Bajnai Discusses Challenges Facing Central Europe

What are the causes and consequences of rising nationalism and social populism throughout Central Europe, and what political and economic remedies can be applied at the national and European levels? Gordon Bajnai, former prime minister of Hungary and leader of the Together 2014 electoral alliance, addressed these questions during a January 28 visit to SIPA and its Center on Global Economic Governance.

Bajnai, the seventh prime minister of Hungary, held office from 2009 to 2010. In 2011 he taught a course at SIPA on EU current affairs. Now Bajnai is leader of the Together 2014 electoral alliance and a senior adviser at the Center for Strategic and International Studies. He was introduced by Victoria de Grazia, director of the Blinken European Institute; Jan Svejnar, director of the Center on Global Economic Governance, and Alan H. Timberlake, director of the East Central European Center, contributed to the ensuing discussion.

Ten years have passed since the accession of Hungary and seven other Central European states to the European Union. Their integration has been challenging, but largely successful. Yet the repercussions of the financial and economic crisis have revealed the fragility of democracy and the rule of law in a number of these countries.

Gordon Bajnai contends that the original consensus holding together Hungarian society began to fall apart in 2001-2002. This is the so-called convergence trap: In the initial catch-up phase, Hungary reached its target quickly, but regional and socioeconomic gaps grew rapidly across the country. There were, therefore, winners and losers. Bajnai asserted that “in a democracy, if the most of the active voting population does not feel a winner, sooner or later they will want to change the political equation.”

Bajnai discussed Hungary’s loss of growth potential and the need for structural reform with Svejnar and Timberlake. From the former PM’s perspective, this is due to weak investment, low employment among low-skilled workers, and shortcomings in labor and product markets.

What are the sources of growth? “There is no more expansion of the European investment,” Bajnai said. “Investors just try to find the best location to focus their efforts. In that sense, enhancing competition and the business environment is critical to… stronger investment and productivity.”

Throughout the discussion, Bajnai emphasized the role of education in promoting long-run economic growth in Central Europe. “The poor performance of disadvantaged students limits their employment prospects and social mobility. Education, education, and more education is the only way to bring our countries into the knowledge economy and to integrate the poorer parts of the population.”

Bajnai also presented his view of the political landscape: “The current leaders have managed to break the backbone of Hungarian democracy. The checks and balances have been weakened. There is a strong centralization and nationalization ongoing. Strong price controls have been introduced, especially in the energy sector. Finally, Hungary has become a strongly divided society.”

On the coming elections, he commented: “Hungary is not going to choose only a left or right government. It is going to decide its future. This is what it is a stake. And the potential effect of contagion for the European Union is high and increasing.”

— Dariela Sosa MPA ’14