Facing the Abyss

Social Watch Hungary
Matyas Benyik

Political situation

At the parliamentary elections held in Hungary on 6th April 2014 the ruling right-wing populist Fidesz party won a landslide victory over its opponents and retained its two third majority. Prime Minister Viktor Orban's policy has been justified by a strong nationalist course in order to catch the wind from the sails of far-right Jobbik.

Jobbik increased its share to nearly 21%, and reached a significantly better outcome compared to 2010, so no doubt we will see more of its paramilitary Hungarian Guard rallies, and Arrow Cross nostalgia in the future.

Fidesz has transformed the electoral system and electoral districts (constuancies) according to its own political interests. However, independently of the electoral system, Jobbik has definitely become stronger as it gained not only more votes, but it has become the second force in the countryside. In many places Jobbik thoroughly has beaten the left-liberal coalition. In other words, the citizens – seeing no alternatives - clearly rejected the liberal left. If democratic opposition had not appeared so well in Budapest, the far right party clearly have become the second force. However, neither the Fidesz's nor Jobbik's results were particularly influential to the electoral result of the green party LMP.

It was not a surprise that Jobbik increased its share, because the party refrained from adopting hard extremist tones in the electoral battle, concealing its antisemitic behaviour and its hatred against the Roma. However, there is no doubt that Jobbik will continue its previous course.

In Hungary, the political situation is now ever more shifting to the right: Fidesz owns a similar proportion of the seats in the Parliament as prior to the election, and the right became stronger.

On the one hand, all this shows is that the people perceive how horribly the Fidesz government has run the country in the past four years, and also the dependence and the attendant fear of the people. It turned out, on the other hand, that the present opposition is no alternative, so the new electoral system could not have brought different results.

Since the system change in Hungary, and in Central Eastern Europe (CEE), new authoritarian regimes have been emerging. Indeed, the so-called new capitalism were unable to stabilize civilian democratic institutions and instruments in this semi-periphery of the world. The reasons are well known: the impoverishment, the long-term downward pressure on wages, maintaining high levels of unemployment, the sacrifice of millions of people require the establisment of new ruling class from the top. The historical roots of the second edition of capitalism are inseparable from the „traditions” of the interwar Horthy regime. The traditions of the new ruling class partly go back to the gentry „family tree”, thus demonstrating - mutatis mutandis - the second edition of the Horthy regime. The social structure of today's Hungary is showing the same „caste” character as the system of Horthy.

The aim of Viktor Orban is to establish a new national bougeoisie and by this to create a stable voting base. Until now this was partly successful, because the new elite has purchased the lands, brought institutions and the people into a highly dependent position. Directly or indirectly the destiny and the existence of masses are much more dependent of the new ruling class.

It became clear as well that the Left following the neo-liberal dogmatism sank and suffered an historical defeat. In addition, Socialists' untalented careerism and corruption was a more serious problem and it seems that liberal democracy is unworkable in Hungary. It turned out again that the Hungarian people do not ask for market oriented and global utopias which contradicts to their whole culture. Since Fidesz’ authoritarian system, with the help of the Liberals, closed almost all the left-wing options of political orientations, it is clear that large masses of people are behind the winners, despite the fact that only 60.2% of those entitled took part in the elections.

The result of the 2014 elections did not depend at all on the election campaign, or the party programs and the debates. Neither of these had almost any influence on the outcome of the general elections. Moreover, the result is a direct consequence of Orban's policy in the past four years.

Fidesz gained also an overwhelming victory in the EP elections on 25th May 2014: the ruling party acquired 51% of the votes in the low, only 29% turnout and 12 MEPs will be sent to the EP out of Hungary’s total seats of 21. The ruling party improved its outcome by almost 8 percentage points compared to the results in the national elections last April, while Jobbik reached second place with about 15%, which means three seats in the European Parliament.

The real surprise is the appearance of the left-liberal forces: the MSZP reaching 11% of the votes slipped to the third place, which means only two EP-seats, while the Democratic Coalition led by ex-PM Ferenc Gyurcsany causing serious surprise reached almost 10%, which means also two EP seats. Immediately behind them the party of ex-PM Gordon Bajnai, the Together 2014-PM has 7%, which represent one EP-seat.

Power relations within the left-liberal Unity have thoroughly been changed since the MSZP lost the previous leading position, the dismembered Gyurcsany fragmented the left voters. MSZP party chairman, Attila Mesterházy has offered his resignation to the Presidency of the Socialist Party National Board. After Mesterházy’s resignation chaos prevails in the MSZP and Bajnai’s party reached the limit of disintegration. Meanwhile, more and more disappointed socialist sympathizer joined Gyurcsany’s DK party.

Summary of the EP elections in Hungary

1.) Many citizens believe that on April 6 at the general elections they have fulfilled their obligations. Therefore, many asked the question why the EU Parliament and the national election was not held at the same time. If it is held in two different Sundays, the people could easily reply that they do not sacrifice their two rest days.

2.) The EU is very far from the vast majority of the 8 million Hungarian eligible voters. There is a widely spread belief that mainly the elite will benefit from the EU fundings, which are spent on new urban centers, fountains, decorative coatings.

3.) EU funding has not created new jobs, and the EU has not proved very effective in crisis management. The EU clearly followed an austerity policy, and it could not elicit any particular sympathy for the Hungarians. The EU election was in no way about the future of the EU and Hungary's 21 seats can have little meaningful influence on the functioning of the EU Parliament. In addition, there was no information on what the parties want to achieve when the mandates become reality.

4.) Thus, many citizens tend to think that domestic policy is more at stake. Low turnout is also an immediate judgment on how things are going in Hungary. Behind the massive absenteeism a rebellion against the existing order may also be discovered.

5.) The anti-EU rhetoric of Fidesz leaders who are constantly speaking about freedom struggle against the EU because „Brussels limits Hungary’s national sovereignty and interferes into our country’s internal affairs.” It would have been a miracle if under such government rhetoric more people would have gone out to vote.

6.) The low participation explains almost total lack of EP elections campaign, as well.

According to an expert, namely Balazs Böcskei the Left's electoral defeat in 2014, among other things, happened due to the lack of dealing with the important real situations facing the country today. Regarding Public Policy programs the Left only dusted off the views of the 2000s. The Left was both populist and technocratic. This means that they were unable to respond authentically to the question how the citizens' perception has changed in Hungary since 2010 or what factors could affect the former, but now broken socialist-liberal coalition, or the potential voter block after a period of eight years, four of which they ruled in actual legitimacy crisis. Regarding ​​personnel and eligibility issues, or handling the public and the civilians, as well as the relationships with their own illelectuals and the green LMP, the Left also missed the irrevocable exploration of the root of the problems.

By 2012, when we turned to the „unity” discourse, we might have guessed already that these problems can not be fixed by spring 2014 - the expert stressed. Although there was very high proportion of undecided voters, a kind of objective need arouse to introduce a new narrative on the Left to get out of the stagnation. This was the time for Gordon Bajnai’s entry into party politics. In 2012 the Democratic Coalition (DK) was in a slump, the MSZP was in a state of already familiar stagnation over four years. One thing, however, was not calculated by Bajnai, namely that in power technology he cannot overcome the MSZP in the midst of the present balance of power, since the Socialists have always been one step ahead of him.

The Orban government builds a new socio-economic model, of which contours and in some cases serious difficulty tracks for the opposition are quite visible. The role of the state, the legal environment, the relationship with the multinational firms as well as relationship between the individual and the community are under serious transformation. System-wide transformation is taking place against which only hesitant denial of the Left exists. Despite the thouroughly elaborated center-left program of the Together 2014-PM, there was no action plan on the Left represented by all other actors, but suggestions to bring back the earlier followed neoliberal system. It was too little political and public policy self-reflections perceivable by the voters in the midst of continuous weakening of the anti-Orbanism.

The left part of the Hungarian voters is still waiting -  in vain - for a savior, because in the foreseeable future no man of such type is available. While Bajnai showed only the competence of an expert and the traits of the depoliticized politics, Mesterhazy seemed a conflicting person having an ego hiding his competency. In order to be competitive against the right wing, personal and public policy quality guarantees are needed. The Left has to approach a number of policy areas, sphere of interest in a different way, and should align its organization and staff basically to its moral preferences. The facing is more difficult than it may be interpreted in terms of political communication, but only an unity can defeat the ruling Fidesz. There is no other option for 2018 elections, but to explore the strategy of a wide coalition of democratic opposition parties.

Economic situation

Since 2010 the Orban government has implemented a range of unorthodox economic reforms which have drawn criticism from economists and financial analysts alike. To break down the public debt the social benefits were abolished, private pensions funds in USD 14 billion were nationalized. Orban has introduced the biggest tax in Europe on banks and financial companies and imposed large levies upon energy, retail and telecommunications companies. VAT was raised to 27%, which is the highest in the EU. In addition, Orban has announced plans to fix the exchange rate for loans taken by individuals in CHF. Further unorthodox policies included interfering with Central Bank independence.

Prior to the 2014 parliamentary elections the Orban government re-introduced social measures, among other things, launched the so-called „overhead-battle”, which forced the utility providers of gas, electricity and water to reduce their prices by 20% in two steps: 10% in January and 10% in October 2013.

After 4 years of Fidesz rule, Hungary has not even reached the economic performance it had before the crisis. Cohesion is not moving forward either: in 2009 the country had about two thirds of the EU average purchasing parity, and the gap has been growing each year. As a result of the unorthodox economic policy Hungary’s potential economic growth has shrunk from 3% to 0-1%.

However, recent statistical reports indicate that the Hungarian economy may have finally exited of negative growth. The GDP of Hungary increased by 3.5% in the first quarter of 2014 compared to the corresponding period of the previous year. According to the first release of Eurostat, the total GDP of EU-28 increased only by 0.3% and the GDP of Germany was up by 0.8% in the first quarter of 2014 compared to the previous quarter.

Despite first quarter GDP-growth the recent IMF report warns the Fidesz government: „Based on current policies, the medium term growth prospects––although somewhat improving––remain subdued and below that of Hungary’s peers. While the drag from the private sector’s deleveraging is projected to gradually diminish over the medium term, policy unpredictability and persistent interventionist government policies are likely to continue depress private investment. At the same time, labor market performance, while gradually improving, is held back by the low participation rate, weak labor productivity, and skill mismatches. Although estimations are subject to high uncertainty, they suggest that, under current policies, potential output growth is likely to accelerate modestly to 0.9 –1.7 percent in 2019 from just above zero in 2013.”

Regarding the expansion of Fidesz’s public works program IMF is on the opinion that it is too expensive and resembles rather a traditional social program, as well as it does not focus on the retraining and it is inefficient, too. Only 13% of the participants in the program was able to get jobs in the labour market after exiting the public works program.

In the general election on 6 April 2014, voters said „yes” to the Orban government’s new economic policy, whose goal is to build an economy on the foundations of „labour rather than speculation”. Orban has promised a continuation of his economic policies, which include boosting industrialization, lowering energy prices – and more controversially, increasing the level of Hungarian ownership in the agriculture and banking sectors. Orban and Hungary’s Central Bank governor György Matolcsy want to see more than 50% of bank assets held by Hungarian institutions, up from the current 42%. Taxes have also been increased on sectors dominated by foreign investors. The officialy declared goal is that the multinationals should not acquire „intermediate illegal profit”. „Hungary and the Hungarian land are for the Hungarian people”.

Domestic critics say that Fidesz’s reforms benefit local businesses close to the party, while liberals say that Fidesz is actually implementing socialist measures. Hungary’s currency has come under serious pressure in the past few months as investors have backed away from emerging markets. Hungary was dubbed one of “shaky six” developing economies particularly vulnerable to capital flight.

The main problem we are facing now is that - as a result of a dysfunctional economic model - the greater part of Europe, including Hungary reached an impasse. Unfortunately, many policymakers still believe that combining foreign capital and cheap labor is equal to catching up, which is a serious mistake. It is also a big problem that among the proponents of this erroneous economic idea – with a slight difference – we can find both major parties of Hungary. The neo-liberal economic policies are spiced on the right by Fidesz and its traditional runic and Turul bird elements, and by MSZP on the Left with uncritical adoration of Europe. It goes without saying that there might be a constructive role of the capital, but it has already crossed the borders, leaving behind a socially unacceptable situation. In addition to the classical bargains and fights between the antagonistic labour and capital, the knowledge as a third factor also entered into the productive scene. However, the Hungarian leadership of the last 25 years has been ignoring this change and deteriorated Hungary into a low productivity. It will be interesting to observe whether Fidesz economic policies will pay off in the long run. If so, it would be interesting to see how the economic community accounts for the success of a number of policies which have aimed to boost consumption at the expense of inward investment.

Social situation

According to a recent survey made by the Centre for Social Sciences of the Hungarian Academy of Sciences, there are dramatic social inequalities in Hungary, the middle class is almost missing and there is a vast gap between the capital or major cities and small town or villages. The members of the upper classes typically are living in metropolitan or urban residential areas and are highly educated, while the life of lower class determined by debt and they live in rural small towns or villages, lacking of education. Every fifth Hungarian is hopelessly lost. Impoverishment and weakening of the middle class during the second term of the Orban government has accelerated dramatically.

The Hungarian society pulls down to the lower layers and it is very difficult for the lower layers to move up. The society is pear-shaped with a thin neck, at the bottom widens, the lowest part of the fruit separated from the fruit body. The leaf, however is small, and has almost no contact with the pear.

200,000 people (2%) belong to the leaf of the pear (i.e. the élite). The upper middle class is  about one million people (10.5%). The narrow middle layer (7%), belong to the rural intelligentsia. One and a half million (17%) is considered as „Kadarist small existence” while 1.7 million (18%) belong to the so-called „drifters”. One and half million workers represents 16.5% and 2 million people (23%) is in the giant camp of the fallen.

Like most of the CEE region, Hungary’s employment rate has remained far below EU average. Youth unemployment is 30%, almost half of 18-35 year olds are forced to live with their parents, 75% of them are unable to save, and those who can save, save about EUR 32 per month.

The productivity difference from Western Europe has grown since EU accession, as had the wage difference. In these aspects, Hungary again resembles almost all of the CEE region. Hungarian average wages (at around 30% of EU average) provide a standard of living that is comparable on purchasing power parity to the lowest fifth of Western European society. Yet some two thirds of Hungarians live below this average income level! Some 4 million of them have incomes that do not meet the subsistence minimum of basic physical needs according to the Hungarian Central Statistical Office. Roughly another 3 million of them survive from one month to the next.

The Orban government has radically revamped Hungary’s education system. Municipalities have been deprived of their functions in primary and secondary education, and the autonomy of universities has been reduced. A central government agency has become the employer of all teachers in Hungary, and the choice and provision of school books has been centralized as well. The centralization of education has been accompanied by increasing political-ideological pressure on teachers and students and by drastic cuts in funding. The budget for higher education is now around only 0.5% of GDP, less than half of the EU average. In December 2012, the government declared its intention to further cut spending on tertiary education. The planned reduction in the number of state-funded study grants from 30,000 to 10,000 has triggered a wave of student protests. The cuts in funding of higher education have partly been compensated by increased spending for vocational education. A further important change has been the increasing role of churches in education. As a result of these reforms, the quality of education, the access to education and the efficiency of the education sector have worsened.

The basic social message of Fidesz in the 2010 election campaign was that a Fidesz-led government would struggle for upward mobility in Hungarian society and represent the interests of the middle class and of low-income earners. In fact, however, the impoverishment of people in the lower-income deciles and the fragmentation and weakening of the middle classes have continued. The poorest strata of the population, first of all the Roma, have become more isolated from other strata and more dependent on state support. The plight of the hundreds of thousands of individuals holding foreign currency debt testifies to the struggle of the middle classes. The Orban government has provided some relief by shifting part of the debt burden to foreign banks, but has done little for the poor. The government has also failed to reduce the significant gap in economic and social development between Western and Eastern Hungary.

The family policies of the Orban government have not aimed at improving opportunities for women to combine parenting and employment, but instead have worked to strengthen traditional family models. The new constitution defines only married couples with children as a family. As a result, non-married couples have lost entitlements. The Orban government has introduced a new family tax allowance and has extended the maximum period for parental leave from two to three years, thereby luring women away from the labour market. There are still only a few part-time jobs for highly skilled women, and the female employment ratio is one of the lowest in the OECD and the EU.

Health care has been one of the most conflicted policy fields in Hungary. Policy-making has suffered from the lack of a separate ministry dealing with health care concerns. The Orban government’s organizational reforms have been largely confined to the nationalization of hospitals, which were previously run by municipalities. This move has made it easier to reduce overcapacity and to reduce regional and local disparities, but has also raised the danger of over-centralization. The Orban government has failed to tackle mismanagement and corruption in the health sector, the discretionary refusal of services and the increasing brain drain of doctors to other countries. The severe cuts in public spending on health care have further aggravated these problems.