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Orbán is Right.

Hungarian history after 1989 may be described as a capitalist success story, and in many ways, it is. Hungary handled the transition from dictatorship and centrally-planned economy to democracy and market capitalism seemingly smoothly. Since then the small central European nation has shown constant economic growth, thanks also to the help of the European Union, which Hungary joined as a full member in 2004. Walking around Budapest you can find plenty of signs of this renaissance. The beautiful and eclectic architecture of the 19th century, once filthy and dilapidated, is shining again, construction sites are springing up all over the place, and the streets of the city center are full of tourists in awe of the sights. Wages are increasing, foreign capital is flowing-this could easily look like a success story of open market, democracy, and an economic “catching up.”

Yet, something is off. The far-right Fidesz party has been firmly holding power since 2010, in an increasingly authoritarian fashion. The Prime Minister and part-leader Viktor Orbán obtained a two-thirds majority of the Parliament seats in 2010, which allowed Fidesz to modify the constitution and the electoral law, without substantial cooperation from other parties (save for its minuscule coalition partner KDNP, a hardline Christian conservative party). As a result, when Fidesz received 44 percent of the votes in 2014, it could once again come close to a two-thirds majority in the Parliament; and, with a deeply divided opposition ranging from center-left parties to nationalist Jobbik, Fidesz could retain its grip on political power and decision-making.

Under Orbán’s reign, Hungary has come into the international spotlight for a series of very divisive and highly criticized actions: the way it handled the migration crisis by building a wall on the Serbian border and demanding the European Union to pay for it, a very vocal opposition to EU’s policies while using the EU as a scapegoat in domestic political communication, suppressing free press and public sector accountability, an apparent obsession with “background powers” led by NGOs (all allegedly linked to billionaire George Soros), and open flirtations with autocratic leaders such as Vladimir Putin or Turkish president Recep Tayyip Erdoğan. For those who fear increasing extreme right sentiment in Hungary, the Fidesz party is not even the most hard-lining player. The impressive electoral results of Jobbik are alarming-the far-right party was previously openly neo-Nazi, although it most recently attempted to strike a less extremist tone, partly in response to Fidesz’s more pronounced nationalist turn. In the 2014 elections, the party received over 20 percent of the vote, although it gained a much more modest share of parliament seats, thanks to Fidesz’s electoral law.

These developments are quite puzzling from the outside. Why would a small country with an open economy, which seems to have profited so immensely from the EU and open markets, experience such an alarming isolationist and extremist turn? With a highly fragmented opposition, ranging from technocratic centrists to liberal parties to the extreme right Jobbik, and a massively dominant governing party-which identifies itself as conservative but has been increasingly considered “extreme right” by international onlookers-is present-day Hungary in reality torn between the right and the far-right?

Hungary is far from being the only country among post-socialist nations to have shown the same symptoms: Poland is in a similar situation and, ça va sans dire, Russia. To be fair, nowadays a conservative wave is far from being limited to the post-socialist context, as the Brexit vote or the recent elections in France, Germany, and the United States have shown. But the case of Hungary seems to be even more extreme, comparable to Poland’s regressive turn, showing signs of an EU member state slipping towards an autocratic system similar to Turkey or various post-Soviet states. Also, Hungary’s conservative-nationalistic turn seems to have been around longer, preceding rather than following Western trends. It may also have begun a dangerous cycle on its own: while nationalistic, xenophobic, and autocratic measures may have initially been ignored or ridiculed by Western media and public opinion, similar turns now seem to receive legitimacy elsewhere thanks to being “mainstreamed” by Orbán’s regime. We can see the symptoms, but what is the illness?

1. A Polanyian story.

To understand what is happening, the insights of Hungarian economic sociologist Polányi Károly (1886-1964), better known as Karl Polanyi, have become timely once again. In his opus The Great Transformation (1944), he explains how economic elites are incentivized to advance the interest of Capital against the interests of labor and nature. As utility maximizers, capitalists have a vested interest in transforming the greatest possible share of social relationships into a market relationship, even at the cost of threatening the cohesion and stability of society. Money may be an important lubricant for the economy, but persons without much capital on their own need it primarily to ensure vital living conditions; their commodity to sell in the market society is therefore their labor.

Labor is labeled as a “fictitious commodity” by Polanyi, and it is quite clear that it cannot be treated as a commodity very easily. Treating labor as a commodity creates various damages. Unlike normal commodities for example, labor can’t be stored if demand is low, because workers need to survive, nor can it be displaced as easily as a bag of potatoes. We arrive therefore to what Polanyi calls the “double movement”: on one hand, capitalist forces try to open economies and enforce self-interest as the basis of all social processes, treating everything as a commodity on the market; on the other, persons without wealth push for social protection. This theory is used to explain the nature of the modern welfare system, which allows the (partial) decommodification of what the market has commodified.

But decommodification isn’t necessarily socially “progressive.” Polanyi, for instance, explained the rise of fascism in Italy as society’s attempt to protect itself from the excesses of the market, and makes this important point:

“Yet the victory of fascism was made practically unavoidable by the liberals’ obstruction of any reform involving planning, regulation, or control.”

(The Great Transformation, p. 265)

2. Waking up from a terrible hangover.

During the transition to market economy, Hungary immensely suffered under the excess of unregulated liberalism, sharing the fate of many neighboring countries. Major elements of economic restructuring were referred to as “shock therapy,” and the patient is still not quite well. Hungary was long considered a promising eminent of economic transition. But was it really? Let us consider one important aspect: for many years, Hungary’s most competitive commodity has been its cheap labor force for the international capital.

To boost restructuring and competitiveness, as well as reduce the country’s crushing debt, decision makers hurried to privatize state-owned companies; this also seemed at the time an adequate solution to “adopt” capitalism and attract foreign investment. Eventually Hungary did not only become liberalized-it became more liberalized than most “old capitalist” countries. Opening the markets was so successful that, walking through Budapest, one cannot miss how large a share of the economic life in Hungary is dominated by outsiders: the biggest banks are Austrian, German, and Italian, as are the supermarkets and the IT and telecommunication companies. The same goes for production: the biggest companies in the country are Audi, General Electric, Mercedes Benz, and Bosch, making Hungary appear as a sort of a neo-liberal colony. In a race for investors, Hungarian governments have cut corporate tax rates to among the lowest in the world, at 9 percent (as opposed to 35 percent in the United States, a par excellence liberal market economy). Political communication in Hungary praises SMEs as much as anywhere else, but the true drivers of economic growth are predominantly foreign-owned corporate giants. Hungarian workers have little access to the “means of production,” but, in all fairness, neither do Hungarian employers.

State revenues are predominantly covered by outstanding taxes on consumption, with one of the highest VATs in the world. The Hungarian economy is all export oriented. On the flipside, this has led to low wages and incentivized tax evasion. This setup also left many public services severely underfunded, among them health care and education; investments have been stagnant or lowering for years, and currently their quality stirs public debate. Welfare provisions inherited from the socialist period were extensive initially and then continuously cut for budgetary restraints; currently, a modest unemployment benefit is available for only a three-month period and social provision is meagre.

In the end, Hungarians have little control over their economic life. Especially within the European open market, they become a commodity themselves. In an outstandingly open economy dominated by international companies, the vast majority of Hungarians make a living on the sole thing they can offer: a cheap workforce. This puts people in a constant state of alienation: all the surplus wealth they produce during their (long) working hours is siphoned away.

Hungarians increasingly compare their own salaries to the higher salaries of Western Europeans; a sense of injustice has been growing more intense and a growing number of workers leave the country to establish a more secure living elsewhere. After all, why would a worker stay when they can earn three times their current salary in just a three-hour train ride, with better public services and higher unemployment benefits? The recent modest and gradual wage increases have been offset by a controlled devaluation of the Hungarian forint to keep Hungarian exports cheap to the outside world. While record low unemployment in Hungary is often cited by politicians as a success, it is currently developing into a severe labor force shortage in underfunded public services, especially health care, while the situation borders on crisis.

To understand national feelings, one must also leave the thriving capital and its metropolitan area, which is home to about 20 percent of the country’s population, but provides 40 percent of the country’s GDP. Quality of life improved in some smaller urban centers, but wage levels lag behind not only the EU, but Hungarian averages as well. And the more rural the location, the worse access people have to services and basic welfare provisions. Fidesz party media dominance follows the exact opposite patterns: Budapest’s city dwellers have abundant access to internet-based media outlets critical of the ruling party, while small locality populations are significantly more likely to be informed about the threats of international migration, George Soros, or “Brussels”-as well as their government’s almost heroic efforts to protect them from these ills. And in a way, rural Hungarians’ and the urban poor’s strong preference for someone who claims to stand up for them is perfectly rational: they have been left behind by post-transition political elites, and they sense it very clearly.

3. What Orbán understands - and liberals don’t.

The personal history of Hungary and its Prime Minister Orbán are curiously intertwined. Orbán began his political career in 1988 in the ranks of Fidesz (then short for Fiatal Demokraták Szövetsége, the Alliance of Young Democrats), a newly formed liberal party hailing transition and democracy. But as a rising number of Hungarians came to see the drawbacks of a heavily liberalizing transition, Fidesz-led by Orbán with an iron hand-also turned away from its original ideology and slid first towards conservatism, then, when the vision of a “bourgeois” Hungary failed to bring him victory in the 2002 elections, towards right-wing authoritarianism. It now seems he has a unique ability to trace the feelings of the population like no other player in politics, understanding especially the very legitimate needs of those often labelled as the “losers of transition.”

After forming government in 2010, Orbán championed against what he called “the Western financial crisis”; he green lit an “unorthodox” economic policy and eventually shared his vision of an illiberal society, which, in his words, would be able to “bring a nation to success.” Since 2010 Orbán’s government has implemented “crisis” taxes on sectors dominated by Western Europeans companies and imposed one of Europe’s highest banking levies on mostly foreign-owned banks. To allegations of corruption, he responded with the necessity to establish a “national capitalist class,” which implies keeping Hungarian capital in Hungary and allowing internal investments and the development of an internal economy. His government made huge efforts to nationalize utility companies and much of the banking sector in the name of “economic patriotism.” Such measures were often hasty and poorly planned, but they otherwise could be easily seen as an attempt to mend the errors made during the shock-therapy liberalization of the 1990s.

Not too differently from the rise of extremism described by Polanyi, Orbán was able to occupy a political space of disgruntled and alienated citizens when the opposition still seems to have no better ideas, other than more liberalism. All that opposition parties (apart, of course, from Jobbik) seem to be able to offer is being “more European”; whereas, for most Fidesz voters, the past decade’s efforts to advance “towards Europe” only brought about less welfare, less job security, and more uncertainty. Voting for Fidesz, especially for the numerous “losers of transition,” makes perfect sense.

4. Orbán is a consequence, not a cause.

We are not here to do the hagiography of the man. A lot of his illiberal narrative is just a publicity stunt. He is himself a member of the elite, he was and is a part of the liberals that wracked the country. But outstanding communication tactics, including playing the victim of the liberal order, position Orbán as the underdog against evil globalist forces-which is the essence of his populism. His “economic patriotism” is just crony capitalism, a redistribution of wealth among his acolytes. But there is no clear sign of the cronies’ intention to keep profits within the country rather than sent to offshore investments. This basic confusion between national interest and corruption is even being institutionalized, as a prominent sympathizer of Fidesz put it in an interview: “What I mean is that the government set such goals as the formation of a class of domestic entrepreneurs, the pillars of a strong Hungary both in agriculture and in industry. . . . That is what people call corruption, which is a political point of view. The word “corruption” becomes something mythical.” (source)

But it’s important to reiterate that his success is thanks to his understanding of voter sentiment and addressing the disenfranchised, marginalized, and alienated losers of globalization. Orbán is a liberal that was intelligent enough to understand that liberalism failed Hungary.

Where is the opposition in all this? The opposition is in Budapest, mostly; it suffers from an acute case of false consciousness. Highly educated persons without a ruse comparable to the prime minister’s, the Budapest based intelligentsia, focuses its refined messages at the highly educated voters. Virtually, on the left of Fidesz there is nothing but 50 shades of liberal: liberal greens, third way “socialists” with no socialist sentiment or program, and just plain liberals, à la Soros. Youth movements are mostly liberal as well. While Budapest mimics the way of life of Western European capitals, with its hipster bars and overpriced coffee shops, the opposition forgets that a silent majority around them, with no access to power positions and limited access to media, finds in Orbán somebody who is willing to listen to them as well as address them.

In a condition that recalls the Italian left with Berlusconi, the opposition in Hungary is obsessed with Orbán but not really interested in the structural reasons of his popularity. The opposition loves to hate his flamboyant rhetoric, the obvious falsehoods and inconsistencies of the ruling party, and the absurdities of the government-managed cheap mass media. But while many people see a dangerous swing toward authoritarian rhetoric, no one seems to care about why it is so successful.

Elite preoccupations are far removed from the preoccupations of the poor population. It is reasonable that the old elite in Hungary is liberal: they lived the dictatorship first hand, and they try to distance themselves from it. Much more worrisome is that the young elite is still liberal: they live in a world of English language, relative stability (with the illusion that their modest wage increase is real wealth), and a “European lifestyle” while most of them are just “information-age burger flippers.” The neoliberal colonization of Hungary is not just a question of supermarkets and industries, it is a colonization of the elite’s minds as well.

There is an immense opportunity for a young, genuinely anti-capitalist left in Hungary. Paradoxically, Orbán already paved the way. People just need to defeat their fear of not looking cool enough.