György Enyedi
Hungary's Cities and Regions at the Turn of the Millennium
The post-Socialist transition has produced substantial changes in the urban and regional structure of Hungary. The new structure shows growing inequalities, stronger international competitiveness and the beginning of integration into a European urban and regional system. This new structure has been shaped by two fundamental factors: the post-Socialist transition process and the new global trends of the 1990's.
The past ten years have created new conditions both for the location of economic activity and for the management of urban development (by establishing a market economy based on private property and by introducing a democratically elected and controlled local government system). Economic restructuring-the shift from an industrial economy to a post-industrial, knowledge-based economy-which started in Western countries in the 1970s, occurred in Hungary during the 1990s. Of necessity it was squeezed in time and achieved at great social costs, but it was successful. The economic success is reflected in a continuous and fast economic growth (a 5-6 per cent annual growth in GDP since 1997); in the export-led character of growth and in the restructuring of exports, of which two thirds now go to the EU countries; two thirds are produced by the engineering industry; and 30 per cent of the goods now exported are high-tech products. This new economic structure prefers to locate in larger urban centres, a skilled workforce, industrial clustering and a high level of ancillary business services being the main attractions of locations.
The 1990 Act on Local Governments abolished the Soviet-type council system, and guaranteed the autonomy of the democratically elected and controlled local governments. The quality of local government management contributes to the competitiveness of individual towns and villages in attracting investment, tourist events or the location of services. In sum, this post-Socialist transition managed to create, within a few short years, locational processes and urban or regional development trends that are similar to those in Western Europe.
Simultaneously, development processes in Hungary have been influenced by the new global trends of the 1990s, such as the much mentioned (and misunderstood) globalization. This exposed Hungarian settlements and regions to global competition, to a certain form of urban reindustrialization via industrial clustering, and to the emergence of new economic trends, such as the growing importance of the cultural economy (culture, higher education, etc.). The cross-party political consensus on the European integration of the country, together with wide-ranging preparations for accession to the European Union, have facilitated the penetration and absorption of modern economic elements.
All these extremely rapid changes have burdened the citizens of Hungary. After decades of what is now seen as close to stagnation, coupled with the welfare safety net of the state Socialist system, many people were unable to cope with this radical transformation or with the need for continuous training and re-training. The new challenges have produced a serious generation gap, in the form of advantages available to the young and educated who were socialized during the 1990s. Still, the Socialist system still provided the older generations with a useful skill: they have learned how to survive difficulties.
The urban and regional structures of a country usually adjust slowly. The networks composed of the infrastructure, the environments the settlements have created and the location of economic activity are all conducive to inertia. Nevertheless, the changes of the 1990s were very important. The economic base of the urban system (traditional industry) collapsed in the early 1990s. Between 1990 and 1993, GDP dropped by 20 per cent, the output of agriculture by 30 per cent. One third of the active population (no less than 1.5 million in all) found themselves without employment. These losses were comparable to the economic losses caused by the Second World War and the recovery took longer. It is now possible to state firmly that the destruction wrought by the transitional crisis was, in Schumpeter's terms, a creative destruction. The economy has been successfully rebuilt, but is now structured very differently; since it operates in a new way, its locations have changed too. Hungary now has an entirely new economic geographical map.
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Growing regional inequalities
It is fashionable to speak or write of the country as being split: the East/West divide or the Budapest/countryside divide is a regular topic for newspapers or politicians. What they say about this split is usually one-sided and based on prejudice, rather than on a careful analysis of facts.
Regional inequalities are usually measured by economic indices (per capita GDP) or data on living conditions (unemployment rate, average family income, etc). These inequalities are defined at the level of the basic administrative units (in Hungary, the counties). The existence of regional inequalities is evident. They reflect the uneven distribution of land and mineral resources, the differences within the settlement network as they developed historically, the inequalities built into the quality of local societies (age, ethnicity, educational structure, work ethic or trade traditions), the accessibility of dynamic centres, etc. The value of a given set of regional economic elements depends on the general trends in the economy. Now it is clear that soil fertility has a limited impact, while formerly it was decisive in an agrarian economy. Currently, in our age of a knowledge-based economy, advantageous geographical location, the quality of the settlement environment and, primarily, the quality of the workforce are the most important elements for a regional economy to be successful. All these can be improved, albeit slowly and with difficulty.
Regional inequalities can be such that a large proportion of those resident in backward areas find themselves pushed into poverty and gradually marginalized. All societies try to offset the effect of these inequalities. Traditional methods for a local society to correct itself are migration or introducing new economic activities. The 20th century saw state-imposed corrections (from different considerations and through different methods) in the countries of Europe. The major tool of state correction is regional policy.
Regional inequalities, as measured in per capita GDP or by counties, have not changed much. We have no exact data from the state-Socialist period. The Central Planning Office, in 1978, estimated that the leading county's per capita GDP was 2.5 times higher than that of the least developed county. Twenty years later, the ratio is practically the same.1 In economic performance, the most significant regional change has been the outstandiong performance of the Budapest Metropolitan Region, producing a growing gap between the capital and the rest of the country.
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After the Second World War, this situation changed in the European market economies: a rural vs. urban dichotomy has been replaced by a rural/urban continuum. Most of the rural areas (except for a few mountainous and remote Mediterranean regions) have been incorporated into the urbanizing zones; there was a social evening up (not total levelling) between rural and urban societies; the basic settlement infrastructure (e.g. running water, sewage systems) became identical everywhere, and high standard urban services became easily accessible for most rural dwellers.
This equalization process remained distorted and unfinished in Eastern Europe. The Hungarian village has conserved many more traditional elements than, say, the Austrian village. There were important improvements in education, employment, housing and communal services, but a serious gap remained in transport, communications and commerce. Rural dwellers did not find it easy to reach (and therefore to use) urban services, the educated young left the countryside, and traditional rural life (e.g. a strong attachment to agriculture, food self-sufficiency) remained important. Even the outer zones of urban agglomerations retained much of their traditional, semi-rural character.
It was the rural economy that was especially seriously hit by the transition crisis. There is no room here to discuss all the reasons (unavoidable and avoidable) for the crisis (from the collapse of outmoded rural industry to questionable ways of reprivatizing land and the lack of an agricultural policy). Nevertheless, the conclusion is clear: Hungarian villages were unprepared to join in the competition that European settlements have been engaged in. In the 1990s, world economic trends everywhere favoured large cities and backward rural areas were among the serious losers. Rural unemployment is especially high and many rural families live on welfare. Regional development programmes had recourse to few dynamic elements in these zones. In sum: until the 1980s the rural character of an area was not an important handicap, while in the last decade, the presence of undeveloped rural areas has contributed to a major and long-lasting extent to regional inequalities in Hungary.
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The transition placed the cities into a competitive situation and subjected them to the shock of fast economic restructuring. By the end of the 1990s, it was easy to distinguish between winners and losers. In the Centre for Regional Studies we carried out research to analyse the trajectories of Hungarian cities during the transition. The main conclusions are as follows:
The Budapest Metropolitan Area has produced an outstanding performance, with a rapidly modernizing economic system and a strong concentration of high standard service facilities. Budapest is the only Hungarian city which participates in the European metropolitan system.
Many provincial cities have adapted well and recovered from the transition crisis within a few years. The larger regional centres were first (those with over 100,000 inhabitants). They were followed by smaller county seats in becoming dynamic nodes of the urban system. Their dynamism was expressed by their economic performance, by the presence of modern market institutions (one should remember that a market economy has only recently been restored in Hungary and such banal data as the density of ATMs is a good indicator of modernization) and by their competitiveness. Competitiveness has been primarily supported by the quality of the local workforce, by the business climate of the given city and by its accessibility. Despite the limited size of the country, distance still counts for much in competitiveness: distance from the unevenly located motorways, distance from the Budapest Metropolitan Area, distance from the Austrian (the European Union) border. The geographical distribution of these centres is not especially uneven; they are more frequently found in Western Hungary but they are present and are developing in northeastern Hungary, too. More than one third of the urban population outside Budapest live in these cities.
Medium-sized and small cities were in deep crisis at the beginning of the 1990s. Two thirds of them were classified as "marginalizing" at that time. That was when state-owned industry collapsed, collective farms were dismantled and privatization and foreign direct investments had just started. Weakened economic functions were not yet replaced by innovative elements. Within a few years, most of these cities emerged successfully from the crisis, primarily because of industrial restructuring. They advanced at a slower pace towards a service economy, except in the case of special (education, health or tourism) functions. In the case of small cities, trading traditions and geographical proximity to the dynamic large cities or urbanizing axes are of great importance. This city group is still in transition, the final outcome is not yet clear. The geographical distribution of these emerging local centres is more uneven than that of larger cities, clustered as they are west of the Tisza river, in central Hungary and in northern Transdanubia
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Transborder effects
The state-Socialist economy was a closed economy where urban and regional development was shaped by internal conditions. Borders were a barrier to economic relations (and to the movement of individuals), consequently the border zones became marginal and were ignored by regional policy as well.
The political opening of the borders and the continuous improvement of the transborder infrastructure have made a fundamental impact on regional and urban development. Small in area (93,000 km2), Hungary has seven neighbours (Austria, Slovakia, Ukraine, Romania, Yugoslavia, Croatia, Slovenia). Four of these became independent recently, in the early 1990s, after the dissolution of former federal states. In effect this means that transborder economic or cultural ties involve seven legal systems, seven traditions, seven different levels of economic structure and development. A drive of 200 km west from Budapest takes you to the Austrian border, the eastern edge of the European Union. A drive of 200 km south of the Hungarian capital leads you to Yugoslavia, the scene of the most tragic events of the last decade, a country in a state of armistice rather than of peace. Fourteen out of Hungary's nineteen counties have an inter-national border; there is no Hungarian settlement further than 100 km from a foreign country. It is no exaggeration to say that the whole territory of Hungary (like that of many a small European state) could be defined as a border zone.
Historically, the Hungarian settlement system was shaped within the geographical and political entity of the Carpathian Basin. This entity was seriously distorted as a consequence of the Trianon Peace Treaty of 1920. The Austro-Hungarian Empire was dismantled by the Treaty and the Hungarian Kingdom lost two-thirds of its former territory. New borders cut traditional ties within the urban network, a number of cities lost their hinterlands and became peripheral. Between the two World Wars, transborder contacts developed poorly because of Hungary's frigid political relations with neighbouring countries. During the Communist era, borders were difficult to cross, even those with other Socialist countries. After 1990, the opening of the borders has reestablished many transborder relations and helped to develop new ones. The most spectacular result was the recreation of the Budapest-Vienna axis,2 which re-established the country's centre of innovation in northwestern Hungary (including Budapest). The development of cross-border regions is also very promising. These follow the example of the Euroregions and they are partly supported by the European Union's CBC (Cross-Border Cooperation) programme. Economically, the Burgenland-Western Hungary regional development programme is the most successful. Politically the Tisza-Maros Euroregion is the most interesting, where Hungarian, Romanian and Yugoslav areas have agreed on a close cooperation. French- German cross-border cooperation contributed greatly to a better understanding between the two nations-hopefully, the same will happen within the Carpathian Basin. Although the frequent redrawing of state borders has been a contentious issue in southeastern Europe, Hungarian governments since 1990 have been pragmatic enough to sign agreements with neighbouring countries concerning the acceptance of the present borders. Cross-border cooperation is facilitated by the presence of over 3 millions ethnic Hungarians in the neighbouring countries.
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The concept of a gateway city is well-established in settlement geography. These cities were located on the border zones of large natural landscape units, and their main functions were to exchange the goods and products of different natural resources and to assure the-institutional, cultural, personal-contacts between the population of the large landscapes (regions). Gyöngyös, Eger, Miskolc, Kassa (Košice in Slovakia, with its substantial Hungarian population) are examples of gateway cities in the zone where the Hungarian Great Plain and the Carpathian Mountains meet.
Gateway city has acquired a new notional value as a consequence of the recent integration of the European urban system. The processes of globalization are being conveyed into the European regions by the international cities, and gateway functions are among the international roles of such cities. Gateway functions may be carried out by large urban centres that are located on the border zones of the highly developed and the less developed regions and which are able to receive, transform and redistribute innovation, information, capital and production relations that are coming from the highly developed core regions. This is not a simple transfer, and it may contribute to the prosperity of the city and its region; consequently there is a strong competition for gateway city functions. Gateway cities between the Western European core area and the Mediterranean semi-periphery (such as Lisbon, Bilbao, Barcelona, Lyons, Milan) have produced spectacular performances during the last twenty-five years.
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Gateway city functions need a high-standard communication infrastructure. This was developed at a spectacular rate in the 1990s but there is still a gap between Budapest and the Western metropoles. Telecommunications are good enough to permit Budapest to be an information gathering and processing centre in East Central Europe. This function primarily benefits the Budapest economy because the redistribution network towards southeastern Europe is poorly developed.
In Hungary there is a dense road and railroad network but its quality is unsatisfactory. Budapest is the main hub, all main rail lines and motorways lead to it. Railtrack needs renewal to increase traffic speed and none of the motorways, except for the Vienna-Budapest motorway, extend to the state frontier. Another handicap is that Budapest has the only international airport (except for a small charter airport at Lake Balaton) and this adds to its island-like position. The communicatons infrastructure is adequate for linking Budapest to the core European innovation region, but the links to southeastern Europe need a substantial improvement in quality.
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The quality of urban life is rather good. Standards of the built environment, urban transport, schools and of cultural life are important for competitiveness. Those working in the knowledge-based economy and the highly mobile managers of the large companies place great importance on the quality of life. In a survey carried out by the Centre for Regional Studies in 1998, the Western residents expressed overall satisfaction. They emphasized good schools and a colourful cultural life as the main attractions. At the same time, living costs in Budapest are among the lowest in the developed world.
Budapest has strong traditions in multicultural life, making acceptance of foreigners easy. Four generations ago (in the 1870s) only half of Budapest's residents spoke Hungarian; even today it is accepted that people on the street or in your apartment house speak other languages. However, there are some difficulties here, because of some new and-to many-surprising features: the presence of refugees and of non-European migrants. One third of the Budapest population have migrated in from the countryside, where multiculturalism was exceptional. The strict EU policy on emigration also has an influence (Hungary is a buffer zone between the EU, Eastern Europe and the Balkans). Overall, Budapest people live easily with the fact that a gateway city attracts foreigners for long periods and even permanent residence.
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There was a reformulation of the subnational system in the 1990s. The Act on Local Governments (1990) devolved much competence to the local (settlement) level; it has thus become a source for many bottom-up initiatives in local development, it has mobilized local resources and given an important impetus to the development of democracy. At the same time county governments lost many of their earlier functions and many of their decision-making powers were removed. Territorial functions were taken over partly by larger cities,3 partly by a large number of government agencies (county offices). Even after a slight modification of their status in 1994, the counties cannot take on the role of subnational government, and they are not prepared administratively for promoting and managing regional development programmes. For this reason, the Law on Regional Development (1996) established regional development councils independent of county governments, and started to build up a system of development regions for territorial planning, designing them as NUTS II regions for EU classification. This region-building process has been strengthened after 1998, and planning regions now cover the whole country. The territorial system of government now consists of 3200 (very fragmented) local governments; 19 counties of limited territorial competence; county offices of the central government's ministries; and 7 regions and regional development councils without elected bodies or competences in public administration, established solely for the purposes of regional development.
Since there is no regional identity and regional pressure in Hungary, it was purely a policy decision to establish regions. Six of the seven regions cover three counties each (county borders have remained unchanged ) and the seventh is the Budapest region (Budapest plus Pest County). There is still much uncertainty over the future development of regions. First of all, their borders and their main cities are yet to be designated. Another open question is the relation between counties and regions. Will the regions become another subnational unit, together with the counties; will they replace the counties or will the county remain the subnational unit and the regions simply perform selected functions (like regional planning)? All these options are possible, and the smaller the changes the less resistance from the counties can be anticipated. There will be no popular pressure for regions-building a regional identity takes time-and there is the usual large vested interest in protecting the status quo. If the change is minimal, political decentralization will be slowed down. If the future implies regional decentralization, this process has to be carefully planned, has to achieve the support of the electorate and has to be formulated as a long-term goal.
NOTES
1 Thus the inequalities in economic performance have remained the same. The leading counties were Komárom (1978) and Győr-Sopron (1998), both located along the Budapest-Vienna motorway, and the least developed in both years was Szabolcs-Szatmár, in northeastern Hungary. Back
2 Both parties left unfinished the (potential) Budapest-Vienna motorway: the lanes stopped 30 km short of the Austrian-Hungarian border, traffic then had to take local roads. The motorway was completed shortly after the political transition. Back
3 Cities with the same legal rights as counties. Back
György Enyedi
is Vice President of the Hungarian Academy of Sciences and Chairman of the Hungarian Commisssion for Unesco. His twenty-six books, most of them on regional geography, have been brought out by Hungarian, British, U.S. and Russian publishers.
