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Okay, but what the hell am I going to talk about after Jeffrey Sachs?
Welcome to All of You. Good morning to Everybody. If you allow me, I will use one of the secret weapons of the Hungarian nation, the Hungarian language – which is not just a language, but the first defence line of our national sovereignty as well.
So, good morning Ladies and Gentlemen, Professors, Ladies and Gentlemen.
We thank Jeffrey Sachs for his words about the Hungarians, which touched our souls; the Hungarians indeed believe, Professor, that we have given more to the world than we have received from it. It was a fine list that you wrote for our benefit, and we thank you for it. I would like to add two more points, if I may. I have this instrument here in my hand, which in America is called a biro. This, the biro pen, is the invention of a Hungarian. And although you may not know it, Illycaffè and espresso coffee is also a Hungarian invention – thanks to Ferenc Illy. There are few good things in wars, but this is a small example of the fact that we can still find something in it. Because he was a prisoner of war, taken prisoner by the Italians in the First World War. He was a Hungarian from Timișoara/Temesvár, who married an Italian lady who was a coffee merchant. This gave rise to Illycaffè, after he invented the high-pressure steam espresso machine. So this is what Hungarians are like, Ladies and Gentlemen.
Distinguished Professor, thank you again for your words of encouragement.
I first spoke at this conference in 2014. Before I came here today I read my speech from back then. This in itself was proof of the importance of this conference, because not only in my remarks but also in the speeches of the other speakers then, we found the warnings and signals that are the most important challenges in geopolitics today. And then I was here in 2017, when I spoke about the fact that the world is changing and that there were clear signs of that. Many people doubted this at the time, but if you look back at that year, the world has changed so much since 2017 that one can hardly recognise it. This is the tenth Lámfalussy Conference. We have heard of several anniversaries here, but there is another special aspect to our gathering today. Because in the natural order of things, as President Lagarde has said, every mandate comes to an end. I am not referring to my own, of course, because one hopes that one’s own will never end; but the reality is that all mandates end – even those in the Central Bank. So today was the last time we heard György Matolcsy greet the audience at the Lámfalussy Conference as the Governor of the Central Bank. We can tell the Governor of the Central Bank that this is not the end of the story: we learned from the Terminator that there is no end-point unless you end it yourself. That, however, is still a long way off. I am confident that the Governor will continue to be an important and influential figure in thinking on Hungarian economic policy. In this capacity – including at today’s conference – we owe him a debt of gratitude for the past ten years or more. The legacy that the Governor leaves is one of the greatest, and in the Hungarian context I must mention Kálmán Széll, Sándor Wekerle and even the first Governor of the Central Bank, Sándor Popovics. György Matolcsy is an epoch-making economic policymaker and an epoch-making Central Bank Governor. Thank you very much for your work.
Ladies and Gentlemen,
I must pay tribute not only to the Governor, but also to Sándor Lámfalussy – or, as he is called by foreigners, Alexandre Lámfalussy. I told you, this is the first line of defence: they will never be able to say the name “Sándor Lámfalussy”. As a true Central European, he took on the lion’s share in ensuring that the accession of the Central European countries to the European Union went as smoothly as possible. He was so ready to help that he assisted me as an adviser between 1999 and 2002, when I was also Prime Minister and we were preparing for accession. I was grateful to him for that. I remember our discussions at that time about the euro. What was it, and what was it going to be? Lámfalussy knew the operation of the euro better than anyone else: after all, it was his invention and he saw its potential; but what we rarely talk about nowadays is that he also saw its potential operational failures. I am not an economist, I studied law, and so I remember asking him as an unqualified enquirer: “How, dear Sándor, can there be a single currency without a common fiscal framework?” To an economist it may not seem absurd for there to be a common monetary unit without a common fiscal background; but it was a strange thing to a humble lawyer meddling in economic policy – something the like of which we had never seen. How can this happen? And Sándor said that with the introduction of the euro, the question of a common fiscal policy would be settled. It would be unstoppable. The euro would bring with it a common fiscal policy for all eurozone members. It could not be otherwise. Professor Lámfalussy was a very clever man, and he may have been right that it could not be otherwise, but he forgot to say one thing: how long it would take. It has been twenty-five years since we spoke, and there is no common fiscal policy behind the euro. This little story just reminds us that when doing such large-scale things it is certainly not a good idea to rely on the wisdom of politicians.
Ladies and Gentlemen,
Mr. Lámfalussy also made some criticisms. He said that if we European leaders are not skilful enough, if we do not take important steps, we will fail to create a situation in which the euro benefits all members of the euro area. I may also have heard President Lagarde say this once somewhere. Mr Lámfalussy said that if we did not make changes, only the richest would benefit from the eurozone; the less large and less rich countries in the eurozone would not benefit. If you look at the data, it presents a very sad picture. Since the introduction of the euro, US productivity and competitiveness have improved at a much faster rate than the competitiveness and productivity of the euro area. Since 2000, US GDP has grown by about 170 per cent, while that of the euro area has grown by 140 per cent. In its current form, the euro – as Lámfalussy warned us – favours strong and competitive economies, but does not help to strengthen economies which are catching up. This is a grave warning, and for Hungarians – who are not yet members of the euro area – it is perhaps Lámfalussy’s most important legacy. It is precisely because we have heeded his admonition that we are not members of the eurozone. The legacy of the father of the eurozone is this advice to Hungary: “Beware – if your economy is not prepared for accession, accession will kill you.”
Well, Ladies and Gentlemen, we have heeded that advice. Finally, I would like to say one more thing about Sándor Lámfalussy. In an interview, a cheekily provocative liberal journalist asked him this question, which is a dangerous one in this country: “Professor Lámfalussy, are you a Christian?” I remember this interview. I don’t know what it is like in America, or what it is like in our guests’ countries, but around here this is not a proper question. There are three things a gentleman or lady should not inquire about, and one of these is the other person’s religion. But this happened, the question was asked, and later it appeared in print. Lámfalussy’s response was one of the greatest lessons of my life. It went thus: “Are you a Christian, Mr. Lámfalussy?” To which he replied, “I try, but I don’t always succeed.” And this reminds us Christians that Christianity is not a theory, but a practice – one which may even have a place in financial policy.
Ladies and Gentlemen,
And there is another professor of economics among us about whom I would like to say a few words. This is Professor Jeffrey Sachs, whom I am happy to pay tribute to, as we have known each other for decades. Professor, let us reveal our secret. When you decided to head for the countries of the Eastern Bloc it was a very exciting time in the lives of both of us, during the fall of communism in Central Europe. That was when you appeared on our horizon, on our radar, in our lives. You were the most prominent Western economist to come to our region to help in the economic transition. So the Professor and I are old soldiers in the Westernisation of Central Europe and in its process of catching up. And, as is usual with fellow warriors, we have had some friendly duels. But we have always agreed – and I think we have agreed on this ever since – that we Hungarians need to connect with the whole world as soon as possible and as deeply as possible. As I recall, Professor, we first met at your home in Washington DC – your home near Washington. I recall that we differed substantially on a number of issues; and, looking back over the past thirty years, I can see that our positions have converged. I see that the same globalists – permit me use that political language – who once called for the comprehensive opening of borders are the same people who are now calling for the formation of opposing blocs, for segregation and for war. Here I must mention the name of another of our famous compatriots: George Soros. He has been at the forefront of this, because there are – there always have been and there still are – financial circles, let us call them globalists, who thirty years ago were able to engorge themselves with money by spreading neoliberal principles; and today they are able to make huge amounts of money through war. This is the naked political truth, and all the rest is just empty talk – indeed sleight of hand or a mass confidence trick. Professor Sachs, on the other hand, has always insisted that the world can be made a better and more peaceful place through free trade, cooperation and interconnection in the interest of all. In recent years this opinion has led to his excommunication. Obviously this fact has not been unconnected to the character of the US administration in office; but he has persisted, he has always taken the same position, and we owe him our respect. In fact, allow me to reveal a little trade secret: before the Hungarian government launched its official foreign policy strategy, which we call “connectivity”, it was preceded by a long and deep discussion with Professor Hübner – without whom, we would probably not have got this far. So I would say that in thirty years we have gone from the “Washington Dissensus” to “the Budapest Consensus”.
It is perhaps not unreasonable to use the term “Budapest Consensus”, because, if I am reading world events correctly, the previous consensus – the liberal Washington Consensus – seems to have died. It was already on its way out in earlier years, but since Donald Trump’s victory it can no longer hope to be resurrected. In the absence of a Washington Consensus, it is worth defining what it is that we all believe in, and what we can use as a compass, what we could call the Budapest Consensus: a normative vision, projected on the whole world, which can be defined in short as the right of every nation to consider itself as the centre of the world and the most important point of reference. While accepting with utmost respect the “Sachs Doctrine” that we have just heard, that “size matters”, for us, for example, I have to say that, after all, Hungarians think that Hungary is the centre of the world – with or without economies of scale. Likewise, we accept that every nation sees its own country as the centre of the world. And it follows that for every nation, including Hungary, we must seek to answer the question of how we can ensure our survival – and if possible, our prosperity – in this new world. In order for a country to be able to answer this question, it must first clarify what the world we are entering will be like. This is something that the Professor spoke to me about in a deeply philosophical way. If I want to summarise my own answer to this question of the nature of the world we are facing, the world which is now taking shape, I would say, in my own language – which is not the language of economics – that the liberal era is being replaced by a sovereigntist era. After fifteen years of building this era of sovereignty here in Hungary, alone in the Western world, alone here in Hungary, we can say a thing or two about the characteristics of the coming era. Now I too will say a few things. The first important experience is stability and security. In the period ahead security will become more important. Those who cannot defend themselves will not be partners and not even allies; at best they will be subordinates. Therefore, for every nation, preserving its capacity for self-defence will be a key issue. Interestingly, today the focus of this is not the Ukrainian–Russian war, but migration. Today the security and stability of Western countries – especially in Europe – will be determined by migration and its mathematically predictable consequences. Those who do not deal with this will not be able to find their place – a favourable place for them – in the new world.
The second experience is an effective state. This will clearly sound strange to your ears, because – as we have heard from Ms. Lagarde – independence is also understood as the independence of central banks from governments. But believe me, one of the great contests in the period ahead will be – or perhaps already is – a contest between models of state organisation. With neoliberal models of state organisation currently failing, having already failed in America but also failing in Europe, the question is what other models of state organisation will come from different national cultures, clothed in national specificities. In the next fifteen to twenty years we will see which state organisation model will be the most successful.
Our third experience is connectivity-based foreign policy. A country that is not willing to connect with other major players cannot be successful. But those that can connect with everyone will grow in weight and in the importance of their role. Let us look at Hungary. Our liberal opponents tend to portray Hungary as an isolated country. By contrast with this, our relations with the new American Republican administration are today the best in the whole of Europe; and we have the best relations with China and the best relations with Russia. It is not Hungary that is isolated, but the European Union: the European Union fell out with the new US administration before it had even taken office; the European Union has isolated itself from China by starting a tariff war; and it has isolated itself from Russia, with whom it is at war. Who is isolated here? So I have to say that our feeling is that we are on the main street of history, while the European Union is meandering and stumbling somewhere in the muddy back streets.
And the fourth and final thing I would like to say about the new world is that it belongs or is related to the middle class. Our fourth experience is that we can only build resilient societies with strong middle classes. This is because in Europe in the coming decades we will face very serious societal shocks. I have talked about migration, but there are many other foreseeable shocks. And I am convinced that, in this new world, only those will remain standing for whom these troubles and shocks do not cause internal political instability. It would be presumptuous of me to mention France or Germany, and I will not do so now; but success will only be possible in those countries where a societal order based on the middle class is solid and unshakeable. In the next fifteen to twenty years the key issue will be a strong middle class.
Ladies and Gentlemen,
If I may say a few words about Hungary in this respect, I can say that here we have not allowed what happened in the West, where the liberal model of state organisation has weakened the Western middle classes. That is what is happening to the west of us today. So, while the European middle classes are shrinking, in the East Asian world huge social strata of hundreds of millions are being brought into the middle classes from below – creating not only stability but also economic prosperity for themselves. In 1998 the average Chinese urban resident’s income was in the bottom half of the income distribution scale; today it is in the top third. Meanwhile in many Western European countries it has started to fall. Here we have been working since 2010 to create a strong middle class. Those in attendance here may not know it, but there are one million more people in work today than there were in 2010. In a country of ten million people – the total population – there are one million more people in work than there were in 2010. The employment rate for people aged 20 to 64 is now 81 per cent, up from 64 per cent in 2010. Household financial wealth has quadrupled, to somewhere around 90 trillion forints. This represents the thirteenth highest level of financial savings in the entire European Union. This is after forty-five years of communism, Ladies and Gentlemen. We cannot talk about wealth accumulation over generations of historical families, because communism made that impossible. But even so, a middle-class policy has succeeded in getting us to thirteenth place in the European Union today. And nine out of ten Hungarians – and I say this to our guests, because it is obvious to those in Hungary – live in owner-occupied properties.
Ladies and Gentlemen,
In ten years micro-enterprises – let’s leave aside the big ones – have doubled their revenues, from 10 trillion forints to 20 trillion forints. And this figure is growing. And this has happened in Hungary while – because of our close relationship with the American Republicans – the Brussels bureaucracy wants to put Hungary under financial sanctions, and while the Russo–Ukrainian war has cost the Hungarian economy 19.5 billion euros in three years. This is what the Russo–Ukrainian war has cost Hungary so far. Against this background, the middle class has still been strengthened.
Ladies and Gentlemen,
Since 2010, 60–70 per cent of workers in Hungary have seen their real income increase every year. Every year! The only exception to this was 2023, the year of the war: the second year of the Russo–Ukrainian war, which began in 2022. In that year there was an overall fall in real incomes in Hungary – a small one, but nonetheless a fall. So if there is one country that has an interest in peace, that country is Hungary. If there is a country that has an interest in Donald Trump managing to end the war between Russia and Ukraine, that country is Hungary. For Hungary the success of the US administration’s peace effort is not an ideological interest, or even a geostrategic interest, but a vital, everyday economic interest. This is why we hope that there will be peace, that the sovereigntist world political transformation will take place, and that we will be able to conclude a grand US–Hungarian economic agreement, which will boost the Hungarian economy.
Ladies and Gentlemen,
I will not say that I have reached the end of what I have to say, but this is where I will stop. In our community, among Calvinists, there is a well-known story. During an extremely long sermon, a little child asks his father, “When will he get to the end? When will he finish?” His father replies, “He’s already finished, he just can’t stop talking.” That is a mistake I would like to avoid, so I will stop now. I would like to express my great respect and appreciation to those who have created this conference, and who are assisting us with their ideas to help Hungary successfully navigate these global challenges. With your help there is a good chance that Hungary will find its place not only on the map of the old global economy, but also on the map of the new global economy that is now emerging. I encourage you to tell us everything which will enable the Hungarian government to benefit from your ideas.
Thank you very much for inviting me here. Respect to Sándor Lámfalussy, Congratulations to President Lagarde, my thanks to Professor Jeffrey Sachs, and my thanks to György Matolcsy, Governor of the Central Bank. Thank you for the opportunity of speaking to you here.
