Limits of Hungarian local governments in the local economic development

The basically theoretical article seeks to answer the question of how the neoliberal governance model of local economic development can be applied within the framework of the existing Hungarian local government system. The governance model of local economic development, promoted by international organisations and considered as mainstream, is based on decentralisation, multi-actor governance and partnership. It presupposes strong competences and freedom of discretion for local governments. The study reviews the theories, the generally followed targets, governance models and institutions of local economic development and confronts those with the status of Hungarian local governments before and after 2010 when the then newly elected conservative government started in completely different ideological directions based on a new constitution and legislation concerning local government. The literature and international guidelines issued especially by OECD, World Bank and the UN argue that local economic development needs strong participation of local governments in order to adapt to local characteristics, to involve local resources and to gain local community support. However, countries which do not have stable and locally embedded local governments are hardly able to follow international standards. The experiences in Central and Eastern European countries provide evidence for these failures to adapt. The article focuses especially on the Hungarian case where the local government system is suffering from strong centralisation which limits the local development performance of communities. The author points out that although Hungarian local governments received considerable autonomy following the systemic change in 1990, they have gradually weakened and lost their significance and capacities ever since. As a consequence, they have only a limited chance to embrace the opportunities offered by the EU-supported cohesion and local development policies. The change in governance paradigm after 2010 resulted in massive state centralisation and placed local governments under radically new conditions. Local governments lost most of their previous competences in public services. The extreme limitations imposed on their financial and discretionary freedom hardly allows any more for an application of the collaborative, integrated local economic development model based on partnership. Although a strong participation of local governments in the local economic development would be a requirement formulated even at the central government level, the requisite real empowerment and local embeddedness are missing.