Hungary's U-Turn

It wasn't long after Francis Fukuyama published his "end of history" thesis that the war in Yugoslavia definitively wrecked his argument. How could the world be heading inexorably in the direction of market democracy when even the country long considered next in line for membership in the European Community was collapsing into war, nationalist extremism, and ethnic cleansing? History had not ended at all. It had returned with a vengeance.

Yet Fukuyama's theory about the eventual triumph of Europe's rational-legal bureaucracy remained deeply buried in the psyche of the architects of European integration. Yugoslavia was simply a dispiriting detour. The countries of East-Central Europe would all eventually tailor their political and economic systems in such a way as to fit into the regional European order. To get into the club, aspiring candidates had to meet a long checklist of reforms that practically remade their countries. The road to Europe, which was such a powerful slogan in East-Central Europe, was assumed to be one-way. Eventually even the warring parties in former Yugoslavia would beat their swords into accession agreements.

If the war in Yugoslavia confounded those early post-Cold War triumphalist expectations, what has been taking place in Hungary over the last four years represents a challenge to this deeper, less explicit embrace of Fukuyama's theory. Under the leadership of Fidesz, Hungary has effectively turned its back on the EU. It is heading off on its own political and economic path. It hasn't renounced its EU membership -- not yet, at least -- but it has challenged the very understanding of the European Union by changing the rules of the game.

"It was completely unexpected what happened in Hungary, where an already consolidated liberal democracy went backwards toward an autocratic or hybrid regime," sociologist András Bozóki explained to me in an interview in his office at the Central European University in Budapest last May. "Nobody within the country or outside could imagine that this could happen. Actually, this is the fault of the current political elite, which used a democratic supermajority for anti-democratic practices. So, the Hungarian situation is currently unique. It never before happened in the EU that a country suddenly made a U-turn back from democracy toward some kind of half-democracy. When Austrians elected the Haider party, there was a huge protest in the EU. There was also a marginalization of Berlusconi. But none of these people had a two-thirds majority in the parliament, so they couldn't change the constitution."

There is no adequate term to describe the current political system in Hungary. One term, popularized by Philippe Schmitter to describe similar regimes in Latin America, is democratura -- something halfway between democracy and dictatorship. Fidesz has used democratic means to undo democratic institutions.

As such, Hungary formally remains a democracy -- and Fidesz recently retained its two-third majority in parliament in free elections (whether they were fair elections is another question). Informally, Fidesz has instituted a number of changes in the constitution that concentrate power in the government institutions that the Party controls. In the economy, for instance, Fidesz has effectively institutionalized corruption in order to enrich its cadre of supporters. "The problem is not that they are privatizing the state for themselves," said Bozóki, who himself once served in government as a minister of culture. "They are nationalizing other people's private goods for the state and the state is equal to themselves. There is a privatization via nationalization because the state itself is privatized. Don't be misled when you hear that some private activities are nationalized. It just means that the larger mafia took over the smaller one.

Bozóki remains cautiously optimistic, at least about the impact the Hungarian U-turn will have on the EU. "The EU doesn't have institutional mechanisms for dealing with this problem," he concluded. "And so it might happen that the EU will have a non-democratic country among their member states. My prediction is that the Hungarian experience will serve a good purpose in the future to make the European Union into a stronger federation that figures out how to better maintain democratic norms."

The Interview

Why did liberalism become unpopular here in Hungary?

I'm afraid that it is unpopular in some other countries in the post-Communist world as well. I think it's partly because democracy came to these countries as a result of the collapse of the Cold War and the Soviet Union and not so much as the result of a popular uprising or a common popular experience. Poland seems to be the exception to this rule, because Solidarity was a genuine popular movement. But even in Romania, the revolution was widely regarded as stolen by the former Communists.

In Hungary, we did not have a huge popular umbrella organization like Solidarity. We had relatively small groups of intellectuals, liberals, and populist Third Way people in the opposition, who tried to find some common platform for the transition. That led to a situation where, because of the mutual distrust that these intellectual groups had toward each other, we had a multiparty system before we had democracy. They were mediating between political power and society, but not fully representing society because they didn't know what society wanted.

Communism in Hungary was not so tough. It was a kind of goulash Communism. Which meant that people were atomized, neutralized, depoliticized. They were mostly interested in consumerism and their own survival. Freedom of speech was of course a welcome change, as was democracy. But it was not something that millions of people protested for. These new opposition groups organized a Round Table meeting with the Communist Party. The new constitution and the entire institutional setup of the new democracy was a result of the Round Table talks of 1989 in Hungary.

Retrospectively, it was a pretty elitist type of transformation. A couple thousand people participated in it: a few hundred in the Round Table plus the memberships of those nascent parties. Although there was a popular referendum in November 1989 and some huge protests, which were truly important, still it was a rather elite-driven transition. These people also accepted and adopted the dominant political ideologies of the time, mainly this neoclassical economics: liberalism in a neoliberal form. Because 1989 coincided with the Reagan/Bush/Thatcher era, this dominant mood was very strongly anti-state, pro-free market, and so on. Although the Hungarian opposition was initially thinking of different alternatives, by 1989 the new emerging political and economic elite unquestioningly accepted this Hayek-Friedman type of free market capitalism as something that should come hand in hand with representative democracy.

People didn't know about this. Everyone hoped for a positive change. Of course, democracy is much better than dictatorship, so everyone can be seen as a winner in this sense. This is what the political elite communicated to society: "Even if there will be hardships at the beginning and you might lose your jobs, at the end of the day it will be good for everyone."

Society was surprisingly demobilized. People didn't protest against the injustices of "spontaneous" privatization and the hardships of economic transformation because liberalism was the dominant thought of the time. Westernization, free speech, freedom of the press, human rights, checks and balances, rule of law with strong guardian institutions like the constitutional court and the ombudsman. It was a very sophisticated set of democratic institutions - but without the spirit of democracy. And that's what is so strong in the United States: every individual knows that they have to fight for their rights. This is something within people. In Hungary, people expect a lot from the state but, at the same time, they do not trust the state and its organs. Democracy is not just a matter of institutions. There is a tradition as well in the minds and hearts of people.

Here, somehow, democracy and its liberal version plus free market economy were just seen as a Western import. Of course everyone wanted open borders and free access to go to Vienna and elsewhere. They wanted to travel, see, and buy things. But somehow the spirit of democracy did not touch people. Due to the neoliberal agenda, deregulation and privatization were the order of the day. Of course, this also involved the total restructuring of the economy, with the selling of public assets to private individuals. Hungary got the largest amount of foreign direct investment in the region in the 1990s. Hungary also had shock therapy in 1995, this famous Bokros austerity package named after the finance minister at the time. Everything went according to this elite-driven democratization agenda. But somehow the participatory aspect of democracy was missing.

People were patient for a long time. They were waiting, thinking "Okay, it is better, but it was promised to be much better." Indeed since 1995 there has been economic development -- until 2008 when the economic crisis hit. But somehow, economic development is not enough if people feel that the fruits of the income are not distributed fairly. Inequalities were growing in the 1990s, then were tempered a bit in the 2000s, and then growing again since 2009.

By the second part of the 1990s, this basic liberal consensus was slowly evaporating. At that moment, Fidesz came to power in 1998. They were still in this neoliberal framework, but they were already starting to make some populist arguments for an ethno-nationalist understanding of Hungary: not as a political community but as an ethnic community including every Hungarian living outside the boundaries of the country. Suddenly Fidesz discovered the power of nationalism as a constitutive force. Nationalism substituted for this missing link, the spirit of democracy, and this was how people could be mobilized. Even as it remained within the framework of liberal democracy at that time, Fidesz moved from the liberal center to the conservative-nationalist Right for pragmatic reasons. They realized that there was a space for them to occupy and attract a stronger and longer lasting constituency.

The liberal party, the Free Democrats -- which used to be very strong and received more than 20 percent of the votes in 1990 and also did well in 1994 - came into government with the Socialist Party (former Communists), and lost their credibility. They supported unpopular policies, like shock therapy. Not from the beginning but after 2000 liberalism became somehow unpopular and came to represent upper class and "foreign interests." Although there was economic development and foreign direct investment, it was not clear how Hungarians would benefit from this. By the end of the 1990s, the gap between the rich and the poor was rising. Many people believed that they were waiting patiently for a better life. Many of them lost their jobs. There were new factory owners, and many factories were closed. New investments from Japanese and German firms -- Audi, Suzuki -- came to this country and introduced a new working culture. Those who worked in these factories had to learn a new labor culture in which trade unions had little say. Those who were outside these modernizing islands had less salary and worse working conditions. Those who belonged to the "losers" started to hate the rest -- the banks, the multinational corporations, foreign investors. They were easily becoming followers of a right-wing or even far-right ethnicist ideology.

But that tendency was a little bit delayed or interrupted when Fidesz lost the elections in 2002, and the Socialists and the Liberals returned. By that time the liberals were already a tiny party. But the Socialists still needed them in the governing majority. There was an economic boom at that time as well as a successful set of negotiations to join the EU. Even if the economic expectations were not so great, still the political and economic elites were optimistic because Hungary joined all these Western organizations -- NATO in 1999 and later the EU in 2004. Those were the years of hope and optimism and overestimating the positive role of the EU in a new member state. People said, "Look, you can be indebted, it doesn't matter, because from 2004 we will be part of a larger unit and we will receive a lot of money from Brussels in the form of Cohesion Funds." So, this was not a realistic Euro-optimism.

Between 2002 and 2004, the prime minister was Péter Medgyessy representing the Socialist-Liberal coalition and pursuing social democratic policies. But when people realized that this politics of redistribution wasn't working, Medgyessy lost popularity and had to be replaced by Ferenc Gyurcsány, a young energetic person who himself was more like a social liberal following Tony Blair and Third Way policies. He was not really a leftist or a liberal, rather somewhere between the two, a progressive. But he was a very charismatic person. He was able to bring together the Left and the liberals to create a progressive base that was not exactly liberal and not exactly Left.

Gyurcsány was successful at the beginning. The coalition was reelected in 2006. This was the first time in the history of Hungarian democracy that an incumbent government was reelected. Until 2006, all governments lost elections after their four-year mandate expired. The optimism still lasted until 2006. Gyurcsány was self-confident, and he promised a lot and was a lot better in TV debates than Viktor Orbán of Fidesz. Orbán lost two elections -- in 2002 and 2006. But then came Gyurcsány's 2006 "leaked speech," in which he admitted he had lied about the state of economy before the elections. It was obviously a terrible mistake, as well as the mistakes of the police in dealing with protestors on October 23, 2006 -- the 50th anniversary of the revolution in Hungary. Fidesz was clearly beaten in April 2006, and suddenly within half a year they were back. The coalition was mortally wounded already at the beginning of its second term. Gyurcsány asked for a vote of no confidence against himself, but the majority of the MPs gave him a mandate to stay in power and continue to govern. In the following two years he wanted to implement what were intended to be liberal reforms. But it was a hostile social environment. And the reforms, which were not strategically thought out, were poorly implemented and delivered.

There were two years of fruitless efforts, a lost referendum on Gyurcsány's reforms in March 2008, and then in September 2008 the economic crisis started. There was a 6 percent decline in Hungary's GDP in one year. Gyurcsány resigned in early 2009, and it was clear that the Socialist-Liberals would lose badly in 2010. But that had actually been clear in 2008, two or even three years before the elections. The Socialist-Liberal political elite made the mistake of not replacing Gyurcsány with another guy who might have saved the country from the two-thirds majority that Fidesz won in 2010 and preserved the framework of democracy. Indeed, by the second term of the Socialist-Liberal cabinet between 2006 and 2010, not only ardent right-wingers were against the government. There were also neutral people as well as former supporters of the Socialists who'd lost their influence and witnessed the decline of the economy. People were saying that there was something wrong with democracy, that it was not about people but about other interests, that democracy had been occupied by the parties. It was no longer really democracy in the sense of a colorful set of institutions, social movements, trade unions, civic organizations, NGOs, think tanks, and so on. There were mostly parties which colonized public life. If you wanted to achieve something, you had to go along one of these party channels.

The belief in free market economy and democracy was fundamentally shaken due to the political crisis of 2006 and then the economic crisis of 2008. That led to an increasing hostility toward the banks. Many people were indebted -- not in Hungarian forints but in Euro or Swiss franc. As a result of the crisis, the currency exchange rate was fundamentally altered and not in favor of the forint. Those who had to pay back loans to the banks realized that they had to pay more and more, even twice as much within one month. Many people, unable to pay back their loans, went bankrupt. And the Socialist-Liberal government was unable to develop a policy to avoid this procedure. The government said it was an individual responsibility, that the people should have read the contract. But many people had really been encouraged to take a loan from the bank at the time of this fast development. Nobody expected such a decline. They did not see the footnotes in small print on the contract. That was a very painful experience of the cruelty of the market economy. Maybe now people are becoming more educated in terms of the market economy. But they somehow believed that their contract with the bank was like a pension with the state or a labor contract, something reliable and always the same. So, it was a big negative shock.

By this time Fidesz could collect a very colorful social coalition against the Liberals and the Socialists. The coalition included the far Right, the moderate Right, the economic conservatives, citizens from the lower classes who wanted a stronger state, the populists, those who became disappointed with the performance of the Socialist Party, and even those parts of the pensioners and the unemployed who tended to blame the Roma in the countryside for their troubles. There was increasing social segregation between the "white" population and the Roma population, which had not been the case 20 years ago. Budapest was "cleaned up" of Roma, and they were marginalized -- not only to the margins of Budapest but back to the rural areas where they could not find jobs. There is a new culture of unemployment that is very isolated from the working part of the society. That fueled racism. Some far Right groups organized racist killings: six Roma persons were murdered in 2008-9. The political reaction to this was not unanimous. The right wing was saying that it is because they were stealing chickens or cucumbers from the garden so they deserved it. People in the countryside felt that there was no law and order, and Fidesz promised law and order. Jobbik, the far Right party, organized paramilitary troops, the Hungarian Guard (Magyar Gárda), a violent paramilitary organization characteristic of fascism. Fidesz only said, "Just keep calm and wait for the elections." They were in such a comfortable position that they didn't have to promise any policy programs.

When they got the two-thirds majority in the parliament, Fidesz wasted no time in starting their constitutional coup d'état. They fundamentally altered the law on the Constitutional Court, nationalized the private pension funds and introduced a new media law, which controls the mainstream media. There is one radio and one TV station not controlled by them, plus some marginal journals and of course the Internet. There's almost a total media monopoly by Fidesz. Thank god we are living in the Internet age. But there is a digital divide in Hungary, so the young urban professionals read the Internet and the others watch TV. But public TV is controlled by Fidesz, and the commercial TV is depoliticized. In the countryside, the majority of the people watch TV.

We have freedom of speech. You can write any article you want. You can sharply criticize the government. But your space is limited. There are no killings of journalists. There's no forcing people to emigrate - still, almost half million Hungarians left the country for the West since 2010 out of economic necessity. I wouldn't call this Putin's Russia or Lukashenko's Belarus. It is still a democracy, but a majoritarian, illiberal democracy that is moving in the direction of a hybrid regime with a mix of democratic and dictatorial elements. Democratura -- as Philippe Schmitter and others coined this term to describe Latin American countries in the 1980s.

In this way, liberalism became a negative notion in the public discourse. Liberalism is seen as an idea that is somehow against the Hungarian people and imposed by foreigners, diplomats, banks, bankers, multinational corporations. People wanted a protectionist economic policy. They wanted the government to tax the banks. This is what Orbán did, so that has made him popular. He is not taxing the citizens directly, as most democratic governments do. But Fidesz has really taxed the banks, which had only indirect impact on ordinary people. This was very popular in the beginning, not only in the right-wing circles but even on the Left. Even the Guardian published articles in 2010 saying from a leftist point of view that Orbán was such a great guy for taxing the banks. Indeed, from 1998 to 2008, the banks were making huge profits. Since Hungary was the most indebted country in the Communist bloc in 1989, the solution was to sell the debt, i.e. state property, and put the banks in foreign hands. Therefore it was easy to make sometimes anti-Semitic, anti-capitalist, or anti-liberal propaganda against the banks. But for most people it was not completely without reason in the sense that the banks really did make extra profits.

After 2009, people started to suffer. Elderly people wanted a good fatherly figure for a prime minister, a populist who promised to take care of them and save them from competition and from the unexpected and uncertain aspects of capitalism. I condemn the Orbán government for its very strange mix of ethno-nationalism, flat tax economic neoliberalism, socialistic nationalization of, for instance, the tobacco shops, and marginalizing the poor. Ideologically, it's a complete unorthodox mix driven by the populist, opportunistic goal of keeping power and maximizing votes. In the cultural policy, they sometimes follow far-Right policies to pacify and attract the Jobbik voters. While they condemn officially anti-Semitism, they don't separate themselves from those who practice anti-Semitism, because they count on those voters. And they didn't even condemn those who were very anti-Roma in their propaganda. Fidesz and Jobbik are playing a very dangerous and dubious game. Fidesz doesn't want Jobbik to go too far or grow too big, but the price is that they mainstream some of their ideas, which are otherwise on the margin.

Having said all that about these dangerous directions, this situation didn't come from thin air. The economic crisis and the economic hardships, the political mistakes of the previous political elite, an understanding of politics restricted to parties, and the lack of meaningful political participation by citizens all somehow created a situation where a populist politician like Orbán could have a major impact in large segments of society, especially the non-competitive segments. Now they want to create a more rigid and hierarchical educational system by creating a single center that nominates all the teachers. There will be greater ideological control that way. Many schools have been given to the Church, so the divide between Church and state is dubious at the very least.

These very anti-liberal decisions seem to be rather popular among people. With legislation against homeless people, to dislocate them with the help of the police, and the further control of the constitutional court and the ombudsman, they are trying to be more and more secretive and less and less transparent. Transparency International, for instance, doesn't cooperate with this government any more. They are nationalizing the civic sector so that "civil movements" are getting money from the government. They created their own "civic" organization, the Forum of Civic Cooperation, by which they "outsourced" pro-government propaganda. They are also domesticating the trade unions -- not all of them, but most of them. So there is an increasing hierarchization of the civic and political arena.

You discussed the nature of this elite project, with the Round Table and the proto-parties. You contrasted that with democratic spirit. Hungary had democratic institutions without the democratic spirit. If you were able to travel back in time and change the way the transition went -- given that Hungary wasn't Poland and there was no Solidarity here -- what could anyone have been done to have made this less of an elite project, instill more democratic spirit into the enterprise, and avoid the elitism that still plagues the opposition today?

To read the rest of the interview, click here.