Below comes a lecture at the COST A7 economic conference in Budapest, February 28-30, 1994, about the convergence of Hungary to the West/Common Market. Then, 13 years ago, opinions were both more optimistic and more pessimistic than now. The Volume of the conference was published in 1995 as Kovács J. (ed.): Technological Lag and Intellectual Background, Dartmouth Publ., Aldershot, 1995.

Our lecture, however, dealt mainly with the past: Hungary from her foundation (the Christmas of 1000 AD) is converging to the West. I give the 1994 text without modifications; only 5 endnotes marked with capital letters in Lucida Calligraphy have been added, well separated at the end.

The present version is, however, not the edited book contribution. I did find an MS-DOS Word 4.0 text file from 1994, and various graph and data files as MS-DOS Grapher, MS-DOS PaintBrush or even simple data files. So the coming document is a reconstruction. Only obvious mistypes have been corrected.

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ATTEMPTS FOR CLOSING UP BY LONG RANGE REGULATORS IN THE CARPATIAN BASIN

M. Banai¹ & B. Lukács²

¹ Multi-Ráció Cooperation, H-1117 Szerémi u. 39., Budapest

² Central Research Institute for Physics RMKI, H-1525 Budapest 114. Pf. 49.

ABSTRACT

At the end of the Migration Period the Carpathian Basin (and the whole region of Eastern Central Europe) did not belong to the Western civilisation, but was the westernmost part of the steppe cultures. However, the state of the Carpathian Basin accepted (Western) Christianity in 1000, and started to introduce laws conform to Western standards. Then started a close-up by long range regulators. This process is followed in the present paper.

1. INTRODUCTION

Prof. J. Kovács has introduced in [1] the concept of long range regulators as the governors of the social-economic processes of the different societies in different civilization periodes.

He identifies 5 long range regulators in the modern age. These are:

1. Public sector, the ratio of the public to private sectors.

2. The system of education.

3. The system of research and development.

4. Technical development, innovation.

5. The system of planning based on forecasting.

In the following paper we try to formulate the close-up strategies in a region of Europe, called Eastern Central Europe, in the terms of long range regulators. As for the results, some characteristics of societies will be discussed; from cca. 1850 including quantitative data (employment, production, GDP/capita, etc). The data are taken mainly from Refs. 2, 3, 4 and also from handbooks, not referred. For a more detailed quantitative review, see Ref. 5.

In summary our main theses are as follow. In our approach we distinct two historical long range regulators. These are:

I. The legal system of the civilization.

II. The culture of the civilization.

The five long range regulators of modern age listed above had evolved from these historical long range regulators. The long range regulator 1. follows from the historical long range regulator I., and regulators 2., 3., and 4. had evolved from the historical long range regulator II., while the long range regulator 5. has evolved from both as a superposition.

By the study of the history of the different civilizations one can say that the two regulators I. and II. determine the evolution of a civilization. Roughly speaking the legal system of a civilization determines the "kinematics" of that civilization, while the culture of that civilization determines the "dynamics" of that civilization.

In the second chapter of this paper we show that in the last one and half thousand years one can observe three distinct civilization existed up to the II. World War in Europe. These are as follow:

the civilization of west Europe evolved from the unification of Roman law and German private land ownership in culture dominated by Roman Catholicism;

the civilization of east Europe evolved from the unification of Byzantine law and Slav village community land ownership in culture dominated by the Greek Orthodoxy;

the civilization of east central Europe: in this civilization the culture was dominated by the Roman Catholicism and the legal system is also based on the Roman law but it lacked both the German private land ownership and the Slav village community land ownership.

The closing up attempts of east central Europe to West Europe always meant a closing up to the legal system of the West especially in the property law.

After the II. World War east central Europe was dominated by the Soviet Empire and the basis of the east European civilization (law and culture) was introduced by brute force in this region. In recent years, after the fall of the Soviet Union in 1990 east central Europe has started to recover of its own civilization and formulated a medium scale closing up strategy to the West civilization.

In the third chapter of this paper we try to formulate the necessary quantitative conditions of this closing up in the framework of a simplified growth model. According to the results of this study for Hungary to catch up the per capita GDP of Portugal (the less developed country of the EU) in 2005 it needs external financial source between 8 to 16 billion USD distributed on the ten years time interval increasing manner from a lower amount to a higher amount at the end of the period. The lower external source (the bottom 8 billion USD) comes from the criteria that the hidden economy can be successfully legalized, while the higher external source (the top 16 billion USD) comes from the criteria that the hidden economy cannot be successfully legalized.

2. THE REGION FROM HISTORICAL VIEWPOINT

The topic of this paper is the present and future of the close-up strategies of the Carpathian Basin. This Basin (except a strip on the South) is defined by geographic realities. However it is a part of Eastern Central Europe, and such pseudogeographic terms as Eastern Europe, Central Europe &c. have rather doubtful and ill-defined meanings at the end of the 20^th century, and therefore first we have to define the region to be investigated, and, furthermore, we have to show evidences that it is indeed a coherent region with some common social, economic &c. laws and behaviour.

Some pieces of the Eastern Central European history (e.g. some steppe connections) are rather exotic for Westerners. So the Appendix gives brief notes of histories of important steppe nations. Unfortunately the fine details of such histories are often in Hungarian, not translated. The same holds for the history of the Basin.

First we define our region, and then try to give the evidences for coherence afterwards. East Central Europe here will be the self-governing or self-determining part of a roughly vertical strip on the map, from the Adriatic Sea to (or almost to) the Baltic Sea. The borders are: the Holy Roman Empire of the German Nation on the West; the borderline between Catholicism (later all the filioque successors) and Greek Orthodoxy on the East; the Adriatic and the heartland of the Balkan (or again the religious borderline) on the South and the Hanseatic and Prussian territories at the Baltic Sea on the North. Now we are going to show that this region, defined not quite economically, was indeed a semicoherent region in the last thousand years, however all its borderlines were of course fluctuating and semipermeable.

For the western border it is worthwhile to note three facts, two negative and a positive ones. First, the region never belonged to the German Empire, therefore it did not share the legal system of the Empire, furthermore, it never had a complete and many-layered hierarchy of feudal vassallage. The reason will be given immediately. Second, the substrate population here was not the free German warrior-farmer (subjugated only later on the West) with his own primordial piece of individual land. Third, in contrast to the Greek Orthodox territories on the East, private ownership of lands and individual rights of at least the ruling classes were fully established from the first millenium AD. These three initial conditions predetermined a unique historical development for the region.

The lack of a many-layered hierarchy of vassallage comes from the war tactics of the Eastern mounted warriors, occupying East Central Europe during the migration period. As excavations show, in the sixth century still both German and Eastern societies had 3 different groups of the population. In the Lombard law the hierarchy levels were the lance-bearing freemen named arimanni or barones. The whealtier members of this class had a complete armament of lance, shield, sword, helmet, etc., expensive and hard and long to learn to use; the poorer members had incomplete armament, but always at least a lance. Another group which still belonged to the army but was unable to hand-to-hand combat, was the aldiones, who were archers. The third group is the skalks, who were slaves without the possibility and right to fight. A full-property owner is a person who can defend his own property, therefore it seems that the original private owners were the barones; among them a definite social stratification can be observed. The Pannonian Lombard graves indicate that the freemen outnumbered the half-free archers. The contemporary Gepids, after long previous Hunnish rule, show the opposite ratio [6].

Originally the Avars, replacing the Lombards in Pannonia on the Easter Monday, AD 568, had also the discrimination between heavy and light armaments, but in their army the archers were also mounted. It is possible that in this time they still had a hierarchy of rights, but their legal system is practically unknown.

During the subsequent centuries, however, the social evolution diverged. To the west of a fault line roughly along the Vistula and Danube the half-free archers became insignificant (but remember Robin Hood, who led archers and tradition is ambiguous if he were a poor nobleman or a commoner), and the most efficient subclass of warriors became the heavy mounted knight, which type of fighting needed enormous training and investment; around and below them the light mounted and the foot warriors became dependent on them. The economic and legal reflection of this evolution can be seen in the legal texts from the empire of Charlemagne, where poor freemen are continuously offering the ownership of their own lands to the wealthy for defence and for getting rid off the duty of going into battle. So the natural result is the hierarchic society of more and more partial rights of greater and greater number of population.

On the east of the fault line, on the open steppe, the evolution went into the opposite direction. The few heavy cavalrymen vanished, except that some such armament remained in formal use in ducal families, and at the end of the Migration Period, conveniently put to the occupation of Hungary by the Magyar tribes in 896 AD, the Eastern armies were composed almost purely of light mounted archers. In addition the steppe conquerors were at least partly nomadic, so they could change the locations of their communities if needs be. Therefore land-ownership was more or less temporary, while the property rights of cattle and horse were well defined. As a natural consequence, when these migrating peoples stopped at the west end of the Eurasian grassland and had to settle down, ownership was got by the numerous and more or less equal light mounted archers. Their relative number at the first millenium AD must have been remarkable, since even at the end of the Middle Ages, after centuries of economic inhomogenisation, the ratio of nobility is around 10 % in Poland and Hungary, and definitely higher in Croatia.

So at the first millenium the full-right class of Eastern Central Europe is numerous, and legally equal. (The first elaborate document of the Hungarian constitutional evolution, the Bulla Aurea from 1222 AD, only 7 years after the Magna Charta, definitely states the unity and equality of nobility; naturally an ideal whence reality deviated, which was just the reason to demand a royal law.) Below them we find the subjugated population in which the Germans were rare exceptions (as e.g. the Easternized Gepids in Eastern Hungary). Excavations do not indicate private ownership of land below the warrior class; there is no trace of unification of privately owned small estates here at the first millenium, which would be the parallel of the evolution in the Empire. Rather, the new lands were first taken by the whole army, and later distributed by the leaders among the numerous free warriors. So here evolution started from a homogeneous unity towards the spread of the notion of private ownership in bigger and bigger part of the society.

This East Central European territory gets Christianity from the West, from Rome. At the first millenium the Christian Church of Europe is still theoretically undivided; the Rome-Constantinople dualism comes from the dual administration of the Roman Empire after Theodosius the Great. At different parts of this region the predominance of Roman influence has different reasons.

In Poland originally the converting activity could came only from the West. Namely the Kievian Russia took Christianity only in the second half of tenth century, in which time the archbishopric of Gniezno was already founded.

Hungary contained two earlier Roman provinces (Pannonia and Dacia), and parts of the Barbaricum between and above them. Dacia was completely evacuated by Aurelianus in 271 AD, therefore no ecclesiastic organisation survived. As for Pannonia, the territory was always administrated from Rome until the defeat of Avitus, 455 AD, when it became lost forever for the Western Empire. (For the lack of any Greek influence in Pannonia Romana see the dream of Emperor Probus, in which the ghost of Apollonius of Tyana spoke him in unnatural Latin because he did not expect a Pannonian to understand Greek [7].) Anyways, Pannonia is very near to Rome, and in 795 it temporarily became incorporated into the western empire of Charlemagne.

As for Croatia, remember that the so called Southern Slavic ("Yugoslavian") nations are mainly of Western origin. The German name of Slovenians is Wend, which indicate an original location in the neighbourhood of Venice. The Serbs and the Lausitz Wends (Sorbs) must be closely related according to their common own name Srb. Finally the similarities between Serbian and Croatian languages indicate that the ancestors of the Croatians must have also been located in the Elbe region. For all the present knowledge both ancestral tribes were pushed to the East by the settling Avars returning from Thuringia between 562 and 568. Since these Slavic groups were settled down on both sides of the demarcation line of Theodosius,^A the Eastern groups were subjugated by the Byzantian Empire about 630, at the weakening of the Avar Khaganate (when the dynasty of the founder Bayan became extinct); by definition Croatia is the territory which remained under Western influence (and later both neighbouring nations were employed for defending the borders of the two regional centers against the other neighbour). The name "chrvat" (Croat) comes from a Sauromatian tribe, i.e. the Croatian nation was organised by Sauromat leaders. Fig. 1 shows Europe just before the end of the Avar Chaganate. (Formally the Frank dominions became an Empire 5 years later.)

Fig. 1: Europe in 795

But the whole administration, and specially tax-collecting of the Western Church was based on the individual owner, either from Roman Law or from German customs. So when Christianity became accepted, the Church not only established a heavy Western legal and ideological influence but also taxed the families individually. This helped to spread the clear definition of pieces of lands belonging even to subjugated families, therefore helped the individual family husbandry even without legally owning the land.

In 1054 happened the Great Schism between Rome and Constantinople, existing even now, and thenceforth the cultural ties to the Byzantine East were severed. In the whole Roman region the Church was in symbiosis with the State (while on the East the Church was subjugated), therefore the prohibition of ecclesiastic connections acted against other connections as well. Therefore from 1054 practically no cultural influences came from the Byzantine region. This definitely does not mean closed borders. True, the Carpatians shielded Hungary from the East, and a consequence is that in later times Hungary got Byzantine incursions not from the East but from the South. But Poland was without any natural border on the East. Indeed, 896 is only a theoretical end of the Migration Period; latecomers, as for example Petsenegs, Cumans and Osetian Jazones crossed the Eastern border of the region as late as the early fourteenth century, but these new groups were incorporated and assimilated into the societies of the region, giving special local colours but not altering the foundations of these societies. Fig. 2 is Europe in 1076, just when King Zvonimir of Croatia has been successful to free his country from Byzance. Observe that the 3 Roman Catholic countries east of the German Empire roughly continue the territory of the mounted peoples on Fig. 1, except that Bulgaria went to Byzance. There was a short period in 864 even there for trying to make agreement with Rome.

Fig. 2: Europe in 1076

The first close-up stage in Hungary was the acceptance of Christianity, and privatisation of a part of state property to warriors and local leaders [8]. (There was a second wave of privatisation during Andrew II, in the first half of 13^th century, leading to dominance of private estates over ones of the State.) After that the ruling class was accepted by the Western feudal lords and knights as their peers. As a proof, note that the Eastern border of the common Western heraldics were the eastern borders of Poland, Hungary and Croatia; for example in Russia the rules of heraldics were imported by Tsar Peter the Great in the late seventeenth century, who founded the so called Geroldmaisterskaia Kontora, an office of evidently German name. So this close-up strategy was politically successful; the society started to converge to the western ones even at the bottom levels.

This convergence was helped in some territories by Western immigration. This process was, however, quite different in the three medieval sister countries. In Poland, the so called Drang nach Osten is still a point of discussion: but, no doubt, about the first millenium German population moved into the north of the later Kingdom of Poland, establishing there a German substrate. Later, a military Order (The Teutonic Knights), having evacuated the Holy Land, went to the so called Prussia (after a short interlude in Hungary), and colonized the territory before the Poles. This was followed by a massive German immigration, and this is the reason that we have serious doubts to extend the region under investigation until the Baltic Sea. (We are not too interested in political or linguistic histories but rather in evolution of societies.)

Otherwise a number of Polish cities were founded by German burghers who remained the dominant element for centuries there. But in Central and Southern Poland no substantial German population could be found outside the cities.

In Hungary the story was different. Pannonia belonged to the Frank Empire and later to its eastern successor state for almost a century. Although her German population was very sparse, it seems that the western fringe of the territory had a Franko-Bavarian strip, and this population remained undisturbed at the conquest of the Magyar tribes. Afterwards Hungarians were continuously raiding Western Europe for two generations and without any doubt a substantial number of Western captives were brought into Hungary who may have contributed to the farming and artisan population. After the first millenium the Kingdom of Hungary is receiving Western immigrants, and in the twelfth century King Geyza II organizes the first large scale implantation of Saxonians, who went first into the south-eastern part of the Basin (Siebenbürgen Saxons) and later also to the north-eastern one (Zips). These groups were farmers, and the settling process was organised from the Hungarian side.

In the same time some families of the German nobility seeked fortune in Hungary, and became incorporated into the Hungarian ruling class. The cities were founded, refounded or extended by Italian, French and German immigrants. While the survival of Roman elements is utterly improbable until the foundation of the Hungarian state, a rather unexplained fact is the survival of the wine culture of the Balaton Highland, initiated by Emperor Probus in the third century.

Croatia did not have these massive immigration processes. However, at her Adriatic coast she had a chain of cities continuous from late West Roman times, with a Neolatin population, whose language (extinct from 1898) is called Dalmatian. (Some time in the Renessaince period these cities switched to Italian.) This coastal region gave Croatia an organic connection to the developed world even without any immigration.

As for higher culture and economy, also some definite convergence was seen, the Hungarian currency followed Bavarian style from the first millenium, and in the first half of the fourteenth century Hungary and Croatia (in an English-Scottish style personal union between 1091 and 1918) immediately followed the leading Italian states in the use of reliable golden coinage. As a special explanation, note that in this time the economic, cultural and innovative center of Europe was in Northern Italy, just in the neighbourhood of Croatia and Hungary. The region was definitely not peripheric in this time.

During this period Hungary is always in a balancing position between the imperial superpowers of Germany and Byzance. Note that this properly appears in the title of Archiregnum, i.e. a kingdom without any imperial overlordship; the parallel is the Kingdoms of France and England. (Indeed, the Holy Crown of Hungary came directly from the Pope, and it is closed above, compared to the open crown of Croatia.) On the north Poland had no neighbour on her east comparable to the German Empire, and on the south Croatia was in connection only with the Byzantine superpower. After the temporary evaporation of the Greek Orthodox superpower in the Fourth Crusade (1204) Hungary (in personal union with Croatia) tried to fill in the vacuum on the Northern Balkan. It is not trivial if these territories became parts of East Central Europe or not; e.g. Bosnia was Roman Catholic but with a strong Bogumil or Kathar heresy, but here we deliberately ignore the question, because later the 500 year Ottoman occupation removed again these lands from the region.

It is interesting to observe the repeated recurrences of unifying tendencies within the region. Hungary and Croatia got a common king in 1091 and this status (slightly more than a personal union) remained unchanged until 1918, but during this period always two nations existed with two parliaments. The border between the two states was a matter of common agreement, but changes were rather exceptions. As for Croatia + Hungary and Poland^C, the first personal union happened in the 1370's under a Hungarian king, and in the next century it was repeated three times backwards. Still the Hungarian-Polish border is practically constant from the 11^th century; from 1918 it became the Czechoslovakian-Polish border, and from 1993 the Slovakian-Polish one, but it is still unchanged. Therefore foreign dynasties from within the same region do not mean colonialization or territorial losses, therefore there was no danger for asking help for the country attacked from outside.

Between 1450 and 1500 a serious change happens in the position of the region. The center of world commerce and innovations leaves Northern Italy and goes to the Atlantic shores. The reasons are manifold, but the final cause is the discovery of America; thenceforth the Mediterranean Sea lost primary importance. Afterwards the region belongs to the periphery, gets only indirect pull from the center, and in the same time starts to have to defend itself against the Ottoman invasion. Croatia and Hungary get the invasion frontally, while Poland is more or less a secondary theater of war for the next two centuries. Fig. 3 is Europe in 1491.

Fig. 3: Europe in 1491

In the next two centuries the Ottoman Empire is a substantial factor in the region. There is a continuous border fighting in the middle of Hungary and Croatia, while Poland is continuously attacked on her southeastern periphery. Since Northern Italy is also a theater of war from 1494, the southern part of the region can hope support only from Poland or from the West, the German Empire. The Polish support could not stop the Ottoman advance, and from the middle of the XVI. century the Ottoman Empire keeps the southeastern half of Croatia occupied, and also a third of Hungary which strip runs roughly vertically in the center.

However still the eastern and western boundaries of the region are intact. On the east the border is still the Eastern Carpathians, not occupied, and further up the border of Russia is roughly the River Dnieper. (Our guess is that the eastern border of our region is somewhere to the West from the Dnieper, but it is rather hard to draw there a definite line. In the eastern parts of Poland and Lithuania (in personal union) the population is then a Greek Orthodox peasantry, with Catholic landowners, tax collectors and warriors, a number of Armenian and Greek merchants, and in the Zaporozhye, some Orthodox free warriors known as Cossacs. We would rather avoid to discuss the economy and sociology of that area.) The western border deserves some discussion. From 1526 Hungary (together with Croatia) is in personal union with the Archduchy of Austria, practically with the German Empire under the Hapspurgs. Still the western border continues to exist (and unchanged up to 1920), Croatia and Hungary do not join to the Empire, keep their own legal systems, and the societies continue to give different answers to the challenges. E.g. in the first wave of reformation half of Germany converts to Lutheranism, Austria herself remains Catholic, but the majority of Hungary becomes Calvinist. (One of the reasons is, of course, that Luther made some pro-Ottoman speeches, so his teaching was not too attractive in a fighting situation for Hungary in distress.) In the same time Poland and Croatia remain Catholic; our guess is that the reason is to clearly distinguish themselves from Greek Orthodox neighbours of very similar languages. Hungary and Croatia gets some financial support for the continuous fighting from the neighbouring parts of the Hapspurg estates, and the frontier is stopped in the heartland. Two centuries of fighting disturbed the economic development, but it seems that this factor was only one amongst a few. As mentioned, the center of the European economic life is no more in Northern Italy; what is more, the silver and gold mines of Hungary (not occupied) become secondary in comparison to those in America. As the scarce surviving data show, in this time Hungary only partly participates in the inflationary tendencies of the West. In the same time she does not follow the development of industry, but specializes for food production for Western customers. The same is true for Poland.

In the same time the Ottoman occupation disturbs the internal commerce in Croatia and Hungary, but does not stop it. The demarcation line does not develop into a true border. Hungarian and Croatian laws remain valid for the non-Moslim subjects of the Ottoman Empire in the occupied areas. The Ottomans tolerate even the taxation for the rightful landowners and for the enemy states. Occupied cities of Hungary get their law books confirmed from the King of Hungary, who is incidentally the German Emperor. Guilds in the occupied area keep legal and commercial contact with brother organisations of the free areas.

Still the continuous fighting and the agricultural specialization have a consequence unique in Europe, which is sometimes called "the second serfdom". In these centuries the peasants are being gradually freed from personal dependence on the West, and in lesser extent in the Empire. In the same time in our region there is the very populous warrior class with a real function, and there is a need to organise the mass commerce of wheat and meat to the West. So they take this role too, and again subjugate the peasants, who cannot be independent because they need defense against the invaders. It seems that the more important factor is the agricultural specialization, because the subjugation is stronger in Poland, not occupied, and the weakest in Croatia, where the Ottoman danger is the strongest, but the territory is not too good for mass production of food.

Poland looses large territories on the East from the middle of the XVII. century. However it is not too clear if these territories were really the parts of Eastern Central Europe.

From the beginning of the 18^th century the Ottoman Empire ceases to influence the region. Croatia and Hungary remain in personal union with each other and with the Hapspurg lands, but they continue to keep their identities as well. During the 18^th century both countries, but mainly Hungary, are getting German immigrants to the depopulated territories, and the wounds of the previous two centuries start to heal up. In the same time Poland has no intrinsic connections to the German Empire, but is more and more the object of Russian political and military influence.

At the end of the 18^th century the region looses territories on the northeast. This is the 3^rd partition of Poland. Thenceforth up to now, except for 20 years between the World Wars, the former Eastern Poland belonged to Russia. (From 1991 to Ukrainia.) Henceforth Eastern Central Europe reduces to Croatia, Hungary (personal union still) and the so called Galicia or Southern Poland, belonging to Austria until the end of the First World War.

The Napoleonic Wars do not disturb too much this reduced region. Hungary even enjoys some prosperity from food production for the armies. From 1815 the reduced region is in peace, and has the possibility to try to close up to the more Western parts of Europe. Indeed, in Hungary then starts the so-called Reform Age.

2.1. The "reform age" of the Carpathian Basin

Emperor Francis I lost the throne of the German Empire in 1806, when the western German territories had been occupied by Napoleon. From that time the Hapspurg rulers used the title of Emperor of Austria, although there was no state called Austria. From this time the connections of the "Austrian" and Bohemian territories became weakened with the Western half of the Empire. However in principle the Empire itself was not dissolved, therefore we continue to regard the Austrian and Bohemian lands as parts of the Western Central European region. In 1815 Austria got back Galicia, and acquired Dalmatia (taken previously from Venice by France.) Galicia was claimed by Hungary in 1772 when Austria took it; Dalmatia also was claimed via Hungarian or Croatian (or both) arguments: she was continuously disputed between Croatia (or Hungary) and Venice from the Fourth Crusade, and earlier (back to 1076) had belonged to Croatia. So both Galicia and Dalmatia was governed from Vienna, but did not belong in any sense and on any right to the Empire. Therefore we must consider both territories as parts of Eastern Central Europe.

Now remember that close-up strategies imply some organisation and planning. If individuals learn techniques from more advanced regions, such an activity may or may not be successful, may or may not result in some close-up, but it is not a close-up strategy. We concentrate on strategies. But the formulation and execution of a close-up strategy and programme needs some kind of a body politic, which can make decisions and can enforce them at least in some extent. By other words, some kind of a parliament is a precondition. The optimal case would be an independent country, but in the period just considered no part of Eastern Central Europe was independent in the sense as used in the last century. Galicia and Dalmatia had some Landtäge, which were responsible for taxation and education in some restricted sense. However the only parliaments with full souvereignities were the Hungarian and Croatian ones. For example, the Hungarian parliament offered the taxes, made laws (valid if signed by the King of Hungary, incidentally the same person as the Emperor of Austria) and the government of Hungary was the Chancellery of Hungary (strangely enough in Vienna). So the Hungarian Parliament definitely was in the position to formulate and execute a strategy for developing the country, even if it could not enforce directly the acts on the government. (The situation was slightly similar to that in England during the reign of Charles I.)

Indeed, the Hungarian Parliament did formulate some steps for close up. Some laws created between 1825 and 1844 were parts of such a strategy. They wanted to change or manufacture some long-range regulators of the national economy. We can classify these ones into the following groups:

1) Education, Research & Development, &c.

Introduction of the majority language into legal life. Effects: extension of culture to a large part of population; minority frustrations on the periphery.

Organisation of a network of industrial training schools. Wanted effect: increase of the level of industrial skills; however the law was not signed by the King.

Erection of the Hungarian Academy of Sciences. Effect: the state starts to organise research, industrial development and import of ideas from developed countries.

2) Modernization of the legal system (of economy)

Creation of separate Hungarian laws for finance (credit) &c.

Transformation of the feudal ownership of lands into a Western-type property. Effect: market of lands; ability for investment into agriculture.

Freedom for erecting factories independently of the guild membership of owner or employees. Effect: weakening of guilds.

3) Infrastructure

Licences and tax reductions for channel and railway creation.

Decision for a permanent bridge on the Danube. Effect: the first bridge across the Danube in east-west direction, therefore permanent connection between the eastern and western parts of the Basin.

Planning and starting of river regulation. Effect: prevention of regular floods on the Great Hungarian Plains, therefore new agricultural land and safer traffic.

While these steps had only a limited effect on close up, Hungary was able to do this autonomously, having her own legislative body. Other parts of the region were able to regulate only the educational regulators at best. This continuous legislative activity was interrupted in 1848 by the Austrian-Hungarian war; in 1849 Hungary was defeated, the Hungarian Parliament dissolved, and no part of the region was self-regulating until 1867.

2.2. The age of dual monarchy

In 1867 the Austro-Hungarian or Hapsburg or Danube Monarchy was rearranged according to an agreement between the Austrian and Hungarian leading political groups, and in 1868 there happened a subsequent agreement between Hungary and Croatia. Thenceforth the situation was as follows.

In first approximation the Monarchy consisted of two independent states, loosely called as Austria and Hungary. In this context Austria means Austria proper, Bohemia, Trieste, Slovenia, Dalmatia, Galicia and Bukovina (the last one should be classified to Eastern Europe). The Hungarian half consisted of Hungary and Croatia. In Austria the constituent lands had no home rule; however they had local administration and a limited autonomy in education and culture. There was a souvereign Imperial Parliament in Vienna for all the Austrian lands.

In Hungary there was a Hungarian Parliament as well as a Croatian one. However a great number of issues were common matters and in them the decisions were made by a common body containing the whole Hungarian Parliament together with some Croatian delegates. Education, culture, law, economy and administration were separate in Hungary and in Croatia.

However in second approximation there were some common matters between the two halves of the Monarchy, namely defence and foreign policy. For these matters both Parliaments sent delegations (with Croatian delegates as well in the Hungarian delegation) to make decisions. In addition the two halves agreed in customs union for 10 years, which agreement was repeatedly renewed until the end of the First World War.

Therefore

1) East Central Europe as a whole was not a self-governing or self-regulating unit, because Galicia and Dalmatia were ruled by Austria. However note that the 1881 Linz Programme of the German parties of the Austrian Imperial Parliament suggested the reorganisation of the double monarchy by transferring Galicia and Dalmatia to the eastern half. The suggestion was not accepted; however afterwards Galicia got limited autonomy, while there was a continuous increase of influence of local Croatians compared to local Italians in the administration of Dalmatia. In the same time Hungary continuously demanded the transfer of Dalmatia to Croatia.

2) The core territory of the region, the Carparthian Basin, i.e. Hungary with Croatia, was in principle self-governing in all questions relevant in economic development. The customs union was an agreement, and if great needs be, free not to be renewed. However practically the existence of this union established a coupling in economy.

3) On the East Croatia had a limited possibility to regulate her own close up via the educational and cultural regulators, and in a less extent, Galicia had the same possibility.

The situation will be demonstrated on the Hungarian strategy of close up by long-range regulators. The example has been chosen on the ground that until the First World War in the region Hungary had the widest possibility to determine her own regulators. Before this review two technical notes are

made:

1) The jurisdiction process of Hungary results in laws named after the year and a Roman numeral followed by a "tc" which indicates the sequentional order of the law in that year. For reference we mention these numerals. For details see Refs. 2 and 9.

2) As told earlier, the term "Hungary" needs a nontrivial definition. As a rule here for cultural, and partly for legal, issues, Hungary stands for Hungary proper, not including Croatia. On the other hand, for financial and foreign issues "Hungary" is Hungary and Croatia.

While this needs some attention, one cannot help, because this complication originated just from the special position of the Central Eastern European lands, territories and countries.

Regs. 1: Laws

As told earlier, the legal system of Eastern Central Europe did not originate from that of the Western Empire or any Western state. In addition, the medieval legal system here survived until the middle of the 19^th century, therefore modernization of economy and society needed legal changes. (However, note the quantitative differences between the Hungarian system and that of e.g. the Ancien Regime in France. In Hungary i) no chain of vassalage existed, so each noble was equal, directly depending on the Crown; ii) the percentage of nobles was in the neighbourhood of 10 %; iii) some local groups were more or less self-governing, and their territories free of the medieval landlord system. As a result, the share in voting power for the Parliament was higher in 1830 in Hungary than in contemporary modernised France.) The biggest steps of this process followed each other as listed below:

1848. tcc (a whole sequence): Establish legal equality of all male citizens, including taxation according to common principles. (Note: this decision did not completely eliminate prerogatives of nobility. E.g. all noblemen retained their voting power, while commoners got it only above a certain level of income. Reason: existing rights were not confiscated.)

1872. VIII tc: Disbands the guild system. Henceforth economic activity is free for everybody.

1881. XLIV tc: Supports the home industry. Freedom from taxation for 15 years if the factory is sufficiently up to date, either existing or under construction. This law substitutes the custom laws for which the Hungarian Parliament had no authority, such questions belonged to an Austro-Hungarian body of delegations of equal number (and the Hungarian delegation must have contained Croatian delegates of prescribed number too).

1890. XIII tc: Widens the above preferences.

1907. III tc: Gives the possibility for such support in any industrial establishment, if economic reasons suggest.

At the beginning of the new century complete legal equality of male citizens is an established fact in Hungary; earlier preferred or dispreferred classes, religions and other groups have been equalized, with some exceptions in the voting power, and with special legal regulations for big lands of feudal origin. This situation is comparable to the contemporary Great Britain, except that the percentage of the population with voting power is lower, somehow between 6 and 10 %. Industry and finance are completely free.

Regs. 2: Monetary, fiscal &c. regulations

1848: Customs agreement with Austria on the basis of greatest preference.

1850: Austria unilaterally forces customs union.

1864: Stock market is established in Pest (one of the precursor cities of the later capital Budapest).

1867. XVI tc: Establishes customs union with Austria for 10 years, renewable.

1867: Hungary accepts that she will not erect a central state bank.

1878: Reorganisation of the Austrian central state bank on dualistic basis.

These regulations generally were made as external agreements. As told above, neither Hungary, nor Austria had the right to regulate her own external relations and defence: these issues together with the finances supporting them were common issues of the two independent states Hungary and Austria, determined by the mixed delegations of the two Parliaments (or three, including the Croatian one), and in the lack of any "federal" government the administration of these issues was done by the offices of a common foreign ministry, a common ministry of defence, and a common ministry for the finances of the foreign affairs and defence. (In addition, the ministry of finances for common foreign affairs and defence governed the Territory of Bosnia, whose position between Austria and Hungary was rather obscure. Until 1908 the same ministry administrated the Novipazar Sandjak, belonging to the Ottoman Sultanate, given by the Berlin Conference to Austria and Hungary for administration, and separating Serbia and Montenegro. This task ceased by the peaceful reoccupation of the Sandjak by the Sultanate.) Neither part of the Austro-Hungarian complex had its own monetary system, and had no right to introduce it. Separate customs territories were possible in principle, but only after a long and difficult process of not renewing the customs unions. Until the end of the First World War no separate customs territories were established.

Regs. 3: Infrastructure

The whole Eastern Central European region was behind the West in the middle of the 19th century for the development of the so called infrastructure, including roads, railways, enbankments, etc. The Hungarian government strategy was to concentrate the available financial sources here, because an improved infrastructure would result later in higher incomes, consequently taxes. Infrastructural investments just after 1867 were high, while in this period their profit was negligible. After a quarter century the share of this area went much down in the investments, but the profit increased. The explanation is that the first quarter century was necessary to reach the level of profitability in development.

While these investments were by no means purely made by the state, the state had a great possibility to regulate them, and in this area the Hungarian (Croatia included) souvereignity was complete.

The first process was to promote investments into railway building. Up to 1875 this was achieved by indirect means, namely the Hungarian Parliament guaranteed a fair profit for 10 years for anybody who got the licence to build a line. From 1876 the state treasury started to buy up the private lines, by which the Hungarian State Railways became the biggest employer of the country, and railwaymen became state employees similar to soldiers, customs officers etc. This new status of the Railways led to frictions between the Hungarian and Croatian authorities about ruling the network. This indirect or direct investment activity definitely helped the close-up in the density of railway lines.

The next step was the building of artificial waterways and other regulations of natural waters; from 1878 the state started to organize the building of the so called Ferenc Channel between the two great rivers, the Danube and Tisa and backwards in the area which is now the Voivodina. Henceforth some laws promoted the activities as follows:

1879. XXXV tc: Regulates River Tisa. The total length of the menandering river was reduced to 60 % by shortcuts. Result: floods became less frequent, new lands became available for grain, and in the same time fishing was reduced. A large part of the river became available for steam ships.

1888. XXVI tc: Prescribes the regulation of Danube at the so called Iron Gate between Roumania and Serbia. It was based on a multilateral agreement. At the Iron Gate the river was very narrow, therefore the stream was too strong for shipping upwards. The regulation made the Danube an efficient international route to the Eastern seas.

1895. XLVIII tc: Orders the regulation of the Danube within Hungary. With this all the Danube of Hungary became available for steamers.

1897. XVI tc: Nationalisation of the telephone system of Budapest.

1898. IX tc: Establishes the Hungarian Oriental Shipping Company.

Regs. 4: Education, Research & Development, &c.

1868. XXXVIII tc: Orders education for everybody up to age of 15.

1872: Erecting the second university of Hungary in Clausenburg.

Later laws tried to solve the problem of a centralised education system in a multilingual country.

2.3. The Carpathian Basin at the eve of the first world war

In 1900 Budapest became a big European city comparable to Vienna, or to Munich not only for size but also for the general level of industrial, civilizatory and artistic level. For the English-speaking reader we can recommend the review book "Budapest 1900", by John Lukács. Here we stop for a moment just before the First World War. For such a stop and overview the most convenient year is 1910, when in the whole Austro-Hungarian Monarchy population counts were made according to common principles [10]. In some pie diagrams one can compare the structures of employment of the 4 more or less independent countries of the region (Hungary, Croatia, Galicia and Dalmatia) to other countries of all regions of the contemporary Europe.

Fig. 4 shows the distribution of various religions in Hungary and Croatia in 1910, from an East-West cultural viewpoint. No doubt, in that time religion strongly influenced the everyday way of life. From the above viewpoint 3 blocks of religions will be distinguished among the 7 religions individually handled in the population counting process in the Basin.

1) Western. Includes Roman Catholic, Calvinist, Lutheran, Unitarian and Israelite.

2) Eastern. The Greek Orthodox religion.

3) In between. The Greek Catholic Church, with Byzantian rite but accepting the filioque dogma and Roman leadership.

All other religions counted as Others, remained in each county under 0.1 % individually and 0.3 % together. (The Basin was divided into 72 counties, 63 Hungarian and 9 Croatian ones.) A block is considered "dominant" on Fig. 4 if in a county it is the biggest. Then Fig. 4 shows that in 1910 in the biggest part of Croatia+Hungary it was dominant to belong to the West either directly (Block 1) or indirectly (Block 3). The Eastern substrate was characteristic only in an Eastern wedge based on Serbia and showing to the North. This wedge was partly a product of the 150 years of Ottoman rule.

Fig. 4: Religions in Hungary and Croatia in 1910

Within the Western group Roman Catholics were absolute majority, but mosaic-like one could find counties of Lutheran and Calvinist majorities as well. No bigger unit with Unitarian or Israelite majority existed; for both the highest ratio was between 20 and 25 %, in a Szekler county in Transylvania for the first, and in Budapest for the second.

Hungary was a multilingual country, and language is not a topic of this paper, not being among the important long-range regulators. So we only note that in Hungary proper (i.e. without Croatia) the biggest language group was the Hungarian (Magyar) with 54.5 %. Croatia had some 65 % of Croats and 25 % Serbs. Religions correlated with languages; in some cases strongly, in some cases weakly. In Hungary Roman Catholics were mainly Magyars, Slovakians, Germans or Croatians. Calvinists were almost exclusively Magyars, Lutherans mainly Slovakians and Germans, Unitarians exclusively Magyars, Israelites mainly Magyars and in a less extent Germans, Greek Catholics mainly Ruthenians and Roumanians and Greek Orthodoxes Roumanians and Serbs. In Croatia the correlation was rather strong: Roman Catholics were Croatians, and Greek Orthodoxes were Serbs.

Figs. 5 and 6 display the employment structure in Eastern Central Europe in 1910, compared to that in the rest of Europe. Eastern Central Europe is then characterised by a high enough share of agriculture, however with non-negligible industry and commerce. Note that within Eastern Central Europe the structure is "more Western" or "modern" in the two countries not belonging to Austria, so not governed from the West (of Central Europe). Since it is extremely improbable that Austria would have "exploited" the poor countries of Galicia and Dalmatia, we must see the result of a close-up strategy, possible in the Basin due to the souvereignity of the Parliament of the Basin (which we cannot name, because it had no name of its own), but impossible with simple Landtäge. The employment structure in the Basin was transitional between East and West, but not unlike to the South. In Eastern Central Europe Hungary showed the "most modernized" structure, similar to that of Italy. This similarity would be preserved until c. 1965.

Fig. 5: Shares in employment in Central Europe at the beginning of the 20th century (for a while see instead Table 1)

Table 1

Country	Year	Agriculture	Industry	Transport and commerce	Other
Eastern CE
Croatia	1910	69.6	17.0	4.0	9.4
Hungary	1910	60.1	18.9	6.0	15.0
Galicia	1910	79.9	6.2	6.1	7.8
Dalmatia	1910	85.2	4.3	4.1	6.4
Western CE
Austria proper	1910	42.3	25.0	13.5	19.2
Germany	1907	33.1	37.4	11.6	17.9
Bohemia	1910	38.1	34.5	10.7	16.7

Fig. 6: Employment structure in other regions of Europe at the beginning of the 20th century (for a while instead see Table 2)

Table 2

Country	Year	Agriculture	Industry	Transport and commerce	Other
Southern
Italy	1911	53.5	29.5	5	12
Portugal	1910	51.0	23.0	6.4	19.6
Northern
Denmark	1911	36.4	27.3	10.0	26.3
Sweden	1910	48.4	32.3	13.5	5.8
Western
Belgium	1910	24	48	12	16
Holland	1910	28.4	34.7	18.3	18.6
France	1906	42.5	25.0	14.0	18.5
United Kingdom	1911	11.3	56.6	12.6	19.5
Eastern
Bulgaria	1905	82.0	7.3	3.8	6.9
Roumania	1910	66	10	5	19
Russia	1897	77.2	11.5	5.7	5.6

2.4. The post-war changes

In 1914 started the First World War. At its end, between 1918 and 1920, serious changes happened in the region. Briefly they can be summarized as follows:

1) The Austro-Hungarian Monarchy was dissolved.

2) Hungary shrank to the center of the Carpathian Basin. Her peripheries went to states outside the region.

3) The personal union of Hungary and Croatia was dismantled and Croatia went to a state outside the region.

4) Poland had been restored, however with a substantial Eastern and some Northern parts, which may or may not have belonged to the region of Eastern Central Europe.

As a consequence one may say that between the World Wars the region was represented by two national economies, that of a new, smaller Hungary, and that of the new, greater Poland. It is doubtless that all of the territory of Hungary belonged to the region, while Polish data contain the contributions of the new territories. Therefore henceforth comparison to other parts of Eastern Central Europe is impossible. We, furthermore, must continue the study with a lesser Hungary, so some data are not comparable even for Hungary before and after 1920, because of the substantial changes in area and population.

The period between the World Wars was a general stagnation for all of Europe. No close-up strategy was possible for Hungary until the Great Crisis, because long years were needed to reorganise the national economy according to the new numerous customs borders. As a single example, the Hungarian grain mills, concentrated in Budapest at the great railways centers of lines coming from the fields and going to the Western markets remained without the grain from the southern lands. Therefore some factories simply became superfluous. After years of reorganisation started the Great Crisis which shook Hungary, although not so strongly than the West. However she was able to regain her relative position.

We mention only 3 characteristic changes between the World Wars as follows:

1) The weight of agricultural population continued to decrease: from 60.3 % (1910) to 50.8 % (in 1930); the weight of industry and commerce continued to grow. Roughly the Hungarian employment structure evolved parallelly with that of Italy.

2) In the industry the employment share of small enterprise decreased from 47 % (1910) to 39 % (1938).

3) The use of electricity fastly increased, so strongly that the decrease of area did not result in a perceptible jump back, as can be seen on the graph at the end of this paper.

All of these changes are generally considered "modernisation".

2.5. The socialist period

After the Second World War soon Hungary became the part of an economic community centered in Eastern Europe. In that time some modernisation continued to go on; "modernisation" was a slogan of the Eastern ideology. However, at least between 1949 and 1968, the modernisation was not regulated by long range regulators, but by orders based on natural quantities of some products regarded as "modern". Consequently the employment structure continued to change in the general direction of modernisation, although the lag behind Italy became perceptible from 1965. For electricity the increase continued roughly parallelly with the leading part of the world. However the weight of the tertiary sector remained small, and there appeared an increased lag in the GDP/capita.

The period of planned economy can be divided into two parts. Between 1948 and 1968 the economy was directed by commands based on plans or superstitions. After 1968 regulations became "indirect", so the long-range regulator concept became again very useful, and from that time the country continuously reestablished the Western connections, thus deviating more and more from her Northern, Eastern and Southern neighbours. However, interestingly, the very important turning point in 1968 cannot be seen in the aggregate economic data of Figs. 7 and 8.

Fig. 7: Net investment rate in Hungary. Note: Observe the high and growing investment rate in the socialist era. After 1982 this rate returned to its pre-war values.

Fig. 8: Home consummed GDP/capita. Note: 1914=100

Fig. 7 shows the (net) investment rate in the period. Before the Second World War this rate was permanently between 8 and 10 %. The forced close-up is demonstrated by the sudden jump to a higher value, and even more by the continuous increase of the rate. Until the end of 70's the planned economy was able to maintain an exponential growth of GDP (Fig. 8), however on the cost of forcing more and more the investments. Even so, the exponential growth broke down at the beginning of the 80's, and then the investment ratio started to return to a moderate level similar to the inter-war times before planned economy. So the close-up strategy of Hungary's socialist period ended somewhere in the first half of the 80's [11].

At the end of this Chapter we give Figs. 9-11, which compare the raw iron production, electric consumption and GDP/capita for Hungary and USA, roughly during a century. One can see that

1) In iron production Hungary's lag was slightly growing until the First World War. Between 1940 and 1970 the Hungarian increase was relatively faster.

2) In electricity the Hungarian and American developments were parallel between 1920 and 1980. No close-up is seen, but no increase of lagging either.

3) In GDP/capita the USA started from an initial level at 1867 four times higher than Hungary, but Hungary was able to keep this initial ratio roughly constant. However from 1931 the Hungarian currency is not convertible, and from 1948 the currency rates became purely arbitrary. So Fig. 11 stops at that year.

Fig. 9: Crude Iron production in USA and Hungary

Fig. 10: Electricity consummed in USA and Hungary

Fig. 11: GDP/capita in USA and Hungary

However, in the last 200 years the main desire in the Hungarian soul is not the close-up to distant USA but the catch up with neighbour and sister country Austria. So Fig. 12 is the ratio of the two countries' GDP/capita. After the First World War both data strings are rather uncertain, but sophisticated estimates do exist. We use the data of Refs. 12 and 13, and, indeed, our Fig. 12 is almost a transformation of one of the Figures in [13]. For the GDP ratio some corrections are needed. Namely: i) between 1921 and 1937 Hungary's NNP is converted to GDP by a constant factor 1.55 to reproduce the average ratio known for 1925-34; ii) after 1945 existing ratio estimates are used (for these two items see the text of Ref. 12); and iii) the Schilling-Pengő parity was cca. 0.80 in 1937.

Now the moral of Fig. 12. The long and systematic efforts of the Parliament of the Basin resulted in the increase of the ratio from 0.58 to 0.70 until 1913. After the First World War the increase continued, ended with 0.86, so catch-up was not impossible first after the Middle Ages. The socialist era broke this trend, but in its first half returned only to the ratio of 1913 (the last peaceful year of the Double Monarchy) and stabilized there. However after 1973 the ratio drops steeply, and at the end of the socialist era Hungary is back at a relative position similar to that at the beginning of the Reform Age in 1825, 165 years before. In short 17 years she slipped back as much as was the slow climb-up of 88 years before the First World War.^B

Fig. 12: Hungary's race to catch up Austria since 1850. Note: It is remarkable the gradual close-up until 1938, the slide back and stagnation until 1973, and the later decline.

However mere 17 years is nothing in the ages-old race of the two countries. What can be lost by mishandling in relative position, can be won back as well in comparable time by appropriate strategy.

3. THE FORECAST OF THE PRESENT CLOSING UP ATTEMPT OF THE REGION BY MEANS OF A GENERALIZED KOVÁCS -- VIRÁG DINAMIC ONE SECTOR ECONOMIC MODEL

In this chapter we briefly present a quantitative approach of predicting the outcome of a possible closing up strategy of the central European civilization to the west European civilization. In this study we have determined the lower and upper bound of the "cost" of the closing up growth path for Hungary.

In [14] we formulated a generalization of the Kovács - Virág dynamic one sector economic model [15] and gave solutions optimalizing the consumption function.

One can slightly modify this model to obtain a quantitative predictions about the time horizon of the present closing up attempts of our region.

The basic equations of this modified one sector economic model are

dK/dt = qsY - λK, (3.1)

Y = gK, (3.2)

where the savings rate s is a function of the time

s = s(t),

λ is constant (depreciation rate of capital stocks), the efficiency of the capital g is a function of the savings rate and the time

g = g(s, t)

and the investment to capital multiplicator is a function of the time

q = q(t).

We have specified the form of capital efficiency in [14] as follows

g(s) = βs(1 - s)^γ, (3.3)

where γ is a constant in time (around 4 in Central Europe according to quantitative analyses) while ß can depend on time.

In evaluating the generalized Kovács - Virág model we specified the time dependence of investment to capital multiplicator and the capital efficiency in the following manner

q(t) = (q₀T_q + q₁t)/(T_q + t), (3.4)

β(t) = (β₀T_β + β₁t)/(T_β + t), (3.5)

We note that with the explicit time dependence in the saving rate, in the capital efficiency and the introduction of the time dependent investment to capital multiplicator enables the model to describe transition processes a phenomenon characteristic of an economy being in closing up state.

Numerical analyses (not cited here) give the following values for the parameters in equations (3.4-5). The Hungarian value of β₀ was 3.53 y^-1 at the end of 80's, while the contemporary Italian value was higher by some 2/3. The q value of the average of the 35 years up to 1986 was 0.84 in Hungary, while the corresponding West German value was 1.36. Therefore the initial and final values of a reasonable close-up path are

β₀ = 3.53, β₁ = 5.76,

q₀ = 0.84, q₁ = 1.36;

what remains is the values of the characteristic times of changes in (5.4-5).^D We were looking for a path of optimal total consumption in 15 years, which ends at the half of the present Austrian GDP/capita.

The results are as follows. The path cannot end at the target GDP/capita if either of T_q and T_β is larger than 3 years.

So, fast privatisation and technological renewation are needed.

Loans without real interest rate (e.g. a new Marshall project) may help. If investments can be finished 2 years before paying back, then the desired path is marginally possible with the characteristic times 10 years for complete technological changes and 4.5 years for privatisation + efficient stock market.

We have also calculated growth paths of optimal total consumption in 10 years, which end at the Portugalian GDP/capita in 2005 (assuming a 3 % average growth rate for the Portugal economy in the next 11 years). We calculated two paths, one of them applies the assumption that the hidden economy is legalizable at the start of the growth path, while the other assumes that it is not legalizable. In the first case the parameters T_q and T_β take values 3 years and 4 years, respectively, on the growth path, while the average half gestation time takes value 1.9 years. In the second case T_q=T_β=5 years and the half gestation is equal 0 years. Then one can calculate the cost of these growth paths to be implementable, and obtains that the lower bound of the needed cost-free external source is about 6-8 billion USD (used 2/3 of the amount for the legalization of the hidden economy at starting period of the growth path) and the upper bound is about 16-18 billion USD partitionated for the 10 years in a slowly growing manner. Figure 13 shows the investment rate and growth rate on these paths.^E

Fig. 13: A 10 years path optimalizing total consumption and enhancing GDP by 2.7 for an economy with the average data of Hungary. Note: Time scales: New technology 5 years, privatization 5 years, gestation 0 year. Details in the text.

References

[1] J. Kovács: Regulative Planning. In: Economic Planning in Transition, eds. J. Kovács &. B. Dallago, Dartmouth Publ. Co., Aldershot, 1990, p. 33

[2] Berend I. T. & Szuhay M.: A tőkés gazdaság története Magyarországon 1848-1944. Kossuth, Budapest, 1973.

[3] Ciepelewski J. & al: A világ gazdaságtörténete a XIX. és XX. században. Kossuth, Budapest, 1974

[4] Ocherki novoi i noveyshci istorii SShA. Izdatel'stvo Akademii Nauki, Moscow, 1960

[5] M. Banai, J. Kovács & B. Lukács, in: Carpathian Basin: Evolutionary Stages. KFKI-1993-21, p. 84

[6] I. Bóna: The Dawn of the Dark Ages. Corvina Press, Budapest, 1974

[7] Fl. Vopiscus Syracuseanus: Divus Aurelianus, in Historia Augusta.

[8] Győrffy Gy.: István király és műve. Gondolat, Budapest, 1977

[9] Hanák P. (ed.): Magyarország története III-IV. Tankönyvkiadó, Budapest, 1975

[10] The data of the 1910 census were published in volumes for the whole Double Monarchy. Specially for the Hungarian data: Magyar Statisztikai Közlemények, New Series, Vol. 42, Budapest, 1912

[11] Bogár L.: Kitörési kísérleteink. Közgazdasági és Jogi Kiadó, Budapest, 1989

[12] Tarján T.: Közg. Szemle 40, 815 (1993)

[13] Gy. Molnár & T. Tarján: Production Lag and Intellectual Background, in: Kovács J. (ed.): Technological Lag and Intellectual Background, Dartmouth Publ., Aldershot, 1995, p. 85

[14] M. Banai & B. Lukács: KFKI-1989-68

[15] Kovács J. & Virág Ildikó: Közgazdasági Szemle, 28, 675-686 (1981)

APPENDIX

Keywords of the History of Some Steppe Nations

Here some historical data are collected for the convenience of Western readers about steppe nations almost unknown in the West but mentioned in the present text and present in the everyday historical memory of the Carpathian Basin. The Reference numbers restart here. The nations, tribes, peoples &c. are alphabetically ordered here. See also the short explanations in [1], which paper will not be explicitly cited henceforth.

For brevity, if not indicated otherwise, dates are meant in AD. A number of shorthand notations is used, namely: E.=East(ern), S.=South(ern), W.=West(ern), N=North(ern), P.=Prince, K.=King, Kg.=Khagan, R.=River, c.=about (in time), ct.=century, bw.=between. "Basin" means Carpathian Basin, and "obscure" is to be read as "still a matter of argumentation". ~ stands for the entry.

In some cases the Hungarian literature is the most detailed (among the steppe nations Hungary founded the first Academy of Sciences) and often is not translated to Western languages. This we cannot help.

After the entry the most common name used in the Basin in singular is given in brackets.

This Appendix has its own reference list. When looking for an item in literature, note that in Hungarian, Chinese and Japanese names family name comes first (at least when the text is also in one of these languages).

Avars (Avar)

Possibly the zhuan-zhuans of early Chinese chronicles [2]. C. 500. ruling in the Altai (now Kazakistan and S. Russia). Defeated by the uprising Turks led by Kg. Bumın (and by the mythical Grey Wolf) in the first half of March, 552 [3]. Led by Kg. Bayan to W., in 565 defeat the Thuringian K. Sigebert I at the R. Elbe (FRG). Thence turn back with Slavic tribes (probably Serbs, Croats and pre-Slovaks) and enter the Basin in 567 [4]. Anti-Gepidic coalition with the Lombards; take the Gepid lands in 567, and, by a Treaty of 200 Year Friendship, the Lombard lands on the Easter Monday of 568. Second unification of the Basin. (For the first see Huns.) 630: extinction of the Bayan dynasty. Steppe territories E. of the Carpathian lost. First in history the Basin is a self-governing unit (with border guard tribes on the outer slopes). 680: reorganisation of the state after immigration of new tribes (probably Onogurs from the First Bulgar state) led by P. Kuber [5], [6]. 791: Frank attack, completely unsuccessful and disastrous [7]. 795: internal struggles exploited by Count Erik of Friuli. Avar Pannonia is subjugated by Franks. 805: E. half of the state subjugated by Kg. Krum of (Danube) Bulgars [5].

The subsequent fate of ~ is obscure. Until 822 (or 840) names of Christian Avar Khagans are known. (E.g. Theodorus and Abraham.) They were subjects of the Frank Emperor so must have belonged to the Roman Church. ~ probably were assimilated by the incoming Magyar tribes. Arguments exist for and against linguistic similarity bw. tribes entering the Basin in 680 and 896 [6].

The exact time of the settling of Serbs and Croats on the Balkan is a matter of argumentation. Some scholars believe it to be pre-Avar, in which case ~ could not have had a role in it. However it seems to have happened in the Avar era [5], [8] and the 6 Croat leaders of the migration mentioned by Konstantinos Porphyrogenetos have all Turk names [9] which, in any possible time, could not have been anything else than Avar (or related). See also [10], and for reconstructed previous locations, [11].

Bulgars (Bulgár)

Alliance of tribes organised N. of the Black Sea by Irnak, son of Atilla, just after 454. Later ruling the Lower Volga region. K. Kovrat, c. 635-665 baptized in Byzance. K. Batbayan subjugated by the W. Turk (later Chasarian) Chaganate in 668 [5]. His 4 brothers with peoples emigrate. P. Kotrag founds Volga Bulgaria. P. Asparuch founds Danube Bulgaria. P. Kuber goes to the Avars. P. Altsek goes to Ravenna.

Since Bulgarian belongs to a special subgroup of Turkish languages (the r-group), inheritors of Bulgarians can be recognised among Turkish peoples. Danube Bulgaria has survived. Volga Bulgaria existed until ct. 13 and her successor people and state is the Chuvash Republic of the Russian Federation (Middle Volga, near Kazan). The old Turkish words of the present Hungarian language are of r-Turk, so probably Bulgarian.

Chasars (Kazár)

Successor state of the W. Turk Chaganate, core territory among the Volga, Don and Mtn. Caucasus, Sarig Sin (White Wall, in Russian times Tsaritsin, later Stalingrad) keeping the narrow gateway between the rivers. The 7 Magyar tribes lived on the W. periphery of the Chaganate bw. 750 and 830; in 830 the Magyars picked up 3 rebel tribes of the ~ (the Kabars). Mixed population in the Chaganate; the leading ~ Turkish. Defeated but not subjugated by P. Sviatoslav of Russia in 976, then decaying until the Mongolian invasion in ct. 13. Assimilated into the Golden Horde c. 1240. For some details see [12].

As for culture, the Chaganate was a focal point of influences of Byzantine, Arab, Steppe and Varaegian (Middle Swedish) cultures. In c. 750 Begh Bulan accepts the Old Testament religion in Karaitic form (i.e. without Talmud), the common part of Judaism, Christianism and Islam [13], [14], [15], [16]. The extent of conversion is obscure, but Karaitic communities survived in Krimea and Lithuania, the latter speaking Kipchak Turk. C. 840 Kg. (or Begh) Obadia accepts Judaism. In the Chaganate also Christianism and Islam were widespread [12].

The Kabar rebels of ~ entered the Basin with the Magyars in 896, transferring thither some Chasarian culture. Khasdai ben Yitzhak ibn Shaprut, Prime Minister of the Cordoba Chaliphate contacted K. Joseph of the ~ c. 955. In the answer K. Joseph mentions Bulgarians and Magyars (or maybe Onogurs?) as previous Chasarian tribes, having gone to the Danube. For the most detailed surviving text of this letter, found by Abraham Firkowicz, see [17]. It gives various details of cultures in Chasaria.

Cumanians (Kun)

Kipchak Turks fleeing from Mongols into the Basin in 1240, led by K. Kuthen. Now in Europe the Cumanian language is spoken only by the Lithuanian Karaims. In Hungary free subjects of the Crown. Local Cuman autonomy dissolved in 1872.

Gepids (Gepida)

East German tribe, subjects of the Huns, leading the uprising against Huns in 454. Then rulers of the E. half of the Great (Hungarian) Plains, E. of the R. Tisa. From c. 520 bitterest foes of the Lombards. In 567 defeated by Avars and Lombards [4]. Still in existence along R. Tisa c. 950.

Later fate is unknown. Assimilated by Magyars, Slovaks, or, maybe, Saxons (Zips).

Huns (Hun)

Possibly the Hiung-nus of early Chinese chronicles [2]; maybe of mixed Turkish-Mongolian origin. At the end of ct. 3 BC triggering the erection of the Chinese Great Wall. BC 209-175: Kg. Mao-Tun. Starting to W. in ct. 2 AD. Crossing the Volga (led by Balambér) in 375; immediately subjugating the majority of Goths and triggering the Migration Period for Europe.

Great King Attila (433-453) rules an empire from France to Central Asia. For details see [18], [19]. Under his rule was the Basin first united in historic times (and as far as it can be known in any time at all). However this united Basin was not self-governing then but a part of a huge empire. He dies in 453, and next year the empire breaks up in a revolt led by Ardarich of the Gepides. ~, led by Irnak, son of Attila, retreat to N. of the Black Sea.

The later fate of the ~ is somewhat obscure. A state of the Black ~ is in existence in 681 when Bishop Israel of Georgia is fairly successful in converting them to Christianism [20]. Hephtalits subjugating N. India in ct. 6 are called also White ~. According to Gumilyov [21] Asian Huns in the Hosi region (China) survived until c. 500, and then their Asina clan went to Avars, thence Turks, founding the Turkish state. The Bulgarian states may be of Hunnish origin. The Szekler tribes (speaking Hungarian) in the S-E. part of the Basin traditionally originate themselves from the ~. The founder dynasty of the Hungarian state from 896 regarded itself as descendants of Attila the Hun.

Hungarians (Hungarus, uhor)

Up to 1920 the common word for subjects of the Basin (except Croatia) with no relation to language. Since 1920 the term has a narrower meaning: the subjects of Hungary (dominated by Magyars) in the center of the Basin plus Magyars anywhere. In Slovakian, however, the equivalent word uhor means Slovaks plus Hungarians together.

When applied to language it always means the language of Magyars.

Originally the word meant the Onogurs of the Basin in the ct. 8-9, and went continuously to the new state and nation after 896 in W. use.

Jazones (Jász)

Iranian horsemen, entering the Basin in ct. 14. Nearest relatives are the Osets along the Russian-Georgian border. In Hungary free subjects of the Crown. Local Jazonian autonomy dissolved in 1872.

Magyars (Magyar)

Dominant population of the Basin from 896, and especially of the present Hungary. In first historical notes alliance of 7 tribes, of whose names 5 are Turkish (probably Bulgarian or relatives), 2 Finno-Ugrian.

First recontruable location S. of the Ural, c. 500 BC. Possible connections with Huns moving to W. Later on the periphery of the W. Turkish and Chasarian Khaganates until 830. Then moving to the W., and stopping to migrate up to now in the Basin c. 900.

Since Old Testament religions were well known in the Chasarian Khaganate, and the territory (especially the Krim Peninsula) was within the radius of the (Eastern) Christian missionarism, ~ can have known elements of medieval "European" culture before reaching the Basin; but definitely not in their Western form.

Magyar tribes unified the Basin third time (for first and second see Huns and Avars).

The language of ~ is called Hungarian in the W. The present form of this language is mainly Finno-Ugrian, i.e. a member of a family whose most W. language is Finnish, and most E. ones are two Ugors (see later). However there is a strong layer of Bulgarian (or r-) Turkish words. Nearest kins (without the Turkish words) are two small languages, the Manysi or Vogul (6000 speakers) and the Hanti or Ostyak (20000 speakers) just E. of the Ural, at the confluence of R. Ob and R. Irtis. Hungarian, Ostyak and Vogul constitute the Ugrish subfamily of Finno-Ugrish family.

Onogurs (Nándor)

Alliance of 10 (Bulgarian) Turkish tribes (on = 10, ogur = tribe, Bulgarian word form). Some ~ lived in the Basin in ct. 8-9. Assimilated to Avars, Bulgarians and Magyars. For more details see [5], [6].

The W. term "Hungary" comes from the name of ~. Contemporary W. historiography did not observe the reorganisation of the Basin in 896.

Petchenegs (Besenyő)

Alliance of 8 (common or z-) Turkish tribes. Until 889 E. of R. Jajik (Ural). Pushing Magyars to the W. just before 896. Some ~ entering the Basin c. 950, later assimilated to Magyars. The ~ remaining E. or S. from the Basin contributing later to the formation of Walachians and Moldovans ("Roumanians") [21].

Sauromatians (Szarmata)

Iranian horsemen, from ancient Hellene times, relatives to mythical Amazons. (Distinction bw. Sauromatians and Sarmatians ignored here.) At 500 BC in the Volga region. Five big tribes of ~: Alans, Aorsi, Jazyges, Roxolani, Siraces [22]. Aorsi mixed with Alans from ct. 1, and Siraces always outside of the Basin. For the other 3 groups:

Jazyges enter the Basin c. 20, and occupy the Great Plains bw. Pannonia and Dacia. Some Roxolani join them during the Jazyg-Roman War (ends in 176). The Basin Sarmatians become more or less the allies of Romans. Their last king mentioned is Babai, killed by Theoderik of the Ostrogoths [23] c. 469. His subjects assimilate to neighbours.

Alans divide into branches in ct. 2 BC with different fates [22]. E. Alans are dominated by Huns from 200, participate in Hun movements and some go as W. as France. Some Alans are independent in the Caucasus up to 450, may meet with Magyars (or with Onogurs), and can be seen until ct. 13. 3 other groups are Antae, Choroates and Serboi.

Antae are in Moldavia after 200, where divide into two branches. One goes to W., settles in later Poland (Zakrzew graves). This kingdom is subjugated by Attila of the Huns c. 440. The other group remains in Moldavia until the retreat of Huns to the E., and afterwards (c. 470) extends its rule to Kiev.

This kingdom is subjugated by Avars at the end of ct. 6. "After AD 500 the Serboi, Choroates and Antae (Alanic tribes) are gradually absorbed by the Slavs over whom they reign." [22]. So the Serbian and Croatian nations seem to have founded by Sauromatians. Note that within the Indo-European family of languages the nearest kin of Slavian group is Iranian, to which Sauromatian belonged. The possible successor states of Antae may be Poland and Ukrainia, but with one remark. The later Poland was formed by N. (Polyan) leaders occupying S. (Wislyan) territories. Now, the latter ones around Cracow are called also White Croatians. White Croatians were allies of the Hungarian state from 896. Their Cracow territory was continuously incorporated into the Polish state from 962 by K. Mieszko of Poland. In Bohemia the Slavnik clan of White Croatians (center in Libice) concurred for high power with the Premisl clan of Czechs (Prague) but became exterminated c. 995 [24].

In mediaeval Polish historiography Sauromathians as organisers of the Polish state was a commonplace.

A convenient steppe timetable of migrations can be found in [26].

As for the possibilities of Western influences in culture and legal system on peoples prior to entering the Carpathian Basin, one can conclude as follows.

1) Huns moved too fast to get any Roman influence. They lived together with Germans for decades, but these tribes were Eastern Germans, at which no clear data for private property of land &c. are known.

2) Avars remained outside of East Roman or Christian territories until the Carpathian Basin. In the Basin they may have got Western influence, but until the end of the 8^th century no wish can be seen on the Avar side to converge to the West. Since in 795 Erik of Friuli was able to occupy Pannonia after that the Western Avar chief (the tudun) have changed sides, it is possible that by then convergence was a program in some groups of Avars. The Christian Khagans and cross motives in Avar graves are signals. If so, there was a pre-phase of convergence by long-range regulators c. 800. However the Christian Avar statelet was not quite self-governing.

3) As for Magyars, various pre-Basin Christian influence may have existed. Note that Nestorian Christian missionary activity is proven in 781 as east as China by the Chang Ngan stele [26]. Also, Old and New Testament teaching could very easily be picked up in Chasaria and their devotees must have been among the Kabar tribes joining the Magyars. However there "Christian" did not mean "Western" at all. It was Byzantine, or even more eastern variety. (Georgia and Armenia were Christian from the beginning of the 4^th century.) Still, such pre-Basin influences were important because they made the conversion to Western Christianity of Pannonia much easier.

REFERENCES FOR THE APPENDIX

[1] Bóna I.: In A magyar régészet regénye. Panoráma, Budapest, 1976., p. 105

[2] J. Deguignes: Histoire général des Huns etc. Paris, 1756.

[3] Ecsedi Ildikó: Nomádok és kereskedők Kína határán. Akadémiai, Budapest, 1979.

[4] I. Bóna: The Dawn of the Dark Ages. Corvina Press, Budapest, 1976

[5] N. Todorov & L. Dinev: Bulgaria. Historical and Geographical Outline. Sofia Press, Sophia, 1968.

[6] László Gy.: In Évezredek hétköznapjai. Panoráma, Budapest 1973. p. 164.

[7] Bóna I.: In Évezredek hétköznapjai. Panoráma, Budapest 1973. p. 141.

[8] C. C. Giurescu (ed.): Chronological History of Romania. Editura Enciclopedica Romana. Bucharest, 1974

[9] J. J. Mikkola: Archiv f. Slav. Philologie 10, 158 (1927)

[10] A. Alföldi: Eurasia septemtrionalis antiqua. 9, 302 (1934)

[11] Atlas zur Geschichte, Band 1. VEB Hermann Haack, Gotha/Leipzig, 1981

[12] M. G. Magomedov: Obrazovanie hazarskogo kaganata. Nauka, Moscow, 1983

[13] Kohn S.: Héber kútforrások és adatok Magyarország történetéhez. Athenaeum, Budapest, 1881

[14] A. Dubinski: private communication

[15] Galina Kobeckaite: Vilnius 1990/4, p. 103

[16] A. Koestler: The Thirteenth Tribe -The Khazar Empire and Its Heritage. Random House, N. Y.

[17] L. Harkavy: Russ. Rev. 7, 79 (1875)

[18] E. A. Thompson: A History of Attila and the Huns. Oxford University Press, Oxford, 1948

[19] Németh Gy.: Attila és hunjai. Magyar Szemle Társaság, Budapest, 1940.

[20] M. Kalankatuaci: Patmutiwn Aluanic asxarhi. Tiflis, 912

[21] L. Rásonyi: In Phil. Turc. Fundamenta III, Wiesbaden, 1970, p. 1

[22] T. Sulimirsky: The Sarmatians. Thames & Hudson, London, 1975

[23] L. Schmidt: Geschichte der deutschen Stämme bis zum Ausgang der Wölkerwanderung. Die Ostgermanen. 1934

[24] Győrffy Gy.: István király és műve. Gondolat, Budapest, 1977.

[25] Sz. Bérczi & L. Szabó: In Carpathian Basin: Evolutionary Stages (ed. B. Lukács & al.), KFKI-1993-21, p. 72

[26] A. Toynbee: A Study of History. Weathervane, N. Y., 1979

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Endnotes from 2007:

A The present Croatian-Serbian border is not too far from the Theodosius line; we suggested in 1995 that this is not an accident. The fact is quite uninterpretable in the paradigm of linguistic nations, fashionable in 19^th century.

B The trend is not clear in 2007. It seems that the fall-behind did not continue, but we are well below the 1913 relative level.

C It might seem natural & symmetric to write Poland + Lithuania. However, Lithuania started to converge only in c. 1400, and her tradition was not a numerous and roughly equal mounted archer class, but numerous swordsmen, both mounted and not. So the initial conditions & timescale for the convergence somewhat differ, so the process might differ as well. The problem would deserve investigation; maybe some Polish/Lithuanian colleagues will do it.

D The exposition in 1995 was rather laconic, so some explanation would help. Parameter q expresses the “efficiency” of an investment turned into capital. In optimal case the investment of the previous year would be a capital next year (amortisation being explicitly handled in λ). We had performed numerical fits for some decades using Hungarian and West German data (and a few other old Common Market countries as well) and got q=0.84 for Hungary between mid-50’s and mid-80’s, and 1.36 for BRD. The Hungarian number means that some 16% of the investments were “lost” (say, irrational and then abandoned); private ownership of capital keeps such losses low. On the other hand, in West Germany q was >1, so “new capital were created from nothing”. Our guess was a multiplicator effect: the market value of a good investment goes up. As for β, it is some efficiency of the production, so it increases with technical advancement. So we tried to simulate a smooth, rational transition.

E Paths discussed here have not been realized between 1995 & 2007: the growth rate was always well below 10%. This is not the deficiency of the mathematical model. The model is not a prediction, but the optimal path (meaning maximal consumption in an interval of length T with the given initial conditions at t=0). The optimalisation means e.g. investment in the best way. While the non-optimal growth would deserve discussions, an optimum is of course never realised.