Discussion Papers 1993.
Spatial Research and the Social-Political Changes 47-57. p.
THE RELATIONSHIP BETWEEN ECONOMIC POLICY, ENERGY POLICY
47
THE RELATIONSHIP BETWEEN ECONOMIC
POLICY, ENERGY POLICY
AND THE TREATMENT OF DECLINING MINING
AREAS IN HUNGARY
GYORGYI BARTA
CHANGING CIRCUMSTANCES IN COAL-MINING
Hungary is poor in energy sources: natural gas and brown-coal are the most important,
crude oil reserves are running out.  (Table 1)  Because of disadvantageous geological en-
dowments, the mining of poor quality brown-coal has been more and more expensive, and
mining has required continually increasing state support and credit  even  during the last
decades. This decrease in domestic coal cannot be replaced with other sources of energy:
the specific Hungarian geographical relief is not favourable for building water power sta-
tions (those that have been built have caused more damage till now than advantage), the
# only Hungarian uranium mine was closed down in 1989, the nuclear power station works
with Soviet raw material.
Table I
Energy production and consumption of Hungary, 1986
Production (%)
Consumption (%)
Source of energy
1986
1985
Coal
36.6
25.6
Oil
11.8
32.3
Natural gas
33.7
27.7
Other hydrocarbon
4.7
12.6
Nuclear energy

10.7
Hydro energy
0.2
Others
2.3
1.8
Total
100.0
100.0
Source:  Conception for the long run energy policy. Report for the Council of Ministers — 1989;
Statistical Yearbook, 1986 — Central Statistical Office, Budapest

Barta, Györgyi: The Relationship Between Economic Policy, Energy Policy and the Treatment
of Declining Mining Areas in Hungary. In: Spatial Research and the Social-Political Changes.
Pécs: Centre for Regional Studies, 1993. 47–57. p. Discussion Papers. Special
THE RELATIONSHIP BETWEEN ECONOMIC POLICY, ENERGY POLICY
49
vestments from  a technical point of view.
Table 4
As a result, a part of them had been can-
Energy consumption of production, 1982
celled or finished at a loss (for example:
the common Hungarian-Soviet construc-
Energy
.
tion of gas-pipeline in the Soviet Union;
Countries
consumption
the water power station at the Danube
Austria
0.41
bend; new "Eocen and Liassic Programs"
in order to increase the black- and brown-
Belgium
0.62
coal-mining etc.).
United Kingdom
0.52
Of course, Hungary needs considerable
France
0.40
energy import in spite of all efforts to force
the domestic generation of energy. Ap-
Greece
0.52
proximately 50% of energy consumption is
The Netherlands
0.60
covered by import. It is a well-known fact
Hungary (1983)
1.96
that Hungary, similarly to the other Eastern
West Germany
0.51
European countries, has received energy
from Soviet sources. During the last forty
Italy
0.47
years this economic orientation has never
Spain
0.48
been questioned partly because of Hun-
Sweden
0.42
gary's political alignment and the same so-
cial-economic system existing in these
Japan
0.39
countries, and partly because of the very
USA
0.71
low prices of Soviet raw materials, and the
Canada
0.80
location of infrastructure built up for en-
ergy transport and refining.
* Equvivalent tons of coal per 1000 USD GDP
Hungary has recently changed its pol-
Source:  International Statistical Yearbook,
itical and economic system, which directly
1986 — Central Statistical Office, Budapest;
Grouping by di: Jozsef Papp
or indirectly would have an influence on
energy policy, and consequently on coal-
mining, as well. The way out of the social-economic crisis cannot be conceived without a
fundamental restructuring of the economy. Enterprises working at a loss, among them a
lot of large heavy industrial ones, are going to close: this tendency will have to decrease
the demand on coal, as well. Its effect, of course, cannot be predicted yet.
Table 5
Structural change in energy production
Source of energy
1950
1960
1970
1980
1986
Black coal (1000 t)
1,4.00
2,847
4,517
3,065
2,325
Brown-coal and lignite (1000 t)
11,868
23,676
23,679
22,636
20,804
Oil (1000 t)
512
1,217
1,937
2,031
2,005
Natural gas (million m 3)
381
342
3,469
6,142
7,022
Source:  Enyedi, Gy.; The economic geography of Eastern Europe — Kozgazdastigi es Jogi
ICOnyvkiado, Budapest, 1978; Statistical Yearbook, 1986 — Central Statistical Office, Budapest

Barta, Györgyi: The Relationship Between Economic Policy, Energy Policy and the Treatment
of Declining Mining Areas in Hungary. In: Spatial Research and the Social-Political Changes.
Pécs: Centre for Regional Studies, 1993. 47–57. p. Discussion Papers. Special
THE RELATIONSHIP BETWEEN ECONOMIC POLICY, ENERGY POLICY
53
one of the problematic branches of the economy, while, at the same time, the coal-mining
enterprises are struggling for their survival. The interest of the government is to force the
coal-mining enterprises towards profitability without increasing social tensions and with-
out disorganizing the supply of energy. On the other hand, the mining enterprises want to
impose conditions or to make compromises in order to keep the majority of coal-mining
enterprises alive.
Conditions of the Mining Association
Cancelling at least one third of the 40 billion forints debt (as a compari-
son: in 1987 the total revenue of the coal-mining was 24 billion
forints). The other part of the debt has to be converted into capital: the
bank would get back the loan in the form of shares. To reach this solu-
tion it is necessary to convert these state-owned mining enterprises into
share companies.
— It is proposed that the mining companies should share with the state
budget the costs for repairing the environmental damage caused by
mining.
— The same solution is proposed in case of paying the costs of closing of
mines (till 1995 this sum will exceed 1 billion forints).
But the mining enterprises want to charge the state (budget) or other
local organizations with compensating dismissed miners, the payment
in kind (coal), and the expense of social allocations given formerly by
the mining enterprises.
According to the plans, the restructuring of coal-mining would lead to the decrease by
50-70% of former production, giving enough coal for the operation of the network of
electric power stations (125-160 PJ per year, approximately 19-20 million tons). About
one third of the mines would be closed till 1995 (parallel with new investments, of
course). About 11 thousand miners would be dismissed between 1990 and 1995, 19% of
the total staff. (Between 1988 and 1990,8 thousand miners have already been dismissed.)
The state-owned mining enterprises will be converted into share companies. A case
study of the reorganization will be shown later on.
ORGANIZATIONAL CHANGES IN THE COAL-MINING ENTERPRISE
OF TATABANYA (A CASE STUDY)
The present report is based on observations in North-Western Hungary, at a large
brown-coal-mining company (Tatabanyai Szenbanygk Vallalat, TSZV).
The enterprise was to be reorganized into a holding company; the headquarters were
to deal with long-term development, foreign trade, management of property, organization
of associations, control and supervision and supplying certain central services. Production

Barta, Györgyi: The Relationship Between Economic Policy, Energy Policy and the Treatment
of Declining Mining Areas in Hungary. In: Spatial Research and the Social-Political Changes.
Pécs: Centre for Regional Studies, 1993. 47–57. p. Discussion Papers. Special
54
GYORGY1 BARTA
was to be organized in self-accounting divisions. By 1990, the employment of 3,400
people was planned in the accounting divisions, and 5,800 at the whole enterprise. (The
reality exceeded the plan: the number of employees has decreased more quickly and dras-
tically: by 50%.)
In the actual, transitional phase, already some 2,000 people are employed by the dif-
ferent share-holding companies having English, German and Soviet capital interests and
a wide scope of diversification.
At the moment, the TSZV itself seems to be able to avoid liquidation this way. Be-
cause its total production might become profitable, it might save about 50-60% of the
previous jobs. But the future of the whole domestic coal production is still uncertain.
Labour-force restructuring
Staff number has been reduced gradually. In the second half of 1989, 600 people were
dismissed, mostly by retirement and the offer of early retirement. Miners dismissed this
year were able to find employment in the neighbouring mines, so far. Nevertheless, it
seems to be almost certain that these mines will soon get into a similar situation as the
TSZV. And later no jobs will be available for the miners in this area.
Decreasing social subsidies
The TSZV gave all sorts of different subsidies in kind to its employees. The institu-
tions of these social services (the TSZV has or had its own first-class football team, sev-
eral institutions for sports, a theatre, a school, several parks, a restaurant, shops, an ambu-
latory clinic, buses for transporting workers, a housing estate, even a church) are part of
• the property of the mining enterprise. The maintenance and operation of these institutions
put immense burden on the TSZV. The Enterprise is now selling off a part of these institu-
tions and tries to make the operation of the rest profitable (e.g. the unused part of the
holiday home will be operated as a hotel).
This solution is understandably reasonable from the point of view of TSZV but it is
doubtful whether the local council, which has limited resources as well, will be able to
take these activities over. Finally, the miners, the employees of TSZV, will be deprived of
these services.
Finally, is there any hope for survival of TSZV in Tatabanya?
The Enterprise could fulfil the conditions of the agreement contracted with a social
committee of the Ministry of Finance concerning economic rehabilitation:
several mines working with deficit were closed in 1989;
coal production has decreased;

Barta, Györgyi: The Relationship Between Economic Policy, Energy Policy and the Treatment
of Declining Mining Areas in Hungary. In: Spatial Research and the Social-Political Changes.
Pécs: Centre for Regional Studies, 1993. 47–57. p. Discussion Papers. Special
THE RELATIONSHIP BETWEEN ECONOMIC POLICY, ENERGY POLICY
55
— number of employees has decreased by 50%;
— the organizational modernization has been implemented.
Consequently, it can be said that the TSZV became profitable (the production costs are
covered by the income). But two serious problems remained unsolved, keeping the future
of the Enterprise in a state of uncertainty. These problems are general in case of other
enterprises, as well.
(1)
In spite of the present profitability of this enterprise, the total income
does not cover the paying off of the accumulated debt and the new sour-
ces of investment. This fact brings into question the existence of the
enterprise both in the short and long run.
(2)
The other problem comes from the crisis of the national economy. Not
only the enterprises with deficit but more and more profitable enter-
prises are getting into a hopeless situation because of the insolvency of
subcontractors. Nowadays the mutual indebtedness reaches about 25-
30% of the Hungarian total national income. This fact is going to par-
alyze the whole economy.
Consequently, my opinion is that the future of mining enterprises after restructuring
depends on the economic policy of the government in the same way as before.
THE TREATMENT OF DECLINING MINING AREAS
Mining areas in crisis are regionally concentrated. These kinds of regions have sharp
boundaries yet, at the same time, there are not regional programs attempting to solve or at
least diminishing the crisis. What is the reason for this fact?
It can be said that regional policy, regional planning was not successful in Hungary.
Villages, where about half of the population live, were almost omitted in regional plan-
ning programs. The basic services, the infrastructure have been unnecessarily concen-
trated causing the slow death of the small but potentially viable settlements. The new,
so-called socialist towns built during the last forty years were not successful estab-
lishments either: most of them are characterized by one-sided industry, distorted social
structure and low cultural level. Nevertheless, it is true that the social-economic differen-
ces among the big regions have diminished, and disregarding the last one to two years,
employment was full everywhere in the country. But these positive results were due to the
economic prosperity of the 1960s and early 1970s much rather than to a proposeful re-
gional planning policy.
The strongly centralized redistributional system has had an essential effect on regional
policy. The aversion now to this system is rightful and understandable. Because it did not
pay any attention to local authonomy, local movement from the ground up, all incomes
were concentrated and distributed again according to central decisions.
It is obvious, too, that we are living in a transitional period when the social system is

Barta, Györgyi: The Relationship Between Economic Policy, Energy Policy and the Treatment
of Declining Mining Areas in Hungary. In: Spatial Research and the Social-Political Changes.
Pécs: Centre for Regional Studies, 1993. 47–57. p. Discussion Papers. Special
56
GYoRGYI BARTA
being changed: the new government has been established just now, together with the new
ministries, the election of the local authorities will be held in autumn. A new power struc-
ture is forming in Hungary. But the economy of the country is in deep and unchanged
crisis. In this way it is partly understandable that certain questions such as the treatment of
regional conflicts are pushed into the background.
In my opinion this is not only a matter of pushing regional questions. Instead, they are
completely neglected. The new government has forgotten regional problems, dissolved
the official authorities of regional planning (formerly in the framework of the Building
and Town Planning Ministry, later in Ministry of Transport and Communication, and Min-
istry of Home Affairs), and now there is no new organization dealing with regional plan-
ning.
Nowadays, the local solution of increasing tension is not possible. The territorial sys-
tem of administration is under debate, and it may change considerably. It is clear that the
admininstrative officials pay more attention to their own carriers than to the local prob-
lems. In the counties with declining mining areas the general situation is particularly des-
perate. During the last four decades these counties were specially favoured. In this way
the local management forgot how to accomodate to the changing situation, how to initiate
and work independently. And now, they are not able to move, to do anything regarding the
crisis of their counties.
It is to be feared that rising regional tensions and possible explosion, not only in the
mining areas, will catch the new government and the local administration unprepared.
Then they will be forced to use "fire-fighting" instead of a long run mature plan.
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