The Political Enforcement of Liberalism: Bargaining, Institutions, and Auto Multinationals in Hungary

Abstract

The demise of communism triggered large flows of foreign direct investment into Eastern Europe. This article examines the impact of recent changes in the international environment-the transformation of world production systems and the rise of neoliberalism-on bargaining between multinational corporations and post-communist governments. It focuses on the Hungarian automobile industry, one of the region's largest recipients of FDI. The Hungarian case illustrates the ability of small, open, and geopolitically weak states to parlay shifts in the global environment into a bargaining asset. The ascent of lean production heightened pressure on auto MNCs to develop local supplier systems capable of fast delivery of components to East European subsidiaries. The pull of backward integration was particularly strong for Japanese producers, whose non-European status enabled Hungarian state authorities to secure commitments to raising domestic content. Transplanting Japanese-style production in Eastern Europe proved less vexing for European MNCs, whose status as EU-based companies freed them of local-content requirements and whose preexisting supplier networks obviated heavy investments in the Hungarian components industry. But while Western auto producers enjoyed highly favorable terms of entry into Eastern Europe, even they could not elude the paradoxical effects of global changes on MNC/host state relations. The very eastward extension of the European Union's nondiscriminatory rules that facilitated EU-based firms' entry into Hungary also permitted host state authorities to parry efforts by MNCs to obtain particularistic concessions after entry. The Hungarian case thus demonstrates that MNC/host state bargaining in the post-Cold War period hinges more on the global positions of multinationals than on the structural vulnerabilities of capital-importing states (per dependency theory) or the internal capacity of host states (per statist theories).

Upgrading Local Economies in Central and Eastern Europe? The Role of Business Service Foreign Direct Investment in the Knowledge Economy

“…The post-communist economies of Europe have generally pursued market based, neoliberal transformation since 1990 and therefore none of these countries have introduced the policy of 'obligated embeddedness', based on joint-ventures and follow-up network configurations, popular in other countries including Ireland, China and India (OECD, 2003;Liu and Dicken, 2006). On the contrary in the earlier phases of FDI to CEE TNCs were allowed to obtain local-content waivers and other concessions from the post-communist governments, which has led, in general to their low spatial embeddedness (Barlett and Seleny, 1998). TNCs' failure to develop linkages with local and regional economies has had adverse effects for regional development, including the intensification of regional disparities and increased regional economic instability, (Pavlínek, 2004).…”

power of path dependence? State capacity and autonomy in East Central Europe during transition

“…State capacities in general were also enhanced by EU integration, through the adoption of international policy standards (Bartlett and Seleny 1998). In consequence, not only capacities but also autonomy of ECE states could be enhanced vis-à-vis private economic actors, whether foreign or domestic.…”

“…This paper argues that as a result of a dynamic interaction between transition economic development and state building, ECE states' autonomy and capacities have increased. Thus, state autonomy vis-à-vis other economic actors, as well as state capacities to formulate and implement policies, have been accumulated because of institutional differentiation (a differentia specifica of modern capitalism [Weber 1978]), institutional learning by state organs (Vernon 1971) and the effects of EU integration (Bartlett and Seleny 1998). An important factor of enhancing state autonomy vis-à-vis traditional distributional coalitions (Olson 1982) was the large scale entry of FDI, although under particular circumstances multinational companies (MNCs) may also threaten "state capture."…”

Competitive Rent-Seeking, Socioeconomic Infrastructures, and Post-Communist Transition in Central and Eastern Europe

“…The experience of Belarus which is presented in greater detail in Section 4 consists of a compelling counterexample of the unconditioned justification of democracy as the panacea for curing the "under-reform trap". Research done by Bartlett and Seleny (1998) touched upon something to do with socioeconomic infrastructure but they did not clarify the mechanism through which the socioeconomic institutional context shapes the connection between state and the market. The remaining part of this paper attempts to establish a theoretical claim that socioeconomic infrastructures shape the pattern in which state apparatus and market mechanism are connected, through determining the type of rentseeking regime.…”