Institutional trust and economic policy Lessons from the history of the Euro : Lessons from the history of the Euro

Preface and Acknowledgments

Preface and Acknowledgments Distrust is a palpable experience for all who live in Central and Eastern Europe. Untrustworthy governments and endemic corruption characterize the political class, while law avoidance and lack of civic involvement is a feature of the masses. In such an environment maintaining an attitude of distant cynicism is a sort of survival tool for those still interested in politics . Understanding the consequences of this state of affairs for economic policy is the major objective of this book. My interest in trust originates from following Hungarian economic policies in the past decade. During this period an atmosphere of permanent electoral campaign produced short-sighted policies, which eventually made the country the first victim of the subprime crisis in the European Union. As distrust towards policy-makers grew, the inability to implement long-term oriented measures became increasingly evident. In my earlier book (Győrffy 2007) through exploring the roots of fiscal profligacy, I found that the relation between trust and economic outcomes is more than a moralistic narrative: in the old EU member states satisfaction with democracy proved to be a strong predictor of fiscal performance during the decade following the introduction of the euro. The recognition for the potential influence of trust on economic policy however presented more questions than answers. What are the precise mechanisms through which trust exerts influence on economic outcomes? Why have some post-socialist countries been more successful in mitigating the consequences of distrust than others? At the time of a global financial crisis it is also natural to wonder whether trust can help our understanding of the roots of the crisis as well as the tasks to build more resil- xiv Preface and Acknowledgments ient economies. The research presented in this book focuses on these questions. During the years of research and writing I have received support from several sources. First and foremost, I am deeply grateful to my former doctoral advisor, long-time friend and mentor László Csaba, who encouraged me to undertake this project and helped me through every stage from conception to completion. His enthusiasm was crucial in overcoming my recurrent feelings of inadequacy, when it appeared that I would never be able to organize my thoughts. The project was greatly helped by a three-year Bolyai Fellowship between 2007 and 2010 from the Hungarian Academy of Sciences. Being a recipient of this fellowship allowed me to research questions, which interested me the most. Many of the ideas presented in this book were first discussed at the annual economic policy roundtable conferences, which started in 2007 at the University of Debrecen. I am indebted to the organizer of this roundtable, László Muraközy, for always inviting me and giving insightful feedback on my presentations and papers. Over the years the event became a wonderful place to exchange ideas and opinions on the state of the world economy and Hungary within it. I was greatly inspired by the presentations and discussions with the other members of the roundtable including the late László Antal, István Benczes, Lajos Bokros, László Jankovics, Júlia Király, József Péter Martin, Éva Palócz, István György Tóth and Ádám Török. During the period of writing up the manuscript, I was privileged to be a fellow at the Collegium Budapest through its last semester as a participant of a joint program with the Volkswagen Foundation on new European democracies. I am grateful to Mihály Laki for suggesting the opportunity . At the Collegium I had the chance for regular discussions with János Kornai, whose work has always been an immense source of inspiration for me and crucially shaped the way I approach social science problems . His kindness and support for my ideas gave me confidence about the research. I also had inspiring conversations with Menachem Fish about science, theology and rationality, which helped me see beyond my immediate questions. In such an intellectually stimulating environment many of my preconceived notions on trust changed, and the end result turned out to be something different than I expected. The publication of this book was made possible by Central European University Press. I am indebted for the support and insightful comments of the two reviewers, Joachim-Jens Hesse and Alexander Lascaux. The Preface and Acknowledgments xv quality of the text was greatly improved by the editorial team and I am grateful for...