A Rich Relative At The Discount Store – Austria vs. Hungary In The 21st Century

While staying at a small hotel in Gallbrunn, Lower Austria I decided to try the on-site restaurant. This was one of only two dining options in this somnolent, tidy village on a late Sunday afternoon. The waiter recommended a wiener schnitzel with parsley potatoes. The serving was sizable and the food was delicious. We struck up a conversation with the waiter who had a Hungarian accent. It turned out that he was from the nearby city of Gyor in western Hungary. Like so many Hungarians who grew up on the other side of the border, he had come to work in Austria. The wages were so good that not only could he afford a flat in Gallbrunn, but he had also managed to purchase a home for himself in Gyor.

I had spent quite a bit of time in Gyor a few years ago. I recalled its quaint old town and prosperity in comparison with other places in Hungary. It was obvious that Gyor had maximized its proximity to Austria. The waiter agreed that this was true, but mentioned the fact that wages were still much lower in Gyor than in Austria. He said it was difficult for people in Gyor to save money and get ahead financially. On the other hand, the waiter in this tiny Austrian village, a 40 minute drive from Vienna, had managed to earn and save a sizable income. It paid so well that he had now been working at the restaurant for twenty-two years. When I asked him what the main difference was between Austria and Hungary he replied with one word, “Money.”

Civil Flag of Austria-Hungary

Partners, Rivals & Neighbors – Civil Flag of Austria-Hungary

The Rich Relative – Austria As Seen By Hungary
Austria and Hungary will forever be linked by their long and contradictory history. For just over half a century – from 1867 to 1918 – they made up the Dual Monarchy, also known as the Austro-Hungarian Empire. This was the most glorious era of a relationship that had been terribly deeply conflicted at times. The Habsburg Austrians imposed their will on Hungary with varying degrees of success from the 16th through the 19th centuries. This sparked several rebellions, most notably the Hungarian Revolution of 1848-49. Even when the two were united in the Dual Monarchy, the relationship was fraught with disagreements. The only way this empire could really work was to give each entity a large degree of autonomy. Following the First World War, Austria and Hungary became independent nations.

After World War II, the great divergence of their economies began. By end of the 20th century relations between the two nations were excellent, but the economic disparities were wide. This was due to the fact that Hungary was on the wrong side of the Iron Curtain during the Cold War, while Austria was neutral. The latter enjoyed western investment and capital, while Hungary was restricted by its communist government and membership in the Warsaw Pact. After the Iron Curtain fell, the Hungarian economy opened up, but it has never managed to attain anywhere near the prosperity of Austria. This difference in wealth has led Hungarians to look westward with envy at their former imperial partner.

Austria has come to symbolize the wealth and prosperity of the western world to Hungarians. A closer look at economic and quality of life statistics shows why. Austria’s Gross Domestic Product (GDP) per person ranks 13th in the world at $51,306. That is nearly four times higher than Hungary’s at $13,881. Behavioral economists have shown that people most often base their economic status in life by comparing it with their neighbors. In other words, how rich or poor one feels is all relative. It is little wonder that Hungarians look to the west and Austria for their optimal standard of living. Even though Hungary borders seven countries and has a higher average income than four of them, Hungarians hold up Austria as their economic ideal. I have never met a Hungarian who compared their economic situation with that of say Ukraine, where Hungary holds a four to one advantage in average income.

“The Discount Store” – Hungary As Seen By Austria
Austria is seen as one of those countries – much like Switzerland – that is a land of eternal prosperity. Being wealthy for Austrians does come at a price though, specifically a higher cost of living. Austria’s cost of living is the 13th highest in the world, higher than that of the United States, while Hungary’s is one of the lowest in the European Union. Austrians are fond of referring to Hungary as “the discount store.” Since Hungary uses its own currency, the forint, rather than the Euro. Thus, prices are even lower than usual due to the exchange rate. Such western Hungarian cities as Sopron, Szombathely and Mosonmagyarvar are flooded with Austrians crossing the border for cheaper goods and services. Case in point, Mosonmagyarvar has 350 dentists, offering cut rate dental care to Austrians. A recent Hungarian government survey found that 160,000 Austrians cross the border annually to get their teeth worked on.

The difference economically between the two countries has always been quite visible to me. The roads in Austria are better, the trains are shiny and sparkling, the houses are freshly painted in picture book villages. There is still a gritty feel to Hungary, a ”rough around the edges” aesthetic that can be seen in the rickety trains, the dusty villages where bicycles outnumber automobiles and the faded paint jobs with cracked siding on many a home. Hungary is more down at the heel, while Austria is a sublime fantasy. The latter can seem a bit eerie, almost too well ordered while Hungary looks as though it is still recovering from war. Economically it still is, from a very cold war that froze its economy in stasis for decades.

The EU – Good Work & They Get It
The European Union is trying to rectify the economic disparities between its members. This is made clear by the amount of EU structural funds Hungary gets compared to Austria.  Hungary has been allocated 25 billion Euros for 2014-2020 for a wide variety of economic, social and cultural development projects, while contributing 4.63 billion Euros. Conversely Austria has been allocated 4.92 billion Euros for that same period while contributing 5.73 billion Euros. In a sense Austria is helping keep “the discount store” open. While for Hungary, the EU – just like Austria – is good work and they get it.

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