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The corruption of Hungary

Credit: Carsten Koall/Getty Images

January 17, 2019   5 mins

Hungary is now the epicentre of European crony capitalism.

That might seem a surprising statement given Russia’s record over the past two and a half decades. I lived in Moscow for several years in the 1990s and return relatively often. Most of my friends have fled, citing physical danger, demoralisation and the impossibility of doing business legitimately in the Mafia state established by Vladimir Putin. So why should we be so worried by a small state in central Europe, with the most impenetrable of languages and little geo-strategic influence? Hungary was last synonymous with the global power when it was allied with Austria in the Austro-Hungarian empire.

The problem with contemporary Hungary is that it represents Europe’s problem. It is at the heart of the continent, geographically and spiritually, and the contagion of its dangerous model is spreading to its neighbours and beyond.

The architect of it all, the Putin mini-me, is Viktor Orbán. The trouble is that he has been elected Prime Minister of Hungary four times now, the last three in succession, as an avowed authoritarian. He is obviously doing something that people, or enough of them, like. Or are impervious to.

A quick reprise: Orbán shot to prominence in 1989, in the year of revolutions in Central and Eastern Europe, when as a twenty-something firebrand he denounced the Communist government in a speech in Budapest’s Heroes Square. He demanded free elections and the withdrawal of Soviet troops.

Hungary had been the loosest member of the Warsaw Pact and its transition from dictatorship was relatively smooth. The country followed a familiar path of democratisation cum privatisation. The problem was, as with Russia and others in the 1990s, the transformation became synonymous with theft. Those with power and influence – mainly but not exclusively those with connections under the old regime – were the beneficiaries. The ordinary voter, particularly people who had worked in the old smoke stack industries or in the public sector, suffered.

Orbán took office for the first time in 1998 at the helm of his right-wing Fidesz party, becoming at 35 the country’s second youngest leader. Already his modus operandi was becoming apparent. He had little patience for negotiation, seeking to sweep aside parliament and others who stood in his way. His administration was marked by a number of corruption scandals. In spite of the problems, Western governments saw him as a reliable ally. Hungary was joining Nato and the European Union.

They say power corrupts, but in his case, it was the loss of power in 2002 that turned Orbán. He resolved that next time, not only would he need to win, he would need to take control of all the levers. He began working on what his supporters terms a patriotic cohort of entrepreneurs, people on whom he could rely for political muscle and cash; in return they could benefit commercially.

Hungary developed a Russian-style oligarchic elite. The rise of Fidesz-linked businessmen happened in plain sight.

Orbán developed his concept of “illiberal democracy”, taking on the so-called ‘global elites’, in a precursor to the mindset of Brexit and Trump that would become so seductive later on.

The financial crash of 2007-8 hit Hungary hard. Unemployment shot up, living standards crashed. All around them Hungarians saw European countries, especially those in the south (like Greece) or east (such as Latvia) suffering under the debt burden. This fuelled the already latent mix of resentment and xenophobia. Hungary has traditionally seen itself as encircled.

In April 2010, Orbán swept to power with a stunning victory and the two thirds majority required to enact radical change. He planned, even during the transition, for an assault on the constitution. He needed to go after those who might resist his power grab: first the media, then the judiciary. His strategy was predicated on removing checks and balance and silencing investigations and critical voices.

Over the next five years, he used his party’s dominance to pass more than 1,000 laws, many of them enacted after a few hours debate and often presented by low ranking lawmakers who had not read them, let alone written them. Through legislative sleights of hand and force of will he transformed his country into a political test bed for a 21st century version of autocracy, combining crony capitalism and far Right rhetoric with a one-party political culture.

Old school friends, neighbours and football mates (he was obsessed with the sport) made fortunes. The more control he seized, the easier it became to distribute largesse – and to receive loyalty in return. Self-styled entrepreneurs queued up to ‘work’ with him. Except they weren’t particularly entrepreneurial. It was all about state assets, or ‘state capture’ as it came to be known.

Unlike famous Russians such as Roman Abramovich or Oleg Deripaska, their Hungarian equivalents are not household names. Nor do they count their money in billions. For them it tends to be merely hundreds of millions. But as a proportion of national income, it is still not to be sniffed at.

Previously the one person whom Hungarians had heard of was Lajos Simicska. He was at school, military service and university with Orbán. He helped him build up Fidesz, assembling a loyal media empire and a sprawling construction business. Then he got too big for his boots and was kicked out of the inner circle. He is still Hungary’s 11th richest man, worth £250 million.

Fourteenth on the list, with an estimated wealth of £180 million is Andy Vajna, a Hungarian-American who made some of his fortune as a producer of films like Rambo and Total Recall. He was appointed Hungary’s film commissioner by Orbán in 2011. Among the lucrative state contracts he was awarded were five of seven casino licences.

Perhaps the most exotic is Lorinc Meszaros, a former gas fitter and mayor of Orbán’s home village of Felcsut (a village where they built a football stadium to accommodate a crowd more than twice the size of its population). Thanks to a number of state contracts, he jumped to number five on the rich list, his wealth soaring five-fold in just one year to £330 million. Asked by reporters how he had grown his business faster than Mark Zuckerberg, he declared: “maybe I’m smarter”.

Hungary has built this system from within the European Union – with EU funds. Some 60% of state contracts, billions of Euro, are funded by the EU. The Corruption Research Centre Budapest, a non-governmental organisation, analysed all public procurement contracts from 2010-16. It found that the aggregate value of contracts won by four Fidesz-linked businessmen (including the prime minister’s son-in-law) was 13 times larger than the size of other contracts. Their total haul came to £1.8 billion. Sometimes contracts are put out to tender; sometimes tenders take place, but competitors know they are going through the motions.

The rot set in a long time ago. Corruption was rife under Communism, when consumer goods were in short supply, it was all about who you knew and who could get hold of what. During the mad-dash liberalisation of the 1990s, the opportunities for self-enrichment increased exponentially, as assets were privatised. From Russia to Ukraine, Moldova to Armenia, they were effectively stolen, as the notional purchase price did not remotely correspond to value.

The most vocal criticism of cronyism comes, dishearteningly, from the only major opposition force, the far-right Jobbik party. Before and during the last election, it erected billboards across the country. One showed Orbán with three businessmen above a slogan in the typeface from the film Godfather, which read “gangsters”. Another brandished the words: “You work. They steal.”

Hungary has slid down Transparency International’s global legal table. It is now rated as more corrupt than Montenegro – graft was cited by the EU as the main reason why the Montenegrans were told they are not ready for membership.

The founders of the EU never considered the possibility that a member state would go backwards, in terms of politics and probity. It did not create procedures to deal with the new era of populism and cronyism. Viviane Reding, EU Justice Commissioner at the time of Hungary’s accession told the New York Times recently: “We never thought that someone would go the other way.”

Orbán invariably gets away with it. Just occasionally he runs into problems. His labour law passed in December has led to genuine street protests, which he has not been able to dismiss as part of his global elite conspiracy. The anger has come from ordinary men and women who will be required to work compulsory overtime, to compensate for labour force shortages exacerbated by his visceral anti-immigration policies.

One rule for some, one rule for others is, as the wily Orbán will know, a dangerous place for any politician to be. The crony capitalism that is now deeply embedded is facing its first serious test.

John Kampfner is an author, broadcaster, commentator and cultural entrepreneur.


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