The Tenth Man and the (Not So) Hidden Winners of Hungarian Inflation
A Contrarian Take on Hungary’s 2020–2023 Inflation Story
Inflation is typically viewed as a crisis that governments seek to combat. Yet, evidence suggests that many governments may quietly benefit from inflationary environments through increased fiscal revenues and altered economic dynamics. This analysis uses Hungary’s experience from 2020 to 2023 as a case study to explore how inflation can serve as a covert fiscal tool. By examining tax structures, wage policies, and revenue data, this report challenges conventional political narratives and highlights how inflation can advantage state finances—often at the expense of households and small businesses. The findings prompt a critical reconsideration of inflation’s political economy and raise important questions about the incentives shaping government responses across the globe.
I’ve always been drawn to frameworks that challenge conventional wisdom — especially when the stakes are high and the stories seem too simple.
Roughly a decade ago, I watched World War Z, and one scene has stuck with me ever since. A former intelligence officer explains the “Tenth Man Rule”:
If nine of us agree on an analysis, it’s the tenth man’s job to disagree — no matter how improbable it seems.
The job of the tenth man isn’t to be contrarian for its own sake — it’s to protect against dangerous groupthink. It forces decision-makers to ask: What are we missing?
Lately, I’ve been applying this lens to Hungary’s economic story — particularly its battle with inflation between 2020 and 2023.
And the more I looked, the more one question kept surfacing:
What if the Hungarian government wasn’t just fighting inflation — but quietly benefiting from it?
Hungary’s Inflation: The Official Narrative
Between 2020 and 2023, Hungary recorded the highest cumulative inflation in the European Union. While many rightly pointed to external shocks — the COVID-19 pandemic, the war in Ukraine, soaring energy prices, disrupted global supply chains, and corporate profiteering — the Hungarian government positioned itself as the people's defender. It railed against “war inflation,” imposed price caps, penalized retailers, and expanded welfare protections. But much of this came too late or there were only partial measures, leaving households and small businesses to shoulder the real cost
The numbers from this period tell a clear story:
Hungary experienced roughly 41% cumulative inflation between 2020 and 2023 — the highest in the entire European Union — compared to around 17% in the Eurozone.
That gap isn’t just statistically significant — it’s politically revealing.
But what if that isn’t the full picture?
What if, in this inflationary drama, the state wasn’t merely a victim or a savior?
What if it had something more to gain?
What if the Hungarian government, far from being caught off guard, became a quiet beneficiary of inflation—perhaps even its hidden shareholder?
A Contrarian Angle: What If the State Gained from Inflation?
Inflation is typically seen as harmful to governments — rising costs, angry voters, political risk. But what if, in Hungary’s case, inflation turned out to be… convenient?
Let’s apply the “Tenth Man” rule and consider a different perspective: Inflation as fiscal strategy — or at least, as a side effect too beneficial to stop.
Here’s what stands out:
World-record VAT levels (27%): This consumption tax scales with prices — so when inflation rises, VAT revenues rise even if people buy less (till a certain extent).
Flat income tax + rising nominal wages: As wages increase (even just nominally), income tax receipts swell.
No bracket indexation: People pay more in real taxes, even if their purchasing power shrinks.
Currency weakening: Ostensibly to help exporters, but it also inflates import prices and boosts nominal GDP.
Targeted wage hikes: These were not broad-based wage increases, but targeted hikes — primarily designed to raise minimum contribution thresholds and sustain payroll tax revenues.
If inflation were merely a crisis, these might be unfortunate side effects. But if you follow the incentives, they start to look like features — not bugs.
Inflation’s Winners: Households and SMEs Weren’t Among Them
Let’s look at official KSH (the Hungarian Central Statistics Office) data on revenue growth by enterprise size, overall and food inflation, between 2020–2023. Then as a benchmark, let’s compare it with state treasury tax revenues. Hungary’s tax model leans heavily on indirect, consumption-based taxation—especially VAT, which is inherently inflation-sensitive.
By checking the above data, the following patterns are emerging:
Large enterprises: +74% nominal revenue → ~34% real increase
Hungarian state: +51% total tax/social contribution revenue
VAT revenues alone: +50%
Food-sector companies: most benefited from 65%+ food inflation
Meanwhile:
Gross wages: Up ~42% — barely keeping up with inflation
Real inflation adjusted wages: Up just 0.42% net
Micro enterprises (SMEs): Below-inflation revenue growth = real decline
SME sector: Grew less than state tax revenue
In short: the state and large corporations came out ahead. Households and small businesses fell behind.
And if the government truly believed inflation was an emergency — wouldn’t we expect policy responses that reduced its own gains?
Based on the numbers, the so-called “nanny state” that many citizens demand appeared more paternalistic toward itself than toward the public.
Inflation as a Quiet Fiscal Tool?
This pattern reminded me of the tobacco industry playbook:
If you can’t grow demand, raise prices. Even if fewer people buy, revenue stays up. Assuming it that you have some kind of control on slowing consumption decline.
Inflation, like excise taxes, can act as a silent extraction tool — a way to raise public funds without ever announcing a tax hike.
And it may even bend the rules of the Laffer Curve — the classic economic model that shows the trade-off between tax rates and state revenue.
Normally:
Tax too low → underfund the state
Tax too high → choke economic activity
But with inflation:
VAT revenues grow without raising rates
Income tax intake rises via nominal wages
Real tax burden rises — quietly
No parliament debate. No street protests. Just... quietly swelling government revenue.
But Every Game Has a Cost
Of course, this strategy — if it was a strategy — isn’t sustainable. Inflation may deliver revenue, but it also carries risks:
Eroding real wages and savings
Rising debt service costs
Declining household consumption (among the lowest per capita in the EU)
Damaged trust in institutions
Widening inequality
Political volatility
If this is fiscal strategy, it’s balancing on a knife’s edge.
Stakeholder, Shareholder… or Both?
What role does the Hungarian state play here?
As a stakeholder, it’s supposed to guard stability, protect citizens, and fight inflation.
As a shareholder, it benefits from inflated revenues, eroded real debt, and currency conditions that help exporters.
The truth may lie somewhere in the middle.
But the tilt — at least over the last four years — seems to lean more toward quiet shareholder than outspoken protector.
And this is exactly why contrarian thinking matters.
It’s not about conspiracy — it’s about asking the question consensus forgets:
Who actually benefits from the status quo?
Final Thought: Follow the Incentives
Inflation isn’t just an economic side effect. Sometimes, it’s a political and fiscal tool.
For SMEs and households: a slow, invisible squeeze.
For governments: a golden goose that doesn’t squawk.
So next time a minister blames “war inflation” or “global markets,” channel your inner Tenth Man.
When everyone agrees on the cause — stop and ask:
Who gains if this continues?
Disagree? Good. I don’t write to be right—I write to be tested. Bring your Tenth Man view, your sharpest counterpoint, or even a quiet doubt—so long as it builds on data & insights. The most useful critique is often the one that unsettles my own thinking.
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