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Politics of the COVID-19 crisis in Hungary

Deepening of authoritarianism and uneven struggles of global capitalist reorganization

by Solidarity Action Group

Viktor Orbán’s government previously introduced a measure that effectively banned universities from teaching gender studies. Photograph: Reuters

This article was written as part of a series of analysis published by Solidarity Action Group, a collaboration between 12 left organizations which works to collect, connect and broaden solidarity-based solutions in face of the crisis. It was edited by Agnes Gagyi.


Just like in the case of each previous step towards authoritarian control in Hungary since 2010, the international media has been mesmerized by the Hungarian Prime Minister’s move to introduce rule by decree for an indefinite period of time.

This move undoubtedly marks an escalation of the regime’s authoritarian tendencies. But the regime’s present crisis politics reflects a more complex reality, with strong and continuous relations of embedding into transnational capitalist processes.

The further centralization of power is not a mere attack against democratic institutions. It is a tool by which the regime strives to maintain and fortify the accumulation model upon which its hegemony rests.


After 2008, this hegemony was built on the combination of dependent industrialization fueled by relocations of Western manufacturing capacities; the capitalization of a state-based domestic oligarchy; and the diversification of Western financial dependence by Russian and Chinese loans.


This hegemony stabilized the regime as the junior partner of Western and Eurasian capitalist restructuring, but it was dependent on world economic growth. The present crisis transforms the conditions of this position. Most emphatically, it started a global wave of capital concentration mediated by crisis effects as well as states’ crisis measures.


In this environment, we interpret the Hungarian regime’s fast steps as preemptive measures through which it seeks to maximize domestic oligarchic capital concentration, and stabilize external partnerships. This to be able to maintain its position within global capitalist reorganizations.

Earlier, the Budapest-based Working Group for Public Sociology “Helyzetdescribed the Orbán regime as an attempt to build a temporary and externally dependent local hegemony, within the context of the global crisis and geopolitical transformation.


Making use of the increased space to maneuver opened up by the 2008 crisis, this project was built on capturing foreign direct investment from Western multinationals. This outsourced production due to the crisis, will carve out additional maneuver space for local oligarchic capital accumulation through increased state intervention in the sphere of domestic service industries; and, diversifying external financing by reducing unilateral dependence on Western sources, by new deals with Russian or Chinese capital.


The centralization of administrative power, criticized by international commentators since 2010, was as a tool in this process.

Members of “Helyzet” argued that the regime’s policies can be differentiated into four aspects of these goals:

1) policies supporting macroeconomic stability to ensure the conditions of external and internal accumulation, and broaden the government’s maneuver space vis-a-vis the influence of lender institutions


2) policies serving reindustrialization through foreign direct investment, in order to produce competitive exports to keep the balance of trade in order – which included measures from extreme labour flexibilization to special benefits directed at investors,

3) policies that serve the capitalization of domestic oligarchs and domestic upper middle classes who serve as consumers and as a political base, and

4) policies of control and punishment directed at the poor.

These policies served the stabilization of a double accumulation flow that simultaneously serves external and domestic capital. Yet this situation is extremely dependent upon external conditions of accumulation – most importantly the German automotive industry and German export markets. Also, this model produced a growing reproductive crisis following from the burdens this process puts on labour.


Helyzet Mühely’s analysis predicted that in case of a broader economic crisis, the regime’s only way to maintain control would be to deepen authoritarianism.


The regime’s reaction during the COVID-19 crisis has followed and expanded the logic of this analysis. Today, conditions of a post-crisis recovery give way to a global recession, and an immense pressure of global capital concentration promoted by external capital-state alliances. In that context, the regime makes maximal use of the broader space for state interventions opened by the situation, in order to accelerate internal capital concentration, and increase centralized control over its external and internal conditions.

Expanding earlier tendencies, the regime provides new benefits to multinational manufacturing; steps up the expansion of domestic oligarchic capital in domestic service industries to squeeze out multinational actors of the sector; feeds oligarchic concentration from the crisis of smaller domestic companies; and keeps crisis allowances for social reproduction to an extreme minimum.


International context

The Orbán regime’s model of local temporary hegemony within the broader process of global crisis has been significantly based on selective internal redistribution of EU transfers, and foreign direct investment. It has been particularly relying on investments coming from the German automotive industry that has been outsourcing capacities in order to compensate for its own profitability crisis.


Throughout the years, the regime has been criticized in the EU over the narrowing of democratic institutions, and over some losses by Western multinational companies due to post-2010 repossession policies. Meanwhile others, e.g. banks, have been handsomely compensated.


However, despite the EU’s activation of Article 7 proceedings (these could potentially lead to sanctions and suspending voting rights) so far, no significant measure has been taken, and Fidesz is still part of the European People’s Party.


Many commentators describe this as a result of indecisiveness or Byzantine European bureaucracy. But the coincidence of European capital’s crisis management with the Hungarian system also needs to be considered.


For the Hungarian regime uses its centralized power to subdue workers into successive crisis management models formulated together with Western industrial chambers. Therefore it needs be understood as an element of global power relations playing out within the crisis, instead of a local specificity.

It is important to present Hungarian crisis measures in terms of their international context, where the regime’s current power centralization takes place within a context of uneven global power relations. Therefore its’ preemptive moves of domestic capital concentration represent an effort to maintain its’position, within a new global wave of monopolization dominated by much stronger actors: like US or Chinese capital fractions promoted by respective crisis measures.


So far, the warning signals from European politicians, as usual, only served to help the government portray itself as being attacked by Hungary’s external enemies. A fast depreciation of the Forint, a market response to the introduction of ruling by decree, halted some of the planned measures on further encroachment of local governments’ capacities.

Hungarian market analysts pointed out that expected property reorganizations by increased state intervention (and the conflicts implied with multinational actors) were probably one of the major causes behind the devaluation of the Forint.


However, the relation between the devaluation of the Forint and authoritarian deepening needs to be investigated. We need to get beyond the idea that the ‘invisible hand of the markets’ tends to punish political insecurity of business conditions.


The devaluation of local currencies is a main tactic that favours market penetration by global capital. It is a step the IMF and the World Bank have promoted globally as part of structural readjustment packages. East European privatizations of socialist state property happened under similar conditions.

The regime’s previous macrostabilization policies successfully reduced the share of foreign currency debt. Therefore a relatively cheap Forint is part of the regime’s maneuvers to benefit export industries. But recent shifts of financial markets threatened its potential to control the Forint.

This change provides a background of threat that further depreciation could facilitate property shifts in fields like: energy, constructions, telecommunication, utilities or banking - to the hands of multinational players. After 2010, the regime managed to roll back the dominance of foreign capital gained during privatization, to benefit domestic oligarchy. Recent global pressures may result in losing these gains again to multinational investors.


The urgency and significance of emergency measures serving domestic property need to be understood against this background.


A similar uneven struggle is happening in the field of financing. Commentators have already noticed that the government’s decision to quadruple foreign debt; and its issuing of Euro bonds of four billion - represent a strong break in the regime’s continued effort to reduce foreign debt and thereby increase policy autonomy since 2010.


Meanwhile, previous tendencies to balance off Western financing, with Eastern sources have been reinforced. For instance, in April, Hungary and China signed a previously planned loan agreement to finance the construction of a railway link between Budapest and Belgrade as part of the Belt and Road Initiative.


Details of local transformations described in the following sections need to be understood against the background of these uneven relations among new shifts of global capital concentration.

Further centralization of state power

Authoritarian deepening in the immediate political-institutional context, should note that except for a short period between 2017 and 2018, Viktor Orbán had de facto emergency powers ever since he became head of government in 2010.

During these years, Fidesz had a super-majority in parliament and repeatedly changed the constitution in accordance with its political calculations, limited by virtually no significant legal-institutional checks. Even if some concrete expiration date was attached to the newly introduced emergency powers, this was prolonged over and over again by the party.


Also, the “emergency situation” because of the “migration crisis” was already introduced in 2015, and remains in effect ever since. That gave additional power for the government, the police and the army, although not yet to the extent introduced following the coronavirus pandemic.


The further concentration of power through introducing rule by decree was interpreted by Hungarian investigative journalists as serving Orban’s autonomy from his own party. Fidesz is strongly hierarchical, where conflicts of interest were successfully held in check from above up until now. But its cohesion started to falter in the first weeks of the crisis, with some MPs siding with the opposition on closing schools and urging measures of social distancing, which Orban was reluctant to introduce.


Besides politicians’ personal fears, this was also motivated by Hungarians’ mass organic preparations for the crisis. This they took independently of government measures, and which constituted a significant constituency pressure on representatives.


In terms of the broader context of the regime’s struggle for stability, the concentration of power can be understood not only as a response to immediate pressures in the present, but also as a preemptive move.

With the introduction of rule by decree for an indefinite period of time, Orbán gained independence from his own parliamentary party, and managed to strike the opposition as well. After voting against his emergency powers, the PM could portray the opposition as forces wanting to block effective governmental response to the epidemic.

Further cuts to the already narrow decision power and financial capacities of local governments served to further eliminate the opposition. The opposition, despite their mitigated powers, mobilised some threats due to a widening delegitimation of the regime, culminating in successes at the local elections of 2019.


After these measures, while lacking sufficient means, local governments are still responsible for tackling many issues exacerbated now by the epidemic. These include offering social assistance, helping homeless people, providing general practitioners for the local population, maintaining public institutions for the elderly care etc.


At the level of ‘soft power’, a new wave of reorganizations in the cultural sector was introduced. Stepping up plans already laid out before the epidemic, cultural workers in the public sector are stripped from their special employment status with benefits, allowing for further precarization and selective incorporation/exclusion of cultural workers.


After Corvinus University of Budapest was taken over by a public foundation last year, making its finances dependent from dividends paid after shares of the petrochemical company MOL and the pharmaceutical company Richter, another six universities will be de facto privatized in this form in 2020 (University of Veterinary Medicine Budapest, University of Miskolc, Moholy-Nagy University of Art and Design, John von Neumann University, University of Sopron, Széchenyi István University).


Reorganizations of property


As of today, military task force units have appeared at over 100 companies declared of strategic importance. What this kind of control means is still unclear. In certain cases, like that of the export subsidiary Kartonpack in Debrecen, it means full state supervision, and the sidelining of previous management. In the field of domestic service industries, both internal and external actors expect the regime to push reorganizations of property.


After 2010, policies ranging from extra taxes inflicted on multinational competitors, to direct re-nationalizations - served to increase the domestic oligarchy’s capital shares on domestic service markets. This sphere is where state policies play a defining role and therefore local capital is less exposed to global competition than in the case of manufacturing. Therefore it has been the main field of domestic oligarchy’s capitalization since 2010.


The present crisis opens larger opportunities for state intervention in the name of crisis management. György Matolcsy (former minister of economy and current head of the Hungarian National Bank) wrote in an optimistic essay on the new economic opportunities opened by the crisis, marking these times as optimal for a wave of repossessions.


Policies that pressure competitors, or provide specific benefits to domestic oligarchic capital have already been introduced. Besides cutting funds from local governments and party financing, the emergency fund has also been supported by special taxes on banks and multinationals.


The largest shares of such taxes are paid by large foreign retail companies. These compete against growing Hungarian counterparts, and the foreign companies have also been pressured by other policies, eg Sunday closure in the name of Christian holidays after 2010.


Meanwhile, sectors already dominated by domestic oligarchic capital like construction, tourism and agriculture, got special subsidies, and significant legal exemptions in the case of priority state investments.


The sphere of domestic capital, however, is far from secure. Instead, it constitutes the sphere of violent capital concentration. Already before the crisis, these spheres have been reshaped according to steep hierarchies of profitability, governed by state subsidies as well as various means of inter-company and financing networks.


Compulsory buyout offers, controls and even closures by the national tax agency or the police, were characteristic of oligarchic capital concentration already before the crisis. In many companies, they were matched by various avoidance tactics to prevent property shifts: like moving their headquarters and liquidity abroad, or selling the mother company to foreign investors and restarting their activity distributed in smaller domestic companies.


In the present crisis, direct measures (like the takeover of Kartonpack) are complemented by a larger process in which delayed and selectively limited measures of state assistance allow smaller companies to fail. With companies on top of oligarchic chains who have a high capacity to invest, analysts expect a domestic property centralization in these sectors, to the benefit of the latter.


Measures to sustain and expand foreign direct investment


In domestic service industries, the regime occasionally conflicts with multinational capital. But in the field of export manufacturing, crisis measures provide new benefits to foreign investors. Here, the emergency package on economic measures has been coordinated solely with representatives of chambers of commerce and industry. Beyond Hungarian ones, this included AmCham and the German-Hungarian Chamber of Industry and Commerce.


Besides a severely cut version of the German Kurzarbeit model, and a modification of the labour code that practically bracketed labour regulation for the time of emergency, this package included the expansion of the working time banking scheme to up to two year. This was defined by unions as a covid-19 expansion of the “slave law” that was introduced at the recommendation of German car manufacturers, and caused country-wide protests in 2018.


The increase of allocated cumulative working time by the 2018 “slave law” served to make labour time flexible, according to the needs of fluctuations in manufacturing. This allows manufacturers to deactivate and activate labour according to market fluctuations in a context where domestic labour shortage limited this possibility due to the lack of a significant reserve army.


For small and middle-size companies with low levels of liquidity, which cannot finance basic wages for workers in times of inactivity, this flexibility provides no help. But for large companies with sufficient reserves it provides a beneficial tool to bridge fluctuations in production caused by the crisis. When production is stopped, they can finance a few months of wages; when production starts, they can oblige workers to work the hours for wages paid out during the lockdown.

This move to ‘flexibility’, however, was still bound to collective agreement, and in this respect, it allowed some space of maneuver for unions. The covid-19 version allows employers to unilaterally declare cumulative working time up to two years. Trade unions and labour lawyers also pointed out that many details of the implementation were not defined by the new regulations, leading to further possible conflicts in the future.


An illustrative example for the intersecting interests that govern Hungarian crisis policies today is the case of the new Samsung accumulator factory in Göd. Trying to balance a unilateral dependence from manufacturing exports dominated by German car manufacturers, the regime has promoted Eastern technological collaborations even before the epidemic, and laid out the plan of the Samsung plant as the largest in the region.


Due to its toxicity, the plans for the plant were protested by locals. The government dismissed the protests and signed the contract with the South Korean company, including a 108 million government subsidy. Locals’ protest manifested in electing an oppositional local government in 2019.


As the economy severely feels the effects of the crisis in the German car industry, the government stepped up efforts to diversify dependencies. As part of the covid-19 emergency package, the government created the legal possibility for new special economic zones.


The first such zone was designated for the Samsung plant in Göd. Péter Szijjártó, minister of foreign affairs and trade communicated this as a key move in the governments’ efforts to tackle the economic effects of the crisis, to compensate lost workplaces through new investments. The decree on new special economic zones, he said, serves to encourage new investments. Göd is the primary example of that effort, constructing one of the biggest ‘accumulator’ factories in the world.


“This investment by Samsung SDI is one of the most important elements of our policy to restart the Hungarian economy. With this plant, after the traditional auto industry, our country becomes the European bastion of electromobility, too” – Szijjártó said.


Among others, the decree on new economic zones implied that local taxes paid by the company to the city of Göd are centralized to county administration (ruled by Fidesz). For Göd’s opposition government, this means losing one third of the annual budget, making it unable to fulfill basic functions.


The legal structure provided by the decree prescribes this shift of business taxes from local governments to counties, as a general condition of new special economic zones. It allows national and county governments to overwrite local regulations on construction and environmental protection. In May, the government already proposed to expand the Göd model nation-wide, tanking local business taxes away from local governments.


By the end of April, the government engaged in a large public infrastructural development project in Göd, building logistical, energy and water infrastructure to serve the Samsung plant.


Göd’s case is just one of many, but it shows some of the ways the tactical reorganization of local oligarchic hegemony, enabled by the centralization of control, is embedded within and acts out interests of broader capitalist reorganization within the crisis.


Labour


Crisis measures that help labour’s reproductive needs have been more selective and more narrow than in neighboring countries.

A moratorium on debt repayments with relatively favorable conditions has been expanded to private debtors, too, but the waiving of wages based on proceedings that have already been started were not stopped.


More than half of households have savings for less than three months of reproductive costs. Yet benefits for the job search period in unemployment has been left at the former short period of 3 months, and only covers a maximum 60 percent of the previous salary (and not accessible for many outside the formal wage-labor).


Wage subsidies rolled out in the framework of emergency measures came later and in a smaller volume than in neighboring countries. An austere version of the German Kurzarbeit model, this measure limits benefits to companies that suffer more than 50% loss of income, and covers 70% of the incomes lost due to shortened working times.


According to the calculations of G7.hu, through this peculiar scheme the Hungarian government would cover maximum 23 % of an employee’s salary, but in the majority of the cases this share would be even lower.


Several unions have protested shortages of protective gear and unsafe working conditions. This includes educational cadres forced to carry out graduation exams at the time when the number of infections is expected to peak; and, healthcare and social workers bearing the weight of the pandemic under conditions of an extremely underfunded healthcare system and social care.


An extreme centralization of the healthcare system and of the public communication over the virus, includes forbidding hospitals to provide public information. All this serves to suppress public awareness on the actual state of the healthcare system and the epidemic. Meanwhile, the regime also uses the emergency state to roll out a previous plan reducing the number of hospital beds.

Besides workers at home, Hungarians working abroad as part of a new migration wave in the recent crisis also lost jobs in Western Europe and returned in the past month, before the borders closed. Tens of thousands, who are commute daily abroad also feared losing their jobs. However in that case Western national governments shortly eased border closures, allowing Eastern agricultural and care workers to work again.


The lack of protection in these cases – from the possibility of physical distancing, to the lack of formal contracts with health insurance – caused international scandals, and exposed poor conditions of labour and security in Europe.


Rural regions where poverty had trickled down a post-socialist geographic polarization particularly suffer under the lockdown. They were a recent source of cheaper migrant labour during the extraction-based boom and labour shortage years. But these villages lost their incomes together with the expulsion of migrant labor from closed plants, construction sites and venues.


Lack of heating and famine became imminent threats for thousands of families, eased only by civic initiatives channeling a narrowing stream of donations from wealthier regions.


The crisis also exacerbated the existing care crisis in Hungary. With the introduction of home-schooling, and several tens of thousands in hospitals with chronic illnesses sent home to free up hospital beds for coronavirus patients, the burden on mostly women’s reproductive labor grew enormously.


Women either lose their income or jobs to care for children and the elderly, or find it hard to juggle telework, home-schooling and household work. Like elsewhere, cases of domestic violence surged during the lockdown.


In the context of emergency measures, unions have been even more marginalized than previously. Yet they also became more visible as sole representatives of workers’ interest. The new activity and politicization of unions expands a former trend of previous years. It also reflects a generally low levels of unionization and the divergence of different unions’ positions within the economy.


The surge of unemployment and aspects of reproductive needs and conflicts outside of the workplace – from the crisis of care work to domestic violence or rural famine – show that labour organization needs to go beyond the framework of existing unions in order to provide an answer to the crisis.


Like in many other crisis situations, initiatives of mutual aid and solidarity have springing up all around Hungary in response to the present situation.


This next article in this series will present the main lines of its activity. This article first appeared on the LeftEast Website. Reproduced with permission.