George:
Thanks for that excellent economic analysis!  This is the area where I
seldom find any disagreement with you.  Now about those other areas ...
Well, maybe some other time.  Let's just stay with the subject of
economics a while longer so I can ask a question that has long been
puzzling me; German vs. US economy.

How can the German economy be so successfully competitive relative to the
American one with their cost structure?  I am not talking about their
cost of unification right now which is an anomaly.  So let's just
consider the status that existed in 1989.

To my knowledge, the German wages are now higher than the American ones,
part of it due to the change in exchange rate in favor of DM.  When you
also consider how much more vacation and paid holidays a German worker
gets vis a vis his American partner, added the cost of higher social
safety net subsidised heavily by German employers, Germans are still
able to export far more than import.  This is so despite the steadily
increasing value of German Mark!  Here, in the U.S., we are constantly
being told about our politicians that we need to reduce the value of
dollar even more to stay competitive in the export market.  Sometimes I
wonder how low will the dollar have to be to satisfy these guys.  A
dollar for a peso perhaps?  Why is it that the Germans can stay
competitive on the export market with constantly strengthening DM and
their higher costs of labor?  The German workers cannot be that much
more productive!  In fact we are also told by our experts that American
workers are some of the -- if not THE! -- most productive workers in the
world.  So what am I missing here?  What's wrong with the picture I
painted here?

Anybody has thought about this in these term before among the readers
here?

Thanks,
Joe Pannon

I don't know what happened in such a short time.  Last week I was
reading some magazine articles about Muslim successes against the Serbs
in the battle field and how the tide was being turned.  Today the
picture is quite the opposite: not even the UN-protected Bihac is immune
from Serb onslaught.  Seeing the pathetic Western response to the Serb
provocation makes me puke!  I am talking about the latest news I've been
hearing which was quoting some Western politician that the way to get
the Serbs to the negotiation table is by making it more attractive to
them than fighting in the battle field.  That, Ladies and Gentlemen, is
another way of saying that they intend to reward the Serbs for their
aggression.  Did that stop Hitler at Munich?  When will they ever learn?

Joe Pannon

On 26 Nov 94 16:27:23 GMT+0200, Thomas Breed >
asks under subject: Economy

>There is one thing that I still can't understand: why are the reforming
>economies in Eastern Europe (Czech Republic, Slovakia, Poland, Hungary,
>etc.) doing so poor?
>
>You can can object that they have achieved major successes in the
>economy transition, monetary stabilisation, etc, but WHY IS THEIR
>GROWTH SO SLUGGISH? Especially when compared with China, Thailand,
>Malaysia or Mexico. They say that Eastern European countries possess
>skilled work force, proximity to the West, and almost any comparative
>advantage you can invent. Then what makes them laggards?


On 27 Nov 94 06:26:32 GMT+0200, George Lazar >
suggests

~Two reasons:
~
~1. Hungary, Poland, Slovakia etc. already have much higher GNPs than
~    China., therefore growth ratios expressed in percentages can be very
~    misleading.
~
~2.  None of the Eastern-European economies are true market-economies.
~     While Thailand or Malaysia was able to support  fully free market
~     economies, Eastern-Europe is not willing to pay the social price of
~     this transformation.
~
~Hungary's has a manufacturing economy.  With the
~overvalued currency (Ft), she is unable to compete with the Far-East.
~I'm hoping that the booming service sector will be able to pull the
~rest of the economy along.


and on 28 Nov 94 17:04:06 GMT+0200, Eva Durant
> completes:

>Is it anything to do with the population having higher aspirations
>than the living standard of the above mentioned countries, therefore
>missing out on capital investment which prefers  starvation wages
>no trade unions, no health @ safety acts etc, etc...?



My answer to the last question is definitely YES. It has much to do with
capital creation potential which is higher in Japan, Thailand or Korea.

On the other side, when comparing Central European countries only from
financial point of view, Hungary is a frightening place to invest because
of many defavourable parameters like taxes, wages, employer's costs (like
insurances and fees paid by employer), etc. However, when taking into
account variables like political stability, it comes ahead of some
neighbouring countries, but these variables are more tough to assess.

Like Eva Durant, I am not implying that lack of government intervention
is a bad thing and think that one has not be a conservativist to agree
that cheap labor does attract money. That's exactly the problem: for how
long the labor will remain cheap? An investor facing location/allocation
problem on strategic level is not reasoning in two-five year terms...

Roman Kanala

Date sent:  29-NOV-1994 01:44:50
>
>I don't know what happened in such a short time.  Last week I was
>reading some magazine articles about Muslim successes against the Serbs
>in the battle field and how the tide was being turned.  Today the
>picture is quite the opposite: not even the UN-protected Bihac is immune
>from Serb onslaught.  Seeing the pathetic Western response to the Serb
>provocation makes me puke!  I am talking about the latest news I've been
>hearing which was quoting some Western politician that the way to get
>the Serbs to the negotiation table is by making it more attractive to
>them than fighting in the battle field.  That, Ladies and Gentlemen, is
>another way of saying that they intend to reward the Serbs for their
>aggression.  Did that stop Hitler at Munich?  When will they ever learn?
>
>Joe Pannon

They will never learn.  Funny how it's the same coutries which sold out to
Hitler at Munich who most admantly oppose an expansion of Nato, who dither
around refusing to commit to anything that could accomplish anything at all
in Bosnia-Herzegovinia.  I read somewhere about some diplomats basically
mitting that the Serbs have for all purposes won.  It's a New World
Orde  Aggression is to be rewarded while the international comunity
whines.  My prayers go out to the poor trampled souls who get left
behind...

                        Thomas Breed
                        

                "Ted' ma zena ma hlad, tak musim jit."

> bright she is, and I saw her stop John Major cold during question time.
>
> Charles

Who couldn't stop the poor soul? (Original wording was rude, and
I changed it!) 

It seems that those who think darwinism came from Satan direct,
also think that survival of the fittest is the law to govern
society. This takes us back to the cut-throat capitalism that
created the wars. I don't like state intervention when it is
in the undemocratic interest of "the captains of industry"
or entrenched burocrats. But history shows, that the laws of
society are not "above" us, should be controlled (democratically)
all that chaos is not necessary. This is directly involves Hungary,
as like all other country is supposed to follow this crazy
direction.

>
> Are you implying that lack of govt. intervention is a bad thing?!? :o :)
> Looks like certain econ. conservatives on this list were right:  free
> market (so free in this case that the vertigo makes me ill) DOES do great
> things for the economy!  Sure, child labor and low wages makes life sort'a
> tough for the average Joe, but it would be great to be an investor!!
>                 :):):>:):>:> <- or something like that...
> Speaking of investors and investments, don't most of these investors
> originate in the US and Western Europe?  (Japan too!)  Maybe the
> conservatives are right:  cheap labor does attract money.  Everytime an
> investor invests in one of those cheap countries, however, isn't that a
.

.

> What if Hungary's economic success is dependent on the economic decline of
> the West?
>

It was apperently since the seventies, everything was blamed on
"begyuruzes"  - the influence of Western economies.


>
>                 "Ted' ma zena ma hlad, tak musim jit."
>

?? Is it Czeck?? 

Date sent:  29-NOV-1994 08:19:55
Szia!
        Just a thought:  what's more important:  GNP or standard of living?


Eva Durant wrote:
>>
>It seems that those who think darwinism came from Satan direct,
>also think that survival of the fittest is the law to govern
>society. This takes us back to the cut-throat capitalism that
>created the wars. I don't like state intervention when it is
>in the undemocratic interest of "the captains of industry"
>or entrenched burocrats. But history shows, that the laws of
>society are not "above" us, should be controlled (democratically)
>all that chaos is not necessary. This is directly involves Hungary,
>as like all other country is supposed to follow this crazy
>direction.
>
>>
>> Are you implying that lack of govt. intervention is a bad thing?!? :o :)
>> Looks like certain econ. conservatives on this list were right:  free
>> market (so free in this case that the vertigo makes me ill) DOES do great
>> things for the economy!  Sure, child labor and low wages makes life sort'a
>> tough for the average Joe, but it would be great to be an investor!!
>>                 :):):>:):>:> <- or something like that...

                        look:  SMILEYS Eva!  That means all preceding was a
JOKE...  Irony?  Sarcasm?  I'm trying to make pretty much the same point
you are:  that those social nets and labor laws that conservatives so love
to cut down on as bad for the economy are NECESSARY.  Many conservatives
look at the marketplace hypocritically, saying that any form of socialism
(etc.) will never work, since it goes against peoples' natures while
subscribing to this incredibly naive view of how business treats people,
and how businesses would treat people if there WERE no protective laws.
How they actually used to treat people, and in some places (like those
Workers' Paradises in SE Asia! :> )  STILL do!  It's unfortunate that a law
of lace dictates that those who do not adapt (meaning
businesses) will perish.  A hard truth, but, considering the worldwide
embrace of the market system, one that still remains true.  A shoe business
who has to pay its workers 6USD for every hour will be hard pressed to
compete with another firm paying 5USD for every hour.  The second can
undercut the first's prices...and it's all HISTORY from there....
I'm not defending the concepts I'm throwing out as moral:  I'm just
painting a little picture of what I see going on.   It's not pretty.  If
you disagree with the Satanic-Darwinism you see presented here, either
prove its not true (PLEASE!) or let's try to find a way for Hungary to
navigate the dangerous straights between the lands of Free Market Hell and
Economic Stagnation.
>> originate in the US and Western Europe?  (Japan too!)  Maybe the
>> conservatives are right:  cheap labor does attract money.  Everytime an
>> investor invests in one of those cheap countries, however, isn't that a
>..
>
>..
>
>> What if Hungary's economic success is dependent on the economic decline of
>> the West?
>>
>
Once again:  I never said I BELIEVED this.  I just thought it might be
interesting to talk about.  Using George's hierarchical conservative
economic breakdown of the world (where every country has its place, and
every place has a country) then there must always be a poor country
scraping to sell raw materials and labor to the rest of the world.  When
they "advance" enough (infrastructure-wise, George?) then everyone plays
musical chairs and they move up a rung.  Or something like that...:)
Personally, I'm a strong believer in MODERATED free trade, that is: Free
Trade with countries that don't allow unfair labor practices like China's
prison labor or SE Asia's child labor.

>It was apperently since the seventies, everything was blamed on
>"begyuruzes"  - the influence of Western economies.
>
>
>>
>>                 "Ted' ma zena ma hlad, tak musim jit."
>>
>
>?? Is it Czeck?? 
Yes, it's Czech.  It means:  "My wife is hungry, so I have to go now."


                        Thomas Breed
                        

                "Ted' ma zena ma hlad, tak musim jit."

> of the FDR, there are coming along very slowly. I also believe that the USSR
> sucked these countries dry, whereas they did not do that to China. China of
> course is by no means free of problems.
> Andras (expatriate Hungarian)

In this case why were Hungarian/GDR/Chechoslovak/Polish standards of
living so much higher especially since the 60's, than in the S.U.?

George Antony writes:

> I think labour is
> cheapest in Africa, still there is little investment going there.
> Any guesses why ?

RACISM/RACIALISM, obviously.

--Greg

"The greatest threat to democracy and stability in Central and Eastern Europe
comes not from the nationalist right but from former communists. A strong
centre-right or conservative political alternative would provide welcome
political competition for the former communist elite."

"It is now clear that the intense Western fear of nationalism in Central Europe
misidentified the problem, and that the attempt to thwart the progress of the
so-called nationalist parties was a mistake."

"...,it is not the centre-left that needs Western diplomatic and intellectual
encouragement in Central Europe, but the centre-right."

These quotes are taken from an article entitled: "The real danger in Eastern
Europe" in the Wall Street Journal. It is a summary of an essay in the Foreign
Affairs. Anne Applebaum is deputy editor of The Spectator of London and the
author of Between East and West: Across the Borderlands of Europe (Pantheon,
1994).

An interesting article. I wonder how much influence such an article has in
altering the views of politicians?

Barna Bozoki

> E-German and the US health care was the stress on preventive care in the
> old E-Germany. He specifically mentioned compulsory immunization, prenatal
> care, etc. Not being familiar with the current medical situation in
> Hungary, I am wondering how different the preventive health care
> development was in Hungary compared with other ex bloc countries.
>

There was compulsory immunization, tb screening and more or less
compulsory pre-natal care in Hungary.

>
> I had a chance to visit several large industrial (state owned) concerns in
> Hungary and found that all had "executive" dining rooms, but there was no

Perhaps this is a new Western influence? In my factory everyone dined
in the same place, illustrous guests were provided at the same place,
but tables were pushed together for them and they had the table laid
for them. (Videoton, Tab, cca.2500 workers).

> ear/eye protection, or safety shoes for the workers and OSHA would have
> kittens at the total lack of safety rules. Of course some folks would
> prefer such state owned "paradise" even among the readers of this news
> group. I do know what it costs me to lose a worker due to industrial
> accidents and it is in my very strong interest to prevent it. There it does
> not seem to matter. The statistics does not really exist for work related
> health problems in Hungary (or any of the ex-"workers paradises"), but I am
> sure that also has an effect on life expectancy and other sundry problems.
>

I think those statistics are there since the 60's in the statistical
publications, and probably very bad.
My husband didn't find health @ safety worse than in the UK (1983-87)
If you have piecework, you wont have health or safety. He was impressed
by the showers - never seen by him before in the UK workplace.
(See: Worker in the Workers' State by Haraszti Miklos - you won't find
it praising Hungarian conditions)

> I am not sure about the smoking/food related problem as being major cause.
> People smoked more in the 30s to 60s than now even Hungary and the food
> choices were even more restriceted (zsiroskenyer for school was a standard
> fare) and the life expectancy was higher than now. It is probably a

I had my fair share of zsiroskenyer - with purple onions - yammy, and
my cholesterol level is much better, than husbands' local relatives/
friends, brought up on "healthy" oil and margarin.
What was the life expectency in Hungary in the 30's?

>  Hungarian car driving habits. One
> can see the horns grow as soon as some otherwise meeek person gets behind
> the wheel.
>

I agree!

Date sent:  29-NOV-1994 09:19:30
>>
>> of the FDR, there are coming along very slowly. I also believe that the USSR
>> sucked these countries dry, whereas they did not do that to China. China of
>> course is by no means free of problems.
>> Andras (expatriate Hungarian)
>
>In this case why were Hungarian/GDR/Chechoslovak/Polish standards of
>living so much higher especially since the 60's, than in the S.U.?


The S.U. had deep structural problems.  The economicerm  vitalsucked out of
East Central Europe was not applied to these problems but was instead
quandered by Brezhnev on short term relief.  The S.U. went down into ann
economic black hole, and almost dragged East Central Europe down as well.
A major problem of the former S.U. which still exist is the poor
infrastructure.  Foriegn companies have to supply their
own roads, their own telephone lines, etc.  I read somewhere that over 60%
of Russia's infrastructure is now beyond repair.  Perhaps this also
explains the lack of serious investment in Africa (though I don't rule out
racism as a factor).
East Central European countries had a higher standard of living than the SU
because of several factors.  First, a traditional infrastructure was still
in place, and allowed them to produce on a level that, even after Soviet
vampirism, they still had better living conditions.  Secondly, there was a
higher technological level, which compounded the infrastructure imbalance.
Soviet troops in Prague in 1968 were amazed at the way water came out of
sinks (apparently out of the wall) and were stealing sinks to bring back
home.  Thirdly, in Hungary in particular, after the 1954 rev, some free
marketing (on a small level) was allowed.



                        Thomas Breed
                        

                "Ted' ma zena ma hlad, tak musim jit."

> that cheap labor does attract money. That's exactly the problem: for how
> long the labor will remain cheap? An investor facing location/allocation
> problem on strategic level is not reasoning in two-five year terms...
>
> Roman Kanala

They out for a quick kill, that is all about, well known here in the UK.
Pocket local subsidies, tax free for a few years, than bugger off,
leaving a looted rubble and workers without redundancy payment.

Date sent:  29-NOV-1994 09:49:23
>>
>"The greatest threat to democracy and stability in Central and Eastern Europe
>comes not from the nationalist right but from former communists. A strong
>centre-right or conservative political alternative would provide welcome
>political competition for the former communist elite."
>
Which Central and Eastern European countries?  Are they suddenly a
political unity?  I think the political situation of the Ukraine and
Hungary don't have all that much in common.  And what about Slovakia, where
nationalism has been coupled with ex-communism by the newly reelected
sweetheart Meciar, who has initiated disputes with ALL his neighboring
nations.

>"It is now clear that the intense Western fear of nationalism in Central Europ
e
>misidentified the problem, and that the attempt to thwart the progress of the
>so-called nationalist parties was a mistake."
>
In America, this was a result of CNN, which trained people in an almost
Pavlovian manner:  East Europe = Serbia = Natl. = War = East Europe
Most people, being ignorant, have come to accept this as doctrine.  It's
called prejudice, and boy is it ugly!
Of course, the new "angle" to take, according to CNN, and other "experts"
is to fear the resurgance of communism.  ie East Europe  = Russia =
neofacist communists = absolute economic collapse = East Europe.   Hungary,
even with economic problems, isn't Russia.  As the Czech economic minister
Klaus said about the prime minister of Poland having Communist ties - He
was honestly elected, which is more than any of the pre-1989 leaders could
honestly say.

>"...,it is not the centre-left that needs Western diplomatic and intellectual
>encouragement in Central Europe, but the centre-right."

I'm sorry, but ex-communists are NOT centre-left.  Likewise, nationalistic
parties are not always centre-right.  Both are EXTREMISTS, and both should
be discouraged.  Encourage both centre-left and centre-right, on the other
hand.
>
>These quotes are taken from an article entitled: "The real danger in Eastern
>Europe" in the Wall Street Journal. It is a summary of an essay in the Foreign
>Affairs. Anne Applebaum is deputy editor of The Spectator of London and the
>author of Between East and West: Across the Borderlands of Europe (Pantheon,
>1994).
>
>An interesting article. I wonder how much influence such an article has in
>altering the views of politicians?
>
>Barna Bozoki

It probably has more influence than logic, or reality.  That's the problem
with these media-defined realities:  people and politicians don't question
them enough (especially not politicians, who need the media as their ally
in order to be reelected).

                        Thomas Breed
                        

                "Ted' ma zena ma hlad, tak musim jit."

I've always found annoying the way most Brits around me treat(ed)
burocratic nonsense seriously (though I have to admit most
administrative control/reaction was then at least fast and
efficient compared to Hungary). You were not supposed to complain
(stiff upper lip-syndrom?). Things did change quite a lot, all
previously never questioned public figures - police/banker/
politician/sportsman now can be under scrutiny. In this
respect USA is more open society, cover up and secrecy is a fine
art, needs imperial history... Hungarians kept their healthy
skepticism, good for them! 


> Eva Durant's postings re: illegal immigaration, etc., raise a number of
> fine points, but I was deeply troubled by her--perhaps not seriously meant--
> comment that "I [being] a Hungarian don't take legal/bureaucratic things
> that seriously."
>
> That is precisely the issue--those of us born and raised in "Anglo-Saxon"
> countries *do* most certainly take "
> "legal things" with the utmost seriousness, and believe, with some reason,
> that they are the only thing that separates us from mere sentimentality or
> worse, barbarism.  A point nicely made from a slightly different angle by
> Charles (a [former?] Brit.  Hungarian society is not going to advance much
> further until ordinary Hungarians, as well, of course, as the political
> elite, begin to take "legal things" seriously.
>
> It was all very well to treat the law under the Commies as a cynical tool to
> maintain the power of the "cadres," from which ordinary folks were absolved.
> To carry that attitude into the post-Commie era courts anarchy, and a literal
-
> ly lawless society.  In my view, this is jumping from the frying pan into
> the fire, as we native speakers of American English (*pace* Imi Bokor) say.
>
> Ele'g!
>
> Be1la

>
> Quite apart from Eva's instinctive anti-capitalism, the above is also
> incorrect.  Capitalists do not 'prefer starvation wages', they prefer
> maximum profits.  Wages are only one component in the equation and
> do not in themselves determine where investment will be directed.

I wish more people know this "only one component" argument.
All my working life (England/Hungary) I was told if only for a few
years I tighten my belt, everything will be fine...
Sorry, I do not trust your economics argument, there is no
consistency in any I've heard. No-growth is bad. Growth/overheating
is bad. Strong currency is bad. Weak currency is bad. Etc.Etc.
I think market economy is not predictable, admit it! Or some people
can't tell their arse from their elbow and get WELL paid for it.
Hm. Sorry I think. 


>
> Maximum profits come from a favourable ratio of revenues to costs.  It
> is perfectly possible to gain high profits in high-cost countries as long
> as the output is of high value.  If Hungarian industry wants to supply
> rubber thongs to the world market, it cannot sell them for more than the
> Vietnamese and, hence, its costs must also be just as low.  In Hungary
> this would mean starvation wages.  On the other hand, if Hungarian
> industry were able to produce supercomputers, it could pay its workforce
> US-level wages for the highly skilled.
>
> At the moment, Hungarian industry is turning out products that are very
> efficiently produced by South Korea (run-of-the-mill automobiles,
> computer monitors), but which do not give enough value added to be
> produced profitably in high-cost Western countries.  Malaysia and
> Thailand are waiting in the wing to take over once South Korea's costs
> become too high and South Korean industry matures to move on to more
> sophisticated goods.
>
> Thomas Breed wrote:
> >Speaking of investors and investments, don't most of these investors
> >originate in the US and Western Europe?  (Japan too!)  Maybe the
> >conservatives are right:  cheap labor does attract money.
>
> Capital inflows to cheap-labour countries are only a fraction of what
> goes into developed countries, only the former is more controversial and,
> hence, more often quoted.  Cheap labour does attract money, but the
> Taiwanese investor contemplating setting up a toy factory in China is
> not going to invest in high tech in the US anyway.  I think labour is
> cheapest in Africa, still there is little investment going there.
> Any guesses why ?
>
> >Everytime an
> >investor invests in one of those cheap countries, however, isn't that a
> >decrease in potential investment in their own country?
>
> Only to some degree.  As I pointed out above, people prefer investing in
> areas they are familiar with, therefore capital is not perfectly mobile
> around the globe.
>
> >Higher unemployment
> >and immigrating jobs?  Specifically - is the opening up of the former
> >Communist block, as well as the wonderfull new free market systems of SE
> >Asia, causing the economic stagnation (or outright recessions) of the West?
>
> The principle of comparative advantage has been much maligned by those
> opposed to free trade and/or capitalism, but it has never been refuted.
> It basically says that if two partners specialize into what they do best
> and trade with each other they both will be better off than if they tried
> to produce everything themselves (i.e., autarky).
>
> >I read an article in Forbes magazine which described the biggest and latest
> >economic problem to be a shortage in capital.  Eastern Europe, SE Asia,
> >Latin America, and the West are all desperately trying to get investors to
> >invest.  There is not enough capital to go around, however.
>
> What is 'enough' ?  There is certainly not enough to fill every hole
> everyhwere.  It is nowadays not state aid (as a couple of decades ago)
> but private investment that is the bulk of capital flows.  Private investment
> follows hard-nosed rules, and it will not go into a country where its
> objectives are not met.  This may sound too harsh for some people, but if
> there is one lesson from the debt crisis of the 70s it is that handouts
> create aid dependency and not sustainable developement.
>
> >So maybe those folks who say that higher mininum wages will cause
> >unemployment are right:  jobs go where the labor is cheap.
>
> It is empirically well established that high minimum wages cause
> unemployment: the difference in unmeployment rates between the US
> and Western Europe is just as well documented as the existence of the
> low-paid working poor in the US.
>
> >QUestion,
> >however:  should the West start lowering standards of living to the level
> >of Hungary?
>
> The West is lowering living standards already.  Unemployment means lower
> living standards on average for all if paid for from current tax collections
> or lower living standards for future generations if paid for from government
> borrowing.
>
> >Or should the West sit and get beaten, hands down?
>
> THere are signs of this too: Western Europe especially is slipping back
> relative to the US and the newly industrializing countries (NICs).  It has
> a debt problem similar to that of the US, but without the economic vitality
> of the latter.
>
> >Should
> >East Central Europe take a page from SE Asia and start selling themselves
> >into virtual slavery in order to be competitive on the market?
>
> This 'virtual slavery' thing is a little rich.  What SE Asians have been
> doing, one country after the other, is to do and sell what they can at the
> price they can get and pay themselves only as much as they get.  Since they
> are doing it diligently, they can bootstrap themselves, and graduate from
> flimsy clothing to high technology.  As the products get more sophisticated,
> the wages grow proportionately too, although this fact is pointedly ignored
> by those whose anti-trade arguments it does not fit.
>
> >What if Hungary's economic success is dependent on the economic decline of
> >the West?
>
> On the contrary, it depends on the economic advance of both East and West.
> ANd, importantly, domestic reforms are indispensable even if they hurt.
> As the New Zealand example has shown, radical economic surgery has
> short-run social costs but it can deliver sustainable development.  Or,
> closer to home, watch the Baltic states for the next emerging positive case
> study or the Ukraine/Belarus for the consequences of not making the hard
> decisions.  The Czechs are instructive too: reforms do not have to be
> a free for all in everything.
>
> Unfortunately, Hungary has lost four years under the previous administration,
> and must make up lost ground before going forward again.
>
> George Antony

Eva Durant wrote to Thomas Breed's discussion starter parallel between
Central Europe and South-East Asia:
>Is it anything to do with the population having higher aspirations
>>than the living standard of the above mentioned countries, therefore
>>missing out on capital investment which prefers  starvation wages
>>no trade unions, no health @ safety acts etc, etc...?

Eva is right.

Hungary was able to pay relatively high wages for unskilled work and
relatively low wages for highly skilled work under the 'socialist'
system. This social experiment was financed from the $ 26 Billion (?)
foreign debt.

Today, manufacturing technology in SE Asia is at higher levels than in
Hungary (S. Korea chips, Malaysia disk-drives)... with lower real wages.
Hungarian workers priced themselves out from the world labor market by
demanding relatively high wages without proving their value-added benefit
to the international investor.

The underpaid Hungarian technocrat elite (engineers, doctors, biologist,
computer professionals..) will do better in the future in Hungary,
leaving behind the less-educated masses.

In my opinion, Hungary should forget about manufacturing. Some specialized
areas might make it, but it's too late to compete with the Far-East
on the world markets. Service economy (finance, tourism, transportation),
specialized agriculture and some very specialized manufacturing (chemicals,
drugs) should be the focus of the current government .. with a massive
retraining program. I know, It'll be hard to explain to the Hungarian
steel-worker or miner that they have to accept a lower standard of living
while retraining and hoping for a better paying higher skilled job.

-george

Joe Pannon asked:
>How can the German economy be so successfully competitive relative to the
>American one with their cost structure?
>
>To my knowledge, the German wages are now higher than the American ones,
>part of it due to the change in exchange rate in favor of DM.  When you
>also consider how much more vacation and paid holidays a German worker
>gets vis a vis his American partner, added the cost of higher social
>safety net subsidised heavily by German employers, Germans are still
>able to export far more than import.  This is so despite the steadily
>increasing value of German Mark!  Here, in the U.S., we are constantly
>being told about our politicians that we need to reduce the value of
>dollar even more to stay competitive in the export market.  Sometimes I
>wonder how low will the dollar have to be to satisfy these guys.  A
>dollar for a peso perhaps?  Why is it that the Germans can stay
>competitive on the export market with constantly strengthening DM and
>their higher costs of labor?  The German workers cannot be that much
>more productive!

At the same salary, the German worker is most likely just as productive
as the US one, except that in the US there is a much broader range of
wage levels and productivity.

Where the Germans are unbeatable is superb quality coupled with excellent
design and a reputation second to none.  German car makers have been
exporting to Japani, a very discriminating market in every sense of the
world, while US manufacturers have been whining that their cars with
the steering wheel on the left side were not selling well.

Still, the US is still the most innovative country, shown by the number
of patents filed per capita.  In quickly-changing new areas the US is
the leader: in computers Japan did not manage to get a significant
foothold apart from making ever bigger memory chips and some finished
product with US processors and software.  The Germans failed altogether,
despite the usual generous EU incentives.

It seems to me that Western Europe is going down the Swedish path, only
more slowly, while the US retains raw potential technologically.  What
a pity that socially the US has such disparities and tensions.

The Hungarian relevance: as George Lazar pointed out, Hungary has a
comparative advantage in (and I dare say, reputation for) intellectuals.
Hence, an innovation-oriented economy would seem easier to achieve than
the German-style reputation-cum-quality orientation.

George Antony

George Lazar wrote:
>In my opinion, Hungary should forget about manufacturing. Some specialized
>areas might make it, but it's too late to compete with the Far-East
>on the world markets. Service economy (finance, tourism, transportation),
>specialized agriculture and some very specialized manufacturing (chemicals,
>drugs) should be the focus of the current government .. with a massive
>retraining program. I know, It'll be hard to explain to the Hungarian
>steel-worker or miner that they have to accept a lower standard of living
>while retraining and hoping for a better paying higher skilled job.

The statistics on direct foreign investment do not seem to agree with
your suggestion that manufacturing should be scrapped.  There seems to
be a fair bit of manufacturing that is profitable, even in competition
with SE Asia.  Hungary's proximity to Western Europe means that transport
costs will always be cheaper than from SE Asia, and the EU's protectionism
will always hit SE Asian companies harder than the Central-European
factories of their own Opel, VW, Philips, etc.  In a couple of decades
Central Europe will be more or less part of the EU, further reducing
trade barriers to most products.  There will always be a need for a
low-cost producer manufacturing bulk goods of medium-level sophis-
tication within the EU.  At the moment Spain is preferred for making
low-profit small-medium size cars, tomorrow it will be the Czechs and
the Poles, perhaps Hungary.  Ditto for electronic/electrical goods.
These sectors can provide retraining on the job, buffering the cost of
transition.

THere is little hope for Hungarian coal miners however, and the big money
would be in the niche areas that George Lazar points out.  I reckon the
Hungarian government should have a good look at New Zealand: few natural
resources, small population, far from markets, not in cosy trade blocks,
still doing well after scrapping their own brand of socialism in the mid
1980s.

George Antony

This message is to Eva Durant and some other posters who regularly
repost ENTIRE messages they are responding to:

I've asked once already politely to stop this practice as it wastes a
lot of Internet resources, including disk space on local nodes.  Some
people even have to pay by the amount of data transmitted from Internet
to their non-Unix accounts.  What is so difficult about including only
few lines of original messages?  That is normally enough to remind
someone what you are responding to.  What's the point of including a
100-line message with 5 lines of response to it?  Why should Hugh
archive so much more message traffic than it's necessary?

So for crying out loud ...  let's be more considerate!

Thanks,
Joe Pannon

On Wednesday, November 23, 1994, the NYT published a lengthy overview of
the state of health care in the former satellites under the heading,
"East Europe Health Care, Out of Cash, Has Relapse" by Jane Perlez.

The article cites a Unicef survey and the World Bank report on the
same subject by Alexander S. Preker who also paints a rather bleak
picture.

Some highlights:

"It is not the very young or the old who appear to have suffered the most
from the creaking health systems but working men between the ages of 20
and 59. The death rate among men, suffering from cardiovascular problems
and cancers, has soared in all countries covered by the Unicef report,
which included Russia and Ukraine, except in the Czech Republic and
Slovakia.

Bribery by patients to doctors and nurses to provide care was
commonplace under the Communists, but has become even more pervasive in
some countries as state-run medical institutions pay doctors less than
bus drivers.

Also....in Romania, relatives of patients bring food and even basic
medical equipment to the hospital. In some cases, surgeons are given
under-the-table payments to operate. Liliana Miron, a 27 year-old social
worker in Constanta, said her family had to come up with the equivalent
of about $115 in unofficial payments for a neurosurgeon in Bucharest to
operate on her father. The figure is about twice the surgeon's monthly
salary from the Government. "If we didn't bribe, the doctor wouldn't
operate," Ms Miron said, adding that the family provided medicine and
syringes."

_________________

Somewhat removed from statistics, but with health care in Hungary as a
backdrop, the gifted writer Peter Esterhazy has written a poignant
novel on the death of his mother. Its English title is "Helping Verbs of
the Heart" and was published by Grove Weidenfeld, New York, 1991.

C.K. Zoltani