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Sunday, February 12, 2012

Flying Low--Very Low

On February 3, Malév, the sixty-six years old Hungarian Airlines—a private company in which the Hungarian government has a 95% (or, according to other sources, 99.5%) stake—went into bankruptcy, forcing it to cease all operations. Mass layoffs and crowd scenes at Budapest Airport were the news of the day. This prospect has been in the news for some time—and yet, travelers kept buying tickets until the night before the collapse. Clearly, whomever the management and politicians will fault for this collapse—the non-existent “Communists” or the very real, but hands-off “EU” are two prime candidates—they cannot possibly blame a lack of faith on part of the Hungarian public.

Until a few years before the collapse of state socialism, Malév was considered a reasonably profitable airline in its size category. Its decline and eventual demise today thus stand out as a particularly striking example of the fallout of post-state-socialist transformation in Hungary. Could there have been another outcome? The question points at issues far beyond the concerns of Malév or even Hungary per se.

So far, each of the six post-state-socialist governments of Hungary (not counting the various changes of Prime Minister within a given ruling coalition) has managed to find some public assets to privatize. This was done, primarily, in order to satisfy its specific client capital groups (residing both in- and outside Hungary). The financial windfall from such theft would be used partly to repay the debts for under-the-table financing of the political process, especially the election campaigns, and partly to buy the future good will of those capital groups.

All this was always facilitated by the prevailing post-"Communist" rhetoric that posited private capital ownership, under just about any conditions, as akin to the second coming of Christ, while state ownership was imagined as a form evil to be purged. As Tamás Sárközy, the Minister of Justice of the last state socialist government (no relation to the current French President) put it on the occasion of his submission of the Act on Company Transformation to the Parliament in 1989, "the worst capitalism was better than the best socialism". Given this, let’s just say, somewhat simplified view of the world, assets of the socialist state had to be sold off as fast as possible. It is perhaps only now that some Hungarians are realizing the full implication of what Sárközy may have meant.

On accession to power in May 2010, the leadership of Hungary’s right-wing Fidesz party faced a new problem: There was almost nothing left to pilfer from the public. This was a real structural problem, and the new government acted with the verve and resolve that distinguished them in the post-socialist Hungarian politics. (This dynamism is what Martin Schulz, the current President of the European Parliament presumably referred to a few days ago when he described Viktor Orbán, the current Hungarian Prime Minister, “an efficient man.”)

The new government swiftly created some liquidity, for instance, and most shocking, by forcibly nationalising private retirement pension plans—one of the moves that gave the foreign media the idea of calling their economic policies "unorthodox." In sharp contrast to Nestor Kirchner’s Argentina—from whose script Orbán's economic team seems to have borrowed significant elements—the current government of Hungary made no effort to allay the rapidly escalating social crisis on their hand with those assets. Quite to the contrary, a remarkably consistent feature of its, otherwise quite polyphonic, policy has been insistence on maintaining, and wherever possible, increasing, social inequalities and class friction. This is true even in areas—such as access to higher education—where the current government's hyper-restrictive policies are clearly contrary to its, otherwise not too complicated, nationalist—i.e., within the bounds of “the nation,” universalising—rhetoric.) (My previous post talks a bit more about that, in a different context.)

So, instead of ameliorating the increasing suffering of those who lost out in the post-state-socialist transformation due to no fault of their own, the government used its newly obtained cash to re-purchase some, previously privatised (or, as in the case of Malév, privatised, re-purchased, privatised, re-purchased, etc.) erstwhile state-socialist companies. The argument was: these are key assets in “strategic branches of the economy.” Considering Malév’s putative “strategic” importance as a national carrier, it is somewhat unusual for a nationalist government to allow this state-owned corporation sink into bankruptcy. Surely the explanation must be elsewhere.

What can be a more effective way to steal from the public, but to bring the company to financial ruin and then sell it at a price that is even lower than its market value to carefully chosen client capital groups? It is devastatingly simple.

Whether Hungary's national airline is, or could be made, economically feasible or not, some significant forms of value must still be left in it—e.g., in its well trained labour force, its route system, its access to the EU airspace, its hub airport in within a Schengen state, the system of interstate agreements that have given Malév access to its specific set of destinations, Hungary’s strong tourism industry, etc. All that is being liquidated, as we speak. There is a noticeable crowding in the competition for the most profitable routes. Some blogs and FB comments suggest that the first "takers" appeared within minutes after the announcement of the end of Malév's operations.

Although the takers are many, a clear winner, for now, of Malév’s disappearance is a hitherto small private arline called Wizz Air. It is interesting to note that Wizz Air is not only owned and run by a former CEO of Malév, but it has on its board a recent Minister of Finance of the Republic of Hungary who has been involved, ex officio, in the various deals concerning the relationship between the Hungarian state budget and Malév, until his departure from power a little less than two years ago. The Hungarian press, eager as always to look for evidence of short-term, individual-personal gain on part of politicians, is very preoccupied with this personal link. In doing so, I'm afraid it misses the bigger picture.

The problem of post-state-socialist corruption is not "just" a matter of the sitting management and politicians entrusted with their oversight taking personal bribes and other unfair advantages out of an ability to block otherwise acceptable business deals. A much bigger issue—both in terms of the magnitude of the financial loss, and the political and moral damage involved—emerges if / when the common interests of the society in whose name the government is acting—in the case of state-owned assets, in a direct ownership role—is summarily ignored, if not trampled underfoot.

And what is the collective owner of Malév, the Hungarian public, doing? It is, for now at least, mourning the loss of a high-modernist symbol of the "national" air carrier. What nobody is talking about is protection of the collective interests of the society, the moral and legal issues surrounding management of collective assets, and the implications of the, by now, more than two-decades-long history of assets robbery.

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cover page of the book

cover page of the book
image used for the cover design by Anannya Dasgupta