State-owned enterprises in the Hungarian economy: what model follows from the law?

Aim: This paper examines the fundamental constitutional and legislative rules regarding the state’s involvement and the state’s ownership in the Hungarian economy. It aims to establish what model follows from the relevant rules regarding the place and the role of state-owned enterprises in the national economy, in particular whether they are subjected to the multiple and complex considerations that became to characterise the state-owned enterprise sector in Europe after the global financial and economic crisis. Previous political economy research has established that state-owned enterprises are now driven in many national jurisdictions by factors beyond their public mission and public interest tasks, which include in particular objectives of strategic nature. Research of the political economy of Hungarian capitalism has highlighted similar developments in Hungary. We aimed to examine whether the applicable legal framework confirms the findings of political economy research. Methodology: Our research was doctrinal legal research combined with evidence collected regarding developments in the Hungarian market for state-owned enterprises. It was framed by providing an overview of the state of the art in the political economy research on state-owned enterprises in European economies before and after the global financial and economic crisis, and in the political economy research on the Hungarian market economy and state-owned enterprises therein before and after the political landmark year of 2010. Findings: Our research has found that although the fundamental constitutional and legislative provisions governing the state’s involvement and the state’s ownership in the Hungarian economy establish only a rough framework, the law indeed reflects the model preferred for the national economy and state-owned enterprises therein, and gives expression of a model change. However, since the law may only provide the fundamentals of the preferred economic model, leaving the choice and the development of details to politics and policy-making, our assessment had to be supported with evidence of actual nationalisations and re-nationalisation in the Hungarian economy. Nevertheless, our analysis of the applicable legal rules has revealed that the Hungarian SOE landscape in influenced by complex, often strategic interests and other factors, beyond their traditional public interest roles. Value: By examining the legal rules governing the state’s involvement and the state’s ownership in the Hungarian economy, our research provides an important contribution to the already existing political economy scholarship on state-owned enterprises, as well as on changes in Hungarian economic policy. The applicable legal rules provided our main evidence, which were supplemented with evidence of market developments, which combination of evidence in the research on state-owned enterprises in Hungary holds considerable added-value.