The resurgence of the state in East Central Europe: Institutions and public expenditure composition

In the context of the recent resurgence of the state in response to a series of global crises, the paper aims to contribute to the debate on state capitalism and political capitalism by integrating perspectives from institutional economics and public finance. How do constraints on the state influence the structure of public expenditure? The paper adapts the Red Queen Effect theory and the Leviathan typology to analyze the parallel political and budgetary transformation in East Central Europe (ECE) between 2004 and 2023. It shows that the developmental goals of increased state intervention are achieved only in countries where limits on government discretion grow in tandem with its power. The Hungarian case illustrates the various mechanisms through which the lack of constraints facilitates predatory objectives and the dominance of private over public interests. The analysis of regional convergence performance highlights the limitations of unconstrained state intervention for economic prosperity.