Commentary

3 Things Orbán Got Right About the EU

There are flaws in financial markets and the EU that PM Orbán learned to exploit cynically. For his own benefit – the peasants may suffer.

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1. You don’t lose access to EU funds for being naughty

The creation of the European Union followed the nastiest period of modern history – the era of great power games and mutually assured destruction. In other words, the politics of threatening with sticks. Seeing the utter failure and destruction caused by such grandstanding and zero regard to the suffering of populations, the idea of a rule-based world was supported by carrot-based incentives instead. The European Union didn’t have an army or any credible threat of wide-scale destruction and violence – but it would use its soft power (money and appeal) to influence – and convince the world of the possibility of growing out of medieval power games.

For Hungarian politicians gaining Moscow’s approval used to be imperative. (Some would argue that this might the case again.) Then came alignment with Brussels in order to gain access to the European Union. It was accomplished by 2004.

Riding the discontent of the financial crisis, Orbán gained big in 2010 with the rhetoric of comparing Brussels to Moscow. They both hand out directives, right? So 

The European Union’s approach to soft power and carrots worked well in a world where politicians still had some shame and still harbored a belief that the good of the public is somehow good for them. But not Orbán and his ilk. They have turned the tables and realized that people can be made to cheer anything, as long as you give them excuses, even their own disadvantage. Public good was thus sunk and the benefit of the king emerged as guiding principle for both the king and his authoritarian subjects. And this is why human rights (their own liberties) became a swearword in the eyes of these subjects – and Brussels became an evil meddler for trying to tie the hands of their precious king and savior.

Besides, the EU does not stop handing out carrots for human rights abuses. Because the carrots are not really there for human rights in the first place.

The idea that you would lose your development funds had worked for a while as credible threat. Hungarian governments before 2010 made an effort to adhere to the rules – and at least were shamed when they were caught breaking them. Some even resigned.

Not anymore. The Orbán-government realized that losing the carrots is actually pretty hard for at least three reasons:

  1. Because net contributor countries use the system of EU development funds to indirectly subsidize their own companies.
  2. Because no eurocrat benefits from pushing through with the process of stopping these funds – especially not against political will.
  3. Attention deficit

2. Attention deficit

No one has time for a tiny rebel country. It won’t be punished if you also have Russia breathing down your neck – not to mention the Greek crisis, the French and German elections, the migration crisis, real or perceived terrorism, Brexit, Trump, etc. But just take Russia. Who has the time to potty-train a toddler throwing a calculated tantrum, when Russia is taking bites out of the EU with the help of Manchurian candidates and genuinely earnest, local useful idiots?

But political attention deficit is one thing. Orbán also realized that markets are stupid. Or at least not very good at punishing misbehavior. (And that’s before we even suspect corruption.)

We all prefer to believe that if a government fundamentally screws its economy, inflates its currency, suffocates its businesses – the markets would react. It appears that they don’t.

Attention deficit ensures that you will be misunderstood when, say, the Forint weakens in line with the Polish currency on the back of negative Polish data – even though Hungary has nothing to do with said data, apart from being lumped in with a bunch of other Eastern European countries (an oft-heard lament of Hungarian politicians).

  1. Firstly, given the relative insignificance of the region only freshly graduated analysts work on the Eastern European desk at investment banks and credit rating agencies.
  2. Secondly, Eastern Europe often also means Russia, so tiny countries simply don’t get any deep attention.
  3. To compound the problem, Hungary is the sole non-Slavic language country in the region, ensuring that the analyst assigned to the task can only read Slavic language sources first hand.
  4. And when it comes to gathering data, the first source that has it neatly assembled in English will win his heart.

Attention deficit thus also means that you will be largely ignored and the analyst tasked with covering Hungary will take shortcuts. And therein lies an opportunity for Orbán.

Because even if a senior analyst is assigned to this region, he would be impressed out of his pants when a young, energetic man from The Ministry (!) agrees to talk to him, because it looks so well back at the firm. So he lets himself being sweet-talked – while he poses as totally unbiased and suspicious. But who has the time? So when His Contact From The Ministry (!) helpfully supplies some handy data that makes the economy look like a rocket poised to launch, he takes the charts home, happy to have save a lot of data mining work.

Speaking of data…

3. You didn’t take those numbers seriously, did you?

“I’m a lawyer, not an economist.”

-said the king and he meant business. While meddling with the economy, this government is not bothered by economics – or in fact the numbers. They use legal tools to micromanage the economy – and doctored statistics to lure in investors and keep the bloodhounds at bay.

I can almost hear them after Hungary’s credit rating went to junk in 2011 (after they nationalized private pension funds and spent the money):

“You want numbers – you get your numbers.”

As of the numbers, nothing easier than to pressurize your subservient personnel, hand-picked for loyalty to proactively manipulate the numbers. After all, fixing the economy is hard work – but fixing the numbers only takes a phone call. Or not even that. Sometimes it is done proactively.

In know. Everyone manipulates their statistics. But there are degrees. And more importantly – the recipients of those numbers have no incentive to question them. Either because they are only into short-term investments, or because they are bureaucrats who have quite enough on their table already. Monetary financing? It is the new black.

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One thought on “3 Things Orbán Got Right About the EU

  1. Pingback: 7 Issues Hungary and the Balkans Now Have in Common | Meanwhile in Budapest

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