Analysis

The Dubious Blessing of Remittances

Sándor was in his late forties when he lost his job. Luckily for him, it wasn’t long before his daughter finished high school and started to work while also pursuing her studies. It took her 7 years to complete her Masters degree while single-handedly supporting her parents. To ease her burden, they chose to move back to the countryside, when they “finally” inherited the grandparents’ house. With the move they cut themselves off from job opportunities. 

After finishing university, their daughter moved to Munich. She had 7 years of work experience – but not in her industry – so she had to accept an entry-level position. She couldn’t send money home for a while. But her parents understood.

They glowingly told the reporter how much money she made – sounds better when converted to forints. They also gloated how well they have done bringing up such a good daughter – now they had a steady income despite their lack of work. They had no pensions to look forward to either because most of their employment was formally on the minimal wage – just like many other victims of the punitively high cost of employment. But they had their daughter now.

When a country is fatally mismanaged it starts exporting its own people. And make them send money back. Remittances are the least immoral way of propping up a dysfunctional economy – but they still deliver the wrong incentives.

Papers blissfully celebrate the money sent home by guest workers to keep their family of origin afloat. No one gives a second thought to the personal cost of unwilling migration – and the political and economic signal of remittances. Pouring money over a dysfunctional system never makes it improve. It may be a country or a family, remittances remove the incentive to reform by making it possible to survive on a faulty model. At a talk about the Indian diaspora at LSE in 2012 yours truly heard a London banker complaining that instead of opening a small business, his parents spent all the money hoarding gold – a cultural staple in India.

Political elites of sending countries also benefit from these family ties. They can cynically monopolise economic opportunities at home – and point at the glowing balance of payments as proof of their economic genius. Their populations are left to fend for themselves abroad and their plight doesn’t make it to economic calculations. The young people who are left to keep their birth families – often postponing or foregoing a family of their own – are cynically bashed for not “giving us grandchildren” (in the words of the vice president of the governing party).

migration-remittances-and-economic-development-6-638

The TOP 10 Remittance receiving countries are kept afloat by family contributions from abroad. Source: World Bank Development Prospects Group

 

Before around 2011, Hungary wasn’t famous for its expats. Hungarians preferred to stay at home, thank you very much, only the odd cosmopolite ventured abroad for work or study. According to a 2015 survey by the Boston Consulting Group, the majority of Hungarians would now leave the country for more than 10 years if they could get a job abroad. And these are people who haven’t already left.

Yours truly was one of the early movers so I have a first hand experience of the changing scene of Hungarians abroad. Expats before 2010 were there by their own choice. People who left due to economic reasons, on the other hand, are homesick. They hope to return one day, even when they love their host countries.

Money sent home used to be a negligible sum for Hungary – now around 3% of GDP.

untitled_1-20150203

Remittances by Hungarian expats have reached nearly 3% of GDP by 2014 Source: Central Bank of Hungary, portfolio.hu

Political communication closely followed these developments. Hungarian expats used to be

1) traitors, demonised for leaving their country behind for material benefits (cca. 2012),

2) begged to please come home (more about that later on this blog),

3) praised as brave and determined. (PM Viktor Orbán, 22 February, 2016) Also, a pillar of the economy, obviously.

He is proud of us.

Remittances undo the useful political signal sent by emigration. They keep the system running and slowly digest its last resources. The human resources. They preserve the old routines and keep the system afloat long enough to make it look viable. Even the political elite seems to bank on it now. No need to reform when they have so skillfully secured an income by exporting the working age population.

Sándor and his wife sit on a sofa in their remote village home. They are visibly embarrassed.

“We are so proud,” she says to fill in the silence.

Follow us on Facebook or subscribe to newsletter

Featured image: 444.hu

 

Advertisements

6 thoughts on “The Dubious Blessing of Remittances

  1. Pingback: Hungarian Workers’ Remittances | Meanwhile in Budapest

  2. Pingback: 8 Ways Countries Pimp Out Their Citizens | Meanwhile in Budapest

  3. Pingback: Second Hand To Second Hand In Two Generations | Meanwhile in Budapest

  4. Pingback: Voted for Fidesz – Impoverished by Fidesz | Meanwhile in Budapest

  5. A note of caution: the big increase in remittances mostly came from including the data on those people who live in Hungary, but work abroad, very often right on the other side of the border. So while I broadly agree with your view, there is a statistical abnormality in the data series.

    Liked by 1 person

    • True, I agree. But that doesn’t change that one must cross a border to find a less dysfunctional economic environment to work in – or even thrive.
      And I wouldn’t underestimate the discomfort of a daily (weekly, monthly, etc.) commute across the border either – not to mention seasonal workers who spend months away from their families.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s