Péter Róna: Without a functional Wage Union, Europe will fall apart
Can the wage union idea be put into practice? Why is the migration crisis less of a pressing problem for the European Union than the wage gap between western and eastern member states? What are the responsibilities of EU leaders in this situation? Is the Hungarian government truly fighting against the colonization of our country as Viktor Orbán claims, and could Fidesz’ “political creatures” fattened up from the taxpayers’ money pull the Hungarian economy out of the slump? These were some of the issues addressed by professor of economics Péter Róna in his lecture held in Kévés Gallery on 2nd October.
Mr Róna recalled that he had already warned Hungary’s key economic and political players two years ago that there was a harmful wage and income gap, which was going to open even wider with time, due to the existing European economic mechanisms.
In his view, the process is partly caused by the fact that the four pillars functioning as the foundations of the EU, i.e., the free movement of capital, goods, labour and services, show varying intensity and dynamics in their operation, which ultimately leads to a grave imbalance. What this imbalance means is that multinational companies, driven by the profits coming from the low Eastern Central European wages, allocate their capacities to the east while low-paid workers migrate to the west. As a result, the benefits of the multinational companies are short-lived, and all parties suffer in the end.
Furthermore, as he put it, “people are not like capital: people have families and souls, their movement is not like an export-import transaction. It is a much more sensitive and complex matter.” Mr Róna believes that these differences were swept under the carpet by liberal economists.
We are victims of a grave ommission by the EU
In the professor’s opinion, these phenomena can no longer be ignored, especially because the European Union is contractually obliged to find a solution for this problem: although few people know, in the Treaty of Lisbon EU leaders (who were already aware of the said crises in 2007) have already laid out their obligations to eliminate the economic tensions of our continent.
What did the professor mean?
Although he did not elaborate it in detail, he was probably referring to Article 3 of Section 4 of the contract’s general provisions, which specifically lays out the following guidelines:
“The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. The Union shall promote scientific and technological advance.”
Another point of reference is Article 2d of the part on EU competencies:
“The EU shall take measures to ensure that member states coordinate their employment policies at EU level, with special regard to laying down the guidelines for such policies.”
“They all signed the contract, went home and nothing happened,” the professor explained briefly why the situation had not changed at all in the past decade.
Only the wage union can save Europe from total disintegration
Talking about the wage union initiative, Mr Róna said it was the perfect tool for raising awareness of the huge wage gap between western and eastern member states (we must note here that the professor wrongly referred to the opposition party’s initiative as something that was pointless in this form; later on somebody from the audience pointed it out to him - the ed.). The economist busted a myth widely spread by the opponents of the wage union, who claim that the unreasonable wage gap is caused by the low productivity of Eastern Central Europe, including Hungary. As he put it, even though productivity does have a role in wage differences, it does not explain why a Hungarian worker of a multinational company makes 33 per cent of the western wages when the Hungarian productivity reaches 66 per cent of the western one.
He explained that the problem could not be solved immediately and it must be carried out “carefully considering each and every step” but he also stated that “if we fail to do it, Europe will be torn apart”. He concluded that “if Europe is truly a community of destiny, then we cannot allow one person to be paid X while the other is paid nothing.” In Mr Róna’s opinion, what might tear the European Union and the whole continent apart is not the immigration problem but “the silent frustration and anger that just keeps swelling up in so many EU citizens; it is difficult to express and it is very humiliating." He added that people were reluctant to acknowledge that they were humiliated, so they tend to blame scapegoats to vent their anger on; as an example, he cited post-Brexit xenophobia directed at Eastern European workers.
Talking about the practicality of the wage union, Mr Róna said that the concept was feasible in the long run but it was a substantial process with several preconditions: for example, Hungary should withdraw the one-tier tax system and immediately stop the discrimination of Hungarian enterprises compared to multinational companies. He added that as soon as the big business stopped draining the creative labour force from the Hungarian economy, the pressing shortage of workers would be eliminated and Hungarian enterprises could become competitive, too.
Political creatures and colonialism
Answering a question on Hungary’s economic independence, the professor said: “Viktor Orbán has never attempted to fight colonization, other than with his mouth.” Adding that there was no freedom fight in a country where the Prime Minister and his administration paid multinational companies 4.5 times more than local enterprises for each job created, he pointed out that domestic businesses still had to pay 2.5 times more taxes while, unlike big foreign companies, they were never paid upfront 4-5 years’ worth of employee salaries, from the taxpayers’ money.
“Hungary’s colonization had never reached such a level and magnitude as in the past seven years. (...) This kind of national economic policy is a policy of total dependence,” the professor emphasized, adding that the bad post-Communist economic paradigm of bringing in foreign capital, which Viktor Orbán is a part of, had its roots back in the pre-WW1 period. The audience asked questions about the “new Hungarian billionaires” fattened up by the Fidesz government, such as Lőrinc Mészáros, István Garancsi, Andy Vajna and the others; more specifically, they wanted to know if these individuals could create a strong Hungarian economy and more jobs. Mr Róna’s response was quite clear: “They became billionaires from the taxpayers’ money, (...), they are basically political creatures and not talented, productive entrepreneurs” so they could not drive the Hungarian economy even if they wanted to.