Financial Crisis Management and the Rise of Authoritarian Populism: What Makes Hungary Different from Latvia and Romania?

Abstract

Within the context of the debates on the worldwide rise of populism, this article aims to uncover factors that may reduce the vulnerability of a system to populist challenges. Based on existing theories, Hungary, Latvia and Romania are all susceptible to populism but authoritarian populism has emerged only in Hungary. This puzzle is addressed through examining the process of financial crisis management in the three cases and its impact on the political system. Comparative analysis shows that paternalistic expectations of the state and the government’s willingness to accept Russian support distinguish Hungary from Latvia and Romania.

Notes

1 For a thorough review of the speech see Tóth (2014).

2 His description is closely related to the concept of competitive authoritarianism, a type of hybrid regime, in which ‘elections are regularly held and are generally free of massive fraud, incumbents routinely abuse state resources, deny the opposition adequate media coverage, harass opposition candidates and their supporters, and in some cases manipulate electoral results’ (Levitsky & Way 2002, p. 53).

3 This feature leads Magyar (2016) to call Hungary a mafia-state. Such characterisation is also contested, given the conceptual problem of the mafia, so I prefer the concept of authoritarian populism.

4 ‘Putin’s Asymmetric Assault on Democracy in Russia and Europe: Implications for U.S. National Security, A Minority Staff Report for the use of the Committee on Foreign Relations, United States Senate’, 10 January 2018, p. 1, available at: https://www.foreign.senate.gov/imo/media/doc/FinalRR.pdf, accessed 14 January 2019.

5 For an extensive overview of these relationships see Klapsis (2015) and the Atlantic Council (2016, 2017, 2018).

6 According to Veebel (2016, p. 16), such campaigns have the following objectives: ‘Demonize the adversary, deter and demoralize the adversary, legitimize one’s own activities to the general public, mobilize target populations, promote one’s own political elites’.

7 ‘Putin’s Asymmetric Assault on Democracy in Russia and Europe: Implications for U.S. National Security, A Minority Staff Report for the use of the Committee on Foreign Relations, United States Senate’, 10 January 2018, available at: https://www.foreign.senate.gov/imo/media/doc/FinalRR.pdf, accessed 14 January 2019.

8 Data on GDP per capita in PPS are from Eurostat, available at: https://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tec00114&plugin=1, accessed 14 January 2019.

9 Data on Gini index are from Eurostat, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ilc_di12, accessed 14 January 2019.

10 Data on total government expenditure are from Eurostat, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=gov_10a_main&lang=en, accessed 14 January 2019.

11 In 2018 Latvia’s Rule of Law score was 0.96, Hungary’s 0.56 and Romania’s 0.33. World Governance Indicators with interactive data access are available at: http://info.worldbank.org/governance/wgi/Home/Reports, accessed 26 March 2020.

12 For a broad overview of these developments see Zgut (2018). The next part will also return to these issues.

13 The following description is only a very brief summary about the roots of the crisis in the three countries. For a more extensive description see Győrffy (2018, pp. 155–59).

14 The average fiscal deficit between 2002 and 2006 was 7.9% of the GDP, while debt during these years rose from 51.4% in 2001 to 64.1% of GDP by 2006. Data: European Commission (2018, pp. 161, 165).

15 On the basic facts and timeline of the financial assistance programmes to EU member states, see the EU financial assistance website of the European Commission, available at: https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance_en, accessed 26 March 2020.

16 Prior to the financial crisis a strong consensus emerged on fiscal consolidations, as among scholars and policymakers there was agreement that expenditure-based adjustments are more beneficial for long-term growth than increasing taxes. While this consensus came to be questioned during the management of the crisis, as expenditure cuts depressed domestic demand, it still counted as the orthodoxy during the management of the crisis in the three countries under consideration. Ban (2015) provides an extensive overview of this debate. Structural reforms aim to make fiscal consolidation sustainable as well as improve the growth potential of an economy. For a collection of various reforms in the European context, see Aslund and Djankov (2017).

17 See the timeline on the European Commission Financial assistance to Romania website, available at: https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/which-eu-countries-have-received-assistance/financial-assistance-romania_en#key-events, accessed 26 March 2020.

18 ‘Convergence Program of Hungary 2011–2015’, Government of the Republic of Hungary, 2011, pp. 66–7, available at: http://ec.europa.eu/europe2020/making-it-happen/country-specific-recommendations/2011/index_en.htm, accessed 30 May 2018.

19 ‘Convergence Program of Hungary 2011–2015’, Government of the Republic of Hungary, 2011, p. 47, available at: http://ec.europa.eu/europe2020/making-it-happen/country-specific-recommendations/2011/index_en.htm, accessed 30 May 2018.

20 The ratio of non-performing foreign currency loans increased from 7.5% in 2010 to 18% by 2013 (European Commission 2014, p. 32).

21 The new law cut the number of parliamentary representatives from 399 to 199 with 100 elected from single-member districts and 99 through proportional party lists. The second round of voting was abolished in the districts, which was extremely advantageous for Fidesz as it was facing a highly fragmented opposition.

22 As Benczes (2016) aptly notes, over the past decades Hungary made the journey from goulash communism to ‘goulash populism’.

23 Regulations passed in a very short period of time can drive companies out of business virtually overnight. In Hungary this happened, among others, with tobacco shops (December 2011), the cafeteria system (January 2012), gambling machines (October 2012) and the Central European University (April 2017), forced to move most of its activities to Vienna. For a detailed overview about widespread nationalisations, see Mihályi (2014); on the issue of CEU, see Corbett and Gordon (2018).

24 The information on operating budgetary balance is available at: http://ec.europa.eu/budget/figures/interactive/index_en.cfm, accessed 14 January 2019.

25 The analysis by KPMG-GKI (2017) shows that in the absence of EU funds, Hungarian GDP would have been 6.4% lower than the actual figure in 2015, and even below the 2006 level. The funds also presented an opportunity to enrich loyal supporters of the government. The most prominent example is Lőrinc Mészáros, a gas-fitter and former mayor of Felcsút—Orbán’s birthplace—now the richest man in the country. Enriching the clientele provided a reason for weakening institutional checks and balances, such as the appointment of an Orbán loyalist Péter Polt as chief prosecutor (Magyar 2016).

26 ‘Orosz befolyás Magyarországon (1.a rezs) rezsicsökkentés fogságában’, Political Capital, 23 February 2018, available at: https://pcblog.atlatszo.hu/2018/02/23/orosz-befolyas-magyarorszagon-1-resz-a-rezsicsokkentes-fogsagaban/, accessed 30 May 2018.

27 For a detailed description of these business deals, see Deák et al. (2017, pp. 75–84).

28 ‘Putin’s Asymmetric Assault on Democracy in Russia and Europe: Implications for U.S. National Security, A Minority Staff Report for the use of the Committee on Foreign Relations, United States Senate’, 10 January 2018, p. 94, available at: https://www.foreign.senate.gov/imo/media/doc/FinalRR.pdf, accessed 14 January 2019.

29 ‘Putin’s Asymmetric Assault on Democracy in Russia and Europe: Implications for U.S. National Security, A Minority Staff Report for the use of the Committee on Foreign Relations, United States Senate’, 10 January 2018, p. 96, available at: https://www.foreign.senate.gov/imo/media/doc/FinalRR.pdf, accessed 14 January 2019.

30 Critics of the anti-corruption agency assert the politically motivated nature of the process, which prioritises left-leaning targets. Regardless of its ultimate motivation, the bureau clearly hinders the corrupting influence of Russia.

31 For an extensive overview on the 2017 protests and the background, see Adi and Lilleker (2017).

32 Total government expenditure in Poland fluctuated between 43.6 and 45.8% of GDP during 2000–2010 and between 41.6 and 43.9% during 2011–2018 (European Commission 2018, p. 159).

33 According to Kucharczyk (2017, pp. 100–8), Russian influence operations in Poland work through a variety of channels: narratives on traditional values and morality as well as the migration crisis find a receptive audience in Poland; there are also various Polish websites that spread Russian narratives; Russian actors are actively trolling on Polish social media, and questions about Russian ties have also surfaced with regard to certain senior government officials (Kucharczyk 2017).

Additional information

Notes on contributors

Dóra Győrffy

Dóra Győrffy, Professor, Péter Pázmány Catholic University, Corvinus University of Budapest, Hungary. Email: [email protected]