CONVERGENCE IN THE EUROPEAN UNION FROM THE ASPECT OF DEVELOPMENT ECONOMICS1

A collection of papers published in two volumes by Landesmann–Székely (2021) is the analysis of the process, achievements, and problems of the convergence of 11 countries (including Hungary) joining the EU in 2004 analysed in studies by 36 acknowledged experts of the region and the area. The studies cover vital issues of the present displaying a high standard of professionalism while they provide nonprofessional readers with a clear and convincing description of the region and the special problems of the countries constituting it. 1 This study was prepared in the MTA-BGE Macroeconomic Sustainability Research Group with the support from the Office for Research Groups Attached to Universities and Other Institutions of Eötvös Loránd Research Network 2 Michael Landesmann – István P. Székely (eds.) (2021): Does EU Membership Facilitate Convergence? The Experience of the EU’s Eastern Enlargement. (Volume I–II). Studies in Economic Transition, London: Palgrave, Macmillan. 3 István Ábel, Professor, Budapest Business School. E-mail: Abel.Istvan@uni-bge.hu. Economy and FinancE • Vol. 8. iss. 4 • dEc. 2021 • doi: 10.33908/EF.2021. 4.3 istVán ábEl 390 CONVERGENCE IN THE EUROPEAN UNION 391 In his comment recommending the book, Vito Tanzi calls attention to the prudent approach to the development of the EU-11 countries saying: „The main message in the book, perhaps not a surprising one, is that, joining the EU gave the EU11 access to a large market and to a lot of foreign investment. These contributed to their economic „growth”. Unfortunately, as the first development economists learned 70 years ago, and as many modern economists forgot, economic growth is not the same thing as development. Development depends on the existence of institutions that distribute widely the benefits of economic growth. The creation of these institutions is more difficult than the generation of growth because it depends on established cultural traits. In the EU11 countries, institutional or social development has lagged their growth. This is likely to create potential future problems. ”4 The above remark by Vito Tanzi is an important message for us for two reasons, in addition to acknowledging the research findings published in the books we can confirm that they are meant to avoid the trap described. On the one hand, he emphasises the main message of the research findings should be a guidance on how to avoid the mistakes he attributes to the forgetfulness of „many modern economists” when growth is assessed, and economic policy proposals based on them are offered. Although the analyses in the book cover topical issues and are of a practical nature, the authors’ informed and thorough work prevents them from being biased. At the same time, Vito Tanzi’s benevolent warning raises, for me, the issue: what potential future guidance development economics, almost obsolete by now, may provide for the analysts of today in connection with this book. In this paper I’ll use the paper by Reis–Cardoso (2020) as an overview of the numerous schools of development economics. I should note at the outset that I have presented the following thoughts as critical remarks made on the book by Landesmann–Székely (2021), but the readers will see my remarks do not question their results in any way. Rather, my paper underlines the value of their research and my comments are not closely related to the analyses discussed and thoroughly presented in the book. My comments may raise issues that are related to the convergence of the EU-11 countries discussed in the framework of the traditional approach of development economics. To be more specific, let me say the book by Landesmann–Székely (2021) can be regarded as the formal application of the modern classical approach, while what I want to present here are critical remarks from the heterodox point of view. Still, I would like 4 Vito Tanzi’s remark in the Recommendations on the cover of the book by Landesmann– Székely (2021). 1 DEVELOPMENT AND CONVERGENCE The period looked at (1990–2017) was a success story for the EU-11 countries as they utilised global trends for development to their benefit if you compare their results to those of other regions (Figure 1) Figure 1 Economic and social convergence Source: Landesmann–Székely (2021:37) Note: EU-11 countries: Bulgaria, Czech Republic, Estonia, Croatia, Poland, Latvia, Lithuania, Hungary, Romania, Slovakia, and Slovenia. Latam: Argentina, Chile, Costa Rica, Uruguay, North-Africa: Algeria, Jordan, Morocco, Tunisia. SEA: Indonesia, Korea, Malaysia, Philippines. In the book, convergence is compared prudently not to the EU average but to global frontier countries that are relevant for the region. They are Austria, Denmark, the Netherlands, and Sweden. Readers are given a detailed and differentiated image of the process by presenting the economic, social, and institutional dimensions of convergence achieved in the period studied as well as their interactions and connections. In that way, the improvement of social factors (ends) is presented as the outcome of economic development (means) countries achieved following often individual paths of institutional restructuring (ways). Special emphasis is given to the introduction of the characteristic features of justice and sustainability as their significance is increasing in our age. The authors studied the relationship of the complex process of development integrated into a single frame. The detailed analyses of different factors presented separately convincingly support the approach used. Readers are provided a picture of the main drivers of integration with separate analyses of the features of trade, investments, funding, movement of labour and institutional systems. They, at the same time, represented key channels of integration interacting to exert their influence on convergence as part of the integration. 70