Gabor Scheiring on the Rise of Authoritarianism in Hungary

Americans are aware that democracy is on the retreat. We are observing anti-democratic tendencies in our own country. Bona fide right-wing authoritarians have risen to power in Brazil, India, the Philippines, Turkey, Hungary and many other places. We are also aware that right-wing nationalist groups grounded in ethnic hatred are also rising up around the world. The United States has its own white supremacist militias. In India, Hindu nationalists are cracking down on Muslims. Throughout Eastern Europe, nationalist groups are turning against migrants, foreigners and notably gypsies. The phenomenon extends to Western Europe as well, with the rise of conservative political formations that are explicitly hostile to Muslim immigration.

Some of this is driven by ethnic hostility pure and simple. Some of it is based on gender. Men are fighting to regain power in their families in the face of rising feminism.

    

Much of it is based on economics. In the United States, economic prosperity has generally favored the East Coast and West Coast, leaving the rest of the country high and dry. Highly educated tech workers do well. Blue collar workers watch their jobs move to China. Whole regions of the country face economic decline – and note the government is not doing very much about it. They turn against the government. They turn against anyone who would take further jobs away from locals. They turn against the values of the people on the coasts who are living the high life while the center of the country rots. 

   

Similar processes are occurring in the rest of the world. These explain the global drift towards dictatorship, ethnic hostility and anti-feminism.

    

A magnificent discussion of this issue can be found in Gabor Scheiring’s book Retreat of Liberal Democracy. (Palgrave Macmillan 2020) This is an outstanding discussion of the rise of the right-wing authoritarian Viktor Orban in Hungary. The American mass media does not cover Hungary in any detail; popular explanations of his rise to power are not very satisfying. We tend to think of dictators as “just showing up” much the way that on a given day it rains. Ethnic hostility in Eastern Europe is often attributed to the fundamental Balkan intolerance – a cantankerousness that produced both World War I, the Holocaust and the massacres in Bosnia. Religious groups, such as the Catholic Church hierarchy and Eastern Orthodox leaders, get blamed for both nationalism and gender intolerance.

    

Americans know very little about the economic realities of these countries – and very little about the real life problems that make people turn to political solutions. In Eastern Europe, the general turn rightward was linked to the economic collapse that occurred after the Fall of the Berlin Wall. Scheiring lays out this story in sophisticated detail for Hungary. Parallel stories can be told in the rest of Eastern Europe although some of the other countries are not so extreme due to mitigating factors.

    

What happened when the Berlin Wall fell? The economies of both Hungary and the rest of the former Soviet bloc opened up to Western business. This meant opening up to Western competition. Most foreign products were better made and better priced than were the goods coming out of the former Communist factories. This was especially the case for anything involving high technology. Opening up these economies meant flooding these nations with imports that drove many local companies out of business.

    

The story was exacerbated by foreign companies buying up the “jewels” of the Eastern European economies that would have been the most competitive. When these prime companies were purchased by foreign multinationals, this left them open to repatriation of profits. Corporate revenues that under local ownership would have been reinvested in the local economy were instead drained by foreigners and reinvested in the home nations of the new owners. This was generally Germany, but it could have been Austria, other European nations or less commonly, the United States. Capital was already scarce in Eastern Europe because many of those nations were indebted to the West. When the economies were opened to foreign competition, international banks still insisted that their debts be repaid despite the greater strictures on these local economies. Investment funds to “upgrade” local firms to allow them to compete with Western importers were difficult to come by. Multinationals draining the best firms of their profits only exacerbated the situation.

    

The new owners frequently gutted the technological capacity of their acquisitions. The prime firms that had been bought out often had extensive research and development programs, and good engineers. The foreign companies wished to use their Hungarian subsidiaries strictly for cheap manufacture while doing all their engineering and technical work in their home countries. This was not an entirely illogical strategy for the multinationals. Inventions in their home countries could be patented in their home countries. Inventions in Hungary might be used by the Hungarian government to develop future Hungarian competition. The effect of all this however was a closing down of a substantial proportion of Hungary’s research and development operations. If Hungary was unable to compete with Western Europe in 1992, the owners made  sure that Hungary would still be unable to compete in 2002 and 2012. And this is exactly what actually occurred. Hungary was never able to export effectively, and its economy essentially tanked.

    

The situation was bad in big cities such as Budapest, and areas that were platforms for manufacture for the EU market such as the western provinces. The situation was worse in the Eastern and Southern halves of the country.

    

Economic distress was increased by a gutting of government welfare expenses. The communists had at least guaranteed workers a basic income, basic housing and good health care. The basic income was lost, and expenditures on health care and old age pensions were gutted in the general financial crisis. Hungary outside the Budapest-Western provinces bubble was completely immiserated.

    

Local businessmen were furious at the government for allowing this to happen. Workers were furious at the government for allowing this to happen. Conservative politicians, seeing an opportunity in the air, began to court the discontents. Because fixing the economy was such a driving priority, reform programs focused at the beginning on rebuilding the positions of local non-transnational businessmen. Businesses not in the technology sector had less motivation to please the West than did their high-technology rivals. So they were especially friendly to politicians who would be nationalist and violate Western norms of democracy, ethnic tolerance and feminism.

    

The globalizing leftists were thrown out of office and the conservative right was elected. The conservative right politicians began to take care of their local low-tech supporters. They cut taxes on industries with national ownership and raised taxes steeply on industries with lots of foreign ownership. They steered government contracts and funding towards conservative businessmen, sometimes through legitimate channels, sometimes through mechanisms involving borderline corruption. The government nationalized banks and steered capital towards its supporters. In some cases, it identified national heroes in heavily internationalized industries, and then rewrote all the laws and policies to favor that one particular hero’s firm. One example was the tobacco industry where it found one small Hungarian owned company in an industry that was otherwise wholly internationalized, and then gave that one small company every legal advantage in the world.

    

To cover the working class, they ran large public works projects, generally in the regions of the country most adversely affected by global competition. This put significant numbers of Hungary’s working class on the government payroll. It also bought the loyalty of those workers working for the Hungarian-owned companies who could associate Orban’s government with their own economic well-being.

   

However, in many ways, the working class would be greatly hurt by Orban, who was fundamentally an ally of the business class. Union power was gutted. Protective labor laws were weakened or annulled. Welfare spending was constricted. Wages stagnated or declined for most of the population. Income inequality soared – because the businessmen who were part of the governing alliance got fabulously wealthy. Everyone else in Hungary suffered.

Orban’s reforms did nothing to make Hungary more competitive in world markets. Its export performance continues to stagnate. Hungarian rates of economic growth are not good. Rebuilding Hungarian technological capacity would have been a key step towards putting the Hungarian economy on a firm foundation. But the Westernized techies were members of the political opposition, and the low-tech nationals were allies – so Hungary’s competitive base continued to stagnate.

    

Still, Orban enjoys widespread support both among the national business class and the working class. This allows him to take increasingly authoritarian measures to fix elections in his favor without significant local resistance. Ideological attacks against foreign business and against globalizing figures within the former Hungarian establishment resonate with people who have been burned by globalization. The attacks against George Soros need to be seen in this light.

     

The recent influx of Muslim migrants from Syria has also played into Orban’s hands. Working class people with few skills do not appreciate the arrival of more poor people competing for the same small supply of low-skilled jobs. Attacks on gypsies also raise hopes that Hungarians of the majority Magyar ethnicity will get a larger share of whatever dwindling jobs still exist in the countryside.

    

Add both increasing government control of the media, and Orban’s Trump-like capacity to put on a good show and give rousing speeches – and one has a political configuration that appears likely to be stable. Orban and the conservatives will probably govern for a long time.

    

Note that the story that is being told here could have been told with only small variations in Michigan or Pennsylvania. It could have been told in the coal districts of France. It could have been told in the North of England where support for Brexit and the Conservatives is relatively strong.

    

There are important, international differences in how conservative the new conservative governments are. There are important national differences in the capacity of the highly educated residents of the high-tech cities to fight back against the anti-globalization protests in the hinterlands.

    

But anti-globalization is a real social force. The leaders of these protests are conservative rather than liberal. The new nationalism is a rising force. This does not bode at all well for world trade, for world economic growth, for democratic liberties, for ethnic tolerance, for feminism or for ecological reform.

    

The new conservatism does not come from Fox News, nor from the personalities of Trump or Orban, nor even from organized religious political actors. All of those forces are there. But what gives the new conservatism traction are the legitimate threats facing the losers from globalization. Putting the Soros and the Clintons and the Yuppies back into power in the short term will not stem these forces until a more fundamental solution is found for the victims of the redistribution of world wealth to the financial and technological elite.

   

Read Gabor Scheiring’s book. It is not only about Hungary. It is about the rest of the world.