and financial crisis-induced. Right?
“Slovakia has done way better than the rest of the Warsaw Pact” is the notable detail there; they’ve lapped everyone else.
Interesting, that’s the first I’ve heard of how Estonia handled it. Unemployment is 15% apparently, but from what I can tell all the other economic indictators are looking better.