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ABSTRACT
Viktor Orbán and his centre-right Fidesz party won Hungary's April 2010 parliamentary elections in a landslide, running on a nationalist-populist platform of economic self-rule. This paper explores Hungary's financial nationalist turn and its surprisingly successful resistance to IMF and EU pressures to change course. We open by theorizing financial nationalism, and then trace its ideational roots and contemporary character in Hungary. We subsequently argue that two international factors ironically enabled Orbán to take his financial nationalist ideas from theory to practice: 1) IMF and EU policies that first contributed to Fidesz's electoral victory and then made it difficult to counter Orbán once in power; and 2) the tolerant behavior of international bond markets. In particular, Orbán's willingness and ability to use unorthodox, financial nationalist policies to control government deficits and debt both reduced EU and IMF leverage over Hungary and encouraged bond markets to overlook the unsavory politics that produced those numbers.
ACKNOWLEDGEMENTS
The authors thank Askat Dukenbaev and Seçkin Köstem for their research assistance and the Social Science and Humanities Research Council of Canada for its research funding. David Howarth, Lucia Quaglia, Sebastian Royo, Amy Verdun, Iain Hardie, and the other participants in our May 2013 Luxembourg workshop provided valuable comments on the first draft, while anonymous RIPE reviewers, Cornel Ban, Quintin Beazer, Paul D’Anieri, Antal Deutsch, Rachel Epstein, Tomila Lankina, Amy Liu, and participants at APSA and ASEEES panels made helpful suggestions on later versions. Although they bear no responsibility for the final product, their input has undoubtedly made this a stronger paper.
Notes
1 Keynote address by Jean-Claude Trichet, President of the European Central Bank, at the Council on Foreign Relations, New York, 26 April 2010. Accessed on 10 July 2013 at < http://www.bis.org/review/r100428b.pdf>.
2 Prime Minister Viktor Orbán's State of the Nation Address, Government of Hungary, 16 February 2014, <http://www.kormany.hu/en/prime-minister-s-office/the-prime-ministers-speeches/prime-minister-viktor-orban-s-state-of-the-nation-address>.
3 EBRD Transition Report 2012 (38): ‘The index is calculated as the sum of the share of eurozone countries in exports weighted by the share of exports in GDP, the share of eurozone cross-border claims on a country weighted by short-term external debt as a share of GDP and the share of eurozone FDI weighted by the share of FDI in GDP.’
4 The establishment of Estonia's currency board in 1992 (in place until Estonia joined the euro zone in January 2011) represented an excellent example of financial nationalism that manifested itself in unusually orthodox, liberal, and European integrationist terms (Bohle and Greskovits, Citation2012). Estonian nationalists viewed the currency board as a tool for Estonian national autonomy from the Soviet Union/Russia and as a symbol of the Estonian nation, so much so that serious economic challenges resulting from adherence to the currency board never led to meaningful political pressures to abandon it. Joining the EU and then the euro zone was the culmination of nationalist aspirations to confirm Estonia as a full-fledged Western nation.
5 While this is most obviously true when globalization pressures spur a protectionist backlash, the relationship between globalization and economic nationalism can be more complex and less self-evident. In perhaps the most comprehensive study of this kind, Rawi Abdelal (Citation2001) demonstrated that historically rooted understandings of national identity (which he termed national purpose) explained the different post-Soviet external economic orientations of Latvia, Belarus, and Ukraine. In particular, the Baltic states’ aggressively pro-European, pro-EU integrationist policy arose from deep nationalist roots.
6 As an anonymous reviewer pointed out, ‘in many ways, Orbán's later nationalism is the collective form of his earlier libertarianism in which the motto “don't tread on me” would be most appropriate. Therefore his journey across the political spectrum involved less movement than most people have thought.’
7 This paragraph draws on Bohle (Citation2014) and Enoch and Ötker-Robe (Citation2007).
8 See the EBRD Country Assessment at <http://tr.ebrd.com/tr13/en/country-assessments/1/hungary>.
9 Thanks to an anonymous reviewer for these observations; see also the 2011 US Country Report on Human Rights Practices for Hungary at <http://www.state.gov/documents/organization/186571.pdf>.
10 Freedom House has continually downgraded Hungary during this period, characterizing it as only ‘Partly Free’ beginning in 2012.
11 Gergő Rácz, ‘€24 billion net EU funding for Hungary in 2007-2013’, Budapest Business Journal, 16 April 2014, <http://www.bbj.hu/economy/eur24-bln-net-eu-funding-for-hungary-in-2007-2013_78519>.
12 The program costs would-be residents 300,000 euro, 250,000 of which would be invested in Hungarian government bonds and returned at no interest after five years. See the Hungarian government's publicity website touting the program at <http://www.residency-bond.eu/>. The program started off slowly but exhibited stronger sales in late 2013, with a reported 430 sold by the end of the year (MTI, Citation2014).
13 Foreign-currency debt made up 41 percent of Hungary's total government debt stock in 2013 (Feher, Citation2014).
14 See the website of the Hungarian Government Debt Management Agency (AKK), particularly <http://www.akk.hu/object.096c690e-60fd-4c53-9785-5b297e6d8cd4.ivy>.
16 The spread between Hungarian and Greek bonds was also very large and negative.
17 Csonto and Ivaschenko (Citation2013) likewise demonstrate that, at least in the short run, global factors influence bond spreads more significantly than country-specific attributes, including economic policies. They also show that this trend holds more strongly when a country's fundamentals – such as GDP growth, inflation, budget deficit, and foreign debt – are in order.
18 Some scholars have argued that credit-rating agencies are subject to political pressures, so their ratings should not be seen as impartial measures of reality. Furthermore, the list of micropolicies that the IMF and credit-rating agencies typically emphasize can actually undermine the goals they profess to have, as their likely short-term effects are economic contraction.
19 As Walter (Citation2008) has observed, the signals that international financial institutions send to financial markets through benchmarking exercises such as Financial Sector Assessment Programs are markedly less effective under conditions of high international liquidity.
20 See Sedelmeier (2014) for a discussion of the EU's inability to sanction Hungary for violations of democratic practices.
Additional information
Notes on contributors
Juliet Johnson
Juliet Johnson is Associate Professor of Political Science at McGill University and the McGill Director of the European Union Centre of Excellence – Montreal. Her research focuses primarily on money and banking in post-communist Europe, as well as on post-communist memory politics. She is the author of A Fistful of Rubles: The Rise and Fall of the Russian Banking System and of numerous scholarly and policy-oriented articles, including in the Journal of Common Market Studies, Comparative Politics, the Journal of European Public Policy, the Annals of the Association of American Geographers, Social and Cultural Geography, Post-Soviet Affairs, and Review of International Political Economy, among others. She received her PhD and MA in Politics from Princeton University and her AB in International Relations from Stanford University.
Andrew Barnes
Andrew Barnes is Associate Professor and Chairperson of the Department of Political Science at Kent State University, Ohio. His research interests include the international political economy of finance and oil, post-communist political economies, and the links between markets and democracy. He received his doctorate from Princeton University in 1998. His first book was called Owning Russia: The Struggle over Factories, Farms, and Power (Cornell University Press, 2006), and his articles have appeared in Comparative Politics, Comparative Political Studies, Post-Soviet Affairs, and Demokratizatsiya, among others.