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Philipp Fink, Complementarity and Divergence in:

Philipp Fink

Late Development in Hungary and Ireland, page 154 - 155

From Rags to Riches?

1. Edition 2009, ISBN print: 978-3-8329-4173-4, ISBN online: 978-3-8452-1720-8 https://doi.org/10.5771/9783845217208

Series: Nomos Universitätsschriften - Politik, vol. 168

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154 social partnership process by the social partners and the state (Hardiman 2000a: 292- 293). Hence, the Irish state reacted to the economic turbulences of the 1970s and 1980s by widening its autonomy through institutional readjustment; however it retained its reduced capacity. A stronger impetus was placed on indigenous development, leading to its de-politicisation, contributing to the state’s internal autonomy. The state’s widened autonomy was also embedded within a network defined by international links and relationships with client constituencies. Similarly, political and social consensus to the development strategy was reached through a revitalisation of the social partnership process, enabling macroeconomic stability. 3.5 Complementarity and Divergence Although the evolution of the Hungarian and Irish FDI-led development regimes displays a number of differences, there are similarities, resulting from the common trajectory of the development strategy. Beginning with the foundations of the development regimes, the scope for alternative development strategies was almost non-existent owing to the influence of international actors for Hungary. In Ireland internal factors were of more importance. Aside from economic malaise, the decision to attract FDI was also the result of specific socioeconomic and political issues, i.e. internal factors. Due to the disrepute of local entrepreneurial elites, both countries lacked a capable development agent to fulfil the task of generating the required developmental inputs. Accordingly, foreign capital replaced national capital in the new development regime. Initially FDI was used in the Hungarian privatisation process as an instrument to secure the process of democratisation and economic transition, as potentially harmful post-socialist elite networks were dismantled. In Ireland, FDI and trade liberalisation was a measure to reduce opposition from indigenous capital towards restructuring as well as to strike a compromise between conflicting “expansionist” and “deflationist” interests within the state. In both cases, the issue of development policy was highly politicised. Both states reacted to a malfunctioning of the development regime, resulting from the low level of external autonomy, by widening the state’s internal autonomy, thereby effectively shielding the policy area from outside influences. However, the respective institutionalisation was different. In Ireland, the continued failure to develop an internationally viable indigenous sector led to the disembodiment of industrial policymaking and its implementation from the political system. The policy area was transferred to semi-autonomous state agencies and hence was depoliticised. The Irish state managed to embed its autonomy in industrial and development policy within a mesh of social and institutional ties. However, the state’s embeddedness is biased towards industrial and technocratic interests. 155 In contrast, industrial policy in Hungary was increasingly politicised by its centralisation under state control. Nevertheless, the increase in internal state autonomy did not match the level of the state’s capacity in the development process in either Hungary or Ireland. As in both cases, the state follows a predominately noninterventionist path. The state concentrates its actions on supply-side polices, fiscal and financial incentives to incite investment and to create employment. In part, this is the result of a common philosophy on the role of the state in the development process, which prioritises market actors and forces. It is also partly the result of the adherence to the discussed spending constraints of the development strategy. Similarly, attempts by the Hungarian and Irish states to attain popular consent to the development strategy frequently conflicted with the described spending constraints. Consequently, macroeconomic imbalances ensued, illustrating the perils of premature economic integration. Furthermore, compensatory policies followed the lines of political efficacy, whereby middle and higher income groups disproportionately benefited. They resemble key voters in highly competitive political systems. Both countries diverge in terms of institutionalising consent to the development strategy. The revitalisation of the tripartite social partnership process in Ireland was important to regain macroeconomic stabilisation. Nevertheless, the lack of pressure stemming from popular dissent is the key to understand the longevity of the development regime and its calibration in Ireland. Emigration repeatedly acted as a safety valve. Dissent only compelled the state to action after exit possibilities were reduced. In contrast, consent in Hungary can be characterised by “non-voice”. The extreme politicisation together with a weak civil society and corporatist institutions resulted in the state’s low embeddedness of autonomy. Effectively, lacking a platform for expression, dissent is silenced until the elections, leading to the frequent change in governments.

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Zusammenfassung

Irland und Ungarn verfolgen eine Entwicklungsstrategie, die in bewusster Abhängigkeit von Globalisierungsprozessen in Form von ausländischen Direktinvestitionen steht und sich als Paradigma in der Peripherie durchgesetzt hat. Doch dieser Entwicklungspfad hat zu einer ungleichen und abhängigen Entwicklung geführt. Dies ist laut dem Autor das Resultat des mangelnden Gestaltungswillens beider Staaten, für einen gleichgewichtigen Wachstumsprozess zu sorgen. Die historische Analyse zeigt, dass eine auf ausländische Firmen fußende Entwicklungsstrategie nicht ausreicht, um traditionelle Peripheralität zu überwinden. Der Autor fordert eine Reform des Entwicklungsparadigmas, um eine gleichgewichtige Entwicklung zu ermöglichen.