From an active state-led financial policy to an active state-led financial policy : A taxonomical outline of Hungary’s public finances in the past thirty years

Abstract

The aim of this study is to trace the three-decade-long market economy transition that has replaced the socialist planned economy in Hungary, a process which is divided into two parts by the author. He begins by outlining the harsh, neoliberal methodology of the transition, and the Hungarian fiscal practice which developed from it, built on the application of non-conventional instruments of active government regulation and fundamentally based on the Fundamental Law (Hungary’s constitution) adopted in 2011, particularly its chapter on Public Finances and the cardinal laws pertaining to public finances. The study is a journey through time, encompassing three decades, demonstrating that the Achilles heel of the transition was its dependence on the basic conditions of the socialist planned economic system, which still exert an effect today. It provides an outline of the taxonomical elements of three, significantly different yet interrelated economic eras taking place in a Central European country in less than a century, and draws a macro-economic conclusion. The purpose of the study of more than three decades is to provide a historic set and, based on this, an outlook for the future for prognosis, which is especially important now at the time of Covid-19 problems.