Economic Modernisation in Hungary: Between Path Dependency and Path Creation

Abstract

The present analysis focuses on the restructuring process of the Hungarian economy which has been taking place from the early 1990s and on the possibility to integrate it into the new international division of labour. The Introduction outlines various interpretations of the transformation process in the Central and East European (CEE) region. Instead of the rather simplistic view of transition, the authors adopt the more balanced transformation approach in the interpretation of the past 15 years' changes. The second section analyses the role of Foreign Direct Investments (FDI) in the modernisation of the Hungarian economy. By doing so, two different cycles of the transformation process are distinguished. According to the authors, nowadays we are witnessing a shift to a creative cycle of the transformation in which new paths of development have to be created in order to maintain the relatively good economic position of Hungary among the other CEE countries. To illustrate the possibilities and chances of the creation of such a new development path, the authors take the examples of work delocalisation through eWork and orgartisational innovations together with the related issue of production paradigms on the basis of international empirical research results. The authors interpret eWork not only as a new tool of working enabled by ICT, but as a tool to integrate Hungarian firms into the global value chains. By stressing the importance of organisational innovations, the authors argue that more efforts should be made to better understand and overcome the social-cultural and economic barriers (e.g. industrial age management culture in the labour process) of the flexible use of manpower and knowledge. A horizontal underlying assumption of the authors is that economic modernisation in Hungary can not be successful in the long run without the integration of the small and medium-sized enterprises (SMEs).