BRIDGING AN ECONOMIC GAP: A CASE STUDY OF AID TO ARTISANS IN HUNGARY, 1991-1995 The project commissioned designs from Hungarian ceramics designer Kinga Szabo Funded by a grant from the Ford Foundation September 2005 Beth Gottschling, Aid to Artisans Docey Lewis Mary Cockram, Aid to Artisans Aid to Artisans 331 Wethersfield Ave Hartford, CT 06114 T (860) 947-3344 F (860) 947-3350 www.aidtoartisans.org Table of Contents Hungary and Its Craft Traditions ....................................................................................................................1 Project Origins, Activities, and Results...........................................................................................................2 Project Results ...............................................................................................................................................4 Cooperatives Disappear in the Early 2000s...............................................................................................5 Ceramic Folk Art Masters Also Struggle ...................................................................................................6 Artisan Livelihood .............................................................................................................................................7 Lessons Learned.................................................................................................................................................7 Lessons Learned Already Incorporated into New Programs .................................................................9 Enduring Questions and Future Challenges................................................................................................10 Attachments......................................................................................................................................................11 Attachment A: Project Timeline ..............................................................................................................11 Attachment B: ATA Methodology..........................................................................................................14 Attachment C: ATA Project Implementation Strategy ........................................................................15 Product development.............................................................................................................................15 Business training .....................................................................................................................................15 Sales & Marketing...................................................................................................................................16 In thinking back about the contribution the ATA project made to the Hungarian craft sector, importers Leve and Carole Karvazy remarked that the biggest impact of ATA’s project in Hungary was that “it gave people hope. So much enthusiasm, motivation. It made people feel they could accomplish something.” Bridging an Economic Gap A Case Study of Aid to Artisans’ work in Hungary, 1991-1995 The introduction to Aid to Artisans’ (ATA) 1994 Buyer’s Guide to Hungarian Folk Art notes, “In April of 1991…a small team of ATA consultants embarked on a three-and-a-half year adventure to plug the hole in the leaking vessel of export sales of Hungarian folk art.” ATA did plug that hole— leveraging a million dollars in sales and forging links between Hungarian artisans and the US market that have provided nearly 250 artisans with more than a decade’s worth of steady sales and income. Then, in 2004, macro-economic changes forced both remaining cooperatives and master potters out of business. One import company continued to actively buy cut felt, but the plug in the vessel was leaking badly. This case study reviews ATA’s experience in Export Enhancement Program Overview Hungary from 1991 through 1995 when its Funding history: USAID project 1991-1995 work was funded by an Export Enhancement (US$729,000) Program of United States Agency for Objective: To reduce employment loss in the craft International Development (USAID). It is part sector during Hungary’s transition to a market of a series of cases, funded by the Ford economy Foundation, which examine and draw lessons Activities: from ATA’s global experience. This case describes the activities, results, and lessons Marketing: Exhibition at 8 trade shows; 22 buyer- learned from ATA’s culture-based project designers visited, some two to four times; during Hungary’s difficult transition to a market publication of Buyer’s Guide to Hungary. economy. Two aspects of the project were Design: 163 days of product design (62% by lead different from previous projects. First, highly designer Docey Lewis) educated artisans were struggling to understand Business training for 30 small businesses: the free market economy, and ATA realized Mentoring, practicum opportunities and, as a mid-project that more formal training materials result of the mid-term evaluation, formal were required—training materials that the workshops and written Export Manual. organization regularly updates and still uses. Results: Second, there was a larger emphasis on cultural Cumulative sales surpass total project budget preservation than in most other ATA projects. during life of project. Sales: US$1.1 million at end of project. To write the case, ATA staff reviewed project Jobs: 233 jobs created and maintained for a records, interviewed artisan businesses, buyers, decade as a direct result of project activities and and staff. Field research was conducted in market links. March of 2004. HUNGARY AND ITS CRAFT TRADITIONS ATA began its work in Hungary in 1991, a time of major transition not only for Hungary, but for Central and Eastern Europe, which was reeling from the collapse of the Soviet Union and totalitarian regimes of the Eastern Bloc. This transition to democracy and a free market economy was marked by high unemployment and staggering inflation. At the time the project started, Hungary was struggling to take the first steps towards price and trade liberalization. Hungary Case Study © 2005 Aid to Artisans 1 In the Hungarian craft sector, large folk art cooperatives had been formed by the state in the 1950s, based to some extent on the longstanding traditional European guild system. These folk art cooperatives were directed by OKISZ, the light industry division of the National Cooperative Council. They produced officially sanctioned folk art products for commercial sales. Throughout the Communist era, peasant life and culture was glorified and revered, and folk art was produced for captive markets throughout the Soviet Union and Eastern Bloc. However, when the Communist system was dismantled, so was the structure of the craft market. The fragile Hungarian economy was unable to absorb the output of its 80,000 producers, and those producers were ill equipped to survive in the free market. Hungary’s folk art tradition includes weaving and embroidery; diverse ceramics styles; wood carving; decorated eggs; and a unique tradition of cut felt.1 On May 1, 2004, Hungary joined the EU, a major milestone in its transformation. Among the conditions for membership in the EU was the acceptance of a higher minimum wage, which resulted in a migration of lower paying jobs to neighboring countries like Romania, or even further afield to places like China. The US State Department considered Hungary “one of Europe's fastest-growing and most open economies, deeply integrated into the European economy.”2 Hungary also faced new challenges including retaining jobs in a shifting job market, in some ways similar to the US, which shifted from manufacturing to a service economy. PROJECT ORIGINS, ACTIVITIES, AND RESULTS ATA’s 1991-95 program in Hungary was reflecting the evolving, informal nature and ATA’s program implementation (see Attachment B for ATA’s project implementation methodology). With no office space or long-term local staff in Hungary, ATA relied on project consultants to direct specific programmatic activities and a network of Hungarians who were hired to translate, to provide transportation, and to implement consultant directives. During this period, ATA’s home office staffing was also very lean. ATA emphasized the preservation of Hungarian cultural traditions and skills, unlike its current programs that have a stronger commercial focus. Buyer trips were a key element of success in Hungary, generating more than a million dollars of sales during the four years of the The goal of the project was to improve the livelihood of artisans project (the Karvazys of Sandor Collection, by bolstering export sales in the craft sector. The objectives were in center). to be achieved through business training, new product development, and the creation of US market links. Specifically, ATA worked to: retain jobs, especially for women both at home and in workshops, assist the transition to free enterprise, provide business management and export training to artisan groups and foreign trade organizations, develop market-sensitive products suitable for export, and introduce Hungarian crafts to the US market to stimulate export activity. By 1992, due to 1 To make cut felt, two colors of felt are sewn together in a detailed pattern, then the top layer is cut partially away. 2 State Department Background Notes, http://www.state.gov/r/pa/ei/bgn/26566.htm Hungary Case Study © 2005 Aid to Artisans 2 “the general business decline and unemployment