I dare you to do business in Hungary... / Sounded Like A Good Idea

Orbán fixes fuel prices, forbids closure of gas stations

Shortages, here we come!

One overnight decree fixed fuel prices below their current level. The next forbade gas stations from closing down.

Neither of these decrees were discussed with anyone prior to their publishing in the official journal, they came out of the blue for the markets.

I dare you to do business in Hungary.

I also wonder why anyone insists abroad that Orbán is somehow a conservative or pro-market ruler. This is not even his first price fixing and heavy-handed intervention that sounds like a chapter from Atlas Shrugged. When global fuel prices started skyrocketing the regime could have reduced the tax content of fuels. (We have a world record 27% VAT!) Or they could stop weakening the forint because the weak currency also adds to the pain of inflation for the people.

The inflation is… not great, not terrible

Inflation has been denied for years but it is now here, undeniably, even though it will be massively understated. And not just in Hungary. That is the use of official inflation statistics for your government, by the way. Not to illuminate the situation for the public but to gaslight us once the situation gets really bad IRL. And that is now, just before the 2022 elections for Orbán.

When prices go up for any reason dumb politicians reach to one of two legislative tools in their arsenal. For simple minds who hear about the economy for the first time these tools sound logical – but they only make things worse.

One is price fixing – resulting in shortages.

The other is giving people more money to be able to afford higher prices. Predictably, it leads to even higher prices – as the example of state subsidies for home buying showed.

75% of housing subsidies were soaked up by the price increase they have caused

The Orbán-government didn’t talk to market players before the move, not even the national champion was notified officially. (Unofficially, its CEO was probably informed because he sold shares just before their prices tanked due to the price fixing decree.) Orbán simply announced the price fixing personally, harvesting the hoped popularity points before the elections.

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“We decided! The price of fuel can’t be higher than 480 forints.” (Source: Orbán’s Facebook)

For a few days after the price fixing decree everyone wondered who was supposed to swallow the losses. Is it the wholesale supplier? Is it the retailers? Who will get compensated for it (and how will the cronies steal from it)? Now that the follow-up decree is out on Saturday night (!) we can see that it is designed to make retailers suffer. The decree itself is a regulatory whack-a-mole, designed to clamp down on any possible attempts to get out of it.

If the retailer doesn’t sell fuel at a loss for whatever reason, they are not allowed to sell anything else. If they shut down, they are fined and not allowed to reopen for up to six months. If they play rough, their business will be given away to other applicants that the minister picks. The new cronies will not be liable for any debt of fine the original retailer incurred so they can enjoy their newfound gas stations without the government giving them a hard time. The old owners, meanwhile, will be hunted down even after their license is revoked.

And who the new cronies will be? You can guess – but tone down your naïve hopes of logic and that the good of the public will matter. It is Hungary, the land of tobacco retail permissions being given only to Orbán loyalists with the explicit goal of rewarding them and punishing corporate retailers.*

I am waiting for the next decree to establish a gas station authority to ensure enforcement – or a decree to call for citizen informants to report on big, evil corporations to the good king. (A surefire sign that a country is going down is pitting non-government entities against each other, be it family members reporting on each other or organizations made to do the same, in order to keep political power.)

Top Managers Talk About Doing Business in Hungary

It is now a race against time for Orbán. The next economic crisis is upon him and he never governed through one.

Orbán never governed through economic hardship – and he has been anticipating it since 2018. Analysts now openly wonder whether Orbán would be able to govern through an actual economic recession – and his heavy-handed denial of economic reality and his first apparent measures are not promising. He may have been at the helm for a long time, but never long enough for an economic cycle to catch up with him.

Indeed, he only ever inherited budgets balanced by austerity measures for which the other side took the blame. Then Orbán went on to pose like the Man of the Economy, reinforcing the damaging tradition that both politicians and the voters regard politicians as the men who make the economy. Hungarians thus still believe that it is not them but Orbán who creates growth, jobs, opportunities. But after eleven years and with an economic crisis looming some start to wonder whether they have overestimated him.

The myth of Orbán’s talent

The coming high inflation era (and assorted other economic issues) is about to bite Orbán in the butt if he doesn’t get itself reelected in time. And whoever comes into power in April 2022 will face the crisis that puts the last 30 years to shame. So despite his alleged aversion to price controls Orbán magnanimously announced to protect his people from the increased fuel prices.

I say “his alleged aversion to price controls” because he had already fixed the prices of things, like energy and utility bills in 2014, taxi rides in 2013, and construction materials in 2021. The hike in construction materials was also caused by Orbán, it was his policy of pouring money at families for renovation. It is difficult to see the “conservative” or “pro-market” Orbán his western apologists envision.

By the way, he is blaming “Brussels” for increasing fuel prices. Don’t ask me what the logic behind that is. It is an election lie and they don’t have to make sense.

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“Brussels’ latest plan is to destroy the European middle class, increase energy prices and destroy the European economy. We won’t let them!” (Source: Orbán’s Facebook)

* UPDATE: A crony has already reported that he would very much like to take over non-complying gas stations and happens to have the license. The same one who sold his shares in his own energy company before news about the price fixing became public and tanked share prices.

Featured image: “Arithmetic of an alternative plan: 2+2 plus the enthusiasm of the workers=5”. Soviet propaganda poster by Iakov Guminer, 1931 Source: Wikipedia

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