During my visit to Budapest I have learned more about the entrepreneurial climate in Hungary.
First the good news. Officials have recognized the need to cut the red tape that was getting in the way to launch a new business in this country and greatly streamlined the process.
Now the bad news. There is a deep cultural belief that property rights will not be protected. The scars from years under communism have created generations who do not believe that any wealth that they create and property that they control will remain theirs. The collective memories of property confiscation by the state remain in the stories passed down through the generations.
Also, due to periods of high inflation and a weak job market, young people who would like to start a business cannot afford to. In fact, many of them cannot even afford rent for a small apartment even when they have a professional level job. As much of 80% of their salary must go for rent.
Taxes also remain very high, especially on small business.
The rule of law is not on solid ground. Corruption rules markets more than a sound legal system.
In a joint session my students had with Hungarian students today at Corvinus University, it was clear that there is still a heavy dependence on the state. All ideas for businesses seemed to predicate on "government support" and "government funding." The culture of socialism remains deep in their psyches.
What is most interesting to me is the general reaction to the American economic crisis. In a lecture I gave last evening to business people, scientists, and others from the community I found that they have not lost faith in markets and capitalism. Quite the contrary -- they still believe that free markets are their best hope.
However, there was a strong consensus that capitalism must be deeply rooted in morality and ethics. This cannot fall to the government, as they have learned through their past experience with strong government control. It must be built through a strong cultural expectation that business people conduct themselves both ethically and morally.
I have enjoyed my stay in Budapest. Tomorrow we leave for Austria.
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