Yesterday the Parliament adopted the amendments of the personal income tax laws concerning next year. The past days passed with the number-war between the government and the opposition both in the Parliament and in the columns of the media.
Generally on the principles of taxation
I would like to wander from this number-war in my writing. The taxation, including the matter of personal income tax, has principles simple to circumscribe. What would be really important is to change the system of the annual modification marking the custom of the Hungarian governments since the 1988 amendment to a stabile statutory regulation, which has considered principles and is undertaken also politically.
It happens in mumerous countries and in different economical situations that the government settling the present of the economic policy thinks that increasing the tax burden of the people (personal income tax, VAT) and/or the economy (corporate tax, VAT) is the most adequate for the realization of its program. Of course it is possible and also more desirable for the people to make such a government program the realization of which makes the reduction of the general tax burden possible. Also it requires a preliminary political decision that the social welfare always remarking the given society is attained partly through the fiscal system. Or they do not “weaken” the economical effects of the fiscal system by social conditions but the economic effects of the taxes can be fully effective. Besides the social elements it is one of the possibilities of the sate processes, in driving the economical real processes to the direction conceived of the government, to build several relieves in the fiscal system.
So the governments must decide whether they want to urge the economy to the direction of increase by reducing the taxes belonging to the economic processes in the respect of the participants of economy or they want to reduce the time of economical investments, development by increasing these taxes in case of a surcharged economy. The changes of popular taxes can influence the citizens’ decisions too. For example the reduction of the taxes connected to the obtainment of the consumer goods surely produces the increase of consumption. While the increase of the same taxes, together with for example the increase of the interests of the issuing bank, surely results in the increase of savings and the restraint of consumption. The taxes connected to the income might induce interest in the increase of achievement, increase in the number of workplaces. But the increase of the level of levy will result in decrease also in the level of employment.
I have raised it many times, without particular willingness to obey it, that at the changes of tax principles the degree of the suggested change should reach a critical number of people to be able to realize our expectations of economy, consumption, investment and savings. For example by reducing the average burden on the personal income tax by 1% the government has every reason to expect that the tax forints remaining in the citizens’ pockets will be spent mainly on enlarging the consumption. But the reduction of taxes – as the decrease of the expenses of the labor – will have an effect on the increase of the number of jobs, on the rise of performances, on the increase of willingness to pay taxes only if the level of levy is reduced with as much as 4-10%. But in this case also the increase of tax bases can be expected which might be able to compensate even the decrease of the level of levy.
It would be important for the financial governments to have the above-mentioned things unambiguously determined by the politics before preparing the tax regulation striving for stability. Professionally established concrete tax proposals can be tabled only being aware of these decisions. Unfortunately I do not know such a year when these decisions with real contents were available before preparing the tax regulations.
In spite of this I do not exonerate the ones making the proposals because their work has never had that expectable professional level which would be available for the ones preparing the legislators’ decisions. Those techniques of model calculation, on the basis of which the proponents calculated the data of expenses and incomes expectable in the consequence of the certain proposals, had never been introduced. It is rightly expectable for the details on the present mathematical level of modeling to usually stay within a 1-2% limit of error as compared to the calculated plans. The calculated and the real values should not differ more than 4% even in the most unexpected cases. And I hardly know such a tax category and such a year, when the expected details of the certain tax revenues had stayed within these limits as compared to the real incomes. The above-mentioned exactness of modeling is true not for only the certain tax categories or the totaled amount of taxes, but also for the important components of the certain kinds of taxes. For example nor the so-called oil billions could have disappeared throughout years in case of expectable modeling because the tax revenue different from the calculated values would have called attention to the abuses started in the taxation of oil and even for its concrete volume immediately.
In the early nineties as a member of the Board of Interest Arbitration I raised it to one of the under-secretaries of the Ministry of Finance as he presented the usually cocksure reasoning of the annual changes of taxation, including the complete rejection of the bettering-disposed motions for amendment, whether he had “considered” it that the proposals reasoned by him and his colleagues with the same self-confidence in the past five years had never been justified by the following period. But at the same time the actual happenings could always be caught in the act finally, among the complaints “thrown out” during the debates before the proposals.” Of course the under-secretary of state was not bothered by my sentences and he undertook his new ideas as long as we had some gooses left! The only I wanted to show by my sentences was that it was probable statistically that if a calculation model brought in the expectable values in the respect of the details not once in ten years then that calculation process was ripe for change!
I am awaiting for the first appearance of that proposal in the history of the Hungarian tax law, in which the proponent justifies it by modeling that, within the limits of the previously announced political decisions, the so-called tax-optimized value is true for the proposed tax values. It means that the probable results of these tax values include the economic product (tax base) and the taxation morals, including also the capability and will to pay the taxes, the common product of which gives the most important amount of taxes for the budget. Only such a calculation could validly let us know whether, considering also the presently given circumstances, the Hungarian people and the participants of the Hungarian economy are overtaxed or not.
I am convinced that the income of the budget could be increased a yearly 5-8% by just the expectable and immediately initiated significant increase of the professional level of the proposing work with the same tax burden. Of course it is true inversely too. It means that, with the same “hunger” of the budget, the level of the average tax burden could be reduced even 4-6% per revenue in spite of keeping the unchanged being of the income values.
Personal Income Tax in 2000
In Tuesday the Parliament had passed the next year amendments of the Personal Income Tax laws. According to the habits the last days were about the number-war of the government and the opposition both in the Parliament and in the columns of the media. Unfortunately nor it had changed that the consciousness of the above-expressed and indispensable political decisions could be perceptible in the background of the proposals.
While the program of the government has the significant reduction of the tax burden reasoned by the real possibility assured by the economic increase, leaving the tax brackets and the tax rates unchanged became the final decision. And as for it, it means the increase of the tax burden in view of the tax content of the probable wage increase, which is equivalent (6-8%) with its inflation-producing part, on the basis of the fundamentals of the mathematical formulas. Determining the percentile proportion of these taxes compared to the previous tax income can get the percentile proportion of the increase. So the government “swallows” the source of the changes of the fiscal system assured by the economic increase.
The government program lays stress on the so-called family support efforts. The original ideas -–rightly according to my judgement – started the realization of this aim in an independent social program, with a ministerial state administrative structure established for this aim. But the program of the government specified it as a definite aim in the fiscal system that they would make the significant reduction of the tax level possible by depressing the benefits and the elements out of the fiscal system, by widening the tax bases beside the probable economic increase. Without reconsidering the things written in the government program, the increase of the tax level had ensued, while the number of social and other benefits in the fiscal system, which did not suit taxing and had a negative influence on the economic efficacy of the fiscal system, increased significantly.
They cannot defraud the investors „by force” in Hungary any more! The Metropolitan Court of first instance had passed its judgement in the lawsuit between claimant János Palotás and the defendants, the Postabank and its sole affiliated company, the Postabank Invest. The Metropolitan Court sustained the claimant’s action in every respect in its – still appealable – judgement. It obliged the defendants to repurchase the shares, the par value of which was barely two hundred thousand forints now but was more than three hundred million forints and required an investment of nearly half a billion forints at the time of János Palotás’s investment. They also have to pay the claimant more than five hundred million forints with interest as well as fifteen million forints as expense of litigation.Accordingly the defendants must repay the total amount paid by the claimant investor for the investment. And, in addition, the almost one hundred per cent state-owned bank must pay more than a hundred and twenty million forint interest for the damage caused in consequence of their unlawful behavior! And fifteen million forints as expense of litigation. It was already the present management of the bank who caused this loss to the budget and this way to the taxpayers. The damage caused to the two thousand „small investors” will probably mean the same loss to the bank. Its total sum reaches three billion forints and increases with a daily amount of more than ten million forints.
Somebody from among the responsible decision-makers should consider till when it can be done that the corporation of the state damages its nearly to thousand citizens out of spite. And because of this it will have to recompense the previous investors of the bank with billions from public funds. Of course the present leaders of the bank cover these damages not from their own money.
It has to be mentioned here too that the court did not examine the actual value of the bank in the summer of 1998. Because it was the new management, the owners of the bank and the state who decided to consider the 1998 situation of the bank as valueless. The bank modified – to negative value – the 1997 annual balance sheet of the bank retroactively on the basis of this. They devaluated the ten thousand forint par value shares to five forints. And if they did it then they modified the investors’ information retroactively in that period. This substantiates it that the investors were mistaken at the time of making their decisions because of others’ fault. Because the former leaders of the bank and many others are still skeptical about whether the Postabank had really become a five forint bank or it was a devaluation in accordance with a peculiar interest.
ATTENTION!
The reader can interpret the below-expressed thoughts properly only if he reads the earlier published writings, „Generally on Postabank” and „The two thousand small investors of the Postabank”, before!
Many people ask me day by day what to do because they had lost all their savings in consequence of making their Postabank-investments lose value. It was them, the smallest investors, who lost the most because of the unlawful behavior of the Postabank and the state. They are prepared enough neither professionally nor legally for a suit against the „powerful bank” or the state. Although their right is a professional fact. They are several thousands and I cannot undertake the advice, explanation for each. That is why I decided to publish the professional explanation of theses possibilities here. And to present my own action at law and the document-samples serving as base of the action of the „small investors” who are in a different legal situation.
I underline that I adhere to the free employment of these samples but anybody can use them only at his own responsibility and decision. Since I do not know the possible peculiarities of the certain cases, that is all I can do. But on the other hand I believe that it would be the moral duty of the state and the Postabank to recompense all those two thousand investors out of court and without request who they exactly know and have owed for more than a year!
…… or else why is it urgent for the state attorney’s office?
Before the following thoughts I have to tell that in this case the main title of my writings, „Subjectively on Hungary”, is particularly reasonable. Because I have known György Atyánszky for almost seven years and though we have met just about once a year lately we were still working together as friends for several years. I know that he is a man committed to politics and honest in his thinking.
According to this piece of news dealt by every media repeatedly nowadays the Attorney general proposed to the Chairman of the Parliament to waive György Atyánszky’s parliamentary immunity.
The viewpoint of the state attorney’s office sets out from two transactions of the firm, the managing director of which is the representative. (Divestiture of buying a leased car for its residual-value and the sale of a real estate.) He says that the firm did not have right to do these, respectively the transactions were detrimental for the obligees concerned in the liquidation proceedings.
On the basis of the documents and media statements at my disposal, in my opinion the State Attorney had made a mistake. And the two contracts totally suited the effective statutes, respectively they did not cause any damage to any of the obligees. Of course it is not me but the administrative court who is competent to judge the lawfulness of the contracts on the merits in case of such a request. It is important that the State Attorney’s Office wants to initiate the criminal proceedings against the representative before a competent court would have passed a decision. A decision whether there was a damage, an aggrieved party, an unlawful economical step at all. Because according to the law deciding about this is a „preliminary question”, the result of which is indispensable to judge whether the concept of crime can be in question at all. I could learn it also from my precedent that in the Hungarian law and order (?) – in contradiction to numerous countries with well-developed democracy – the examination of the so-called preliminary question is not instituted. So the state attorney’s office usually can leave the final judgement of the preliminary legal basis out of consideration., though in my opinion they would be bound to explain this. But with the exception of a member of the Parliament whose person has to enjoy extra protection from the unadvised administrative and official harassment. In the given case the institution of Parliamentary immunity can offset the insufficiency of our statutory regulation. And it can limit the obstruction of the fulfillment of the representative’s duties which later might be qualified as a mistake.
In György Atyánszky’s case it is the exclusive duty of the liquidator assigned by the court in the course of the liquidation proceedings to map the situation of the firm. And to examine the contracts concluded by the firm in the year preceding the initiation of the liquidation. The liquidator is bound to raise objections to it if in his opinion the firm concluded contracts within a year which caused damages to the obligees. In this case the one in charge of the liquidation is bound to attack the doubtful contracts at an administrative (not criminal!) court. Only this court can declare it with legal force if these contracts are unlawful, void.
It can be raised only after the decision – if the administrative court classifies these contracts unlawful – whether there is a mistake or a willful illegal will behind the unlawful contracts. Because even in this case only the latter means criminal offence. So the attested being of the unlawful business decision is a „preliminary question” of the criminal proceedings.
The basis of the state attorney’s charge is the standard or unlawful being of such business decisions which should be decided by an administrative court. And according to the rules of immunity the administrative proceedings can be conducted with the reserve of immunity. Therefore the waiving of the immunity does not have a legal basis now.
The administrative court might condemn the firm because of anomalous steps causing damages to the obligees involved in the liquidation proceedings. Then in case of probable cause the Parliament can be requested to waive the MP’s immunity to make it possible to decide whether the steps of the firm were willfully damaging or based on false interpretation of the law.
Before the decision on whether the contracts of the firm were lawful or not examining the will in a criminal procedure, in my opinion, means the unreasonable obstruction of the MP’s work. And as for the legal institution of immunity, its purpose is to preclude the possibility of such official actions in the democratic Parliaments. I would like to emphasize it once again that the administrative proceedings can be conducted beside the reserve of immunity. It is unusual and legally doubtful to me but true that on this stage the proceedings have to be initiated by not the authorities. But by the liquidator or one of the aggrieved obligees if he feels that he sustained legal injury by the behavior of the firm!
Budapest, November 9, 1999
And the continuation! …. On the 30th of November the Parliament waived György Atyánszky’s immunity. I.e. they entertained the request of the state attorney’s office. This way the state attorney’s office can continue its investigation officially from now on. According to the parliamentary explanation the House of Representatives did not ponder the proposed reasons of the state attorney’s office. I.e. they neither agreed with them nor disputed them but followed their „common usage” when they wished to make it possible – as they said, also in the MP’s interest – to ascertain the truth.
My problem is not that again that the standpoint of the Parliament was different from my conviction. Because I looked over the documents and I asserted it on their basis that they did not substantiate the standpoint of the state attorney’s office. This way the judge’s sentence to be expected in several years’ time will decide which of us was right. And as for the Parliament, they did not ponder, so they argued neither with me nor with the state attorney’s proposition.
I have the real problem with the common usage of our democratic Parliament „confessed” by also themselves. Which means that they do not understand the point of the democratic principles in their common usage. Adopting the legal system of the countries having a decennial experience of democracy is an important step of developing our own democracy. But it is worth of almost nothing if our legal usage does not follow the root of these laws.
In the present case, according to the law, the propounding state attorney must explain why to waive the representative’s immunity. Its reason is to make it possible for the immunity commission then the Parliament to decide it after the obligatory examination of these reasons whether they reserve or waive their fellow-representative’s immunity. The root of the constitutional guarantees of the law gets lost when the Parliament makes these decisions of them on the basis of so-called general principles instead of the examination on the merits of the concrete case. It can happen only this way that the state attorney’s judgement, which is false even professionally in my opinion, can easily continue to discredit György Atyánszky. Meanwhile István Csurka can slander anybody anywhere and can disregard their law-protected personality rights in public without limitation. But according to the general usage of the Parliament the common loyalty protects István Csurka’s immunity. And the voter is not a jurist but he totally cannot understand our representatives’ – not really understandable – principles of decision. Therefore the only he can see is that the investigation in György Atyánszky’s case can continue. This way the Parliament surely finds the representative’s business decisions suspicious. Meanwhile they will be better off if they fear István Csurka, i.e. the people in power, because in the relation of the two of them those can do anything to humiliate, discredit or libel them. Because they can do it protected by the law (the immunity in this case)!
I assert that it is not a good parliamentary usage. Moreover this opinion violates the principles and laws of the parliamentary democracy and the democratic guarantees. It can, because the Parliament cannot be punished for its violations of law. The consequences can always be experienced at the next elections by those who are sitting there now from the confidence of the electorate. I trust that sooner or later we will recognize the untenable being of the above-mentioned usage too. It should be noticed yet that the composition of our Parliament is rearranged in every four year so much for which the well-developed democracies would need at least 4-5 cycles!
When I had written the preface of the „Popular topics” chapter then, according to my custom, I chose a concrete case which was the order of that time but was essentially concluded. For the thought „On László Juszt a little differently” as an example it seemed to be a good thought to approach the CASE from Prime Minister Viktor Orbán’s point of view. Hence at the time of my writing I thought that the subject was essentially settled. I have to acknowledge it manfully that I was wrong „again”! This is why I decided not to complete the „Preface” part with the new lessons of the everyday life this time but I will publish it as a separate writing following the repetition of the parts of the preface regarding about this.
Quotation from the Preface:
„„You must learn to read between the lines, that is to hear the real meaning of what is being said!”
This sentence rang in my ear many times during my public presence and even in my private life when hearing or reading about something. I think that many people share this view but I feel it increasingly important that we consciously do so.
When our Prime Minister Viktor Orbán makes a statement concerning the László Juszt case ( publishing papers deemed to be state secret), saying that governmental actions shall be taken and such persons shall not receive media platform, then this sentence is sure to have follow up. Thus the Prime Minister is stepping in as well as the „independent” media. Once hearing the true meaning of this, its no surprise that Hungarian Television breaks contract with László Juszt. Although Budapest Police deems the investigation futile , the Hungarian National police calls for a search warrant and his house is searched by a police squad. National police wants to pursue the investigation even when the District Attorney’s Office orders the stop of the investigation stating that no crime has been committed. The lawyers should have noticed that our Prime Minister, a lawyer by profession did not only step in on this case but also impeached some of our ver important laws protecting our safety. Perhaps they did realize what happened but kept their secret. They shouldn’t! It is everyone’s duty to protect our state of law.
I intended to pick out a case which happened just recently. I wanted to introduce a case out of the ordinary. As soon as the deed was done the same day it was discussed high and wide. Naturally the viewpoints differed. The „star topic” became the center of media attention. But who will discuss the „mistake” made by the Prime Minister?! Since then it was proved that the journalist did not publish a state secret. If this is true, then breaking the television contract is hardly explicable. As a consequence of the statement made by the Prime Minister, the Police had to investigate and the president of national television could no longer contract Mr. Juszt. I must admit that I am waiting for a journalist to signal the Prime Minister to apologize to László Juszt, the police, the president of television and last but not least apologize to us. For those who understood what the words of Viktor Orbán meant lost their sense of security stemming from their right to Law and Order! …….. „
……… And see, here is the continuation! The Attorney General, Kálmán Györgyi, breaking a ten year period, had exercised his right and supervised his direct colleague Endre Bócz’s (Metropolitan District Attorney) legal viewpoint and abrogated the decision of the state attorney’s office about the nonsuit of the investigation. He even directed the police authorities to continue the investigation.
This step has been interpreted by many people in many ways already. I would like to do it a little differently again. Kálmán Györgyi’s decision reminds me of two thoughts which, I am convinced, should surely make the legislators think. One of them is whether that structure of the state attorney’s office really means security in law according to which there is only one Public Prosecutor in the Hungarian legal system. Now he is Kálmán Györgyi and all the co-workers of the state Attorney’s Office just deputize him. They can proceed just the way, the unquestionable scope of action of their decisions is what their superior, directing the deputyship, orders. The superior always mean the direct superior because he shares in his superior’s rights. So this way the „full powers” of the Attorney General starting the „dealing out” stands on the top. Does it assure the defendant’s constitutional rights if the public prosecutor participating in the trial and knowing the particulars of the case only deputizes? This way he has to uphold the charge until he can talk to his superior and ask for his permission even if the real offender enters the courtroom and admits his offense with irrebuttable evidences. Because it is not reassuring for me that the public prosecutor informs his superior about the bygones and backs down on the next trial. I am convinced that at the perception of innocence all the rights, which were previously curtailed in relation to the defendant, must be resettled immediately!
My other thought is more in connection with László Juszt. The security in law, the intelligibility of the laws and the being recognizable of the legal expectations for the citizens also belong to our fundamental human rights which is included in our „fundamental law” as one of the most important obligations. Will László Juszt’s culpability abide after taking it into consideration? I think it will not! I think it unimaginable that anybody could be stood over by imprisonment in a case of which the Metropolitan District Attorney and the Attorney General have different viewpoints. I do not care any more whether „expert analyses” consider the given document a state secret or not. Because the bygones preclude that the fact of the state secret was „compulsorily” recognizable for László Juszt. And if it is this way then the proceedings must be compulsorily ended already in the period of investigation either because of the lack of felony or because of the reason precluding the culpability!
………… We will see the continuation later!
December 1, 1999 …… I suspect that the so-called „Juszt case” will not end even with the lines below. I am not even going to make a try to foretell the final outcome. Also my own experiences often stupefied me when the „self-justifying” machinery of the state administration started. I am convinced that now there are no people working in the state attorney’s office who would have deemed the present viewpoint of the state attorney’s office possible during a talk of friends even a few months ago. Such a behavior of the state attorney’s office which orders a forth forced investigation – of betrayal of state secret – in such a case where the Parliamentary Commissioner for Data Protection and Freedom of Information states it in an official procedure that the published document did not contain any state secret.
I can almost hear my public prosecutor friends’ reasoning in according to which it would be senseless. Senseless because in its legal judgement the court – though the judge is not bound by the statement of the Parliamentary Commissioner for Data Protection – would surely not supervise the viewpoint of the highest forum of public law of the legal assessment of state secret. And what is surer than even this is that the court would preclude the recognizable being of the betrayal of state secret if it had „deceived” even the Commissioner for Data Protection. And this way they would acquit László Juszt because of the so-called reason precluding culpability.
The verdict of acquittal following the formal accusation of the state attorney’s office strengthens the professional prestige of the state attorney’s office nor generally. But in a case, where the actions of the police and the state attorney’s office were going on with the suspicion of the influence of the Power before already, the forcible and self-justifying actions to be fallen in view of their final outcome would result in a grave confidential crisis. It is an extremely important requirement of the rule of law that the citizens should be able to have confidence in the institutions of the state and Power. It is such an important duty that the constitutional requirement of the security in law is usually, this way in Hungary too, is put down also in the Constitution. If some institute of power, this way also the state attorney’s office, significantly unsettles the citizens’ security in law by its operation or daily practice then even the constitutional recusation about the operation of the whole institution can be and must be examined.
If the state attorney’s office also booked László Juszt following the second investigation, which had been just ordered and could be hardly supported by arguments any more, then, I am convinced, the judicial verdict of acquittal could be taken for certain. I do not simply render it probable but in the mentioned case I would consider it desirable that it would be a duty of the parties of the opposition to suggest the establishment of a parliamentary commission of enquiry. It would be the duty of the commission to examine whether the official actions of the police and state attorney’s office had been influenced by the state or any of its politicians in the Juszt case and in a few other cases!
Now I can just hope that we will not get this far. Unfortunately it is already too bad that, to quote the locution which is such well-known in the state attorney’s office, the „probable cause” stands up now already!
……. We shall see the further continuation!
January 11, 2000 – The Metropolitan District Attorney’s Office had withdrawn the charge
The tide turned again today in the so-called Juszt case. The Metropolitan District Attorney, Endre Bócz had dismissed the formal accusation for lack of felony in László Juszt’s alleged case of betrayal of state secret. According to the attorney’s decision an error has crept into the process of qualification as state secret. The document published by the weekly paper Kriminális was qualified as state secret by a person who was not legitimated for this by the law. Therefore the document had not become a state secret. And a betrayal of state secret cannot be committed without a state secret. This way dr. Endre Bócz had discontinued the criminal procedure for lack of felony for the second time.
It cannot be known yet whether Kálmán Györgyi will repeat his previous action and will supervise his District Attorney again. It is not impossible in the given case but I do not think so. I was recently in a company with well-known lawyers and the subject was their confidence toward the certain forums of the administration of justice. None of them disagreed with the summary remark that they had lost their preceding unquestionable confidence in the Attorney General’s impartiality. This way the criminal procedure has probably come to an end. László Juszt will get his passport, sporting-guns, etc. back. Also the script of Juszt’s appearance in the Vidám Theatre (Everybody resign!) will have to be thoroughly rewritten. But the happenings are surely not over yet. Those proceedings will start now for László Juszt in which he can participate as claimant this time. It would not surprise me if beside the Hungarian Television Juszt initiated proceedings against the police and the state attorney’s office. Because the proceedings of these organs would hardly pass the test of legality. But also the legal actions against several people (politicians and journalists) can be raised. Here I would like just to refer to the Prime Minister’s direct intervention in the way of the proceedings against László Juszt.
I am interested mainly in three things. One of them is Viktor Orbán’s behavior. I remember that Viktor Orbán – rightly – pretty firmly called upon his Minister of Environmental Protection to personally do his best for the sake of the reparation of Csaba Aradi’s person’s public calumny when the inquiry against the suspended leader of the Hortobágy National Park was concluded the way that no violation of the law had happened. I wonder whether the Prime Minister of the country will be such consistent towards himself too?
On the other hand, I wonder how the opposition will act in the following days? Will the public figure journalist get that political protection from the parliamentary opposition which he needs and which would be absolutely due to him in a democracy (against the unmerited attacks of the state administration and the politics which happen definitely for political reasons)? I wonder whether the necessity of establishment of a parliamentary commission will be raised in them? …. Or they will stay on the level of speeches.
On the third hand, I am awaiting the reaction of the colleagues, journalists, regardless of their possible political affiliation or what kind of relation they previously had with their journalist colleague. It can be raised belonging to this subject whether the professional circles concerned in the judicature will begin to speak or they will stay at the secure nods of the talks among themselves. Here I mean mainly the social organizations of journalists, lawyers, the jurisprudence, attorneys and the police!
„Or else …. The fourteen billion savings of the state by swindling two thousand people!”
In the end of July 1998 the government decided to obtain the direct influence in the Postabank at any price, respectively to place its own men to the management of the bank. I am convinced that they could have executed this will of them on the previously set general meeting on the 9th of August without a hitch, but it did not happen this way. Unusually in the life of economics they rushed into the second biggest commerce bank of the country as an elephant into the china shop. According to the official explanation, the that-time management of the bank endangered the economy of the financial institution with its work. Therefore they could not wait another eight days after the preceding ten years.
The August general meeting did not even start yet when the new bank-leaders asserted it in their statements that the Postabank had probably lost its entire property. Therefore the state will have to consolidate it. But it also means that also the two thousand so-called small investors, who shared about 23% in the forty billion equity capital of the bank that time, had lost their investment the par value of which was nearly ten billion forints. To avoid the imminent scandal they let it be suspected that the benevolence of the state was looking for the possibility for the small investors not to be hit by a total loss. Following the general meeting the elected new director general, Henrik Auth, asserted it in his radio and television statements unambiguously that the losses of the bank outdid its entire property. Therefore the state will have to save the bank by a capital-increase following a total reduction of capital. At the same time he declared that it was neither legal nor moral duty of the state to compensate the two thousand small investors for their ten billion forint investment lost in consequence of the transaction. The state is looking for that solution only because of its „good-will” by which it might partly compensate these investors’ losses.
It is true for the whole media that it was groping about in the dark in connection with the Postabank-case. It was looking for the new power relations and „lapped up” the statements of Henrik Auth and the Ministry of Finances day by day. I did not see any analysis in those weeks which pointed to the responsibility of the state, its legal obligations issuing from mainly its legal and economical steps. Although the official statements and steps violated both the reality and the not even too complicated legal regulations in succession.
It was typically the management of the bank who „leaked” it for the media that one of the small investors, János Palotás, without any moral basis, had set up legal claims against the Hungarian state that it was bound to recompense his loss. That time only the professional dilettantism of the management of the bank surpassed their self-conceit. For several months running the interviewing journalists wanted to ask me only one question. Why do not I accept the risk of investing on the market and that when the state is constrained to a consolidation of several billions then the private investors lost their risked money? What am I up to that I expect the state to compensate those two thousand wealthy investors from the taxpayers’ money who could risk by buying the stocks of a bank and would have ceded nor the profit to others?
What does the law say?
The state certainly tried to cause a fourteen billion forint damage to its two thousand citizens! The two legal deductions have no relations to each other. They, totally independently from one another, result in the obligation to totally compensate all the „small investors”. This way those have to be particularly indulgent who wish to play down the involved ones’ responsibility by that they did not notice their obligations. Respectively they interpreted the concerning legal regulation differently. Because this is not valid now. These statutes are the same, known and built on the bases of the model of market economy in all countries of the well-developed world. Supposing we thought that the supreme bank and financial management really did not know these principles of regulation then they were professionally ill-qualified for their present positions. If they knew it but they undertook even conscious violation of law for the sake of savings for the state, defrauding its two thousand citizens, then their legal and political inaptitude was proved.
The first reason:
There is a protecting principle of the so-called „rights of the minority shareholders” which is totally independent of a given business corporation. It obliges the investor buying the shares of the joint-stock corporations up to publish it when he obtains significant influence or -like in our case – direct control in the direction of the company.
After the obligatory promulgation the minority investors have sixty days to decide. Whether they accept the new situation or they call upon the majority stockholder to buy their stocks on market value too. The root of this legal regulation is that the operation of the joint-stock corporation essentially changes by the buying up. Earlier one owner could not decide in the name of the corporation, numerous owners’ common will was needed for the decisions of the general meeting. When an investor buys stocks outdoing 75% majority then he will decide in all subjects in himself. This way the other investors will not have any influence on the development of the corporation. They will have passive shares in their investments, meanwhile earlier they could have real effect on their investments by their votes. The law makes an effort to manage the changed situation when it does not let the investor striving after majority end his buys when reaching the optimum majority. He can obtain his influence only if, after this, he also buys the stocks of all those small investors who do not wish to stay in the corporation as passive co-owners. The value, on which the one buying up is bound to offer to buy it in this case, is provided by a statute too, by prescribing the market value. In this case the market value is the average rate of those buys on which the investor obtained his influence in the corporation. These legal regulations must be implemented without exception. Their observation is assured by numerous sanctions too. One of the most important ones is that the corporation, which obtained the influence, cannot exercise its voting power until it does not fulfil the regulation for publishing the buying up! The rules of these laws are clear, their application is corresponding to the content of the international economical acts. And, according to my judgement, the reason for their existence is unquestionable.
So it is indifferent for the legal regulations why the investor buying up is interested in obtaining the influence. And it is also indifferent in what kind of position the bought up corporation is. In the spring and summer of 1998 the Hungarian state had obtained first significant, then majority and finally majority assuring direct control in the Postabank. The state turned the voting ratio to its interest by increasing the capital first, then it „nationalized” the significant share of the Postabank in the social security funds. Finally it reached the majority outdoing 75% by the off-the-floor buys of several billions. All the transactions of the state were between 130% and 140%. Therefore the market value provided by the law has to be determined between these bounds for that time. The value around 140% is fourteen thousand forints in the respect of the par value of the share.
So in the summer of 1998 the state should have published the stronger and stronger being of its influence at all the phases. In the consequence of which they should have made an offer to buy on nearly fourteen thousand forints for all the small shareholders who asked it. And as for till the publishing, the state could not have voted by the obtained shares. But the state disclaimed its legal obligation till the end of December 1998, i.e. it evidently committed a legal default. They crowned it all by that the August general meeting, which made essential changes in the bank, changed the management of the bank by unlawful votes. Because, according to the legal sanctions, the state used unauthorized votes.
In December several investors announced that they would attack all the decisions of the general meeting at court referring to unauthorized votes if the state did not admit its obligation. So the representative of the state admitted the obligation of the state as the overture of the general meeting. True that nor this had discontinued the violation of law. Because the law required promulgation and not an announcement on the general meeting for the voting right. But the small investors trusted the restoration of the lawful behavior of the state. They were mistaken. The state published it only several months later that they had obtained influence. And delaying other months they made their offer to buy only in early summer, on a value of five forints instead of fourteen thousand forints.
The argumentation of the state represented such a low professional level and had broken its own laws so many times that it was unworthy of even detailing. It is generally known in Hungary that they did not keep the above-detailed things. Therefore now several hundred investors addressed the court against their own state. I am convinced that all of them will bring their actions. But who is the loser then? The losers are us all because our security in law had turned out to be shaky. How can it be digested that the state tried to defraud its nearly two thousands citizens with more than ten billion forints? What shall we do with that feeling that the powers are „making a show” of it not for the first time that it has no consequences for them if they do not keep their laws? While they „threaten” the society day by day with unmercifully punishing those who violate the law even accidentally. And also those nearly two thousand small investors are losers who could not afford to assert their rights at the court after their endured investment losses. Because of the lack of their legal preparedness and the significant expenses of the lawsuit.
The other reason:
That deduction differs from what has been written before with all its elements in which the „small investors” can legally claim for the compensation of their investment losses. The point of this thought is that in the case of an investment the investor takes the risk by his investment in view of the future. Accordingly, those statements of the leaders of the Postabank and the state, in which they tried to present the two thousand small investors as ones injured in their investment risk, did not square with the actual legal situation.
The individual assumption of risk really has a significant role in the market economy. At constituting their ventures, making their decisions they trust that as a result of these they will gain in the future. They invest, risk because of the hope of this profit, but its final outcome is certainly often a loss. But it is also an important requirement of making the economy run that these investments happen in a regulated environment. Where the regulation is just for reducing the participants’ risk. For example it has a significant risk-reducing role in the regulation of the securities market that the joint-stock corporations must publish the real details of their economy and financial situation yearly. The details of the published balance sheet must be attested by authorized auditors. In case of financial institutions the State Money and capital Market Supervision Authority plays a particular part. Its constitution was justified just by the depositor and investor protection. Also other statutes protect the participants of the securities market. For example it is statutorily forbidden to deceive the investors in view of the value of the share by money market transactions (for example by intensive buying up, by rate manipulation not supported by real value).
Because the investor can rightly expect to make his decision about his investment on the basis of real information, i.e. to take the risk only in view of the future! Therefore he shall try to prove it if he was deceived by the unreal content of the details he got at the time of his investment. If he can then the obligors of the content of these details are held for damages irrespective of their negligence.
In my opinion the case of the Postabank can be a typical instance of the coming universities. Because almost all of the obligors heavily broke their obligations. This way the investors can almost pick and choose by whom they want to have their damage be compensated. Of course the decision has to be made by the involved ones. I am sure that the court would decide in the small investors’ favor and declare the ones, who are responsible for the details, held for damage in any case. Therefore I suggest to choose that one to be defendant whose responsibility is more easily provable during the suit. I would also consider upon whom it is the easiest to obtain the successful execution.
Going backward, what I would suggest most is the action against the auditor firm certifying the authenticity of the details of the balance sheet. Though it is doubtful to me nor in their case that they could decline their direct responsibility permanently and mainly successfully in a well-prepared judicial procedure. I would gladly watch the course of such a suit also as an economist. It would help a lot in consideration of the future if a legal precedent pointed to that the obligation of auditing is not only a lucrative business for some auditor firms. But they are also liable for their professional obligation. The obligation of auditing which means really significant expenses to the economy. The significant difference between the reports of the same firm, made in the spring of 1998 then – at the new constituent’s „request” – in the fall of 1998, could not issue from the details „hidden” by the previous management of the bank. If the latter shortage is the actual one then they should have noticed it already in the spring of 1998. But the proof is essentially harder in the case of the auditor and also it could not pay fourteen billions for the total damage of the two thousand small investors.
The ÁPTF (State Money and capital Market Supervision Authority) is the next. Being a state institution, its solvency counts sure but the execution would be pretty complicated because the fourteen billions outdoes its budget. Also the declaration of their responsibility would require a more complex proof. But I am sure in the declaration of their responsibility also in this case. It strengthens this argumentation that the concerned one itself have stated it several times that they already noticed the losses in the Postabank before. And they informed the government about it in a letter in 1996. But something is doubly wrong with this statement declining the responsibility. On the one hand, in the case of the Postabank the state is a co-owner in the first place. This way, they informed one of the owners that it should expect significant losses in his property. But meanwhile they informed the two thousand small investors in the television (e.g. at the time of the 1997 bank-panic) that everybody could make himself easy, everything was fine with the bank. It even surpasses the innocent liability. On the other hand, it is the positive duty, and competence in contradiction to the small investors, of the ÁPTF to immediately hold a total inquiry in the bank on case of the possibility of a disorder, be it ever so little. And as for the case of its expert institution, it is professionally impossible to conceal such a big loss. But if they noticed the problem but did not hold an inquiry then their responsibility existed by their default.
The direct liability of the state in the case of the Postabank is interesting also professionally. Interesting but evident, therefore it is definitely recommended as defendant for the investors. In case of its defeat also the execution is relatively simple. Even if it is unusual for the bailiffs to seize the bank accounts of the state. Unusual but not unprecedented any more. This year the Metropolitan Municipality did collect a few billions successfully this way. One of the arguments of the responsibility of the state corresponds to what was written in connection with the ÁPTF. I.e. it is proved already because it is generally known that the state was officially informed about the losses of the bank to be expected. But they kept it back from the other owners and they even definitely deceived those by their statements of contrary content. That argument of responsibility, which occured late in the spring of 1998, totally differed from it. Then the state almost redoubled the equity capital of the bank by a capital-increase on 140 percents. Because this transaction meant it on the money market that, according to the preliminary enquiry of the state and the auditor approving the transaction, the current value of the Postabank-stock was 140%. Because if the real value is lower than this then the state enriched the other owners gratis from the taxpayers’ money. It is just as unlawful as that case if the real value is more than 140%. Because in this case, harming all the two thousand small investors, they obtain an influence in the corporation exceeding the investment value. The effect of the capital-increase by the state immediately appeared on the money market, where the general rate of the began trading of the Postabank-stock was this 140% for months. Also the new government began to buy up on about this rate for the sake of having more than seventy-five percent share in the bank. Accordingly, the used rate really took effect on the market, deceiving it in view of the real value. Also according to the European regulation standards, it substantiates the direct liability of the state.
Finally, the direct liability of the Postabank indisputably exists. The responsibility of the bank was admitted – true that not with this intention – by itself, in a conclusive notarial document. In addition to this, in case of a defeat the – already capitalized – bank is definitely solvent. And also the mode of execution is simple. The director general of the bank, Henrik Auth, admitted it on the general meeting of the bank at the end of 1998 in a verbitim record that in 1998 the bank manipulated the market value of the shares of the bank. And it deceived the investors. In addition to this, on the same general meeting the present management of the bank modified the balance sheet of the bank published in 1997. Namely in such a way, according to which the bank had lost its entire property as early as in 1997. As a reminder, it is that public and authenticated data, what was available for an investor in 1998 to value the risk of the investment. The present Postabank is evidently the successor of its predecessor. It takes no effect on its obligations that the state, as owner with direct control, had totally changed the former general staff of the bank. This way the bank is evidently and directly responsible for the deceit issuing from publishing untrue information. Irrespective of whether the distorting of the information was based on mistake or fraud. My remark: it is today’s official details what seem to be false to me but it is not relevant in the judgement of the present legal situation. In my opinion it is of great importance that the business plans of the bank still do not contain allowances for the expenses of the liability of the bank. Though it significantly outdoes the ten billion forints and several investors called the attention of the management of the bank to it on the general meeting.
A chance extra:
All those „small investors”, who bought their shares between January 1997 and July 1998, can choose another legal course. It is simpler and this way probably concluded faster than the above-detailed legal courses promising to be longer. Because they can rightly claim the seller of the shares to repurchase the previously sold shares with paying a twenty percent interest. The title of the claim is error. Because any investor can rightly assert it that it is evident that he would not have bought Postabank-shares from the seller on a value of 10-14000 forints if he had known it at the purchase that the corporation behind the shares had lost its entire property and the actual value of the share was five forints. It is the two thousand eight hundredth part of the purchase price he paid!
It can be understood without special sense of justice that none of the participants of the market can sell – even bona fide – his valueless assets (shares in this case) to somebody for millions, maybe hundred millions, „transferring” his own losses by this.
It was set forth in detail in the previous point that the investment meant assumption of risk only in view of the future and not the time of the purchase. Also the bona fide seller obliged to repurchase the shares has the possibility of the two above-detailed legal procedures. And he can even rightly claim the Postabank and the other participants to compensate the damages issuing from the innocent deal. But he cannot legally avoid the inconvenience, expenses accompanied with the litigation and financing the shares becoming valueless for the time of the suit. He must repurchase his shares, which had no real value at the time of the sale already, because of mutual error or the buyer’s innocent error.
The following is my addendum which is important and recommended for consideration for the involved ones. It is worth to examine the seller’s financial situation before the action based on error. Because I am almost sure that at the end of the legal proceedings the court will oblige the seller to repurchase the sold shares and to pay interest. But it does not mean it automatically that the seller will be able to fulfil this obligation of him. But the seller’s bankruptcy does not mean the recovery of the damage for the innocent investor. The state, the Postabank and the ones involved in the above-mentioned possibilities are probably permanently solvent. This way, though the legal procedure against them might take more time but in case of a favorable judgement the execution is significantly simpler and surer. Of course, if the seller of the shares is the Postabank, the state or some sole corporation of those then this solution can result in the fastest and most complete recovery of damages.
The outstanding profit:
In case of a favorable judgement there is a further possibility of the small investors in any case. It is to set up a compensation claim for their „outstanding profit” because of the defendants’ unlawful behavior, the long legal proceedings. It is pretty hard to prove that the claimant’s damage outdoes the twenty percent interest adjudged in the original procedure. He has to prove that he could have gained a significantly greater yield by the equivalent of the share if he had been able to dispose of it earlier and freely. And it is pretty hard to prove. In this case he can trust in the effective proof if he had spare capital also during this time and he gained a provably greater profitability by investing it (for example on the exchange).
Remark: The legal representation of my action was conducted by Dr Gábor Hidasi, lawyer, respectively by the Hidasi & Co. Law Office (H-1055 Budapest, Balaton street 16. Tel: +36-1-2693575).
The more than eleven year history of the Postabank and Savings Bank Co. is much rather a political than an economical matter in today’s Hungary. There has not been a day for nearly two years already when one of the economical news would not cover the happenings about Postabank.
It is indispensable to shortly revive the history of the bank to understand the daily analyzing. It is particularly true in the case of the Postabank that my opinion is subjective because the chairman-director general founding the bank has belonged to among my friends for years. At the same time nor it might be secondary that I am one of those few people who were there at the organizing of the bank, who formed opinion and helped its establishment.
The circumstances of the starting of the bank instituted at the very end of the eighties is still obscure but in my opinion the idea of Postabank comes from a young bank-expert working in the National Bank that time, Gábor Princz. True that he himself has never asserted it. I think he did it because he „intrigued” with excellent sense even at the foundation. They would have probably never permitted the establishment of the bank without it. Or, according to the customs of that age, they would have „stolen” it, i.e. it would have come into being not with the inventor’s direction. It seemed to me even then that the bank-leader disclosed just as much to anybody – including his closest colleagues – as they needed to fulfil their daily tasks successfully. He disclosed as much to me as the that-time cochairman of the Entrepreneurs National Alliance (VOSZ) at a lunch of acquaintance that the a commerce bank should be founded. The first one which comes into existence not by the earlier demerger of the National Bank of Hungary, not by the artificial distribution of the firms, but the condition system and needed resources of which is created by the economy itself. This way the bank can have a clean start, it can settle its direction itself, in which the Hungarian private ventures take the most prominent part. Therefore it is definitely important for the VOSZ to be among the charter members – be its share ever so little. What he said was true and not true. I myself, who organized and founded the biggest Hungarian alliance of the private entrepreneurs, would have liked not many things more than a significant bank for the home entrepreneurs that time. But at the same time as an economist dealing with the processes of macroeconomics I knew it exactly that such a bank would be not operational. That time such a big disproportion marked the composition of resources of the private entrepreneurs in which the need of resources outdid the periodical savings of resources of these ventures. Over and above that the private sector represented only a few percent importance in the economy. So nor its bank could have been a significant and influential bank.
But the idea was good to open numerous doors, to make the idea of the new bank acceptable for the most of the political world. Others were possible to be made side with the bank by saying that the development of the competition among the banks should be continued. And the monopoly of the OTP can be broken by only such a bank which is present in all the communities. It was expectable for none of the commerce banks to establish such a network fast within reasonable time. But the bank co-operating with the post could start with the slogan „we are present on the three-thousand two-hundred points of the country” right away. And disliking the OTP that time was a chic even politically. Gábor Princz and his team had overcome all the difficulties extremely deftly. If somebody opposed then instead of the opposition they tried to find what it would be that could make the person in point side with the idea of the bank. If it was possible then it was actually built into the conception of the bank but the importance of it was known and fixed only by Gábor Princz. For example the financing of the private ventures had been built into the aspect of the bank more than anything. The bank constituted an independent Private Enterprise Board, and the VOSZ national headquarters was to be found in its building. The Postabank was the greatest supporter of the financial stability of the VOSZ for ten years. The importance of the private sector inside the economy of the bank followed the current real processes of the economy. This way the real stability of the bank was given by those high cash flow firms the management of which Gábor Princz, before the foundation of the bank, could convince of maintaining their accounts with the new bank. These companies could have provided for an „own bank” on the basis of their financial processes. In many countries their finances are really transacted by their own banks. But in this country they belonged to the „one of the clients” category at our onetime financial institutions, keeping the comfort of the client-situation of the recent past – one bank, so this is all. Gábor Princz offered and gave special customer service, lower bank charges issuing from the mass-commerce, and mainly higher recompense for their account money. The OTP really got its most significant rival (till now) which, I am convinced, had a major part in that the developments at the OTP accelerated, the bank significantly changed its business policy, consumer service, and mainly in decreasing the duration of the administration and the transactions to a fractional part as compared to the earlier one.
But the most important part of the idea was – never outspokenly – winning the post. Everybody could see that the three-thousand two-hundred post offices potentially meant a really big chance. But it depends very much on what a degree the post „lets the bank in” its branch network. But only a few saw the following. While the inflation significantly accelerated, therefore the money cost more and more, meanwhile the post – though with some injury of the consumers – kept the billions of the mail transfers of the people and the legal entities on its account for more than a week even on an average. It did it with reference to its obsolete machines and infrastructure. There was not a moment when the sum of our money „resting” at the post was under the scale of billions. But nobody had to pay for this account money, i.e. it was free of interest also in those periods when the credit interests outdid the thirty percents. It meant such a unique financial background for both the post and the bank of the account which let them make a credit- and deposit-policy significantly different from the others’. The bank assured it by such a background that it gave its new clients more for their deposits, account moneys more than any other banks. And at the same time it assured a more modern and higher level service for them. Accordingly, on the other hand it also assured the needed resources a little more expensively. True that the bank always had money, even in those periods when other banks obtained – if they could – pretty expensive resources from the market.
The bank had developed into one of the best-known banks within a few years. The plans of the Postabank began to fly and it pleased many people but meant an undesirable circumstance to many others. Who liked it those were glad of the successes of the bank but deemed it too obvious which had nothing to do with. This way for example the owners consented to the developments, the strategy that this single chance could not be missed by the bank. But they decided in favor of taking most of the dividend connected to the profit out instead of the further investments (capital increase) attached to the decisions of development. The „special resources” had significantly receded because of the decrease of the inflation, the significant reduction of the duration of the mail transfers, the other founders’ big business privatization and becoming of more participants. And the new money taking their place appeared neither as capital increasing nor by leaving the own accumulated resources in the bank. But the adversaries became more and more active. The general economic processes, in which for example nearly the third of the economic participants became insolvent – including the proportion of repaying the bank loans -, made the state consolidation indispensable for all the banks. Even a law was legislated for this. The ones disapproving of the bank-leader’s person and undesirable independence, including many of the leaders of the rivaling banks and several leaders of the National Bank of Hungary, thought that the time was ripe for the intervention that time. The Postabank could have got the possibility of participating in the consolidation only if it had opened positions for intervening in the life and strategy of the bank. The management of the Postabank and Gábor Princz were not inclined to do it and decided (I think, wrongly) not to ask for the consolidation but to solve their difficulties themselves. Urging this capability, at the introduction of the aspect of the bank they would make an advantage out of the difficulties. Who would not accept that the bank, which is able to hold its head above water itself in such an economic environment without help and indeed developed with undiminished energy even without the state resources, can be only the most significant financial institution?
From that time on the life of Postabank became the period of looking for resources and fleeing ahead. It is unknown who organized the bank-panic in 1997. There were a lot of people that time too who professed that „the worse for the Postabank the better”! The state helped the bank directly (e.g. capital increasing) or in hidden ways (e.g. ÁPV Co. portfolio exchange) several times. The press presented it by turns as the foretoken of the probable scrape of the Postabank, sometimes voluntarily and sometimes as a „favor”. However these „aids”, considering both their form and volume, were far from the amounts of consolidation given to the other banks of the bank-sector proportionally to their sizes. The bank-sector which was flaunting with throwing out its chest already then. However the so-called inherited (of political nature from the period before the change of regime) suspicious loans were only a fraction of these.
In the spring of 1998 – already visibly now – the bank worked a new consolidation strategy out. Its realization was rendered more difficult by that – issuing from the peculiarity of the bank-sector – the bank had to execute it with simultaneously and continually excusing itself. It had to excuse against the statements betting the sure failure of the bank, asserting that the economy of the bank did not require any help. It was probably not true, but since the bank was founded on the clients’ confidence, they could hardly acknowledge it frankly. In the spring, also supplying the loss of the year 1997, the state also increased the capital significantly. Probably to reduce the auditors’ doubts and the debates on the appraisal of the chattels of the bank, the bank exchanged the significant part of its shares and premises hard to appraise for the portfolios of the ÁPV Co. Those were listed, therefore acknowledged also by the market. It continued to decrease the obligation of the bank to constitute a so-called expedient reserved fund. On the spring general meeting they also decided to introduce the bank on the Budapest Stock Exchange by the end of the year.
For the reason of making it clear to all it might have to be told that the banks – issuing from their special nature – must survey their assets (their companies, investments, the value of their premises, the probable likelihood of their lent out loans etc.) on a regular basis. They must compare the appraisal of the assets with the value in the books of the bank. It might be less than the so-called book value. In this case, till the selling of the given asset, till the termination of the loan contract etc. they must constitute a so-called „expedient reserved fund” for the hundred percents of the difference from the profit of the bank or its accumulated reserve. Because it is what means total safety for the clients placing their money in the bank. If neither the profit nor the reserve render it possible then the bank can go on operating only if the owners supply it (for example by increasing the capital). It seemed to me that, also to spare the owners’ purse, the leaders of the bank worked an own consolidation strategy out too. The capital-increase by the state provided the bank with enough resources. So the bank tried to find such investment possibilities of great value in the system of its connections. Where the assets valuations preceding the purchase found significantly greater assets value, business value than how much the bank could buy it for issuing from the seller’s emergency or the low negotiability or the rare being of the given investment. At the total appraisal of the investments of the bank – issuing from their contrary trends – these investments mean positive coverage. I.e. they reduce the obligated expedient reserved fund of the bank. It significantly reduced the risk of these investments that – mainly on the property market – a price rise outdoing the inflation many times was probable within a few years. This process can be continued to strengthen by the Hungarian accession to the Union or even by the official announcement of the exact date of the accession. This way the income to be expected at the significantly upgrading selling of the present investments could probably mean a coverage for the final losses occurring at the expiration of the so-called bad credits. It can result in making a significant part of the expedient reserved fund usable.
But the realization of the consolidation plan begun by Gábor Princz and his colleagues was broken off at the end of July, 1998. The MSZP lost its chance to form a government at the elections – contrary to the preliminary expectation. A new government led by the FIDESZ MPP was formed. The management of the Postabank had valuable political connections also in the circles of the FIDESZ. Also the Prime Minister, Viktor Orbán himself maintained good personal relations with Gábor Princz in the years preceding the elections. But inside all the bank-sector several of those people surrounded the decision-makers of the FIDESZ who „were not interested” in strengthening the Postabank and Gábor Princz. But they deemed to discover much more palpable interests in it that a Postabank made lose its value could open up innumerable new vistas for them. Therefore they had achieved the politics to suddenly remove the entire management of the Postabank and to appoint their own – and mainly loyal even without questions – people to the head of the bank.
It can be only guessed that who and by what reasons were led that time. But I render it possible again that, as at the institution of the bank, also now a lot of people, for various reasons, became interested in „bankrupting” the bank. I can certainly assert it that many former and still functioning bank-leaders, including many of the management of the National Bank of Hungary, cheered for Gábor Princz’s failure with pretty big activity. And definitely because of personal antipathy. Also the opinion of those is probably true, who assert that many people saw definitely a favorable financial possibility in the following. The multitude of the real shortage could be placed to the account of the previous management at the „reorganization of finances” of the bank. Then supplying it from state resources, later they could turn the excess to their own advantage. We can see its empirical realization day by day. Mainly the „robbing” of the assets of the bank for no consideration (e.g. the press holding of the bank) or for the fraction of the value (e.g. the receivables and the premises of the bank). The circle of those is pretty wide who saw a position assuring a significant income in the Postabank for themselves after taking the direction of the bank in hand. Or orders meaning billions even in course of the operation of the bank or a future sponsor possessing significant resources. We can see it from the daily published news that these expectations were well-founded.
But for this the bank needed a new consolidation strategy. The state pledged itself in advance to supply the total shortage of the bank after its „real” volume becoming known. The sum – we remember, do not we? – changed daily. First the statements were about thirty billions, then the amount jumped rapidly to fifty billions. And later it became seventy, ninety and finally one-hundred and fifty billions. But this amount raised it in many ones that something was wrong here. It was hard to uphold professionally that the auditors having international prestige failed to notice one-hundred and fifty billions during their previous works. With an actual loss of one-hundred and fifty billions the bank would have become insolvent long since. The leader of the State Money and Capital Market Supervision Authority (ÁPTF) wrote a letter to the Ministry of Finances that they were „over-planning” the Postabank with at least fifty billions. Of course Imre Tarafás had to leave his post following this. In December of 1998, leaving the above-referred viewpoint of the director of the supervisory body of the bank out of consideration, the new general staff of the bank had the amount of the original conception passed by the general meeting of the bank. But „managing” the property of the overcapitalized bank with two-thousand so-called small investors is difficult and perhaps also dangerous. Therefore the consolidation solution of the bank had to be completed with such an element where the two-thousand fellow-investors lost their investments. Then the state practically becomes exclusive owner and under the protection of the bank secret it gets full freedom in the so desired trusteeship.
The state could have played this ousting game also „lawfully” – with its three-quarter majority holding -, but it would have cost it another fourteen billions. But they did not wish to spend money on it. So nothing was left to them but the trial of „hoodwinking” the two-thousand small investors, where they tried to make the principle of the investors’ loss accepted by the mass of statements for the reason of the losses of the bank. The ones who prepared the strategy took offence at it pretty much that their idea remained unsuccessful in spite of that the editors of the economic papers, news programs certainly „lapped up” the official statements for months. They forwarded those to the public and this way to the involved ones without any professional control. Then it came to light that several investors – perhaps unusually – were from the trade and moreover only a part of them was under state influence. This way they had to experience it unwillingly that it would not be so simple as they thought. For me even that was exasperating that the sate tried to let its nearly two-thousand citizens down by referring to economy. But I think it frightful that the state does not think the lawful behavior obligatory for itself (too!) even after its trial had not met with success. Because now they can not refer to it any longer that they failed to notice their legal obligations. And that is simply improbable for their experts not to know that what they are doing is all unlawful and morally unacceptable at the same time. Now many legal proceedings have been taken against the Postabank and the state of Hungary, the outcome of which can be and must be seen in advance. It will be surely a disbursement of several billions again. The law charges, the increase in expenses can be hardly called a good economical decision. True it will be reduced by that many aggrieved small investors will be definitively losers of the bank because of the lack of proper legal background or the expenses of litigation. But taking it morally by the present decision-makers of the bank is fully incomprehensible and mainly unacceptable for me.
For that one who participated in the establishment of a new bank, the Postabank and cheered for its development, prestige and successes it was very hard to see, hear and experience it now day by day how the ones producing so little in creating so far ruined all we had without any signs of inhibition. The previous year of the bank will remain the „shame” of the life of the bank forever. The real problem is not that a new political trend saw a chance for itself in something that was definitively in their possession. The previous governments „favored” themselves and their favorites in a scale of ten- and hundred-billions just as well. Though it can be never accepted, but also changing it will be very hard anytime. Of course it would be good if the wish for grasping became perceptible together with more self-restraint. If beside the value-making the keeping the own interest in prominence became implied only in a fraction of the cases. The really big problem is the way they executed the expropriation, privatization of the Postabank. Also I myself saw it in the summer of 1998 in the news of the televisions when Gábor Princz announced the following. That the state should not organize an „attack of buying up” more than seventy-five percents of the shares of the bank for the sake of removing him from his function. A bank cannot be led „against” the majority owner if it does not trust his person. Therefore if they request it then he will resign his post.
So it was unnecessary for them to take the bank over from its previous leaders by force, with a spectacular but senseless purge a few days before the general meeting. Which purge was very harmful for the confidence toward the bank and the atmosphere surrounding the bank. The Postabank, let it be directed by anybody in the future, had got so many snubs from its new managers that it would be quite a wonder if it could stay up permanently after all these. It would be possible neither humanly nor legally but even by the interests of the bank to explain that discrediting campaign. That mass of statements by which the new owners, leaders of the bank disparaged the past of their own possession and tried to discredit the people connected to that by any kind of relation. This method caused damages of surely ten-billions to the future of the Postabank for nothing, so senselessly. Perhaps it is the most sorrowful! The senseless lashing, the aimless damaging which have been even combined with the conscious violation of the laws in numerous times. The concept of bank secret worked in the case of the Postabank in the last year only where and when it was needed because of the inexplicable being of its decisions. If they could place the past in a worse light by leaving this out of consideration then a little bit violating the law did not mean retention. The certain statements are often almost painful for economic and legal experts. I do not mean the accidental sentences but the skill of the intended statements. I have heard the following at least ten times as answer for an admonition for an obligation. The competent leader of the bank said such an explanation that the present leaders of the bank did not take responsibility for the liabilities incurred by the previous management. Nor for the fulfillment issuing from decisions, contracts made by the previous management. I am convinced that once that commission and the company audit happening as its result, which later became the basis of the decrease of capital of the bank and the following increase of capital, will be the blot of the trade. The general meeting of the bank in the December of 1998 was the general meeting of the mockery of the statutory regulations concerning the business organizations, banks and financial institutions.
In my opinion outlining these introductory thoughts was indispensable to understand the daily subjects connected to the Postabank and to be able to incorporate them in one system. I trust in that reading this writing you will be able to read between the lines (sentences) and take notice of the speaker’s (the one who talks beside the point) real intention better.
It is not known at the time of my writing yet how the President Of Austria, Thomas Klestil, will decide about the proposed coalition platform and minister-list of the People’s Party and the Freedom Party. Nor it is known what the preamble offered to the President contains. If Klestil undertakes it at all to participate in the constitution of the ÖVP-FPÖ coalition by writing the prefatory part of the government program.
I am convinced that President Thomas Klestil is living the hardest days of his life nowadays. The Austrian President is known as a committed adherent of democracy and he is an acknowledged politician worldwide. I wonder whether the Austrian President has real helpers. I mean such people who do their advisory function feeling the significance of the President’s position seeming to be almost insoluble. The arguments are known on both visible sides. On the one hand, the new Austrian situation is a reality which had unquestionably come about on the basis of the result of the democratic elections of a democratic country. Can they and are they allowed to intervene in a situation formed on the basis of the decision of the electorate by means unusual in democracies for the reason of protecting the democracy? I think, they must not! Then is it acceptable that the President, quoting his own words, „-in spite of his best will- has to accept” the new situation and approve of such a coalition which is now unfit for good society and unacceptable in the democratic part of the world? Can he „better” the platform of the coalition incompatible with his principles by drafting the preamble of the platform, the purpose of which would be the declaration of the worth of the European democracy, this way helping the acceptability of an unacceptable platform?
Although in the opinion of the leaders of the member states of the European Union the Austrian situation means the politically hardest moment of the history of the EU. They really made actions against the coalition with unexpected resolution which could be considered even as intervention in the home affairs of the country. But their position is still not so hard. Because it is not them to find the solution! All the leaders of the EU have to do is express it by a statement that they cling to their own principles. And in the case of a member state of the EU the attitude of the leaders of the state, who direct the country, to democracy is not a home affair any more. Because Austria actually has the right to elect any government to power as a home affair if they do not want to maintain the EU-membership of the country. I read numerous statements of politicians in the days past which suggested and accepted a typical „politician-like” way of solution. On the one hand they express their disapproval about the new situation but according to their habit they think the responsibility of any steps avoidable by saying that the new Austrian coalition can and have to be judged according to its acts. They think similarly of the President’s doubts. They acquit the Austrian President in advance if he accepts, or rather acknowledges the new situation. Because in this case they declare the presidential function independent from the President’s will on the basis of its protocol (it is familiar also from our own experiences, is it not?) being.
I do not think it this way! I am convinced that nobody, including the President, can be obliged to do anything that is incompatible with his own principles, creed. If it was not this way then we could not call it a democracy because numerous basic principles of democracy would sustain an injury. And if it is this way then also the Austrian President (and his helpers) have to know that they have to find another solution in the new situation. They must(!) set out from it that the President’s decision can never be protocol because then the necessity of this step would not have to be assured in the Constitution. It is true even in that case if they had thought it when they put it down in the Constitution that the presidential approval would mean the honor, the prestige for a government-coalition. Although I think it means more but it is true also in the above-mentioned narrow sense that in this case it is this prestige, honor to be refused the imminent coalition. According to the Austrian laws in this case a constitutional crisis can happen in the country which finally can lead even to the declaration of new elections. It is questionable whether a president has the right to apparently come into antagonism with the will of the people of the country. Although, according to my judgement, this antagonism is only apparent, I still say that it is not allowed, this would be contrary to the principles of democracy.
Then is there no solution which can at least raise a new chance? I think there is! There is, if the involved ones consistently accept both themselves and their obligations. There ism if Thomas Klestil exercises his human right and refuses to „bless” the forming coalition. He refuses it because neither statute nor law can oblige him to give up his principles, to support such a prospect which he wishes neither for himself nor for Austria. But he must not antagonize the will of the country as president, so he must(!) resign his assignment as president simultaneously with his negative decision.
This double decision can create an extremely hard situation in Austria but this political course can also give a chance to the country to reconsider its decision, votes. In the case of the President’s negative decision and resignation new elections should be declared in Austria for both the seats in Parliament and the presidency. I believe it sincerely that the ration of votes for the nominated parties would significantly change by the new elections. The Austrians, including the ones who had become a bit indolent in the past, would become more active recognizing it by now what happened if they ceded the decision to the much louder and more active minority by their disinterest, indolence.
And as for the President’s resignation, it would give such an example which would give a chance to introduce the worth of democracy by debates, battles of different opinions to all those who did not live in the past yet. For whom history was „just” a subject in their lives, what they liked or what engaged their attention less.
I am also convinced that the President’s decision would cause only an apparent and short failure also in his political path of life, his role in history. And the new president of Austria would surely be Thomas Klestil’s namesake!
The piece of news which had spread worldwide immediately would really have an influence on the world. Though by the exchange of shares but it was the American Online (AOL), the most significant Internet company in the world, though having only a fifteen year pat, which had annexed the American giant of the media market, the Time Warner. The capital of the syndicated media empire is three-hundred billion dollars and this way it had become the biggest media enterprise of the world now. It marks the capital that the ten year national income of Hungary would not be enough to buy that. The AOL brought its direct connection with it some 20-25 million Internet subscribers and numerous previously bought up companies (e.g. CompuServe) into the marriage. The „wealth” of the Time Warner is, among others, the Time Magazine printed in four million copies daily, the CNN, the HBO, motion picture studios and innumerable magazines.
In connection with the sensational news the speakers had told everything that could be the possible result of the syndicate and others had told the opposite of the same statements. There are people who are anxious for democracy directly about such a big and influential participant of the economy. Meanwhile others see the guarantee of democracy in it that such a participant of the media cannot be limited by even the means of power of the most significant governments. I would not like to join this debate with my writing and become one of the several hundred thousand people of any of the sides. Of course I assume my opinion this time too, and I even believe that it could be gathered from my following raisings. I myself see more positiviness and mainly more desirable potentialities in these processes than the real danger of it. I am convinced that instead of the will to „overcome” each others’ opinion we should lay stress upon the maximum of positive potentialities of the syndicate accepting its fact. And beside this we should simultaneously minimize the possible dangers. Because its lessons have an effect also on us while we can also discover numerous business opportunities in the process conducing to the syndicate of the two multinational companies.
There are winners of this unstoppable trend already in Hungary too. Nor the three individual people constituting the Elender public limited company regretted when they received an offer to buy of eight billions for the enterprise constituted by them on credit and they could not resist it. Nor it was a little purchase price what the municipality of the district five had pocketed for the City TV, the inner city cable television network connected to barely a few thousand places (but what places?). I hope that nor Tamás Gyárfás will get angry with me, who is a friend of mine and spends all his time in the fantastic facilities of the NAP TV constituted out of nothing by him. But I am sure that in the not too distant future he will receive such an offer for his production basis that, regardless to the own child, he will lose his strength. It is not accidental that the PanTel and the MATÁV are developing mainly their Internet-based telecommunication systems now, similarly to the Westel and the Pannon GSM. The MATÁV, though with a few year delay, had already recognized the probable dynamics of this process years ago. It started to extend its cable television and Internet systems and to obtain the biggest market share possible in double-quick time. I am sure that these projects will make multiple refund for the investors. The same thing should be striven after both in the home legislation and in the stimulation of the Hungarian projects. That the still home participants should get a good chance in the realization of the projects of this trend in Hungary and Middle-East Europe, in obtaining the market shares. For the sake of that, at the time of the buying ups and annexations to be expected within a few years let the value received for their ventures mean a several billion dollar investment of capital for the present participants of the Hungarian economy.
The legislation has to prepare itself for the reception of these processes too. It should not resist or restrain this process but it should build it into the Hungarian legal system for the interest of all of us. Who pays attention can see it already that there will not be such a big struggle to buy the concession of the Hungarian ground television and radio broadcasting rights. I am also not sure that following the some day expiring concession licenses there will be any offerors on this field. Also the husbandry of the Hungarian public service television has to be settled the way that it can hardly count on the constitutionally already contestable television operating fee in the long run. Nor the ones offering a „paying” performance yet will be really capable of living, including also the coded television channels.
Because the households connected to the Internet-based cable systems will be able to freely make their own program packages from the television or radio programs of any point of the world. This way the program suppliers can expect incomes only from the advertisers. The payers of the cable networks will be the stores, banks, insurance companies, travel agencies, airlines, hotels etc. offering their performances to the consumers. We will neither have to leave our homes, offices, i.e. our special Internet computer to manage our official businesses (construction permits, applications for passport, real estate registrations, tax returns etc.). we can also exercise our citizenship rights (for example our votes at the elections) over the Internet soon.
…. For this reason both we and the legislators have a lot to prepare ourselves for!
In this column I would like to shortly and a bit differently comment upon those so-called „little news” which take place in the wide world and are not really about us directly but are talked about in Hungary too.
I publish my writings separated from each other, with title and date, and the newest writings always will be put on the top under this introductory. This way by reading the first writing the dear readers had seen before, they would know that all the following lines had been read by them before. But the possibility of reading my earlier writings again anytime will remain henceforward for the readers, if they would like so.
January 07, 2000 – Helmut Kohl and the black money!
The German office of prosecution has started the investigation against Helmut Kohl, who was considered perhaps the most significant European politician of the decade past. He was the chancellor of the FRG then the reunited Germany for almost ten years. The former chancellor can expect even a five year imprisonment since he had partially confessed that his party had secret bank accounts and they kept also campaign money on them.
Nobody can foretell the final result of the news today yet. Among the constantly returning international news of the coming year we will probably hear about the started investigation, the new witnesses getting more and more courageous and the ones clamoring for condemnation with the total rigor of the law. I have neither the proper information nor the reason and/or the right to form a judgement of what happened in Germany. I can neither really give a moral life-belt to somebody who violates the laws of his country, might he be in any position. I also believe that it is rightful to highly expect the public figures to do their best to be able to face the members of the society without hypocrisy day by day, whose confidence they needed to fulfil their chosen duty. This way the few thoughts of mine mentioned below are nothing else but contemplation, struggle about our everyday lives, democracy, future.
I had already raised my doubts in my earlier writing about the way, the proportions and mainly the circumstances of the investigation against President Clinton. There the unmerited way of reference to democracy, the daily enroachment of the investigation, the constant and rude violation of the fundamental human rights of human dignity, which I deem important, with reference to the superior interests were defensible by me more easily. Because they tried to discredit (perhaps successfully) the American president’s extremely successful public judgment definitely by his private life. In Helmut Kohl’s case they deem to proclaim the father of the German reunion, the perhaps most consistent and most influential builder of the „United States of Europe” guilty as a public figure, in this nature of him.
What made me reflect in connection with this is rather that what the matter, that certain grain of sand in the functioning of our present democracy could be, which caused that it could ruin all the successes and historical judgment of the outstanding people who really possessed statesmanlike abilities if they had surcharged manliness in their private lives or made a mistake even once, considered all the circumstances badly on passing the daily decisions. Because in Helmut Kohl’s case nobody has it or even raises it that he had obtained significant and illegal tangible grants for himself immorally, by the abuse of his official power, influence and relations. In the midst of the several hundreds of his daily decisions Helmut Kohl did not notice the risk of in what degree the conception of financing the party prepared by his colleagues passed the legal bounds or it was only, in the opinion of his colleagues in the party, shifting along the loopholes of the laws necessary for his party. As it is evident that it did not belong to among the party-leader/chancellor’s duties to manage and book the finances of the party, to open bank accounts, etc. In spite of this Helmut Kohl had properly made a mistake. Blundering reminds me one of the returning thought of my lectures on what I used to hold forth as a subject of decision theory. Because the ability to decide is one of the most important things that can be expected of leaders. But the requirements of the present world cannot be judged to the same extent as the earlier period of history. According to the example of my lecture, a well-prepared leader is able to pass 20-30 decisions of his field in the course of his daily work which he can think over and consider well before decreeing. These decisions usually can be expected to belong to among the good solutions. It is always possible to find better decisions than even the good ones but either the time to find them is not disposable or the grade of improvement would not be in proportion to the required extra time.
But life is making more exacting conditions today. The daily requirement of decision for the leader fulfilling more important duties surely exceeds the one hundred. But all of one-hundred and twenty decisions can be perfect, good anly with the help of the lucky star. In reality these leaders must learn to live together with the fact, that the 5-10 percents of their decisions will prove to be wrong afterwards. Because in case of a hundred and twenty decisions the decision maker does not have the conditions, he could rightly expect, for the necessary examination, consideration, etc. It has to be definitely learnt how they can handle their decisions proved to be wrong. Many leaders fail during this. Those who are easy-going, about that though they made a mistake but had so many good decisions that it would be enough for three people, could expect that either the 5-10 percents would increase or they would blunder in more and more important questions. But those who start gnawing themselves because of the mistakes, which got to the surface, so much that it would not let them sleep at night, would not be able to decide in the one-hundred and twenty questions next day, would become irresolute leaders, would slip behind. It is definitely hard to learn how to think lesson implied in the mistakes over and hereby to consider which decisions absolutely demand calm examination and proper consideration before passing, but to accept the fact that we will make mistakes tomorrow too, though we do our best to avoid it.
And if it is really this way, if the present world expect this for the good leaders then I wonder whether this same world is able to accept that the outstanding people are human beings too, who make mistakes and can make mistakes. My train of thought deviates from the „inside” struggle neither here. I do not demand an account of that we should consider the outstanding people’s mistakes as pardonable faults with immediate and total forgiveness. If I did it then tomorrow they would be mistaken more and more times and in more and more serious questions. But it is also important to give the judgement of their mistakes and successes, merits the proportion. Because if their first revealed mistake becomes sufficient to ruin the whole path of their lives then sooner or later the really estimable people will take the measure of that today infallibility is absurdity at the same time, so they will not shoulder this level of public life. Of course it shall not have to be feared that there will be no applicants for it but it is to be feared that the new ones coming into prominence will not possess the same human assets and abilities.
It would be good to keep that the politicians like President Clinton or Chancellor Kohl could remain models, people to be followed for today’s young politician generation!
December 14, 1999. – Bluff of several billions!
All the public offices, banks, airlines, multinational companies, manufacturers, who lay any stress on themselves, have already published that they have taken every possible precautions against the computer technical boom of the millennium, i.e. their own systems, products will perfectly handle the „problem” of the year 2000. The root of the problem proclaimed inescapable was that the computer programs, becoming mass-produced barely a few decades ago, – because of programming with economy of space – left the first two figures out in the program controls based on the date of year, and marked the date by only the decade and the year of the century. Following this the programs wrote the number nineteen automatically in front of the result, so the date was restored. In the course of programming we always have to strive to simplification and to the maximum utilization of the automatic controls. All these are built-in elements of numerous softwares as automatism (e.g. computation of interest, determination of periods, etc.) and as controls (e.g. miscalculations and false invoicing issuing from false typing, etc.). In the year two thousand these programs can interpret the ending „00” as 2000, but can also interpret it as 1900. And it really can occur. A lot of false invoices might be made, false resolutions might be born, and equipment steered by computer programs might stall. I still say that the bluff which has surrounded this matter all over the world for already two-three years is of several billions even in dollars.
In the beginning the „anxious” suppositions were about the software’s and or rather the problems of the programs of individual development. Later they were also „anxious” for us about flying at the millennium, using microwave equipment, investing in the stick exchange, etc. Later I would like to say about that the mass-product manufacturers (e.g. personal computer and their operating systems, etc.) were not careless in creating when creating the controlling software’s even a long time ago.
But the many news of the media quoted such examples which cannot be overlooked. The problem of the controlling software, if comes up at all, can have influence only on programs in which the date has a controlling part. The controlling of the above-mentioned microwave oven and any other home equipment are not in direct connection with the date. Some exceptions might be the preprogrammed switching on and off of some home electrical with the possibility of timing. So the most dangerous problem can be that our VCR does not record the preprogrammed movie. Since the „Paula and Paulina” had ended a few days ago, perhaps it would be endurable. Of course nor this is really probable to happen because our home supplies with digital controlling cannot really be older than ten years, and it is improbable that they did not count upon the millennium when producing these products in the 90’s.
My friends selling computer equipment told me in the last weeks that many institutes and private people were exchanging their equipment, what they had used till now, for new ones in a way that was beyond belief. The most important question at buying is whether the machine can surely handle the Y2K. Of course the answer is yes. In their very own interest neither the dealer not the sales clerks add that the well-known manufacturers (IBM, Hewlett Packard, Acer, Pacard Bell, Toshiba, Compaq etc.) have never manufactured such a PC, for which the change of date would cause a problem. The same is true for all the companies involved in the market of the operating systems. With the barely monopolistic Windows 95’ or 98’ anybody could try at work or at home what would happen at the change of date if the setting of the date of the software is „cheated”. If he is a bit afraid of the risk then he can save his documents stored in the computer before the test. Though I can claim that nobody has such an operating computer, such an usable operating system, for which the change of date causes a problem, but there is a solution contradicting the „absolutely necessary exchange” even if I were wrong. In this case the setting of date of our computer, VCR or any other home equipment shall be cheated one or two years backwards and it will operate just as well as it did in 1999.
The airplanes, trains, power plants, electrical network systems, banks, etc controlled by computer programs could mean a more serious threat. But nor here the crisis is so frightening. On the one hand, also in this case only those software’s or program parts from among the controlling programs could mean a problem, in which the accurate determination of date is a condition of some command. The technology of power production, the registry of ownership of the stocks, the proprietary data of the bank accounts, the administration of the current receivables and remittances (except the interest arrears or the accurate amount of interest claim), the operation of the technical equipment of airplanes logically have no connection with the current date data. For this reason it is quite surely tenable that there are going to be neither smaller nor bigger disturbances in seventeen days.
On the other hand, in traffic systems, power supply, telecommunication, financial supply they work with individual directing and controlling software’s, where the operator’s personal attendance is constant from the starting of the system, as well as it is a security requirement of capital importance to ensure collateral automation and the possibility of manual controlling (intervention). The development of this extremely complicated software’s and their continuous setting to the changing conditions require the constant attendance and highly responsible work of many outstanding experts. It is almost unimaginable that these experts would „forget” the few minute programming work of bringing those algorithms forward which assured the right interpretation of date to the date-dependent commands of these software’s if they had these kind of commands at all. And as for the collateral automation, by putting the date forward it assures the possibility to previously simulate the effects of the change of date.
I cannot even estimate how many billion dollars the world had expended on unnecessary software checking, software development, earlier change of devices, prematurely sorting hardware and programs out which are totally utilizable yet, etc. What I am sure of is that the immense overstating of the actual problem of the change of date in 2000 was one of the biggest businesses in connection with the millennium, and its base was certainly nothing else but a „bluff of several billions” taking advantage of the fact that nowadays it was more and more difficult to always find the real content in the mass of information flooding upon us.
I am also sure of that the change of date will not have any influence on our everyday lives, but in the first months of the next year we will hear a lot of unbelievable stories about that everything around us we do not understand immediately will be understandable only by the mystic reason of the millennium.
November 06, 1999 – Microsoft lost a suit in a federal court of the USA
I made my first foreign experiences as a politician in the late 80’s in the United States. I had obtained a lot of experiences which were operating on my thinking even nowadays. I still can not say that everything characterizing today’s America goes without saying for me and pleases me. For example it pleased me that most of my negotiating partners talked about their workplaces as if it was invented definitely for them, while neither their employer could have found anybody else more suitable for the given task. I liked that my friends always said immediate commendatory sentences about the Americans mentioned during our conversations because „there had to be surely some surplus in them which made them excel and be successful”. At that time I often thought about that in company surely would be disputing about who the said person’s „influential assists” are or by what kind of corruption he could become successful? When I drove my car faster than the 55 mph limit on my trips, in turn I was reminded by my American passengers that „the Americans” had decided that they would drive their wonder cars maximum 55 mph – even on their 12-lane highways – for the reason of economizing on energy and protecting the environment. Accordingly in their opinion it was not the government who decided about the speed limit but this decision of limitation meant just the codification of their will. In Budapest on my way home from the airport I was listening to the radio when the ministry of transport announced that they lowered the maximum speed of driving from 60 to 55 km/h within the inhabited areas. In America the law was born by the people’s will so they would keep their own decision. At home it was the minister who decided about the speed limitation, so I thought he would also keep his own decision, of course only when he was not using his distinctive blur siren.
As I wrote in the introductory of this chapter I did not like when they spent hundreds of million dollars to enforce the confession of Bill Clinton and his girlfriend about their relationship which I thought was only their business, I do not like that we can hear news about American – even menacing with sanctions – expectations for many countries of the world which the USA does not impose on itself as obligation or neither can solve itself. One of the favorite pieces of news of the previous weeks was very displeasing for me, which was the case of an eleven year old Swiss-American little boy who was taken from his home handcuffed at night (you can read about it more circumstantially among the colorful news).
It was a curious feeling too which filled me yesterday when the news published it as a sensation that one of the federal courts of the United States declared the Microsoft company guilty in infringing the so-called antitrust acts. The American government has spent more than thirty-million dollars (seven and a half billion forints) for the action till now. The root of the charge is that, according to the law, if a company had got into monopolistic position on some field then it would be forbidden to use this advantage to cause „disadvantage” on other fields for the rivals still existing there. In the opinion of the government of justice representing the charge, the Microsoft committed the violation of the law when by misusing their monopolistic position gained by Windows operating system they tried to oust the still existing rivals from the market of the „browser systems”, whose products were perhaps even more developed than the Microsoft product. And this was disadvantageous for the customers. The way the Microsoft misused its monopolistic position was giving its own browser free with its operating system.
As an economist I believe that it is important for today’s economy to have such regulated conditions which have the purpose of making the fair market behavior be kept. This way the legal control of the activity of the monopolies still has the reason for existence and will have it for a long time. But it is also an important legal principle that misusing the democratic laws is forbidden. It is a very important duty of the courts that by making the best of their right to consider they shall notice if somebody would like to reach his economic goals not by developing and quality but by lawyers’ arguments. The responsibility of the judicial custom is huge. If upon the score of compensation for non-pecuniary loss the court adjudges as much compensation for the customer spilling hot black coffee on himself or the „victim” of malpractice really occurring sometimes as the hundred fold of his lifetime income then it makes the certain services bureaucratic, expensive and incalculable which conduces to the decline of mood for enterprise or medical services and to the deceleration of the progress of the market economy in the long run. And this can scarcely be the consumers’ interest.
The bad feeling about the Microsoft-case came to be felt by me when I read the artificially drafted legal explanation. Was it really the browser system given free by Microsoft what caused a loss and ruined the distributors of the rivaling browser programs? This approach would be a total twist of the intendment of the above-mentioned law. This opinion would mean that those motor works which gave their „factory car-alarm” as an accessory with their cars for no extra cost would oust the companies manufacturing solely car-alarms from the market. Because it is a customary technique of trade when the customer gets some connecting service apparently free with a product for the sake of the successful salability of the basic product. The travel bureaus often offer a „free” rented car for the time of the summer holiday, and the extended guarantee and free servicing vouched by the producing factory are also rivals of the repair shops, etc. The connecting goods are never free in practice, we certainly pay their price when buying the basic product. They could not have started an action against Microsoft if it had circulated an operating system which was able to function as the browser system of the Internet. The charge of ousting the rivalry could arise just because the browser software of Microsoft was made to be a program-element usable independently of the operating system too. It is such a jugglery with the law which is not lifelike and which is harmful for progress. But this way of thinking is neither unknown for the home parochial legislators. Our tax laws abound in elements like this, which leads to unenforceable accounting regulations and thousands of tax actions. For example in the ÁFA law it is a „supported” part if at housing I call the cellar a workroom on the outline in spite of the fact that later I will keep my car in it. At the same time utilizing the support is a violation of law if I call the same room a garage even if I do not have a car and will keep tools in it. The establishment of the category of „sham” contracts in the tax laws is now creating the legal background of constant official abuses. Then in the judicial proceedings the revenue office usually succumbs with its point of view. „Fortunately” the untrue-to-life purpose of legislators is hard to codify in law or mostly contradicts other laws.
The decision of this judge not understanding the rules of economy has now created a precedent in America and will cause a loss of several billions, significant loss of time for the economic progress. As I know the reaction of the American society, we will be able to witness millions of legal contests in the following years where the „losing” companies will ask the courts for the recovery of their investments instead of competing on the market.
November 02, 1999 – Handcuffed eleven year old little boy in the United States.
A neighbor denounced an eleven year old Swiss-American little boy because of sexual harassment in the United states. According to her opinion, the boy was stroking his four year old little sister in an inadmissible way in the garden while the children’s parents were out of home. In the opinion of the child his parents the brother just helped hiss little sister piss just as he saw his parents doing it earlier.
I surely cannot settle what the truth is. And I also believe that the truth has to be known. But the nature of aim counts. In this case the court is looking for the answer whether the child is guilty in sexual harassment (the brother has been charged with sexual assault beside). I find this an outrage against the law. According to the statutory interpretation accepted by me, in the case of an eleven year old child the purpose of inspection can only be whether the child stands in need of medical treatment. If the child really behaved unnaturally towards his sister then he would need a doctor and not galore. But it is more probable that the boy is a curious infant who has no idea about what sexual harassment is (I think every kindergarten teacher could tell stories for hours about the deeds of children discovering the differential between themselves and their mates). I.e. it is a legal principle that the crime has to be recognizable for the perpetrator to be culpable. That is why the mentally disabled people must not be sent to prison and that is also why children have to be precluded from among those who can recognize the results of their deeds. Because if infants can be called to account of their deeds then we should accept their decisions in their other rights too. This way they could decide whether they would like to attend school, where they would like to live after divorce, during hospital treatment they would decide about the assent to surgical operation, etc.
I want to leave neither the night handcuffing unanswered, though it is of much smaller importance. The handcuffs are not the aggressive expression of crime, but are means which keep the suspects and perpetrators back from absconding from their keepers. When the possibility of escape is not a reality then using the handcuffs is the causeless violation of human rights. They can hardly explain why they had to be afraid of a puny little child’s escape or resistance to the police visiting the spot. I can remember what a bad feeling it was to me years ago as the police was marching the leaders of two Hungarian banks away handcuffed, which was nothing else, I am considered, but posing for the television. Particularly the „humiliation” of the seventy year old puny banker was repulsive to me. This had turned the police enrichment on its wrong side. The robust policemen became antipathetic to the viewers and the possible criminal moved me and many others to pity.
There are hundreds of laws helping the progress of the American economy and democracy which we would need to „naturalize” very much. On the other hand it would be good if those legal ideas which served as basis of an eleven year old child’s pretrial imprisonment would never reach us. But to stay objective, in the very most of the states of America they could not initiate a criminal procedure against this child and this regulation is rather the exception of one state of the USA. But it is true in this case too, that sometimes there is still much to do for the sake of the right interpretation of human rights in the United States too.
All the public offices, banks, airlines, multinational companies, manufacturers, who lay any stress on themselves, have already published that they have taken every possible precautions against the computer technical boom of the millennium, i.e. their own systems, products will perfectly handle the „problem” of the year 2000.The root of the problem proclaimed inescapable was that the computer programs, becoming mass-produced barely a few decades ago, – because of programming with economy of space – left the first two figures out in the program controls based on the date of year, and marked the date by only the decade and the year of the century. Following this the programs wrote the number nineteen automatically in front of the result, so the date was restored. In the course of programming we always have to strive to simplification and to the maximum utilization of the automatic controls. All these are built-in elements of numerous softwares as automatism (e.g. computation of interest, determination of periods, etc.) and as controls (e.g. miscalculations and false invoicing issuing from false typing, etc.). In the year two thousand these programs can interpret the ending „00” as 2000, but can also interpret it as 1900. And it really can occur. A lot of false invoices might be made, false resolutions might be born, and equipment steered by computer programs might stall.I still say that the bluff which has surrounded this matter all over the world for already two-three years is of several billions even in dollars.
In the beginning the „anxious” suppositions were about the software’s and or rather the problems of the programs of individual development. Later they were also „anxious” for us about flying at the millennium, using microwave equipment, investing in the stick exchange, etc. Later I would like to say about that the mass-product manufacturers (e.g. personal computer and their operating systems, etc.) were not careless in creating when creating the controlling software’s even a long time ago.
But the many news of the media quoted such examples which cannot be overlooked. The problem of the controlling software, if comes up at all, can have influence only on programs in which the date has a controlling part. The controlling of the above-mentioned microwave oven and any other home equipment are not in direct connection with the date. Some exceptions might be the preprogrammed switching on and off of some home electrical with the possibility of timing. So the most dangerous problem can be that our VCR does not record the preprogrammed movie. Since the „Paula and Paulina” had ended a few days ago, perhaps it would be endurable. Of course nor this is really probable to happen because our home supplies with digital controlling cannot really be older than ten years, and it is improbable that they did not count upon the millennium when producing these products in the 90’s.
My friends selling computer equipment told me in the last weeks that many institutes and private people were exchanging their equipment, what they had used till now, for new ones in a way that was beyond belief. The most important question at buying is whether the machine can surely handle the Y2K. Of course the answer is yes. In their very own interest neither the dealer not the sales clerks add that the well-known manufacturers (IBM, Hewlett Packard, Acer, Pacard Bell, Toshiba, Compaq etc.) have never manufactured such a PC, for which the change of date would cause a problem. The same is true for all the companies involved in the market of the operating systems. With the barely monopolistic Windows 95’ or 98’ anybody could try at work or at home what would happen at the change of date if the setting of the date of the software is „cheated”. If he is a bit afraid of the risk then he can save his documents stored in the computer before the test. Though I can claim that nobody has such an operating computer, such an usable operating system, for which the change of date causes a problem, but there is a solution contradicting the „absolutely necessary exchange” even if I were wrong. In this case the setting of date of our computer, VCR or any other home equipment shall be cheated one or two years backwards and it will operate just as well as it did in 1999.
The airplanes, trains, power plants, electrical network systems, banks, etc controlled by computer programs could mean a more serious threat. But nor here the crisis is so frightening. On the one hand, also in this case only those software’s or program parts from among the controlling programs could mean a problem, in which the accurate determination of date is a condition of some command. The technology of power production, the registry of ownership of the stocks, the proprietary data of the bank accounts, the administration of the current receivables and remittances (except the interest arrears or the accurate amount of interest claim), the operation of the technical equipment of airplanes logically have no connection with the current date data. For this reason it is quite surely tenable that there are going to be neither smaller nor bigger disturbances in seventeen days.
On the other hand, in traffic systems, power supply, telecommunication, financial supply they work with individual directing and controlling software’s, where the operator’s personal attendance is constant from the starting of the system, as well as it is a security requirement of capital importance to ensure collateral automation and the possibility of manual controlling (intervention). The development of this extremely complicated software’s and their continuous setting to the changing conditions require the constant attendance and highly responsible work of many outstanding experts. It is almost unimaginable that these experts would „forget” the few minute programming work of bringing those algorithms forward which assured the right interpretation of date to the date-dependent commands of these software’s if they had these kind of commands at all. And as for the collateral automation, by putting the date forward it assures the possibility to previously simulate the effects of the change of date.
I cannot even estimate how many billion dollars the world had expended on unnecessary software checking, software development, earlier change of devices, prematurely sorting hardware and programs out which are totally utilizable yet, etc. What I am sure of is that the immense overstating of the actual problem of the change of date in 2000 was one of the biggest businesses in connection with the millennium, and its base was certainly nothing else but a „bluff of several billions” taking advantage of the fact that nowadays it was more and more difficult to always find the real content in the mass of information flooding upon us.
I am also sure of that the change of date will not have any influence on our everyday lives, but in the first months of the next year we will hear a lot of unbelievable stories about that everything around us we do not understand immediately will be understandable only by the mystic reason of the millennium.
Yesterday the Parliament adopted the amendments of the personal income tax laws concerning next year. The past days passed with the number-war between the government and the opposition both in the Parliament and in the columns of the media.
When I had written the preface of the „Popular topics” chapter then, according to my custom, I chose a concrete case which was the order of that time but was essentially concluded. For the thought „On László Juszt a little differently” as an example it seemed to be a good thought to approach the CASE from Prime Minister Viktor Orbán’s point of view. Hence at the time of my writing I thought that the subject was essentially settled. I have to acknowledge it manfully that I was wrong „again”! This is why I decided not to complete the „Preface” part with the new lessons of the everyday life this time but I will publish it as a separate writing following the repetition of the parts of the preface regarding about this.
