Hungary’s Bifurcated Welfare State
Splitting Social Rights and the Social Exclusion of Roma
Julia Szalai
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Working Papers m 2013:05
Hungary’s Bifurcated Welfare State
Splitting Social Rights and the Social Exclusion of Roma
Julia Szalai
March 2013
Adam Smith Research Foundation . Working Papers Series
Acknowledgements
This Working Paper was presented at the British Association for Slavonic and East European Studies Conference in
Cambridge in March 2013.
About the authors
Professor Júlia Szalai was ASRF Visiting Senior Research Fellow at the University of Glasgow (March-June 2013).
She graduated with an MA in “Applied Mathematics in Macro-economics” from the Budapest Univesity of Economics
in 1971. She obtained her Ph.D. in Sociology in 1986 and her degree of Doctor of Science (DSc) in Sociology in
2007, both from the Hungarian Academy of Sciences.
Since graduation, she has been working in the Institute of Sociology of the Hungarian Academy of Sciences, where
she is currently serving as Chief Scientific Consultant, and simultaneously acts as Head of the Welfare Research Unit.
Address for correspondence
<[email protected]>
Concepts and frameworks
T
his paper takes departure from two important strands of theorising social citizenship as
the fundament and the most essential normative concept of the welfare state. The first is
T.H. Marshall’s classic work on the historical evolution of the trinity of civil, political, and social
rights (Marshall & Bottomore 1992). Two of his arguments are of key importance for us when applying
the theory in conceptualising the postcommunist welfare state.
Firstly, Marshall’s emphasis on gradualism has to be
taken into account. He argues that the sequence of
the three sets of rights cannot be altered at will: it is
the enrichment of the institutions and practices of civil
and political rights that preclude the institutionalisation
of social rights. In other words, legal arrangements
and daily practices of universal rights for political participation are preconditioning the claims for universal
social rights, i.e. the latter can be perceived and practiced only amidst the conditions of liberal democracy.
Secondly, social rights – as much their institutions as
the daily social perceptions of them – are the product
of a lengthy social dialogue rooted in powerful movements and recognition struggles of earlier excluded
social groups. In other words, social rights cannot be
“constructed” in a top-down fashion and merely by
legislation. They assume a widespread politicisation of
matters of living, and are pushed forward by massive
contestation of the prevailing order of the distribution
of income, wealth, and opportunities.
and national minorities in an equal way to those of the
majority of the nation-state. Recognition struggles of
these minorities are of key importance here: again,
the daily understanding of citizens’ rights is seen
as an outcome of ongoing movements and their
claims to reshape the scope and content of public
discourse. Kymlicka’s approach will be of uttermost
importance for us in looking at the actual content of
social rights of ethnic minorities – especially: those
of the Roma citizenry – in postcommunist Hungary.
As will be shown, inequalities of rights have a clear
ethnic content here that work toward a massive social
exclusion of Roma. Missing political institutions of
meaningfully representing their rights are just part of
the story. As it will be shown below, a built-in dualism
of the welfare arrangements works perhaps even more
powerfully toward this very same end, and, instead of
reducing inequalities in areas under its competence,
Marshall’s two important arguments are furthered
by Will Kimlycka who re-conceptualises the trinity of
rights in light of those important historical changes
that have been brought about by mass immigration
from the global South toward the global North
(Kymlicka 1995). As he stresses, a high degree of
cultural heterogeneity has become a decisive feature
of European societies in the past three decades, thus
once applicable liberal concepts of citizenship have to
be revisited accordingly. Kymlicka outlines a genuinely
multicultural arrangement for practicing rights of ethnic
3
Adam Smith Research Foundation . Working Papers Series
it is the dual welfare structure that contributes to the
deepening of exclusion on ethnic grounds.
In what follows, I will apply the briefly outlined two
conceptualisations of social rights in analysing the
performance of Hungary’s postcommunist welfare
state. As I will attempt to show, it was a meaningful
conversion of earlier gradually elaborated paths
of covert marketisation under state-socialism
that provided the socio-historical foundation of
postcommunist transformation. At the same time, it
has been the very same gradual process that, gaining
rapid institutionalisation in service of majority interests
upon the collapse of the old rule, has led to a sharp
fragmentation of social rights with the concomitant
massive social exclusion of the country’s largest
ethnic minority, its dramatically impoverished and
marginalised Roma community.
Theories and policies governing Hungary’s postcommunist welfare state
Although neither of the above described theories
have had wide resonance in the political discourse in
Hungary, a rather pragmatic interpretation of social
rights still has navigated actual decision-making from
the very start of the transition. Two strands of thoughts
have come to the forefront: the “social market” theory
and neoliberalism. The first had a strong influence
in shaping the orientation of the systemic change.
Despite rather important differences in ideas on
marketisation, in the early 1990s, there was a broad
consensus among the competing political actors
in outlining the role of the state. The claim was a
speedy decomposition of the political structures that
had facilitated the earlier unquestioned overpower
of the state above the citizenry, and a simultaneous
composition of institutions that safeguard individual
freedom and culturally perceived entitlements for
knowledge, healthy life, and a minimum of daily living.
In other words, unlimited freedom was never on the
agenda: access to healthcare, provisions for quality
schooling, guaranteed minima in housing, and the
maintenance of public social security were seen as
constitutionally ascribed responsibilities of the new
state. At the same time, it was the new system of
democratic political institutions that was perceived
to exercise control above the actual accomplishment
of the state’s listed duties. Surely, such a control
presupposes a strong and well-organised civil society
that was hoped to spontaneously come into being
upon “liberation from the state’s oppression”. In the
first period of the transition, the “social market” theory
4
reflected ideas on a strong representative democracy
and an ongoing meaningful dialogue between the
state (the envisioned agent of the “social” momentum)
and the citizen (as an agent integrated into the
market). Put differently, it was thought that the state
would be deprived from its economic role, while the
market would become a potent base of a new social
integration.
In this latter aspect, ideas on developing a “social
market” seemed to be in undisturbed harmony with
those neoliberal claims that gave the backing to
one of the most important aspects of the systemic
change: the conversion of the old property-relations.
It was widely believed that rapid privatisation would
be a primary task both for economic advancement
and the rise of a potent civil society. Or else: beyond
its economic role, marketisation was seen as a
mighty procedure to deprive the “old” state from the
foundations of its oppressive inclinations, thus, the
systemic change in the sphere of production was
meant to induce deep-going changes also in the
political arena.
The translation of these ideas into the actual
accomplishment of privatisation was supported by
a number of other neoliberal beliefs. In the context
of the present paper, it is the claim for an immediate
dismantling of the once omnipotent communist
state that deserves attention in the first place. In this
unprecedented historic process, cardinal reforms
in social security and welfare were put high on the
agenda as those among the few unquestionable
preconditions of genuine change. Urgency to
meaningfully limit the presence of the central state
in these areas was reasoned by a range of powerful
legal and financial considerations. As to the legal
aspects, it was a widely shared view among domestic
and foreign advisors, economists, financial experts,
etc. that, without cutting off the strong bond between
the centrally administered schemes of redistribution
and the individuals’ entitlements for benefits and
provisions, the very essence of the systemic
transformation would be jeopardised: neither the
reallocation of properties, nor the recruitment of
labour, nor free entrepreneurship as the fundaments
of marketisation were to be successfully launched
otherwise. As to the financial side, the equally widely
shared views on the former “premature welfare state”
(Kornai 1996) implied that welfare expenditures had
occupied a too heavy weight in the yearly state budget
of the late 1980s, hence upon the turnover, they should
be substantially reduced in order to reapportion funds
for the primary purposes of transforming economic
Hungary’s Bifurcated Welfare State . Szalai
management according to the rules of the market,
and further, also for substantiating modernisation and
economic adjustment.
But another important neoliberal principle behind
advocating revolutionary reforms in the broadly
meant sphere of welfare was to increase social
justice and efficiency. It was a recurring motif of the
criticism of social policy in the late period of statesocialism that – contrary to the declared goals of the
communist regime – central redistribution, strictly
linked to employment, acted rather to increase
income inequalities than towards moderating
them. Moreover, by originating entitlements from
compulsory full employment, the misconstrual concept
of “universalism” implied massive social injustices
through regularly canalising substantial provisions
also to the relatively prosperous strata of society.
Therefore, when laying down the principles of the
new welfare system, it was one of the fundamental
goals to eliminate “waste” – in plain terms, to ensure
that only those really in need received supplementary
sources through redistribution and only to the extent
of their neediness. It could be hoped that with all this,
the new system became not only more targeted but
also more just: public money was to be spent only to
meet the needs acknowledged by consensus, and
only for those falling behind the widely agreed level
of neediness. At the same time, the fortunate majority
above this invisible, yet generally acknowledged line
of true poverty was presumed to follow other paths
opened up and regulated by the market (contributionbased provisions of social security; private pension
schemes; market-related benefits in health care,
etc.). Hence, the new arrangements were thought
to automatically keep apart the two purposefully
designed sub-systems with their clear-cut mechanisms
of distribution to meet two distinctively, but justly
defined sets of demands.
The technical and practical considerations underlying
the transformation were linked to the assertion of
these new ideas of justice and efficiency. While the
universalistic considerations and welfare aspects
of the centrally distributed provisions weakened
strikingly with the introduction of a sequence of new
regulations, the dramatically reshaped division of roles
between the central bodies of welfare distribution and
the significantly empowered local authorities left the
definition of the scope and content of “customarily
acknowledged” needs to thousands of distinct urban
and rural communities (Vági 1991, Horváth 2000). With
this, the new decrees implied that in the area of needs
it is at the most minimum rules that would be set up
with general validity, but at the same time it was also
made clear that henceforth the central state was not
prepared to give either legal or financial guarantees for
their satisfaction.
In sum, welfare reforms of the past close to two
decades took their ideological departure from the
widely shared notions of the “social market”, but their
actual realisation has taken a neoliberal path. As will
be shown below, the dominance of neoliberalism has
led to two simultaneous developments: on the one
hand, it has concluded in an emptying of the notion
of universalism and has assisted the concomitant
“desertion of the state” (Standing 1997); on the other
hand, neoliberalism has had a strong contribution to
the gradual evolvement of a bifurcated structure of
welfare with significantly departing implications on the
social rights of the respective clienteles.
The reinterpreted role of the central state
As indicated above, substantial curtailment of the
state’s economic power was seen as one of the
primary tasks to accomplish a genuine systemic
change. Meaningful cuts in social expenditure and,
together with them, deep-going reforms in the areas
of social security and welfare assistance were thought
to assist the process. These widely propagated
commitments were much in line with the claims of
speedy marketisation, and corresponded also to
the requirements that the global financial institutions
(the World Bank and IMF in the first place) and the
European Union put forward. It is then all the more
surprising that for the past two decades, actually
nothing has changed in the magnitude of state
spending: macroeconomic trends show a stable
13 per cent proportion of social expenditures as
compared to the yearly GDP (Central Statistical Office
1997, 2005). However, remarkable changes have
taken place in the internal structure of spending. The
5
Adam Smith Research Foundation . Working Papers Series
central state as an agent behind maintaining welfare
has practically disappeared: the ratio of governmental
provisions for financing unemployment and family
benefits has dropped from 20 per cent in 1991 to 6
per cent in 2005. Simultaneously, a substantial rise has
taken place in the share of social security (from 72 to
84 per cent in the respective years), while the ratio of
local welfare assistance has grown from 4 to 10 per
cent. At a first glance, these shifts are in accordance
with the above outlined neoliberal ideas that required
a withdrawal of the central state, and claimed to adjust
entitlements to performance. One can suppose that
the increased dominance of social security reflects
successful and massive accomplishments on the
market, while relative generosity has risen also in
meeting the needs of those outside the realm of it.
However, these assumptions are falsified at a closer
scrutiny. As I will show, the two arenas of welfare
function according to rules other than those of returns
by contribution and by neediness, respectively.
Instead, they define diverse rates of social inclusion,
and thereby create two separated segments of social
citizenship. The exploration of the mechanisms that
work toward these ends requires a closer look at the
role that the state plays in the two sub-systems. For it
will become clear that it is not the market per se, but
the marketised shares drawn from the state’s revenue
at the expense of welfare that are at work in the
background.
Let me briefly outline how such a strange development
has come about. The origins date back to the social
history of the 1980s. By that time, the great invention
of “liberalising” the planned economy through the
limited functioning of the so-called second economy
developed to a rather high stage in Hungary. As a
number of studies convincingly demonstrated, the
way of life put on two pillars (that is, to base livelihood
on work in the formal, state-regulated segment
of the economy in combination with an intensive
participation in the family-run micro-level productive
endeavours) became a model followed by no less
than some three-quarters of the households and
assisted as much the political stabilisation of the
regime as its economic operating (Szelényi 1988,
Laki 1998). Beyond the immediate advantages, the
widespread practice had also numerous fruitful lasting
consequences in acquiring otherwise inaccessible
skills and qualifications, developing new attitudes
toward business, adopting new rules of “fair trade”,
etc. that later importantly contributed to Hungary’s
pioneering position among the transitional economies
of the 1990s (Farkas & Vajda 1990, Laki 1998, Laki &
Szalai 2004).
6
However, forced and enduring cohabitation of the
two economies had also some deeply problematic
implications. Given the unquestionable domination
of the rules and requirements of the state-controlled
first economy above the second, the scope, time and
energy that people could devote to their productive
activities in the private sphere had to be adjusted –
better to say: subordinated – to the pulsation of the
planned sector. At the same time, some flexibility still
had to be maintained: limited acknowledgement of the
productive needs of the second economy also had
to be inserted into the daily functioning of the system.
Amidst the constant efforts to create the necessary
balance, it was the very field of state-run welfare
distribution which turned out to render the necessary
bridging between perpetually clashing needs.
Innovative new benefit-schemes in social security and
income maintenance were set up to simultaneously
secure “unchanged” domination of the party-state’s
command over one’s working capacity and the tacitly
shaped permissions to temporarily withdraw from it
(Szalai 1991). However, the development of such new
double-faced programmes gradually undermined
the classical corrective functions of central income
distribution. For it was an ever increasing portion of
the public welfare funds that was canalised into semiprivate production in the second economy: benefits
became customarily used as “salaries” for unpaid
informal work, and/or as extra payments in addition
to one’s (otherwise low) earnings in the formal sphere
(Szalai 2007). Through this way, a rapid erosion of
the benefit-schemes has evolved to the detriment of
those living solely or mainly from such sources, and
henceforth the political innovations had their grave
contribution to the spreading of poverty by the late
1980s (Ferge 2000, Spéder 2002).
With the systemic change, inherited poverty has
turned into massive social exclusion: in the eyes of
the majority, it seemed justified to blame the poor for
their earlier “keeping away” from the covert market
relations of the second economy and to question their
rights for public support on these historic grounds.
These blames were furthered with widespread
criticism over the policy of “forced assimilation” that
drew Roma under the umbrella of compulsory full
employment. Since they had occupied unskilled
positions in the least developed segments of industry
and agriculture, they became the first victims of
marketisation: en mass unemployment suddenly
grew to the general experience of an entire minority.
However, the majority took this as “natural”: the
cutting-off of entire Roma communities from access
to employment has developed to a self-justifying
Hungary’s Bifurcated Welfare State . Szalai
argument for “minoritisation”, i.e., for creating “other”
schemes of welfare for people who are not “us”. These
widely shared attitudes have importantly contributed
to the dualisation of welfare that meant continuation of
“converting” state funds into support for business for
those incorporated into the market and a simultaneous
squeezing of the poor – especially: Roma poor –
into a sealed system of strictly controlled welfare
assistance away from the market. This way the once
structurally constructed engagement of the state and
the market for the sake of “market success” has been
reinforced according to new needs and legitimising
ideologies, while its limitations have been defined
according to the concept of “market failure” and its
translation into relations of direct dependency from the
local communities. In light of the deficiencies of the
post-1990 transformation process, this is, however,
no surprise. As I will show below, there is a wide
range of old and new, transient and lasting interests
that provide the backing to maintain such a dual
arrangement at all costs.
Let me first consider those sets of interest that work
behind claiming the state’s lasting participation in
market relations.
Such claims are maintained, in the first place, by a
number of obvious economic motives. Independent
economic activity entirely separated from the state
requires a stable capital backing and a firmly
established market, but neither of these conditions
could be created in the preceding decades of statesocialism. (Voszka 2003, Laki – Szalai 2004) Hence,
mere survival of the domestic business, and together
with it, the country’s potentials to keep pace with
sharpened competition on the world market have
been at permanent risk. This is why the need for the
state pillar in the raw material sense has been a builtin constituent of postcommunist transformation and
economic adaptation ever since (Báger & Kovács
2004).
heated competition also on the fronts of domestic
sale. All this has greatly increased the risk of full
independence and invoked for a strengthened buffer
role of the state (Báger & Kovács 2004, Szalai 2007).
In addition to the pressures that are reasoned by the
extra burdens and risks of marketisation, there are
also important cultural and attitude factors at play
when claiming the state’s long-term protection for
establishing independence from it. Widely varying
groups consider that time has come for “the” state
to compensate them for their historical grievances
and their decades of “lagging behind”, to give them
open assistance for the advancement they “deserve”,
but have never achieved – and they do not cease to
outbid each other in submitting various claims for
compensation that are “legitimate” when considered
separately. Having the arguments justifying these
claims accepted and embodied in the legislation and,
consequently, in the yearly plans for central financing,
is a question of rude political force: in this way, access
to the public funds has been mostly the direct function
of the latent bargaining positions established prior to
the systemic change (Laky 2004).
But above all, it is the world of employment where the
state’s presence in welfare is the most loudly claimed.
Hungary’s opening to the world market, an increased
presence of the strong Western multinationals and the
low level of competitive knowledge and skills together
have induced a lasting and widespread insecurity on
the labour market that has endangered the positions
also of the better qualified layers of the labour force.
Amid these conditions, it is again the state’s welfare
roles and its respective schemes that are meant to
meet the needs for prevention and protection. Social
security, and within it, the public pension scheme is
seen as the proper arena for seeking compensation
and stability. In response to the huge and lasting
pressure, a purposeful application of the idea of
“reward according to contribution” has induced no
At the same time, the need for the financial presence
of the state has been kept alive by the fact that
economic restructuring has induced erosion even
in those market relations that had hitherto been
regarded as more or less stable and “everlasting”.
Privatisation of the state firms has disrupted the state
orders thought to be secure, while the collapse of
the traditional Eastern markets and the rather difficult
access to the Western ones in substitution have
confused and endangered the established export
relations. Furthermore, the intense inflow of foreign
capital and consumer products has concluded in
7
Adam Smith Research Foundation . Working Papers Series
less than 103 different forms of entitlements for public
pension: various disability schemes, early retirement
programmes, entitlements for fractional pension,
individually negotiated exceptions from the general
rules according to acknowledged “reasonableness”,
etc. have been opened up to provide security amidst
the rapidly changing conditions. The outcome
is clearly reflected in a pronounced shift in daily
livelihood: for sizeable groups, it is their pension that is
considered to substitute both status and income once
driven from employment. A few data clearly show the
significance of this strange trade-off. While the rate of
households with at least one member in employment
dropped from 59 per cent in 1992 to 44 per cent
in 2005, the ratio of households with at least one
pensioner has jumped from 43 per cent to 61 per cent
(TÁRKI 1992, 2005). The same trend is reflected also
in the macro-level data: while the ratio of pensioners
under the age of 60 was at the relatively low rate of
12 per cent in 1992, the corresponding figure jumped
to 28 per cent by 2005 (Central Statistical Office
1997, 2005). The indicated shifts have had multiple
functions. First of all, amidst the conditions of rapidly
shrinking employment, social security benefits help
to protect against dropping into poverty. Secondly,
they assist in reducing the financial risks: regardless
of success or failure in business, pensions provide a
secure livelihood and a base for free experimentation.
Thirdly, pensions help to protect the families’
social status: pensioners are, by definition, fully
acknowledged members with full-fledged citizenship,
while those on the doll or forced to withdraw to
the household lose ties with the community and
are considered severely marginalised. This latter
implication is perhaps even more important than
money: relative loss in income is richly compensated
by extended access to the informal market where
pensioners still provide an ample source easy to
mobilise upon request (Szívós & Tóth 2004).
At the same time, it has to be seen that contributions
could hardly keep pace with the needs that the shifts
imply. Hence, it is the central state that has been
urged to create the necessary bridge.1 However,
growing transfers undermine the principle of „reward
for contribution” and turn competition for central
funds a matter of harsh power struggles between the
relatively better-off and the poor. All this also means
1 It becomes clear at a closer look at the finances that it is the
central state’s budget that backs the indicated mass-movement
of the “marketised reinterpretation” of public social security. As
compared to the early 1990s when cross-financing from the
central budget gave only 6 per cent of the yearly revenue of the
pension fund, the respective rate rose to no less than 29 per
cent by 2004 (Central Statistical Office 2005).
8
that, despite the initial expectations on separating the
state and civil society, the state has still remained an
agent of defining the content of social citizenship. The
implied notion is bound to participation in the market:
it is only those with ties to property and/or employment
whose access is open to centrally distributed benefits.
The outcome is clearly reflected in data on the
pronounced role of centrally distributed public welfare
in people’s daily living. While the respective benefits
(pensions, family allowance, childcare benefits) gave
44 per cent of the yearly income of households in
1992, their ratio has increased to 49 per cent by 2005.
However, the increase is owed exclusively to the
claims of the better-off: households in the uppermost
segment of the income distribution (in the 10th decile)
drew only 11 per cent of their yearly income from the
mentioned funds in 1992, while their share climbed
to no less than 24 per cent by 2005. This increase in
access has taken place clearly to the detriment of the
poor (those in the 1st decile): their respective ratios
have shown a drastic decline from 54 per cent in 1992
to 41 per cent by 2005. Remarkable shifts in take-up
are even more spellingly demonstrated by comparing
the actual magnitudes: in 1992, the rich received
only 73 per cent of what was transferred through
social security (and/or centrally allocated benefits) to
the poorest households, while the respective index
jumped to 177 per cent (!) by 2005.
As a result of the mentioned components, attempts
at slimming down the state as yet have concluded
in its actual fattening: the portion spent by the
central state for financing itself as the designated
agent of administering the truly complex process of
transformation has been on a constant rise during the
past close to two decades (Central Statistical Office
1997, 2004). The inseparability of the state and the
market, and together with it, the tight interlocking
of the public and private spheres and resources of
living seem profoundly ingrained in postcommunist
Hungarian society and economy. Despite all the strong
motives for full-fledged independence, the majority
has serious reasons and deep-rooted interests in
maintaining the bond – even though the overall costs
have been skyrocketing and have grown to effectively
hindering further economic advancement of the
country as a whole (Kornai 2005, Central Statistical
Office 2004, 2005).
There is only one arena where the door still seems
to be open for repeated cuts: this is the domain of
welfare assistance for the poor. Here the state can
rely on a vast political consensus: all its efforts to
Hungary’s Bifurcated Welfare State . Szalai
apply extra strict rules without concessions are met by
massive approval on the side of the majority.
for its striking inefficacy than any particular internal
characteristics of the scheme as such.
Let me discuss briefly how they work in daily reality.
When looked at it from such a broader perspective, it
is justified to say that the creation of a separate local
system exclusively for the poor has powerfully served
a number of goals other than actually helping the poor.
The primary achievement of Hungary’s decentralised
assistance scheme has indeed been to carry out the
purposeful transformation of the earlier all-embracing
central state redistribution (Central Statistical Office
1997, 2004, 2005). Together with this, the scheme
has accomplished a perhaps even more important
mission: the canalisation of an important part of the
affected social groups into a sealed sub-division
of provisions. True, without the great expansion of
welfare assistance as a new, dynamic branch of the
economy it would have hardly been possible to break
up the former oversized system: while “guiding” large
strata into the market-regulated field of provisions, it
was profoundly needed to “evict” other large groups
from the potential use of central funds – and the local
schemes reacted on this call with great perfection.
The ghetto of poverty with thickening walls
As outlined above, the creation of a publicly funded
separate sub-system for providing efficient and just
welfare exclusively for those in need was an inherent
part of the liberal welfare reforms of the 1990s. While
the primary goal certainly was to contribute this way
to the desired diminution of the state, some further
important considerations were also involved.
First of all, it was widely believed that poverty would
automatically wither away with economic recovery.
The arguments were in line with the reigning neoliberal
doctrines in policy-making: amidst the conditions of
continuous growth and the concomitant expansion of
the labour market, poverty would shrink to a residual
size with successful economic adjustment, and if at all,
it would hit people only temporarily. Secondly, it was
also believed that improved targeting and the local
schemes built on the community’s consensus would
ultimately conclude in generous supports enough
to help the poor to overcome their destitute state.
Thirdly, by swiftly decentralising a great number of
earlier centrally administered schemes and provisions,
it was assumed that the key decisions on people’s
daily living would arise from insightful knowledge and
personal acquaintance and thereby fairness, flexibility,
and accuracy would be raised at once.
However, history has nullified all these expectations.
As amply demonstrated by a number of independently
run studies that have repeatedly arrived at the same
conclusion, there has not been even the slightest
reduction in the degree of poverty and social exclusion
has even increased (Ferge 2000, Spéder 2002, Havasi
2002, Szívós & Tóth 2004). Welfare assistance has
obviously done little to help the poor. The question
therefore arises: what have been the reasons behind?
The involved “exchange” not only required the
application of financial techniques for regrouping, it
also opened the way for important mobility processes.
Another important function of the rapidly growing
welfare assistance system was that, by calling into
being thousands of new offices and tens of thousands
of labour market jobs with decent middle-class
positions, it created a refuge for many who had been
endangered by losing employment amidst economic
restructuring (Central Statistical Office 2005).
An examination of the local supports in their natural
community context reveals further important functions
beyond these macro-level roles. After all, the scheme
turned out to be instrumental in maintaining social
peace and smoothly operating relations in the
life of local communities. Firstly, it has provided a
The answer can but just partially given by looking
solely at the working of the system of local welfare
assistance. As to its principles and constituents, the
scheme is certainly neither better nor worse in Hungary
than similar arrangements are anywhere else (Ferge
2000, Szalai 2007). This said, one can then suggest
that it is probably more the implied additional social,
economic, and political functions that are responsible
9
Adam Smith Research Foundation . Working Papers Series
professional machinery and institutional background
enabling the non-poor majority to deal with poverty as
a minority problem separated from its own “normal”
affairs; secondly, the system has offered efficient
means for managing the fluctuation of the local labour
markets; thirdly, it has rendered reliable guarantees
for the endured supply of the human resources for
the least qualified and least desired jobs. In addition,
the fragmentation of decentralised means-tested
provisions in substitution of the earlier centralised
arrangements has successfully hid the real selective
functions of the system behind its welcome veil: the
potential question of social responsibility for poverty
has been almost automatically reduced to the
question of improving the level of expertise of a few
local welfare workers.
It is important to stress that while exercising the
economic and political functions listed here – which
at first sight appear foreign to the spirit of assistance
– the considerations of fairness and neediness
mentioned above lose nothing of their significance.
Quite the contrary: local welfare providers are not
being misleading when constantly affirming that their
work is guided primarily by these very considerations.
However, by transforming the principles into hundreds
of thousands of decisions on particular cases, they
are continuously doing a delicate “translation” work
in order to justify nothing but selection. In the final
analysis, it is thus the legitimisation of the prevailing
deep social divides which is assigned to them as their
chief role in the broad division of labour.
As I show below, this fundamental trait of the
assistance scheme is inescapable.
In this new order of localised welfare the keyword
is distinction, which, at the same time, has its clear
indication: as said, it is the level of need. However, in
lack of any universal norms for assessment, the new
decentralised arrangements make it the discretional
right and duty of local welfare providers to establish
the criteria with exclusive relevance to the given
community. This way acknowledged needs of the poor
become dependent on a consent of the non-poor
majority whose new authorisation leads, in turn, to the
reinvention of the centuries-old idea of deservingness
as the most powerful “just” basis for selection. The
renewed application of behavioural traits in selecting
has led to extraordinary results on the national level:
within a decade, local governments have cut back
the take-up rates of public assistance by no less than
some 65 per cent! (Ferge 2000, Havasi 2002, Szalai
2007). In other words, instead of warranting solidarity
10
and generosity, “deservingness” has generated in
practice a strong justification for the majority’s claim
to reduce public support for those in need. As recent
surveys have unequivocally shown, only a relatively
narrow circle of the needy can be sure that once they
have been accepted they can count on unconditional
support. But the majority of the poor who apply for
assistance do not belong in this group. The local office
workers – like the widest circles of public opinion
standing behind them – share the already outlined
strong view that the poor have their lot in their situation
and they can certainly be expected to make at least
some attempts to get out of it. On the basis of such
a widely held conviction nobody would then question
the rightfulness and indeed the necessity of taking into
account the degree of the applicant’s “faults”, “errors”,
“failures” and “irresponsibility” in judging applications
for welfare assistance to be given from “the taxpayers’
money”.
The errors, shortcomings, and irresponsibility that
can be listed when making decisions come in many
different forms, but the most serious case of “own
fault” is the lack of “proper” employment, which is
understood as a “failed” attitude to work – for people
can always do work of some kind if they really want
to. A vast body of literature produced to refute such
views has still not managed to topple this dogma. It is
perhaps unnecessary to argue at length that the main
force that keeps it alive is its clear ethnic/racial content,
giving the local communities a handy confirmation
for the conflict that causes the most tension in their
everyday lives: the feelings of the non-Roma majority
who suffered relative losses or at least have lived
in a state of constant insecurity amidst the lengthy
process of economic transformation, towards the
Roma minority living in extreme and lasting poverty.
Furthermore, the implied ethnic/racial differentiation
entails some beneficent outcome also in the economic
sense: it helps to keep claims for local assistance
within limits. After all, amidst the arising competition
and, in fact, heated rivalry between the Roma and
non-Roma groups among the “truly” needy, it is always
the “others” whom to blame for “eating up” the scarce
local funds and for lowering the actually delivered
sums while winding up the rates of refusal.
Of course, in demanding that the cases of “own fault”
be carefully screened out, no one states (openly)
any ethnic/racial implications. But even so, everyone
clearly understands them. And the practice of welfare
assistance converts this widely inferred thought into
money, while at the same time, it also transforms the
personified struggles of openly racialised pre-selection
Hungary’s Bifurcated Welfare State . Szalai
into the rule-governed cooperation of local welfare
providers and their clients under the guidance of
covertly racialised mechanisms of distribution.
Empirical findings show that, regardless of their
personal attitudes, the staff of the local welfare offices
simply have no means at their disposal to properly
react on the present labour market position of those
many applicants – for the most part Roma – who
were thrown out of regular employment 10–15 years
ago, and since then at the most have been able
to find casual, unregistered black work. From their
viewpoint, this labour market situation does not
exist. In response, they either try to force the clients
into “proper” jobs and thus regard their official task
as being principally the prosecution of crime; or
they acknowledge the reality and become silent
accomplices with the “cheating” clients, in which case
they risk their own positions. Either way, continuous
conflict is unavoidable.
It is this that gives the dynamics of one of the main
roles of decentralised welfare in today’s Hungary:
meeting the local demand for the worst jobs and
providing an outlet for labour market fluctuations.
Survey data show that Roma – and the very poorest
non-Roma sharing a similar fate – came to see this
long ago. It was the pressure of a number of daily
facts that taught them. The first among them is the
extreme segmentation of the Hungarian labour market
dating back to the very origins of the post-1990
economic transformation. As a result of the gradually
intensifying segmentation, the poorest strata of
workers (with a heavy overrepresentation of Roma
among them) are now almost entirely excluded from
any access to proper jobs (Kertesi 2005). The second
set of lessons that the poor – especially the Roma
poor – had to draw that marketisation from below
led to an unprecedented competition among those
inside employment to capitalise on all the good jobs
that today arise from the old informal production.
In this process of marketisation from below, access
to work is still at the most only partly regulated by
demand and supply, and is largely a question of trust
and connections where the former relations of mutual
favours play the main role in distribution (Kertesi 2005).
The poor generally did not have and still do not have
anything to offer in exchange and so the well-paid
contracts, commissioned work, consulting projects,
etc. remain beyond their reach. And even if they have
the necessary training and experience they have little
hope of being the ones to learn in time about any
opportunities that exist. The cultural arguments that
owe the lack of employment to “bad” socialisation
and the subsequent “faulty” attitudes to work have
to be considered against the brutal facts of sharp
segmentation and dramatic exclusion that are further
accentuated by a set of ethnic/racial implications.
Under such circumstances it is taken for granted that
if on rare occasions the possibility for even the worst
kind of paid work arises, it is a must for the poor to
accept it without hesitation or bargaining. These and
similar facts should make it clear that whether the poor
have their hands full with work or not does not depend
on their attitude. It is the reality though that their efforts
remain largely invisible: to themselves because of
the very small payment they receive for the extreme
exploitation, and to the outside world because no
written contract was made to set its terms, no records
were taken of its details, and further, because neither
them, nor the employees paid any taxes or social
security contributions on it. On top of the involved
obvious defencelessness it is a most tragic irony that
such a traceless existence is in the own best interest of
the poor themselves. The situation is clear: if they do
not have even a chance of a proper occupation, then
they should at least be allowed a livelihood; and for
this they have to apply for welfare assistance which the
office would refuse to give them if it knew about their
“illegal” incomes from work. At the same time, these
incomes from work are so little that they make no real
difference even to the lives of the poorest of the poor.
Amid the indicated conditions, welfare assistance is
quite literally needed to mere survival – obtaining it is
of vital importance. And in the same way it is a vital
question that the sharp-eyed welfare providers should
be reassured: the concealment of the casual work that
now and then turns up is in the common interest of the
office and the client.
These common interests then guarantee two things.
On the one hand, they secure that unregistered
employment enshrouded by the working of local
welfare assistance continues to flourish unchanged
11
Adam Smith Research Foundation . Working Papers Series
and as needed; on the other hand they powerfully
safeguard that the bargain to be struck between the
provider and the client remains a matter of internal
struggles between the rather defenceless office
workers in service of the public will and the extremely
defenceless poor – above all: Roma poor – in
service of demonstrating general “justice” and wise
economising with the public funds (Szalai 2007).
In this way the ghetto is constructed out of common
interests. All that remains is to safeguard its walls
so that social peace can be maintained and the
majority can accomplish its huge national tasks of
modernisation while enjoying the gifts of democracy
which – for the (unlimited) time being – implies
only their full citizenship. The persistent “cultural
arguments” about explaining poverty along the lines
of deservingness with its ethnic/racial implications
are of utmost importance here: without their powerful
justification, participation in the market would fail to
legitimise the coexistence of two sub-systems in a
hierarchical order with the underlying two distinctive
concepts of citizenship.
Conclusion: the emergence of a bifurcated
welfare state
In this paper, I attempted to describe the complexity
of macro- and micro-level interests that inform the
ongoing social struggles around the role of the
postcommunist welfare state and its responsibilities
toward the citizenry. I argued that the involved conflicts
cannot be understood without due consideration of
the legacy of the former state-socialist order that has
greatly influenced the process of restructuring welfare
according to the often contravening goals of economic
and political transformation. While a qualitative change
of the planned economy toward a market-regulated
one invoked speedy decomposition of the inherited
institutional structure, democratisation implied an
universalisation of civil control above it. The initial idea
was a sequencing of the two huge historical tasks. It
was expected that swift conversion of the propertyrelations would give rise to a private market and an
independent bourgeoisie as twinned foundations
of advancement toward an automatic expansion of
civil control above the state. Further, much in line
with the evolvement of the post-war Western welfare
states, growing civil control over the state would bring
about the universalisation of democratic citizenship
rooted in undivided civil, political, and social rights.
In other words, marketisation was thought to facilitate
economic adjustment and democratic rule with one
12
and the same momentum – hence, decomposition of
the inherited state structures through privatisation was
seen as an unmistakable first step toward genuine
systemic change.
However, such reasoning has been falsified by the
history of the past two decades of postcommunist
transformation. Under the pressure of the preceding
lasting economic crisis of the 1980s that had
manifested itself in extraordinary external and internal
indebtedness of the state, swift privatisation at all
costs was seen as the only way to recovery. Amid the
given conditions, the conversion of the run-down stock
of the planned economy logically led to unconditional
opening of the domestic market that has induced,
in turn, the speedy inflow of the most efficient global
capital. However, unrestricted opening of the economy
concluded in an unexpected devaluation of its
marketable value: in competition with cheap labour of
the developing world, no less than 40 per cent of the
jobs available around 1990 have been lost, while only
8 per cent have been replaced ever since. Amid these
circumstances, the once designed welfare provisions
to assist forced employment under the guidance of
the state-socialist project had to be quickly re-tailored
upon its collapse to calm down sharp competition on
the labour market and to simultaneously keep vast
groups in the insecure informal economy.
Most importantly, successful implementation of the
transformation project assumed remarkable reduction
of the earlier excessive power of the central state.
However, forceful downsizing quickly turned into the
actual desertion of it. Elimination of the all-embracing
programmes of the old regime concluded into a
lasting vacuum situation which led, in turn, to the
rapid increase in the number of people without any
forms of social protection. Hence, beyond steep rise
in the rate of poverty, the withering away of the central
schemes significantly contributed to the speedy social
exclusion of the weakest groups once in full service
of “socialist production” and direct dependence from
the provisions of the then ruling communist party-state
behind.
But the process had some further consequences, too.
As demonstrated above, the drastic retrenchment of
the centrally distributed resources induced heated
social struggles: the freshly freed central funds quickly
became absorbed by privatisation and economic
adaptation from below. At the same time, the
decentralised municipal welfare programmes proved
incapable of keeping pace with the unstoppable
increase in the number of applicants: the poor
Hungary’s Bifurcated Welfare State . Szalai
struggling for mere livelihood and the impoverished
groups of the middle class seeking compensation
unequivocally identified the new local assistance
schemes as their only remaining option. The evolving
cruel competition between the two groups has
contributed to the sharpening of those deep socioeconomic divides by class and race/ethnicity that had
arisen as sorrowing but “inevitable” concomitants of
economic restructuring.
By the turn of the millennium, the indicated processes
concluded in the evolvement of a bifurcated welfare
system with hermetically separated structures of
services for the well-integrated and the marginalised
groups of society, respectively. With the country’s
successful economic recovery all the contributionbased services and benefit schemes have produced
remarkable rise in standards and coverage for those
successfully involved in Hungary’s already dominant
market economy. At the same time, it is the highly
segregationist world of local welfare assistance that
is meant to deal with the respective needs of the
poor: the longer the period of their poverty, the thicker
grow the walls that lock them into the secondary
arrangements designed “for them alone”.
It is worth noting that such a dualism of social rights
represents a departure from Marshall’s ideas on social
citizenship in two important ways. First, it is only the
first set of rights that are driven from a social dialogue
between actors on the market and the state: the
principle of “reward according to contribution” seems
to be a powerful extension of the notion of contract in
business, and also harmonises with people’s attempts
to preserve and redefine their social status amidst the
new conditions. However, the fundamental principle of
“neediness” represents deprivation from the capacity
of entering any negotiations and contracting and thus
is forced by the rule of administrative power. Secondly,
while Marshall described gradualism as an ongoing
process toward universalisation of formerly restricted
rights, nothing similar has occurred in postcommunist
Hungary. Universalism has been conceived of as a
misconstrued concept of enforcement under statesocialism, hence, a clear decomposition of the
concept was seen as a major task of postcommunist
welfare policy. In other words, selectivity and
separation became leading goals of the reforms,
and attempts at maintaining universalism have been
considered as remnants of an ill-working past.2
Such a bifurcated system manifests also long-term
departures from the envisioned West-European path
of social development. Deeply ingrained into the
inherited structure of late socialism, the rising of a new
domestic bourgeoisie is conditioned by maintaining
strong bonds to the provisions of the state. This is
clearly reflected by the still prevailing dominant form
of living based on two pillars: one in private and
semi-private business, and another in acquisition of
state-resources through welfare distribution to keep
the former running. Though the combination might
be familiar from the state-socialist past, the function
of the two pillars has been reordered by the new
rules of the market. Given the conditions of steadily
shrinking employment amidst the working of privatised
market, it is entitlements for welfare provisions ruled
by anticipated “contribution” that are mobilised in
substitution for vanishing labour force participation.
In addition, largely fluctuating small entrepreneurship
is meant to assist material advancement – though
without any motivations for breaking the mentioned
bonds with the state (Laki 1998, Laky 2004). Put it
differently, endured economic dependence from the
state is seen as a precondition to civil independence:
widespread conversion of the welfare funds into
private business is perceived as legitimate to gradually
accomplish the still unfinished embourgeoisement–
process, and claims for the maintenance of state
provisions are articulated according to the historical
arguments of all-societal restoration (Szalai 2007).
However, such a state of affairs resembles earlier
socio-political patterns of “catching up” where
modernisation was meant only in its most restricted
economic terms, and hence it embraced only those
segments of society that had been well integrated into
work strongly against a dialogue that should inform the shaping
of the political and legal institutions and should safeguard their
filling with multicultural contents. Instead, the current trends
point to the opposite direction: they indicate that ethnic/racial
discrimination – both, institutional and personal – have grown
to set the stage for the conflictuous daily reality of multi-ethnic
cohabitation.
2 It goes without saying that the described turn away from
universalism does not favour multiculturalism either. After all,
rapid territorial segregation, the rise of the welfare ghettos, and
the lack of parliamentary representation of the Roma minority
13
Adam Smith Research Foundation . Working Papers Series
the mainstream market relations. The involved danger
is easy to identify: yet again, modernisation becomes
an active agent in weakening social cohesion with
severe consequences also on the inadequate working
of the country’s democratic political institutions.
Furthermore, massive struggles for maintaining
the fusion of the state and the market conclude in
crowding out the poor. The construction of a system
sealed in decentralised schemes of means-tested
assistance of the local communities in an exchange
for powerfully keeping them away from the domain
of guaranteed central provisions has to be seen as
the institutionalisation of second-order citizenship.
However, in a country with a democratic constitution
and declared citizens’ rights the involved differentiation
cannot be made in an open way. But if put in “cultural”
terms, it immediately gives reason for an important
democratic principle: after all, citizenship is nothing
but a contract between society and the individual to
meet certain obligations in return for certain rights.
Those who cannot meet the former should not
expect society to provide the latter. In this vein, the
earlier outlined considerations on the usefulness of
a separated sub-system of provisions for the needy
are completed and, at the same time, justified by the
notion of “cultural otherness”. However, as shown,
their bondage becomes the foundation of structural
disintegration. After all, the coupled principles of
unlimited competition on the market and expulsion on
the grounds of individual failure keep alive as a rightful
institutional separation of an utterly closed world – a
ghetto proper – for those whom the concepts imply:
Hungary’s dramatically marginalised long-term poor
and, above all, the Roma among them. In lack of
multicultural political arrangements, their culturally
imbued secondary citizenship becomes a base for
clear subordination on ethnic grounds.
In sum, the coexistent two sub-systems of welfare
– the rather generous public financing of the market
and the running of the impoverished quarters of
public provisions for those outside of it – reflect and
reproduce the outlined strange social contract in
steadfast advancement toward a social structure
divided along ever sharper fault-lines with ever
more pronounced institutional separation along a
hierarchical order of citizenship. Such structural
developments are in the background of the gradual
weakening of the new democratic institutions coupled
with the spreading of anti-Western and anti-market
populist claims. Whether the new-old rhetoric for
demanding a “strong and protective nation-state”
with authoritative power will receive resonance among
14
those who identify themselves as the ultimate and
terminate losers of postcommunist transformation is a
matter of great concern for all future reforms in welfare
and beyond: for the actual longer-term shaping of
state-citizen relations.
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