The uses (and abuses) of Hungarian democracy

In an aside in the post below this one I pose a provocative question:

“What use is democracy if a government is stopped by international bodies and financial markets from protecting its most vulnerable citizens from the chill winds of economic turbulence?”

Given the intellectual climate of the past decade-and-a-half, I think I ought to explain some of the assumptions and ideas that lie behind this question, for they also inform my scepticism about the strength of the political institutions in the ex-socialist member states of the EU.

When I first became a PhD student focussed on Central and Eastern Europe fifteen years ago, everyone was attempting to examine something they called “the transition”. Liberalism had triumphed, as had market economics, and democracy – by which observers meant a system based on free and fair competitive elections, regulated by a constitutional order administered by an independent judiciary, would resolve all social conflicts. The study of the “transition” it was supposed, would help states with scant traditions of democracy to become like the USA and the United Kingdom. The end – “democracy” – was never in doubt. In the same way, social scientists (joined later by some historians, who probably should have known better) began to develop elegant, grounded arguments about the conditions of “democratization”, in which History – in so far as it was addressed – was supposed to march inevitably towards “democracy”.

Indeed, most historians of Europe have known better. The reasons for the collapse of pluralist political systems in much of inter-war Europe have been (and will almost certainly continue to be) at the heart of historical debate. As historians concentrate increasingly on the period following the Second World War, the reasons for the development of liberal, pluralist political systems in most of western Europe in the late 1940s, and their spread to southern Europe in the 1970s will become important subjects of historical investigation. Historian Martin Conway in an agenda-setting article on the roots of western Europe’s post-war democratic wave has drawn our attention to the historically-specific circumstances, often socially and cultural rooted, which produced it. If “democracy” is historically contingent, this undermines the teleological assumptions which have underpinned the celebratory tone whose echoes can be heard in much of the democratization literature. Political systems fail and succeed depending on historical circumstances – there is, despite what many would have you believe, no democratic model capable of mediating all social conflicts, and therefore “democracy” is not, in any guise, an automatically exportable system (as we should know from the predictable failure of US-sponsored democracy building in Iraq).

It has not been uncommon in the last two years to find commentators in Hungary, who are prepared to talk to some extent about the crisis of their democracy. They generally attribute this crisis to short-term factors; normally the “bidding war” between the two big parties as to who could promise the most since 1998, or the notorious 2006 speech of Prime Minister, Ferenc Gyurcsány, in which he admitted to lying “morning, noon and night” in order to win that year’s parliamentary election. Hungary’s democracy is certainly in crisis – but this crisis is not due to short-term factors; indeed it is a slow-burn crisis, and can be traced back to the mid-1990s.

This slow-burn crisis began with the announcement of the so-called Bokros package in March 1995 – a programme of economic stabilization designed to prevent the insolvency of the Hungarian state in the face of capital flight, and re-start a stalled economy, named after Finance Minister, Lajos Bokros. At its heart were deep spending cuts that focussed on a range of social welfare programmes, and the package brought about a substantial falls in real incomes – 12 percent in 1995 – the largest such fall since the peak year of the Stalinist dictatorship in 1952.

The problem with the Bokros package – or rather one problem with it; there were many – was a product of its political context. The previous May, voters, fed up with the social and economics strains of economic transformation during the early 1990s, elected the Socialist Party (MSZP), in the belief that they would curb many of the perceived social injustices of the transformation process, and pursue “competent” economic policies that would reverse the reductions in the standard-of-living of the early 1990s. The first ten months of the government the Socialists formed, a coalition between themselves and the liberal Alliance of Free Democrats (SZDSZ), were characterized by ideological disputes between those who sought greater social protection, and those who advocated further market transformation. The announcement of the Bokros package represented the victory of the latter group, supported by the financial markets, international organizations, and most western governments, but crucially not by a majority of the population. In 1994 a majority of Hungarians used the elections – by electing the MSZP – to gain a greater degree of social protection in the face of market forces. The events of 1995 were a demonstration that international financial markets would not respect the choices Hungarians made.


The political consequences were profound. In the short-term they increased the appeal of the populist far right; behind this anti-Semitic sentiment spread, as did anti-foreigner sentiment. During 1995 and 1996, the squeeze on incomes was accompanied by considerable anger. In the 1998 elections, the SZDSZ – previously a popular radical liberal party, perhaps Hungary’s first since the 1840s, capable of winning a fifth of the vote – lost two-thirds of its support, abandoned because of its enthusiastic support for pro-market policies. By the end of the decade with average living standards approaching the levels of eleven years previously, and a deep chasm between rich and poor, relative economic recovery concealed deep-seated anger and frustration. Institutions suffered from low public trust. Hungary was also polarized; a product of the divisive tactics of the right-wing government of Viktor Orbán, brought to power in 1998. Both sides in this political battle were relatively evenly matched in terms of public support. As the negative campaign run by Orbán between the two rounds of the 2002 parliamentary election demonstrated, ordinary voters were deeply suspicious of pro-market economic policies, and fearful of a revival of the policies that had been pursued by Bokros.

Faced with extreme distrust among the electorate for the market, a society polarized vertically into winners and losers, and horizontally into right and left-wing camps, the politicians used the state budget, and empty populism as a sticking plaster to conceal the legitimacy problem that first emerged in 1995. From 2002, an election year in which the victorious MSZP both promised and delivered unfunded largesse, the budget deficit and public debt exploded. This explosion of state spending is often presented as a consequence of lax budget control, and the moral failings of Hungary’s politicians. Though both these were present in abundance, this growth stemmed from two factors – one rooted in Hungary’s post-socialist political economy, which I don’t want to describe here, as it is worthy of longer explanation; the other was a symptom of the slow-burn crisis of the political system. Given their adherence to the financial markets (and the necessity thereof), Hungary’s political parties were left with a deep democratic deficit from 1995 onwards. They sought to plug this deficit through using and playing the game of political polarization, but more importantly were only able to win support through using the state budget to compensate their respective constituencies for the failures of the economy to provide them the jobs and living standards to which they aspired. All of this culminated in the 2006 elections, and their aftermath – one of horribly low public trust, deep suspicion of pro-market “reform” measures (demonstrated most clearly by the overwhelming victories for the “yes” camp in the spring 2008 referenda), considerable and growing public anger with low standards of living, and greater assertiveness by the extreme right.

Clearly, therefore, it is not only Hungary’s financial institutions which require rescuing, but its democratic institutions do too. Given the roots of the slow-burn crisis of the political system, it is rather easy to see why the IMF/EU/World Bank package risks killing (or at least wounding fatally) the democratic institutions established in 1989-90.