Reindustrialisation initiatives in the Modern Cities Programme

Abstract

A critical analysis of the Modern Cities Programme, a development programme launched by the Hungarian government in 2015, considers the reindustrialisation components as part of the debate on the varieties of capitalism (in particular the issue of Central and Eastern European dependent market economies) and the persisting institutional deficiencies in the Hungarian planning system.

After the 2008 crisis, the low efficiency or failure of mainstream development policies and Hungary’s poor convergence record have contributed to a growing interest in alternative development policies. The emerging development-policy vision is returning to the idea of strong state intervention, although paradoxically it continues to operate in an environment characterised by exceptionally high foreign participation in the economy, particularly in its most competitive segments. In addition, domestic development policy struggles with permanent and self-reinforcing institutional weaknesses that significantly reduce its effectiveness. The resulting re-centralisation has not only led to an increase in regional differences, but also to a further weakening of development institutions operating in cities and regions. Effective development systems (development coalitions and early-stage urban regimes) that are capable of setting and achieving coherent, systematic development goals exist only in a few select locations across the country.

The Modern Cities Programme, essentially a redistribution of EU funds based on special agreements between the central government and the major Hungarian cities, is a project-based development agenda that somewhat resembles French and Polish planning contracts, albeit in a diluted and less coherent form. As an instrument of development policy, it fits into the new etatist development philosophy. Although the programme is predominantly an instrument of urban development, it also includes 77 projects directly or indirectly related to reindustrialisation. These initiatives focus mainly on improving transport links, developing specific sectors, vocational training, education and a limited R&D+I component.

The programme characteristics vary greatly from region to region. In the western half of the country, traditional development instruments predominate with limited evidence of attempts at building up knowledge-intensive activities. In the Southern Great Plain, also complex industrial development goals are found that are conducive to endogenous growth, partly reflecting the lack of FDI in the region and a more SME-based development trajectory. The programme has not been able to realise favourable reindustrialisation initiatives in the peripheral industrial areas of Hungary. The fact that the programme tended to benefit ‘winners’ is likely to increase existing development gaps rather than reduce existing regional disparities.