From Overdecentralization to Overcentralization ? Hungarian Experience in Handling the Crisis at the Local Level

This paper provides a polemic interpretation of recent Hungarian public-administration reforms compared to the opinions that can be found in international scientific literature. The divergence of the various interpretations stems from the different perspectives on the historic context of the development path of the Hungarian municipal administration during the pre- and post-regime change period. The differences in the interpretation of the achievements of the regime change determine whether one would suggest a minor correction or a total replacement - if given the possibility. After briefly describing the public-administration legacy of the communist past and of the post-communist decades, the article delves into the analysis of the financial unsustainability of the highly decentralized local-government system. The analysis builds on the findings of international financiers that operate as policy- transfer powerhouses, as well. Bursting financial tensions led to Hungary’s loan agreement with the IMF in 1996. Although the loan was paid back by 1998, internal systemic inefficiencies stemming from the uneasy compromises of the regime change still had their corroding effect, although vulnerable finances were veiled by occasional conjunctures in the domestic and international economy. In the year 2008, the country became virtually insolvent and again applied for an IMF loan. The IMF itself formulated certain measures to increase the efficiency of the overdecentralized local-government system. Unlike its predecessor, the government that stepped into power in 2010 had the political power to launch systemic corrections in the local-government system. The reforms contained a trade-off : the majority of local competences in exchange for fiscally consolidating local governments. This is labeled as a trade-off between efficiency and democracy by certain authors. It is a fact that the overdecentralized form of local public administration was inefficient and unsustainable. Now there is an opportunity to test whether an overcentralized public administration would be efficient.