Orbán Outfoxes the EU in Nationalism vs. Technocracy Fight

Members of the EU Parliament are now calling on the unelected members of the European Commission to punish Hungarian Prime Minister Viktor Orbán by stripping his country’s voting rights. His crime? Opposing Project Ukraine

At least 120 of the parliament’s 705 members recently signed a letter calling for the drastic measure.

“Hungary has been repeatedly criticised for its erosion of the Rule of Law, and especially after Hungary’s actions to disrupt the decision-making of the Member-States in the December EUCO, we believe that the time has come for the European Parliament to take action,” the letter read. The “decision-making” Hungary disrupted was the quest to send 50 billion euros to Kiev. Here’s the whole letter:

Signatures collected! We are one step closer to withdraw ’s voting rights.

The feedback was strong, thanks to everyone who has supported this historical petition. I gathered 120 names across party lines and from several Member States. 1/3 https://t.co/vjFyFk46zf

— Petri Sarvamaa (@petrisarvamaa) January 12, 2024

In the end, the EU Parliament voted (345 in favor, 104 against and 29 abstained) to ask the unelected EU Council to explore the possibility of stripping Hungary of its EU voting. Orbán already got the EU to unfreeze 10 billion-plus euros for Hungary in return for leaving the room during a vote to start accession talks with Ukraine, although 17.6 billion euros remains blocked.

While it’s almost comical at this point the way the EU continues to blow itself up for the failed Project Ukraine, the threats against Hungary are also useful in that they show how the EU’s “Rule of Law” mantra has always been nothing more than a political sanctions tool.

The disagreements between Budapest and the European Commission have existed for years, and it’s worth examining the whole “rule of law” saga for two reasons:

• Orbán’s alleged violations are what allow Budapest to resist EU pressure in the first place.
• It clearly delineates the showdown between a version of nationalism and the EU’s governance by unelected neoliberal elites.

What Are Hungary’s “Rule of Law” Violations?

The European Commission and parliament make a lot of noise about Hungary’s refusal to adhere to EU diktats on asylum, as well as the 2021 Hungarian child protection law, which contains a provision that prohibits or heavily restricts depictions of homosexuality and gender reassignment in media content and educational material addressed to audiences under 18 years of age.

But my guess is that the EU’s main target in forcing Hungary to adhere to the “rule of law” is really Orbán’s ability to resist EU pressure and keep Hungary semi-autonomous. The ongoing disputes between the Commission and Hungary are really about who controls Hungary – elected officials and wealthy elites in Hungary or unelected commissioners and wealthy Western elites.

This is an existential issue for the European Commission as it needs its “tools,” as Ursula describes them, or it loses control.

NEW – EU Commission President on the upcoming elections in Italy, where a right-wing victory is expected:

“We will see. If things go in a ‘difficult direction’ – I have spoken about Hungary and Poland – we have tools.” pic.twitter.com/PxtvpXyCua

— Disclose.tv (@disclosetv) September 23, 2022

Those tools are chiefly used to pry open every EU state to be raided and run by transnational capital in a neoliberal EU.  But by solidifying control over national capitalism, Orbán has rendered Ursula’s tools mostly useless. Nowhere has that been made more clear than his intransigence on Project Ukraine. In order for the commission to take charge, they must wrest control of Hungarian courts and finance and institute their vision of “rule of law.”

Orbán’s Long Nationalist Capitalism Project

When the European Commission complains about “rule of law” and corruption in Hungary, it is targeting a multi-year project by Orbán to take control away from international finance and place it in the hands of Hungarian finance and his government.

One of the more illuminating accounts I’ve read of Orbán’s multi-year project is from Miklos Sebak and Jasper Simons in the Socio-Economic Review. Sebak, the director of the Institute for Political Science at the Centre for Social Sciences in Budapest, and Simons, an assistant professor of European governance at the Utrecht University School of Governance, detail how Orbán outplayed the EU. Over many years, the  Orbán government selected economic sectors to target and then used a network of private actors in its quest to re-nationalize and then re-privatize major banks and other assets to ‘national capitalists’ who are typically connected to and loyal to the  government.

To the European Commission this is corruption. To the government in Budapest it is a strategy of financial nationalism to reconstruct Hungarian capitalism in order to regain autonomy.  Orbán, who has been in politics since the Revolutions of 1989, saw early on that he could not really control Hungarian politics playing within the confines of neoliberal EU foundations. He believed his political survival required the reconstruction of domestic capitalism, which he could play a large role in controlling as opposed to leaving his fortunes in the hands of global finance. His goal was for a new ‘Hungarian’ capitalism and he took advantage of the Global Financial Crisis to do so. A quick review from Sebak and Simons:

The financial crisis resulted in a severe depreciation of the Hungarian forint vis-á-vis major loan currencies (notably the Swiss franc), and, along with surging unemployment, this led to a housing loan bust (Bohle, 2018b, p. 208). The issue of NPLs became highly politicized and turned into a symbol of the ineffectiveness and unfairness of the policies pursued by the socialist–liberal coalition. By 2010, the political landscape was set for a major policy switch.

The rhetoric and policy proposals of Fidesz fit the bill: as far back as 2004 it had denounced the MSZP–SZDSZ coalition as a ‘banker’s government’. Despite these omens, conventional wisdom never foresaw the magnitude of the policy changes that ensued with Viktor Orbán’s electoral sweep in 2010. Indeed, the financial elite and most commentators considered such a U-turn from a policy paradigm that had been dominant for well over a decade unfeasible. They saw it as something the international financial elites would frown upon,2 which would make it impossible to implement.

In the event, the reforms of the new government surpassed event the wildest of imaginations. In the midst of fiscal turmoil, the second  government implemented a banking levy and financial transaction tax to retrieve revenue from financial institutions and over Hungarian forint (HUF) 2000 billion forint in mandatory private pension savings were ‘reclaimed’ by the state (Naczyk and Domonkos, 2016).3 Mortgage loan holders—especially those with higher than average income/wealth—received multiple rounds of bailouts (Bohle, 2018b, p. 209, Csizmady and Hegedus, 2016). The thrust of these interventions was aimed at the predominantly foreign-owned banking sector, which eventually footed the bill in almost every case when it was called upon to do so. One hugely important side effect of these manoeuvres was that they created a fertile ground for taking over the local subsidiaries of multinational financial conglomerates, which were buckling under the massive burden they carried as a result of the government’s policies. Thus, a period of financial nationalism begun.

The Orbán government did the same with other industries, typically seeking out those that produce above average profits and  where the state is a significant procurer, as well as those that could influence voters’ financial situation and therefore, their vote.

For Orbán, the plan has been a wild success. He has been prime minister since 2010 despite opposition from the EU and US, and by 2020, he could declare, “We have put the majority of the media, energy and banking sectors into Hungarian hands.” For the European Commission, his brand of nationalism is a threat.  As Sebak and Simons write:

The Hungarian case of financial nationalism was a project manufactured by emerging political and economic elites, based on a self-interested strategy aimed at capital accumulation which was understood to be a pivotal condition of state autonomy. Nationalist preferentialism was not primarily a tool for turning public money into private fortunes but a means to ensure the long-term survival of a political system which held values antithetical to the liberal mainstream of the European Union.

While Orbán clashed with foreign investors in the banking, media, and energy sectors, his government also paved the way for transnational manufacturing corporations – especially German ones.

As recently as August 2019, then-German Chancellor Angela Merkel praised how EU funds were spent in Hungary: ‘If we look at Hungarian economic growth rates, we can see that this money has been well invested by the country, that it benefits the people, and Germany is happy to be able to participate in this growth by creating jobs in Hungary.’

Merkel was key to holding the “rule of law” disputes at bay and keeping Orbán and German manufacturers happy. She brokered a deal in 2020 that kicked the can down the road and temporarily unblocked EU pandemic funds to Hungary. As political economist and Orbán foe Gabor Scheiring notes, a few days later, the Hungarian government announced it would cover 30 percent of the cost of a new Mercedes car plant in Hungary. The very same week, the Orbán government said it would build a factory manufacturing German Lynx tanks, continuing Budapest’s enthusiastic purchases of German military exports under Orbán. Scheiring adds:

Besides showering them with money, Orbán’s government also invests heavily into maintaining excellent connections with influential German business circles. Klaus Mangold, a former top manager of Daimler, is a crucial ally of Orbán. Guenther Oettinger — a CDU member — also plays a crucial role in German-Hungarian business diplomacy. Nominated by the government, he recently became the co-chair of Hungary’s new National Science Policy Council.

Members of European People’s Party (EPP) — the chief political instrument of European economic elites and the party of Ursula von der Leyen and Donald Tusk — has long helped shield Orbán from more forceful measures, likely because of his friendliness towards just enough transnational corporations.

The EPP’s accommodating attitude began to change ever so slightly in 2022, however. Merkel was gone as the crisis manager, the war in Ukraine took precedence over all else, and the Commission began withholding billions in euros from Hungary – money it is now using to bribe Orbán into backing the failed Project Ukraine.

Thirty-two of the 120 signatories in the European Parliament calling to strip Hungary’s voting rights were from the EPP. But that’s still just 32 out of 176 EPP members in the current EU Parliament signing onto a symbolic move since only the Commission can strip Hungary of voting rights. And EPP opposition killed an effort by the liberal Renew Europe group to withdraw confidence in the Commission if it was to unfreeze more funds for Hungary.

Despite Orbán’s critics, for most Hungarians the situation is much improved from the dark neoliberal days of the 1990s and 2000s. Scheiring writes at Progress in Political Economy:

In the 1990s, a massive deaths of despair epidemic hit the country, similar to the one plaguing America’s working-class communities in the last two decades. Deindustrialization and privatization were major economic determinants of premature deaths in the 1990s and inequalities in life expectancy in the 2000s.

However, the economic transformation also hurt many financially. In 2009, two-thirds of Hungarians were in such financial precarity that they could not face unexpected expenses. In the same year, the average real wage was only a little more than 10 percent higher than in the early 1980s: three lost decades of real wage growth. Furthermore, the average hides increasing income inequalities.

It was the Hungarian Socialist Party that implemented the most avant-garde neoliberal reforms. By the end of the 2000s, masses of workers and members of the indebted and weak middle class grew disillusioned. In the lack of a progressive left-wing alternative, they drifted rightward. There was no progressive, left-wing language available to organize people’s disillusionment with the neoliberal transition.

Into that void stepped Orbán who helped steady the economy. Hungary has consistently been a top European performer in GDP growth. That’s a low bar to clear, but the inflation-adjusted average was above 4 percent per year in 2015-2019.

And yet, in tandem with Orbán’s national capitalism project has come a sustained crackdown on workers rights, including limits on the right to strike and collective bargaining (although it’s worth noting that economic inequality is worse across most of Western Europe, including Germany, France, Italy, and Spain than it is in Hungary). The Orbán government has also enacted a forced overtime law, a flat personal income tax of 15 percent, and slashed unemployment benefits among other measures. At the same time, Hungary has the lowest corporate tax rate (nine percent) in the OECD, helping it become a tax haven that fully exempts dividends and capital gains.

For some reason the European Commission never complains about these moves, although maybe I missed it.

“Juristocracy” or Democracy?

The European Commission is concerned about the courts, however, and wants Budapest to boost the powers of the National Judicial Council, a body of judges elected by judges.

Orbán’s nationalism brings back bad memories of Europe’s 20th century, and it undermines the EU project of transferring power away from the people to the more enlightened courts. As Le Figaro columnist Max-Erwann Gastineau writes: 

A precautionary principle is now invoked against any party or regime claiming to correspond to the aspirations of the majority. Thus, as the philosopher Marcel Gauchet summarizes it, we have moved from democracy based on the French Revolution’s prevalent idea of ‘sovereignty of the people’—and its corollary: the law as an expression of the ‘national will’—to a ‘legal idea of democracy’, which centres on the safeguarding and extension of the rights and individual freedoms that were formerly curtailed, and are now protected by the ‘rule  of law’, i.e. the development of independent courts…

As a result of this slow but constant change, the rule of law has changed in nature. It is no longer simply responsible for ensuring the safeguarding of fundamental rights, but aims to extend them, to ‘open up the greatest possible space to individual freedoms’ as a report published by the French Parliament in 2018recalls. It no longer simply gives judges the task of setting the legitimate scope of policy intervention, it extends the legitimate scope of the judge’s intervention to the point of giving the latter a decisive role in the process of collective standard-setting. Ran Hirschl, a Yale University graduate and professor of Law and Political science at the University of Toronto, affirms that by transferring an ‘unprecedented amount of power from representative institutions to judiciaries’, Western regimes have established ‘juristocratical’ regimes. These regimes, Hirschl continues, are dominated by a ‘coalition of legal innovators’ determining ‘the timing, extent, and nature of constitutional reforms’ and who, ‘while they profess support for democracy (…), attempt to insulate policymaking from the vicissitudes of democratic politics’.

Hungary under Orbán argues that the people through their representatives should hold more power than judges. That may simply be window dressing because Orbán doesn’t want judges to interfere in any cronyism nor does he want the EU to use the courts as a backdoor into Hungary.

While some on the left may cheer the attempted crowning of the courts on because the opponent is the illiberal Orbán, it’s worth considering that if a true party on the left ever tries to emulate Orbán’s successful sidelining of the EU’s “tools,” it will face the same opposition. And that stranglehold from above continues to strengthen.

As just one example, during Mario Draghi’s 2021-22 stint as unelected prime minister of Italy, the former vice chairman and managing director of Goldman Sachs International and president of the European Central Bank passed laws that will push for privatizing local public services, change the role of Italian municipalities, and transfer power from elected officials to judges at the Italian Competition Authority (ICA).

On the surface the ICA and other national competition authorities across Europe, which are of course overseen by Brussels under its European Competition Network, are about antitrust. But they’re also moving power in other areas away from elected officials to an unaccountable elite.

The Draghi law, for example, empowered the ICA to oversee secretive settlement procedures which can be used in cases concerning restrictive agreements and abuse of dominant position. The law entrusts the ICA with the task of defining through its own internal processes the procedural rules and amount of fine reductions in the event of a successful settlement procedure. Any information about the proceedings does not need to be disclosed to third parties.

The ICA will also be granted oversight of privatization efforts. Municipalities will be required to submit reports to the ICA justifying why certain services are better served by remaining run by the state, and there will be periodic reviews of these reasons, as well as increased cost-monitoring, i.e., pressure to reduce wages and benefits.

The stated goal is to eliminate red tape “affecting the freedom of economic initiative,” but in effect cash-strapped municipalities will continue to have a hard time providing adequate services, which will then be privatized.

While national governments are already beholden to EU tools like the dreaded Excessive Deficit Procedure and European Stability Mechanism, laws like these from Draghi make it so even regions and municipalities are straitjacketed by Brussels.

Maybe there’s a reason for the plummeting voter participation in Italy, Germany, France, and elsewhere across the EU?

It’s also worth pondering the commonly-cited argument that the transfer of power from the uneducated masses to the elite courts and commission safeguards against the tyranny of the majority, which will also help prevent the continent from relapsing into 20th century warfare. Leaving aside whether that’s historically accurate, today it is the EU elites who signed the bloc up for its ongoing proxy war against Russia in Ukraine, destroying the lives of millions of Ukrainians. It is the elite behind the ongoing economic war against Russia that has caused more harm to the economies of Europe with the heaviest burden falling on the working class. And it is the wise elite, safeguarding peace from the dangers of nationalism, that back the ongoing Israeli genocide of Palestinians.