Diverging developmental strategies beyond “lead sectors” in the EU’s periphery: the politics of developmental alliances in the Hungarian and Polish dairy sectors

Abstract

Due to its focus on high tech sectors and the role played by FDI, the literature dealing with developmental opportunities in Central and Eastern European (CEE) economies underestimates the room for domestic developmental agency. In this paper, we contrast diverging strategies of positioning the Polish and Hungarian dairy sector in European markets. In Hungary, ‘outsourcing’ the integration of fragmented producers to multinational corporations (MNCs) led to competitive downgrading, providing a fertile terrain for economic nationalism in the wake of the financial crisis. In Poland, a developmental alliance between state and farmers upgraded the competitiveness of domestic cooperatives under the constraint of EU accession. Contrary to narratives that describe passive competition states in CEE, we show that the domestic politics of developmental alliances determined whether EU integration resulted in the neoliberal outsourcing of development to MNCs or gave rise to a sector-level developmental state. Using the notion of dynamic institutional complementarity, we explore why lesser-developed countries with similar initial conditions diverge in developmental strategies and outcomes within the same transnational integration regime that imposes the same rules and provides the same opportunities to member states.

Keywords:

• Economic development
• developmental alliances
• market integration
• European Union
• industrial policy
• developmental state

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

László Bruszt is Professor of Sociology at the Central European University (Budapest). His more recent studies deal with the politics of market integration. His latest publications include Leveling the Playing Field – Transnational Regulatory Integration and Development (Bruszt & Langbein, 2014); ‘Varieties of Dis-embedded Liberalism EU Integration Strategies in the Eastern Peripheries of Europe’, Journal of European Public Policy (with Julia Langbein); and ‘Making states for the single market: European integration and the reshaping of economic states in the Southern and Eastern peripheries of Europe’(with Visnja Vukov).

David Karas holds a PhD in Political and Social Sciences from European University Institute, he is currently Assistant Professor in European Studies at Manipal Academy of Higher Education where he teaches postgraduate courses on European integration and International Relations. His research interests focus on the comparative political economy of development in Central Eastern Europe and the Global South.

Notes

1 There are several classifications, technology taxonomies, for example, Kaplinsky-Santo Paulino (2005) or the the United Nations Commodity Trade Statistics (UN Comtrade) Database. In this paper, we rely on the classification used in the United Nations Commodity Trade Statistics (UN Comtrade) Database, which contains detailed international trade flows data reported by about 200 countries all over the world. The dataset is available here: http://comtrade.un.org/data/

2 Interview with Tibor Mélykuti, CEO of Alföldi Milk, Székesfehérvár, 01 December 2013.

3 Csányi is notably the CEO of Hungarian bank OTP. The agricultural part of his empire is called the Bonafarm Group, regrouping a dozen processing firms in meat (Pick), cereals (Bábolna), wine (Csányi) and dairy (Sole-Mizo).

4 Regulation 511/2012 on ‘Interbranch organizations’, Regulation 880/2012 on transnational producer groups and Regulation 261/2012 on contractual relations.

5 Interview with László Lukács, Hungarian Milk Council, Budapest 13 October 2013.

6 https://www.mvh.allamkincstar.gov.hu/-/tamogatasi-adatok-a-bizottsag-908-2014-eu-vegrehajtasi-rendelete-alapjan-publication-of-data-according-to-commission-implementing-regulation-no-908-20.

7 http://kamaraonline.hu/cikk/beruhazasok-kormanyzati-tamogatassal-ezek-a-cegek-nyertek.

8 http://www.kormany.hu/en/ministry-of-agriculture/news/the-hungarian-milk-sector-could-profit-from-withdrawal-of-eu-milk-quotas.

9 http://www.kormany.hu/en/ministry-of-agriculture/news/another-6-billion-forints-in-funding-for-the-milk-sector.

10 Art. 28 states of the EA states: ‘These measures may only concern infant industries, or certain sectors undergoing restructuring or facing serious difficulties, particularly where these difficulties produce important social problems’ (Michalek, 2000).

11 Source: http://www.mlekpol.com.pl/ accessed 01/03/2013.

12 Source: http://www.bialystokonline.pl/mlekpol-zarabia-i-inwestuje-w-swoje-zaklady,artykul,11230,4,66.html accessed 01 March 2013.

13 Source: http://unibep.pl/en/media-en/news/2060-topping-out-ceremony-at-the-mlekovita-construction-site.html accessed 12 December 2016.

14 Source: http://ec.europa.eu/regional_policy/en/projects/poland/mlekovita-strengthens-market-position-with-cutting-edge-laboratory accessed 01 May 2016.

15 Source: http://www.forbes.pl/mlekovita-dariusza-sapinskiego-sukces-mlekiem-plynacy,artykuly,176958,1,1.html accessed 19 June 2014.