The usability and cost-cutting effects of blockchain technology in the operations of large European companies

PÉTER NAGY – BOGLÁRKA NAGY-TÓTH – ADRIÁN SZILÁRD NAGY

Blockchain technology is playing an increasingly important role in the digital transformation of large enterprises, particularly in areas such as logistics, administration, transaction security, and customer relations. This article aims to explore the extent to which the use of blockchain contributes to improving the operational efficiency and cost reduction of large European companies. The empirical basis is provided by structured questionnaire responses from 27 companies classified as large enterprises according to the European Commission’s official classification. The theoretical background for the analysis is the technology-organisation-environment (TOE) framework. The evaluation was carried out using the PLS-SEM (Partial Least Squares Structural Equation Modelling) model and descriptive statistics. Based on the results, the improvement in logistics efficiency is strongly supported. At the same time, the reduction in administrative costs and the increase in security are primarily achieved through indirect mechanisms (data integrity, customer trust). The effectiveness of CRM systems is also mediated by trust. Blockchain can therefore be interpreted not only as a technological innovation, but also as a strategic corporate resource. The article contributes to a deeper understanding of the systemic integration of technology into companies.

Journal of Economic Literature (JEL) codes: M15, O33, L86.

Keywords: blockchain technology, logistics, CRM, enterprise blockchain.

The competitiveness and carbon dioxide emissions of dominant German car manufacturers under the constraints of European Union regulations

MÁRIA CSUTORA – ZSÓFIA VETŐNÉ MÓZNER

The German automotive industry plays a decisive role in the European Union’s vehicle market. In the 2020s, the sector is facing a decline in demand, increasing competition from Chinese car manufacturers, a lag in innovation, and stricter EU regulations on carbon dioxide emissions. The research question of this study is how the German automotive industry has adapted to EU fleet-level carbon dioxide regulations. It examines how effective the regulations are in actually reducing carbon dioxide emissions and how much their effectiveness has been diminished by measures aimed at maintaining the industry’s competitiveness. All this is illustrated using the example of the German automotive industry. It examines the strategic measures of the three largest German car manufacturers (BMW, Mercedes-Benz, Volkswagen) using qualitative research based on company reports and third-party industry analyses. The results are mixed. Some measures are suitable for reducing global carbon dioxide emissions. In contrast, others ensure compliance with regulations in a way that does not result in actual reductions in carbon dioxide emissions. The paper concludes that EU regulations have therefore only partially achieved their original emission reduction targets; however, despite flexible regulatory mechanisms, the German automotive industry has also been unable to maintain its competitive position.

Journal of Economic Literature (JEL) codes: F23, F64, L62, M16, Q55, Q56.

Keywords: carbon dioxide emissions, German automotive industry, European Union, electric cars, innovation, competitiveness.

The functioning and regulation of the platform economy

ANITA PELLE – MIKLÓS SZANYI

Until now, the main organisational and business model of the global economy has been the global value chain (GVC). This hierarchically structured organisation has effectively exploited the business opportunities offered by the liberalised global economy thanks to its flexibility. Since the 2000s, a new organisational model has been emerging: the platform economy. It is based on open networks that are organised on demand. Similar to the GVC, it is formed and operated by a key coordinator. Due to the differences between the two organisations, the existing internationally coordinated regulations developed for GVCs (e.g., in the areas of competition policy and taxation) are no longer effective. Steps have therefore been taken within the framework of the OECD and the European Commission, but in many cases also separately in individual countries, to regulate platforms more effectively. This article analyses the specific functioning of platforms and the regulatory problems arising from this, as well as the attempts made so far to solve them.

Journal of Economic Literature (JEL) codes: F68, K21, K34, L14.

Keywords: platform economy, global value chain, business model, competition policy, tax policy.

From a dead end to a sustainable economic model

IVÁN BÉLYÁCZ

This article hypothesises that in recent years, the Hungarian economy has gradually slipped off the path of sustainable and balanced growth, and stagflation has developed in the economy. A decisive role in this was played by government policy, which led to structural distortions in fiscal policy, resource allocation, and the selection of investment and development directions. The article discusses in detail the critical aspects of the national economy, including consumption, investment, and the budget. Due to distorted income distribution and redistribution, aggregate consumption falls short of the potential offered by the national economy’s performance. The vast majority of investment resources have favoured the material production sectors, with investments in human capital development accounting for only a marginal share of total investment resources. The article emphasises the need for consolidation of the state budget. Frequent changes have made the tax system opaque, with priority and privileged companies becoming beneficiaries. These market-distorting effects have hurt market competition. The article concludes that knowledge-based economic profiles and the development of human capital may offer a way out of the current situation.

Journal of Economic Literature (JEL) codes: E21, E22, H50, O11, O31, L21.

Keywords: macroeconomics, consumption, investment, knowledge economy, innovation, budget, leading companies.

Competitiveness and economic policy

LÁSZLÓ BÉKESI

The performance and development of the economy are fundamentally determined by competitiveness, i.e. efficiency and productivity. This rule applies at both the micro level, i.e., in the case of individual enterprises, and the macro level, i.e., in terms of the national economy and regions. With the Hungarian economy essentially stuck in a stagflation trap for five years now, this article reviews the most important factors that determine competitiveness.

Journal of Economic Literature (JEL) codes: E52, E61, E62, E64.

Keywords: competitiveness, efficiency, productivity, economic policy, fiscal policy, tax policy.

Isolating Russia from technology – how effective is the West’s strategic embargo?

ÁDÁM MÁRKUS – DÓRA MEZŐ – VERONIKA FENYVES – LÁSZLÓ ERDEY

Although Russia has been able to circumvent Western strategic embargoes, this study shows that this does not indicate the failure of sanctions. Sanctions are mechanisms that impose significant economic costs on those affected and provide other actors with previously unavailable benefits.

The study provides a detailed analysis of the impact of the strategic embargo imposed on Russia on dual-use products classified as “high priority” by the European Union and its allies. Drawing on the most detailed and up-to-date data available and taking a broader view, the paper confirms that Russia’s isolation has been relatively unsuccessful in the short term in the product group in question. In a disrupted system of geopolitical relations, the sanctions have reinforced some shifts that had already begun and, in some cases, have had unexpected consequences. The use of intermediary countries in foreign trade has led to significant price increases and deterioration in the quality of critical goods for Russia. The effectiveness of sanctions should not be assessed based on the otherwise unattainable requirements of a total blockade, but rather

on their ability to cause lasting economic and strategic tensions in the target country. This is one of the most important conclusions of this paper.

Journal of Economic Literature (JEL) codes: F13, F14, F51, F52.

Keywords: dual-use products, strategic embargo, sanctions, Russian-Ukrainian war, trade diversion.

The Fragile State of Russian Rail Logistics: The Impact of Labor Shortages, Sanctions, and Financial Constraints on Freight Transport Performance

PÉTER BUCSKY

In the war launched by Russia against Ukraine in 2022, as in any other armed conflict, logistics play a key role. The freight transport systems in the former Soviet region are primarily based on railways, which is why the warring parties must provide the logistics needed to wage war and maintain the economy. While no significant difficulties are foreseen in the former, the latter are increasingly problematic due to the difficult-to-manage interdependent effects of technical, sanction, trade and labour market challenges. Sanctions have also made the supply of rail equipment and parts impossible in its previous form, and Chinese imports have not entirely replaced previous Western technology and partners. A perfect example of this is the case of high-quality bearings, which play a key role in rail freight transport. The sanctions have not only changed the supply of equipment to Russian railways but also the structure of the relationship. Transit traffic between China and Europe, built up over the last decade, has started to decline, causing a significant loss of revenue for Russian railways, which are already facing an increasingly complex financial situation. Overall, the mutually reinforcing effects result in slower, more expensive, and less predictable rail transport, which limits the development potential of the Russian economy.

Journal of Economic Literature (JEL) codes: R6, L92, F51.

Keywords: rail freight, sanctions, international trade.

The political and economic aspects and scenarios of differentiated European defence

BOGLÁRKA KOLLER – ANDREA ÉLTETŐ

The article discusses the current challenges facing European defence policy, focusing on the possibilities for implementing a common defence strategy. There have been notable initiatives for unified defence since the beginning of Western European integration, but these have been mainly unsuccessful due to political, ideological, and sovereignty-related reasons. However, Russia’s annexation of Crimea in 2014 and its aggression against Ukraine in February 2022 have made it urgent to rethink a unified European defence strategy. The re-election of Donald Trump and the radical transformation of transatlantic relations have made it urgent to strengthen the European Union’s independent defence capabilities. Based on the concept of differentiated integration, the article examines a flexible approach to defence policy that allows for varying levels of commitment and cooperation between EU member states and third countries. The article also presents the defence policy, as well as its fiscal, industrial, and innovative aspects, emphasising the interrelationships between the three pillars. The article argues that the creation of a differentiated and integrated European defence policy is essential for strengthening the security and competitiveness of the European Union, this being the only way to preserve the

achievements of integration in a changing global foreign policy and foreign economic environment.

Journal of Economic Literature (JEL) codes: H5, F5, O52.

Keywords: European Union, defence policy, European integration, Common Security and Defence Policy, competitiveness, defence industry, differentiated integration.

Trump 2.0: a new trade war – the end of a world order

GYÖRGY CSÁKI

As the 47th President of the USA, Donald Trump continues what he began as the 45th President, weakening multilateral international organisations and developing protectionism to an unprecedented level in almost a century. However, this time (relying on his much stronger political legitimacy), he does everything faster, more aggressively and at a higher speed. By introducing general customs tariff rates, with supplementary tariff rates varying from country to country, in the first six months of his presidency, he overturned the rules-based international economic order that was based upon the principle of non-discrimination. He has replaced a trade policy rooted in reciprocal trade agreements and seeking mutual benefits with a power-based trade policy as the cornerstone of US foreign economic policy. His repeated verbal attacks on the Fed and its chairman and the narrowing of the institution’s decision-making competencies have weakened the dollar, which, together with unpredictable economic policy measures, reduces trust in the US and the dollar, and thus endangers the stability of the international monetary and financial system, recalling the risk of a rebirth of the “non-system” between the two world wars.

Journal of Economic Literature (JEL) code E42, F13, F52.

Keywords: world economic order, international trade, tariffs.

Thoughts and comments on Paul Blustein: King Dollar. Yale University Press: New Haven and Kenneth Rogoff: Our Dollar, Your Problem. Yale University Press: New Haven

ATTILA KÁROLY SOÓS

Two books on the US dollar written by a journalist–economist and a university economics professor–US and IMF civil servant yield important basic information, case studies, and analyses to readers for a thorough consideration of the past, present and possible future of this currency used in the United States but also globally. The approaches and methods of the two authors complement each other. Both books discuss the advantages and disadvantages stemming from the dollar’s dominant international role for the US and the rest of the world. Albeit none of the two authors can predict whether the dollar will be able to preserve its role of dominant currency of the world in the coming years and decades, we receive from them an abundant basis, a plethora of arguments pro and con for considering that question. The books also treat other issues related to the US dollar, which are not discussed this article.

Journal of Economic Literature (JEL) codes: E4, E5, E62, F33, F4, F52.

Keywords: United States, dollar, central bank, monetary policy, international finance, national security

Thunder or earthquake? How does protectionism affect the functioning of the networked global economy and the level of tension within it?

ANIKÓ BÓDI-SCHUBERT – ILDIKÓ RITZL

Recent events, such as the coronavirus pandemic, heightened geopolitical tensions and the economic difficulties associated with them, along with price fluctuations, have highlighted the vulnerability of global supply chains, reinforcing protectionist tendencies. The study analyses the global economy as a network structure comprising relationships between companies and institutions. It considers any state intervention that seeks to influence global trade or capital flows for its purposes as protectionism. Based on this, it seeks answers to two main questions. (1) Do protectionist interventions affect the structure of the global economy and its network of

relationships? (2) Does protectionism increase global network tension? Composite indicators were calculated using a dynamic factor model to analyse protectionism and global tensions and their relationship. According to the results, protectionism can be measured by two variables: one reflects the dynamics of countries manufacturing processed goods, and the other reflects the dynamics of countries producing raw materials. The variable measuring global tensions significantly impacts these, while protectionism only influences the global economy’s performance through countries’ manufacturing products. At the same time, the impact of protectionism can be considered temporary and does not trigger a structural transformation of the global network.

Journal of Economic Literature (JEL) codes: C32, F12, F13, F51, F62.

Keywords: protectionism, global network, global tension, dynamic factor model.

ESG in the context of internationalization

GÁBOR HORVÁTH – VIVIEN CSAPI

The increasingly close interconnection of global economic integration and social, regulatory and investor expectations for sustainability poses new challenges for companies. It is particularly important for companies entering international markets to align their sustainability performance with changing external standards. This study examines how international presence (foreign revenue share), size, and capital structure influence companies’ sustainability performance (ESG) and, within that, the contribution of the environmental (E), social (S), and governance (G) dimensions to this performance. Based on data from the LSEG Workspace database for the period 2013-2023, panel regression models are used to explore the relationships, including sales revenue, operating profitability (OROA) and debt ratio as control variables. The results show that internationalization has a significant and positive impact on ESG values, suggesting that companies entering foreign markets are encouraged by stronger regulatory and stakeholder pressure to improve their sustainability goals and practices. Company size and a higher debt ratio are also strongly positively correlated with ESG scores, while higher short-term operating performance generally indicates a weaker ESG focus. According to the pillar-by-pillar analysis, the impact of internationalization and other company characteristics is less pronounced in the governance (G) dimension than in the environmental (E) and social (S) dimensions. Based on the conclusions of the models applied to the sub-populations, the relationship between the variables indicates sectoral differences. The study provides important lessons for corporate managers, regulators, and investors on the coordination of sustainability and internationalization strategies.

Journal of Economic Literature (JEL) codes: F23, M14, G32, M14.

Keywords: internationalization, ESG performance, sustainability, capital structure, sectoral dif-ferences.

Artificial intelligence in economic research

IMRE FERTŐ

The proliferation of artificial intelligence (AI) is fundamentally transforming the methodological, ethical, and policy landscape of economic research. This paper examines three key issues: how the adaptive, data-driven approach of AI can be reconciled with the causal analytic perspective inherent in economics; the impact of AI on the distribution of labour, capital, and knowledge;

and the institutional and regulatory frameworks necessary to maximize AI’s benefits while mitigating associated risks. The analysis highlights that while machine learning techniques such as causal forests and deep neural networks offer unprecedented analytical opportunities, algorithmic opacity and ethical dilemmas—including biases and data protection— pose significant challenges. The author emphasizes that the successful implementation of AI requires methodological rigour, enhanced researcher competencies, and the integration of policy measures aimed at addressing social inequalities.

Journal of Economic Literature (JEL) codes: C55, O33, D31.

Keywords: artificial intelligence, machine learning, causal analysis, data-driven decision making, algorithm ethics.

Brick by brick or brick on brick? China, BRICS+ and the hacked bipolarity

LÁSZLÓ LÁNG

With the radical change in the global context, the assessment of the BRICS+ phenomenon in the first quarter of 2025 is more uncertain than ever before. What can be said with certainty is that the middle powers of the global South (and East) are becoming increasingly interested in membership of the BRICS+, now led by China. Their interest is twofold: strengthening regime stability and, not unrelated to this, raising relations with China to a personal level (as high as possible); in other words, international (and consequently domestic) legitimacy and domestic accumulation, i.e. the virtuous circle of China-driven growth.

It is in China’s interest not to present itself as the sole challenger to US hegemony. It considers it more desirable that the global South, as a new and increasingly influential pole, should emerge as a leading power, reinforcing the impression (which will not be unfounded by the first quarter of 2025) that it has a prominent role to play in the competition between flexible and changing power coalitions influencing the world order. In this role, its unrestricted partnership with Russia is a burden, because it pulls China back into a bipolar world order or its radical revision. In the exponentially expanding BRICS+ framework, however, this appearance can be softened without losing influence over Russia. From China’s perspective, the existing bipolarity is a hacked ‘win’ and, if necessary, a reloaded ‘win’.

Journal of Economic Literature (JEL) codes: O01, F01, F02, F50, F55.

Keywords: BRICS, China, world order, polarity.

Komlos J. Foundations of real-world economics. What every economics student needs to know (3rd ed.).

New York, USA: Routledge

TIBOR BARDÓCZY

This review presents the third English edition of John Komlos’ book. The author offers a clear and frank critique of many components of mainstream economics. His basic thesis is that the capitalism we live under does not serve the interests of citizens but instead favours the enrichment of the elite. His argument is supported by examples and case studies drawn from

recent decades of economic and social crises. The third edition of the book, which includes events such as the COVID-19 pandemic, highlights the mistakes of recent political and economic leaders and shows what an ideal – but market-based – approach to economics would look like. The review seeks to convey Komlos’ critical perspective, using practical examples from his book.

Journal of Economic Literature (JEL) codes: D01, E02, N00.

Keywords: mainstream economics, microeconomics, macroeconomics, consumer behaviour, social elites, behavioural economics.

Economic Analyses in Spring

2025 Since 2001, Külgazdaság has been publishing the forecasts and analyses of economic researchers, including the outlook of the National Bank of Hungary. For last year, the government’s goals included dynamic economic growth, mitigating inflation and a budget deficit of less than 3 per cent of GDP. By contrast, in 2024, the gross domestic product grew by a mere 0.5 per cent, inflation was suppressed only temporarily, and the general government’s EU deficit indicator (ESA 2010) was 4.9 per cent of GDP. The fourth quarter did not prove to be a success either. The government planned a dynamic start for 2025, but the statistical data for the first quarter of this year paint a picture of a stumbling economy. The government elaborated the budget law for this year on the assumption of 3.4 per cent GDP growth, a 3.2 per cent inflation rate and a 3.7 per cent budget deficit relative to GDP, but these hopes were dashed by March. And on 2 April, US President Donald Trump’s tariff hike plans devastated the global environment of the Hungarian economy, further worsening the outlook. This year, we asked prestigious economic researchers and analysts to publish their forecasts in Külgazdaság. As usual, the National Bank of Hungary presented a summary of its prognosis in this issue based on its 2025 Inflation Report. The manuscripts reached our editorial office between 7 and 15 April 2025.

Returnees in the domestic labour market

ÁGNES HÁRS – DÁVID SIMON

Labour emigration has become a significant labour market issue in the last decade(s). The extent of emigration, the composition of emigrants, their shortage and their possible replacement in the domestic labour market are closely related policy issues to which various responses have been formulated. Attracting the scarce reserves of the domestic labour market, which requires well-targeted and well-designed labour market training or encouraging returns with expensive and uncertain success, can expand supply. Above all, however, the little-studied natural return process needs to be understood. While some returnees stay at home, others repeatedly leave, commute or live and work abroad. In this process, neither emigration nor return selection is random, and migration thus involves a double selection, either positive or negative, which may determine the composition of returnees. This article examines the measurable impact of emigration on returnees, taking into account double selection: who are the returnees, do they work, and if so, in what form, and what premium, usually measured in terms of income, does their migration history place on returnees? The article seeks to answer these questions through a new data set created by the authors, allowing for a deeper and more factual analysis than before (with limitations regarding the current data). This article presents the first results of a longer study. The impact of returnees on the labour market at home can, of course, be raised, but the answer is beyond the scope of this article and will be answered later in the study.

Financing the real economy in the Central and Eastern European countries in the Covid and post-Covid period

ANDRÁS BETHLENDI

In the Covid and post-Covid period, the study examined eleven CEE countries to see whether the financing of the real economy was damaged, and to what extent did domestic lending processes support the economy’s recovery from the shock. Narrowing the analysis to the dominant banking sector in the CEE region, the relative financing of the real economy in six CEE countries has significantly decreased by 2023, and a creditless recovery has occurred. In the absence of structural changes, this phenomenon may re-emerge in the event of another future negative shock. The results show that in a significant part of the CEE countries, the resilience of the banking sector is weaker than in developed countries. Fiscal and monetary policy in the majority of countries have been basically moving in the same direction. The three macroprudential indicators examined (capital, profitability, and portfolio quality) already show higher cross-sectional variability. It is demonstrated that the development of bank loan portfolio quality and lending are mutually reinforcing factors. The relief of prudential and supervisory requirements showed no clear connection with lending. However, in the case of the payment moratorium, we got the expected relationship. The moratorium is a suitable tool for short-term shocks, but its longer-term application can weaken lending processes.

Review

Komlos J. Foundations of real-world economics. What every economics student needs to know (3rd ed.). New York, USA: Routledge

TIBOR BARDÓCZY

This review presents the third English edition of John Komlos’ book. The author offers a clear and frank critique of many components of mainstream economics. His basic thesis is that the capitalism we live under does not serve the interests of citizens but instead favours the enrichment of the elite. His argument is supported by examples and case studies drawn from recent decades of economic and social crises. The third edition of the book, which includes events such as the COVID-19 pandemic, highlights the mistakes of recent political and economic leaders and shows what an ideal – but market-based – approach to economics would look like. The review seeks to convey Komlos’ critical perspective, using practical examples from his book.

Inquiry of the editors of Külgazdaság

WILL THERE BE A NEW WORLD ORDER? IF SO, WHAT KIND? OR WILL CHAOS BE ORDER? MOREOVER, WHERE WILL HUNGARY LAND?

Global disorder, global (dis)order, global dis-order. The English term is varied depending on what the authors or the institutions want to emphasise. Cambridge Dictionary defines disorder as a state of disorder, a lack of organisation. The British Academy, on the other hand, also raises the question of whether ‘global disorder’ denotes a lack of order, or whether it should be described in terms of the extent to which disorder differs from the existing order. It launched an international dialogue to explore this question. The emphasis of ‘dis’ before ‘order’, whether in parentheses or hyphens, indicates that disorder in the global world, from politics to economics, ideologies to everyday life, is not a disorder in the ordinary sense, but a state of dis-order moving towards a new order. Thus, is an order of disorder emerging? Or is the lack of order, i.e. disorder itself, becoming the new order?

“In a world rife with geopolitical tensions, policymakers grapple with many crises, giving rise to what economists dub a new “global dis-order.” Concurrently, industrial policy is resurging, signaling a return to state intervention in the economy. While some argue for “de-risking” over “decoupling,” notable powers like the United States and the European Union are actively promoting policies aimed at reducing dependencies on China in pivotal sectors. This shift carries significant economic and geopolitical implications, fostering trade within politically aligned trading blocs.”

According to a recent publication by the Jacques Delors Institute, which focuses on possible global economic responses, there are other perspectives and interpretations. The world has survived the pandemic, has weathered a severe inflationary wave and could enter a new growth phase – if there is one. All this is happening as security-seeking blocs and powers try to protect their markets. The fragmented economic process is also being played out by changes in the balance of power between the centres of power: the BRICS are gaining strength, China is pushing forward more aggressively, the traditional liberal democracies in Europe are weakening, and the election of Donald Trump is itself a challenge, with the need to adapt. In addition, Europe continues to be weighed down and burdened by Russia’s war against Ukraine.

In this changing world, the Hungarian government wants to flee forward. The Prime Minister has tied himself and his country to three influential figures on the global stage – Donald Trump, Vladimir Putin and Xi Jinping – and has now plunged himself into a seemingly intractable conflict with the European Union. He has also set the course forward to the 3-6% annual economic growth path enshrined in the New Economic Policy Action Plan, guaranteed by economic neutrality.

What will come of this?

We asked the regular contributors to Külgazdaság to examine the global landscape as a whole or any element of it and write down their observations, hopes, or fears. The genres suggested range from gritty analysis to essays to the world of science fiction or dystopia.

However, free-flowing thoughts are also asked to be limited to 10,000 characters.

Responses were submitted to the editorial office between 18 January and 18 February 2025.

The editorial office of Külgazdaság

The creation of a common currency for a decentralised empire in the 16th century

Review on the book

Oliver Volckart: The Silver Empire: How Germany Created Its First Common Currency (Oxford University Press, 2024, 377 pages)

KÁROLY ATTILA SOÓS

In the first decades of the sixteenth century, the monetary disorder prevailing in the Holy Roman (practically German) Empire became increasingly problematic. Coins were issued by one-third of the approximately 360 imperial estates (elector kingdoms, princedoms, imperial cities, etc.). The total number of coins minted in the empire between 1480 and 1550 was estimated at 4500. Of course, not all of them circulated constantly everywhere. However, extreme monetary diversity – which also facilitated counterfeiting, i.e., copying coins with lower silver content – caused much trouble. Less trouble to “professionals” (merchants), and more to the “common man” (peasants, artisans, workers, etc.), whose political importance was increasing in that period.

Emperor Charles V (1519–1555) made important and not useless efforts to create a common currency. However, it seems that his successor Ferdinand’s diplomatic skills were necessary for shaping the compromises and consensus with the imperial estates required by the final success. He also found and hired excellent experts who were able to establish institutions that could guarantee the endurance of the important monetary reform.

Financial adaptation of sectors in the Hungarian economy during the coronavirus pandemic

BÉLA KÁDÁR – SZILÁRD HEGEDŰS

The coronavirus pandemic and the measures taken to mitigate its effects have had a significant impact on the Hungarian economy, with varying degrees of impact in different industries. The aim of the study is to analyse the financial performance of the industries affected by the pandemic and to identify the distressed and so-called zombie companies in the Hungarian economy. The research draws on financial data from more than 68,000 Hungarian small, medium and large enterprises for the period 2019-2022, with a particular focus on EBIT and revenue indicators. A new feature of the paper is an in-depth analysis of the sectoral changes caused by the pandemic and the structural weaknesses of the economy during the crisis. The results show that five of the 74 industries surveyed were particularly vulnerable, while the use of credit support was more widespread than the direct impact of the crisis would have justified. The study contributes to a better understanding of the resilience and weaknesses of the Hungarian economy to crises, helping to take targeted economic policy decisions.

Changes in the external financing of Central and Eastern European catching-up models after the 2008 crisis

TAMÁS TIBOR CSONTOS

This paper examines how external financing has changed in the catching-up models of Central and Eastern Europe after the 2008 crisis. The theoretical framework is based on the growth model literature, which has become a dominant trend in comparative political economy in recent years, but has so far paid little attention to the relationship between growth models and external financing. The paper uses comparative statistical analysis to illustrate changes in external financing, focusing on FDI flows, EU subsidies, remittances of foreign workers and changes in external debt. The results show that the role of FDI and external debt in external financing declined after the crisis, while the importance of EU grants and workers’ remittances increased. The study distinguishes three different groups of countries in terms of external financing, of which only one has remained FDI-oriented.

Domestic experiences of catching up and sustainability in the two decades after Hungary’s EU accession

IVÁN BÉLYÁCZ

This article examines the relationship between Hungary’s catching up and sustainability based on economic developments over the last twenty years. It analyses the consequences of enforcing economic growth and overheating the economy, the aftermaths of investment-centred economic policies, and playing down consumption. The author takes the view that, in the face of heightened government activism, increasing productivity, neglecting sectors and companies that generate high added value, permanently supporting an over-preferred group of companies, and marginalising the knowledge economy and green transition, are counterproductive to catching up based on environmental, financial and functional sustainability, and cannot be funded by the budget in a state of chronic over-allocation of resources. All this could lead to domestic socioeconomic development diverging from progressive international trends.

Freedom in trouble

Review of Joseph E. Stiglitz’s book The Road to Freedom – Economics and the Good Society (Melbourne, Allen Lane, 2024, e-book, 314 p.)

BENEDEK LITS

This review deals with Joseph E. Stiglitz’s book entitled The Road to Freedom, published in April 2024. The book aims to unravel the false dichotomy between freedom and security in economic theory and economic policy in an era when both economic and political governance see the triad of transactionalism, geopolitics and anti-freedom security as the key to progress. The review could not have been written with any other intention than to illustrate this, to present the main lines of argument in the book chapter by chapter, to put the issues in context where the text requires, to critique them, and finally to draw conclusions about freedom and what it really means.

Acquiescence cannot be the goal

Review on the book Kutasi Gábor (ed.): Economic policy. Economic governance of open economies (Ludovika Publishing House, Budapest, 433 pages)

OLIVÉR KOVÁCS

Economic policy is the area through which economics students can best experience that the knowledge provided by mainstream textbooks is far from being sufficient to understand what is really going on in the complex, open and dynamic socio-economic innovation ecosystem. The present volume under review, based on the contributions of 22 authors, suggests precisely that economic policy requires constant vigilance, attention, a holistic approach and a modern economic governance philosophy that seeks to understand the complexity and evolution of the global economy, while consciously avoid any kind of deceptive acquiescence.

The development of the rules of jurisdiction for cross-border individual employment contracts in the light of the relevant case law of the Court of Justice of the European Union

IBOLYA NAGY

The nature of employment contracts is that the legal relationship is asymmetrical so that in cross-border employment relationships, the employee is in the weaker party’s position for several reasons: first, due to the hierarchical relationship between the employee and the employer and, second, because in cross-border employment contracts, there is necessarily an international element (for example the habitual workplace or the place of establishment of the employer), which may differ from the employee’s rights. Private international law limits the parties’ autonomy, so an employer with considerable economic and information power cannot choose the jurisdiction of a court of a state that does not provide an adequate level of protection for the employee. The paper analyses the increasing presence of weaker party protection measures in the rules of jurisdiction through the relevant case law of the European Court of Justice.

Abstract

The Recovery and Resilience Facility at mid-term: a successful new support instrument of the European Union?

SAROLTA SOMOSI – BEÁTA FARKAS

At the heart of the European Union’s NextGenerationEU financial support programme, launched in 2020, is the Recovery and Resilience Facility (RRF) for crisis management. A radical innovation in the new funding architecture is that funds are secured through EU borrowing and disbursements are linked to the achievement of specific deliverables. The funding will be targeted at green and digital transition, as well as cohesion policy, and will be linked to Member States’ country-specific recommendations. The mid-term evaluation of the programme aims to explore the effectiveness of the RRF in meeting complex objectives, in particular green and digital transformation. After presenting the RRF, the study focuses on the EU Commission and peer reviews and assessments, and then analyses the performance of the six countries that have absorbed the most resources. The results so far show that there are encouraging trends in stimulating reforms, in particular the green transition. However, it is the experience with performance-based financing, an innovation that goes beyond the RRF, that is most questionable. This is remarkable because the experience of the RRF will influence the financing of cohesion policy in the seven-year budgetary period starting in 2028.

Industrial safety, risks, communication – specific characteristics of the Hungarian EV battery industry

ANDREA ÉLTETŐ

The paper published in Külgazdaság (No. 7–8, 2024) discussed the legal regulation of the Hungarian battery industry and its environmental impacts. This report focuses on the industrial safety risks inside and outside the factories, their governmental communication and the handling of local citizens’ activities. It is proved that South-Korean battery cell and recycling factories in Hungary have committed systematic and recurring irregularities over the past years, leading to worker hazards and accidents. The authorities proved to be powerless to efficiently deal with these practices. Factories seem to prefer profit interests over health and safety concerns. With the massive influx of Chinese factories, industrial safety risks will increase even in case of normal functioning. Instead of being correctly informed about this, the public receives a central propaganda that uses all the tools of greenwashing, while the authorities are trying to restrict concerned civil society groups by various means.

The quality of EU decisions and national sovereignty

JÁNOS HERMAN

EU decision-making is not competitive in a multipolar world. EU decisions are made in a heterogeneous, multi-stakeholder, sector-by-sector framework of rules, following lengthy and detailed negotiations between member states. The representation of the common European

interest, which in principle underpins the existence of the Union and the content of its decisions, is weak and often absent due to the nature of the bargaining process. The decisions therefore provide neither the impetus nor the direction for (further) joint action. The EU performs better in areas of Community competence and less well in foreign policy, which remains entirely within the competence of the member states. The limit to improving the effectiveness of decision-making is that the EU is built on a basis of intergovernmental consultation and negotiation, and can ultimately always be reduced to this. The institutional-structural development of the Union has been frozen at a half-way stage without political integration having been initiated. This is the root of the deficiencies in decision-making, which is why EU decision-making cannot be made truly effective by superficial corrections, i.e. by leaving intergovernmentalism intact. A series of crises and ordeals, the diminishing returns of the current decision-making model, and the forthcoming further enlargement of the EU could increase the ambition for reform. A modest but useful first step could be extending the scope of qualified majority voting.

The World Trade Organisation dispute settlement mechanism and its current crisis

ORSOLYA ANTAL

This paper aims to present the WTO dispute settlement mechanism from a broad perspective. Accordingly, it highlights the milestones that have marked the development of the dispute settlement mechanism. It discusses the competence of the Dispute Settlement Body (DSB), the procedure, the rules for the implementation of its decisions, and the elements of amicable dispute settlement, based on predefined rules, stressing that the application of these rules has so far guaranteed that stronger members do not oppress weaker ones. The paper also aims to present the procedure prior to the implementation of the decisions and the main features of the current dispute settlement crisis, including the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), given that in the current situation, this forum can be used if a Member State is not satisfied with the report of the dispute settlement panel.

Guns or butter: the fiscal readiness of EU member states for Russia’s war against Ukraine

GÁBOR KUTASI – ÁDÁM MARTON – GRZEGORZ WASZKIEWICZ:

The guns or butter dilemma is a special case of the trade-offs in public funds, which arises from the choice between defense spending with negative sum and welfare expenditures. Russia’s war against Ukraine activated this fiscal dilemma in various regions of Europe. The study is the first step in a multi-stage research process, in which it measures the preparedness of the selected European NATO and EU member countries in terms of the redistribution between defense and welfare expenditures using the cluster analysis method. The cluster variables include defense spending, CDS margin as indicator of risk for public debt, tax wedge as fiscal room of manoeuvring, the Gini index, and geographical distance from Russia. The analysis clearly distinguished five clusters. The major conclusion is that the geographical location gravitating to the war zone has already strengthened the redeployment of general government expenditures towards defense spending even during the less intensive period of the military conflict before 2022. Additionally, the fiscal room of manoeuvring, which would mitigate the welfare sacrifice of the redeployment, is also an important factor of the readiness.

Journal of Economic Literature (JEL) codes: C38, H56, I39

BULLETIN

Economic globalisation and global value chains

ISTVÁN ÁBEL – BENCE GERLAKI – MÁTÉ LÓGA – GYULA NAGY

This paper focuses on the negative changes in the drivers of economic globalisation and the development of global value chains in recent years. Several phenomena point to a slowdown and a shift in the direction of globalisation, while increasing geopolitical uncertainty has exacerbated disruptions in the supply chains linking the most diverse regions, industries and firms of the world economy. Mitigating the resulting risks has triggered policy responses – like decoupling, de-risking, reshoring, near-shoring and friend-shoring – and has also increased the importance of corporate adaptation and resilience. This is likely to lead to a new balance between globalisation and deglobalisation in which international production networks will continue to play a central role despite mounting pressures. Analysing the changing dynamics of these developments can provide a framework for discussing the economic policy responses to moderate the consequences of this challenge.

The new magic bullet of state aid? IPCEIs in Europe and Hungary

ÉVA VOSZKA

Industrial policy, including one of its key instruments, state aid, is experiencing a renaissance worldwide. As international competition between regions to increase state aid for companies intensifies in the early 2020s, the European Union is also trying new approaches, one of which is the funding of Important Projects of Common European Interest (IPCEI). The still incomplete dataset shows a strong concentration of this subsidy at both country and company level. This is why it is important to investigate what Hungary’s chances are of getting involved. After presenting and critically assessing the scheme, the paper explores this, analysing available documents and drawing on the views of the managing authorities, some of the companies and consulting firms involved. The initial experience suggests that, due to the basic features of the scheme and the characteristics of the Hungarian institutional system, IPCEI will not be the main instrument of economic restructuring in the country. Institutional and financial capacity constraints, lack of expertise and experience in many fields, poor coordination between governmental organisations and the various subsidy schemes, the weakness of Hungary’s formal and informal lobbying in the European Union, as well as the

lack of trust and other specific features of the domestic business culture are all obstacles to the effectiveness not only of IPCEIs but also of other governmental policies.

Journal of Economic Literature (JEL) codes: H71, L52, O31, O32.

BOOK REVIEW

From illiberal democracies to illiberalism

Review on the book of

Sajó, András – Uitz, Renáta – Holmes, Stephen (Eds.): Routledge Handbook of Illiberalism

(Routledge, London-New York, 2022, 998 pages)

FERENC KOLLÁRIK

By the last decade of the 20th century, it had become increasingly obvious that democracy, in and of itself, did not guarantee the promotion and protection of liberal values and freedoms. The term illiberal democracy was coined and proliferated to depict this phenomenon. Although the concept has been criticized by many, it has quickly become a very fashionable term in political science. Nevertheless, the professional discourse on the phenomenon has changed and expanded significantly in recent years, leading to illiberalism becoming a separate field of research. In fact, the concept covers an exceedingly complex set of phenomena, which overlaps with other ideologies and concepts in numerous aspects.

Journal of Economic Literature (JEL) codes: F52, K16

Keywords: illiberalism, illiberal democracy, democracy, rule of law

LEGAL SUPPLEMENT

Why different? Specific characteristics of the Hungarian battery industry – Legal background, environmental impacts

ANDREA ÉLTETŐ

Based on official documents, the paper addresses in detail, why battery production in Hungary cannot be discussed as if it were in another European country. The costs and risks of Hungarian battery production are high because of its specific characteristics, and if current practices remain unchanged, the environmental, health and social damage it causes will directly outweigh the benefits for the population. Experience has shown that large companies will obtain environmental permits (if they are required to do so at all), no matter how unclear certain issues remain. Regulations have not been adjusted to this huge battery industry. And even in cases where rules are appropriate, the centrally-mandated authorities are not only lenient, but even break the rules themselves in the interests of the companies. New government regulations are not helping the public, but the companies. There is also a weakening of transparency and inertia on the part of the authorities in many areas. Overall, the environment and nature protection aspect is not really being taken into account in this area.

Journal of Economic Literature JEL code: O25, P28, Q25, Q58.

Economic policy mix: a simplifying trilemma
ÁDÁM CZELLENG
The aim of this paper is to analyse the changing set of objectives of monetary and fiscal policies and to show the short-term and long-term effects of tools used according to these changing objectives in the face of different economic shocks. The paper empirically examines the changes in economic policies over the past 23 years using data from European Union member countries and presents simulation results associated with economic policy objectives. The simulation shows that, when taking into account the global financial shock, the energy price shock and the two shocks together, the highest level of social welfare over a ten-year horizon is achieved when central banks reintroduce the economic stabilization objective into their reaction function. The scientifically novel results demonstrate that the triple objective system, which is also identified for monetary policy and fiscal policy, is simplified into a dilemma of growth and stability, influenced by the state of the economy, the international environment, economic policy credibility and debt perceptions.
Journal of Economic Literature (JEL) codes: C15, E47, E61, F6.
Dragon fire: China’s natural gas relations with Russia
TAMÁS DUDLÁK
The article analyses the evolution, circumstances, geopolitical drivers and prospects of the natural gas policy negotiations and cooperation between China and Russia over the past decade. The energy policy relations between the two countries are an excellent example of the non-market challenges that major energy policy cooperation faces. Natural barriers (lack of infrastructure, long distances) and competition from other gas suppliers (Turkmenistan, Qatar, Australia, USA), which Russia has to overcome to supply the Chinese market, are significant obstacles to developing and deepening cooperation. The development of a direct natural gas connection between the two countries results from a long negotiation and bargaining process, during which political considerations have often overwritten purely economic considerations. The breakthrough could be linked to the 2014 Power of Siberia 1 gas pipeline agreement. China’s preference in its dealings with Russia is to expand LNG supplies, while at present, it is not in its interest to expand piped gas supplies by building the Power of Siberia 2. Although Russia would export more gas to China following Western sanctions against Russia in 2022, the rapid switch from Western to Eastern supplies is impossible due to insufficient infrastructure and production capacity in the Russian Far East. Due to the changing geopolitical landscape in the West and the slow development of natural gas relations in the Russian Far East, Russia has found itself in an increasingly weak bargaining position vis-à-vis China. As a result, there now is a paradoxical situation in which China, as a consumer, can influence the terms of natural gas supplies more than Russia, as a producer.
Journal of Economic Literature (JEL) codes: F51, F52, Q340.

Review on the book of Éva Várhegyi: The occupation of the banking system – How the political power is putting the banks at the service of the political power
(Magyar Narancs books, Tea Publishing House, 2023, 254 pages)
KATALIN MÉRŐ
Éva Várhegyi’s book guides the reader through the process aimed at giving the Orbán governments that came to power after 2010 as much influence as possible over the Hungarian banking system. The book is easy to read for the public yet written with great expertise. The book analyses in detail the steps in this process, broken down by segments of the banking sector. Following an analysis of the political “occupation” of Magyar Nemzeti Bank, Hungarian Development Bank (MFB) and Eximbank, it shows how political influence gained over private banks was consistently built up: How did the government first liquidate the cooperative banking sector in order to create MBH Bank, a large bank intended to compete with OTP, on the basis of cooperative banks, the Hungarian Foreign Trade Bank (MKB) and the Budapest Bank (BB). How it rewarded and punished foreign-owned banks to “tame them”, and what its controversial relationship with OTP was. The final chapter of the book, and the concluding reflections, take stock of the peculiarities and risks of the crony system set up by the ownership structure and operating system described earlier.
Journal of Economic Literature (JEL) codes: G21, G28, P14.

Toward new crises
Reflections on the book of Guillaume Pitron: The rare metals war – The dark side of clean energy and digital technologies
(Pallas Athéné Publishing House Ltd., Budapest, 2023, 288 pages)
GERGELY SALÁT
Rare metals and rare earth elements, a subset of rare metals, are often called the oil of the future, as they are essential in the technologies that will underpin the economy of the years to come. These special materials are particularly needed for the digital and green transition. However, there are two problems with rare (earth) metals: first, their extraction is highly polluting and second, some countries, notably China, have monopolized their production. This can lead to serious disruptions, conflicts, and even wars. French journalist and documentary filmmaker Guillaume Pitron’s book, which paints a rather worrying picture of the future, explores the dangers of rare (earth) metals.
Journal of Economic Literature (JEL) codes: F18, F51, F52, F64, O13, Q34, Q53.

Perception of the startup entrepreneurial function and regulation
TAMÁS ISTVÁN STIPKOVITS
The present study reflects on the definitions of startups in the business world, in the relevant economic literature and in statistics, and assesses the appropriateness of the startup concepts in the Hungarian legal regulation and provides comments on their development. To meet these objectives, it first takes stock of the relevant definitions (from the fields of business, literature, law and statistics) and then draws conclusions from the analysis of the individual definitional elements. For the conceptual elements, the parameters of high growth potential, small size and early life stage and their relationships with other definitional elements are explained. In the field of legal definitions, the absence of the criterion of high growth potential is noted. In the area of legal definitions, the concept of innovation needs to be rethought in terms of content and its relationship with startups. The article makes proposals for more precise regulation in these areas.
Journal of Economic Literature (JEL) codes: K20, K33, K34, K40.

The fate of battery waste: regulation and technology
DÓRA GYŐRFFY
The paper examines what happens at the end of the battery value chain, i.e. what happens to waste, in the context of the development of the battery industry in Hungary. To answer this question, it first analyses the new European battery legislation, adopted in the summer of 2023, which imposes very strict quality and recycling obligations on producers. The second half of the paper will present the recycling process from collection to processing, based on international literature, with a focus on the issue of profitability. It then argues that the establishment of the battery value chain in Hungary makes it almost inevitable that waste processing will also be in Hungary, which is an overall unprofitable activity given the currently available technologies. The question is who pays the losses. This leads to the conclusion that, in stark contrast to European objectives, the state-subsidised Hungarian battery industry is increasingly dependent on China, damaging the environment, and undermining the country’s development potential.
Journal of Economic Literature (JEL) codes K32, L52, L62, O14, O25.
Wage inequalities in global value chains: the case of the Hungarian battery industry
MÁRTON CZIRFUSZ
The battery industry, which serves the electric vehicle industry, is currently expanding in Hungary. Nearly 40 companies in Hungary will employ more than 30,000 people by the mid- 2020s. Drawing on the global value chain literature and the analysis of corporate finance data, the paper explores the share of labour in the value creation of companies involved in the battery industry. The cell manufacturing industry is the smallest contributor, but the pre-tax profits are significant elsewhere in the value chain. Wages differ between the direct core workers, domestic and third country agency workers. Direct workers can have the most significant impact on increasing the wage share, while third-country agency workers are the most vulnerable. In the context of the analysis of battery value chains, the study also points to methodological limitations of analysing corporate finance data.
Journal of Economic Literature (JEL) codes: E24, F23, L62, O15, P12.

Ownership and market structure changes in the Hungarian banking sector
ÉVA VÁRHEGYI
The Orbán government that came to power in 2010 envisaged significant changes in the banking sector as well as in other sectors qualified strategic by announcing that the proportion of national ownership should be enhanced to at least 50 percent; and the National Bank of Hungary, which supports the government’s banking policy, considered it desirable to reduce the number of credit institutions and intensify market concentration. The achievement of these goals was facilitated by the fact that after the global credit crisis of 2008, state interventions in competitive markets strengthened all over the world, especially in the financial sector. The article analyses the most important characteristics of the changes in ownership and market structure that took place in the Hungarian banking sector between 2010 and 2023, and then formulates hypotheses about the expected consequences in the operation of the sector and the inherent risks. Government actions transforming the sector raised the risk for society primarily by transferring a quarter of banking assets to private owners influenced by political power, which is unprecedented in the developed world.
Journal of Economic Literature (JEL) codes: G21, G28, P14.
A review of Markus K. Brunnermeier – Ricardo Reis: A Crash Course On Crises. Macroeconomic Concepts For Run-Ups, Collapses, and Recoveries
(Princeton University Press, 2023, 123 pages)
KÁROLY ATTILA SOÓS
The book aims at interpreting and presenting the logics and mechanisms of economic crises. These logics and mechanisms are being discussed by the authors as manifestations of relationships between macroeconomics and finances. After the analysis of processes and phenomena paving the way towards crises, we can read separately about triggers of crises on the one hand and about those factors – according to the concepts of general control theory, positive feedbacks –, which aggravate crises on the other. Finally, an important subject discussed in the book is governments’ reaction to the crises, both with its monetary and fiscal components.
Journal of Economic Literature (JEL) codes: D53, E30, E44, E52, E62.

review and reflections
Judit Karsai: From the Incubator to the Stock Exchange – The Functioning of Institutions Financing Start-ups in East-Central Europe
(Centre for Economic and Regional Studies, Institute of Economics, Budapest, 2023, 226 pages)
PÉTER BUCSKY
The countries of Central and Eastern Europe have embarked on the public funding of start-ups with great vigour in the 21st century. The emergence of new technologies is creating opportunities for transition countries to create companies that can capture a larger international market share. It is no coincidence that there is a strong demand to build local companies that can sell high value-added technologies in the global market. Following the transition to the market economy, the emergence of transnational corporations has succeeded in replacing the socialist planned economy with market-based systems integrated into the world economy, but there has been little role for locally owned and/or managed enterprises, or in a broader sense, local capital. Focusing on the role of the state and EU funds, this book demonstrates to what extent venture capital in Central and Eastern Europe is similar and different from that in developed countries.
Journal of Economic Literature (JEL) codes: M13, G24.