Deepening of authoritarianism and uneven struggles of global capitalist reorganization: politics of the COVID-19 crisis in Hungary

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, 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 embeddedness into transnational capitalist processes.

Earlier, the Budapest-based Working Group for Public Sociology “Helyzet” described 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 maneuver space opened up by the 2008 crisis, this project was built on capturing foreign direct investment from Western multinationals that outsourced production due to the crisis, carving out additional maneuver space for local oligarchic capital accumulation through increased state intervention in the sphere of domestic service industries, and diversifying external financing through 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, served as a tool in this process.

Members of “Helyzet” argued that the regime’s policies can be differentiated according to four aspects serving 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 labor 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. While these policies served the stabilization of a double accumulation flow that simultaneously serves external and domestic capital, the regime’s extreme dependence from external conditions of accumulation – most importantly: German automotive industry and German export markets –, and a growing reproductive crisis following from the burdens this process puts on labor were mentioned as factors that threaten the stability of the regime. Helyzet Műhely’s analysis expected that in case of a broader economic crisis, the regime’s only way to maintain control would be the deepening of authoritarianism.

The regime’s reaction during the COVID-19 crisis has followed and expanded the logic captured in this analysis. In a context where previously favorable 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, the regime makes maximal use of the broader space for state interventions opened by the situation 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, squeezing out multinational actors of the sector, feeds oligarchic concentration from the crisis of smaller domestic companies, and keeps crisis allowances serving 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, particularly by the German automotive industry that has been outsourcing capacities in order to compensate for its own profitability crisis. Despite conflicts over the narrowing of democratic institutions, and over some losses by Western multinational companies due to post-2010 repossession policies (while others, like in the case of banks, have been handsomely compensated), this connection at the base of the regime has not been questioned in successive warnings against democratic backsliding. Despite the EU’s activation of Article 7 proceedings, so far, no significant measure has been taken, and Fidesz is still part of the EPP. While many commentators describe this as a result of indecisiveness or Byzantine European bureaucracy, interlacements of European capital’s crisis management with the Hungarian system also need to be considered. As a regime that uses its centralized power to subdue workers into successive crisis management models formulated together with Western industrial chambers, the Orbán regime needs to be understood as an element of global power relations playing out within the crisis, instead of a local specificity.

What is particular to the present crisis measures in terms of their international context is that the regime’s current power centralization happens in a context of uneven power relations where its preemptive moves of domestic capital concentration represent an effort to maintain position within a new global wave of monopolization dominated by much stronger actors, (like US or Chinese capital fractions promoted by respective crisis measures). While warning signals voiced by European politicians, as usual, only served to help the government portray itself as attacked by Hungary’s external enemies, a fast depreciation of the Forint as a 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 conflict implied with multinational actors was probably one of the major causes behind the devaluation of the Forint that followed the news of power centralization.

However, the relation between the devaluation of the Forint and authoritarian deepening needs to be investigated 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 favorable condition of market penetration by global capital, a step the IMF and the World Bank have been promoting globally as part of structural readjustment packages. East European privatizations of socialist state property happened under similar conditions. While the regime’s previous macrostabilization policies successfully reduced the share of foreign currency debt, and therefore a relatively cheap Forint has been part of the regime’s maneuvers to benefit export industries, recent shifts of financial markets have threatened its potential to control the Forint. These provide a background of threat implying property shifts in fields like energy, constructions, telecommunication, utilities or banking, where the regime managed to roll back the dominance of foreign capital gained during privatization to the benefit of domestic oligarchy, but where 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 already noticed that the government’s decision to quadruple foreign debt and its issuing of Euro bonds of four billion represents a strong break in the regime’s continued effort to reduce foreign debt and thereby increase policy autonomy since 2010. While temporarily the government strives to use the Forint’s depreciation by applying EU transfers to sustain emergency funds without going into debt, in the long term the stability of this path is in question. Meanwhile, previous tendencies to balance Western financing with Eastern sources have been reinforced. 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

In terms of authoritarian deepening, looking at the immediate political-institutional context, it has to be mentioned 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 supermajority in parliament and could repeatedly change the constitution in accordance with its political calculations, limited by virtually no significant legal-institutional checks. Even if some concrete expiration date had been attached to the newly introduced emergency powers, it could have been prolonged over and over again by the party. Also, the “emergency situation” because of the “migration crisis” was already introduced in 2015 and is in effect ever since, giving additional power for the government, the police and the army, although not to the extent which was introduced following the coronavirus pandemic.

The further concentration of power through introducing rule by decree has been interpreted by Hungarian investigative journalism as serving Orban’s autonomy from his own party. A strongly hierarchical construct, where conflicts of interest were up until today successfully held in check from above, the party’s alignment 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, which they took independently from government measures, and which started to constitute a significant constituency pressure on representatives. In terms of the broader context of the regime’s struggle for stability, the power concentration 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 who want to block effective governmental response to the epidemic. Further cuts to the already narrow decision power and financial capacities of local governments, and including party finances as a source of emergency funds has served to further eliminate oppositional capacities, which despite their mitigated powers seemed to be able to constitute some threats due to widening delegitimation of the regime, culminating in oppositional 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, such as offering social assistance, helping homeless people, providing general practitioners for the local population, maintaining public institutions for the elderly care etc.                                

On the level of soft power, like after 2010, 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 above the standard labor code, 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

By today, military task force units have appeared at over 100 companies declared of strategic importance. What this kind of control may mean 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, internal and external actors as well expect the regime to push reorganizations of property. After 2010, policies ranging from extra taxes inflicted on multinational competitors to direct renationalizations served to increase domestic oligarchic capital’s shares on these markets where state policies play a defining role and therefore local capital is less exposed to global competition than in the case of manufacturing. With the present crisis opening 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, in an optimistic essay written on the new economic opportunities opened by the crisis, marked these times as optimal for a wave of repossessions.

Policies that serve to pressurize 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 from special taxes on banks and multinationals. The largest shares of such taxes are paid by large foreign retail companies – the same competitors of growing Hungarian counterparts that have been pressurized with policies like 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 an unilateral beneficiary: 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. Irrecusable buyout offers, controls and even closures by the national tax agency or the police were matched on the side of many companies by various tactics to avoid property shifts, from moving their headquarters and liquidity abroad to 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 hit by the crisis to fail. With companies on top of oligarchic chains disposing of high capacities for investment, analysts expect a domestic property centralization in these sectors, to the benefit of the latter.

Measures to sustain and expand foreign direct investment

While in the field of domestic service industries, the regime conflicts with multinational capital, in the field of export manufacturing, crisis measures provide new benefits to foreign investors. 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 labor code that practically bracketed labor regulation for the time of emergency, this package included the expansion of the working time banking scheme to up to two years, something 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 the flexibilization of labor time according to the needs of fluctuations in manufacturing, allowing manufacturers to deactivate and activate labor according to market fluctuations in a context where domestic labor shortage limited this possibility due to the lack of a significant reserve army. This move, 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. For small and middle-size companies with low levels of liquidity, which cannot finance basic wages for workers in times of inactivity, this 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. Trade unions and labor 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 been promoting Eastern technological collaborations already before the epidemic, and laid out the plan of the Samsung plant as the largest in the region. Due to its toxicity, the idea of the plant had been 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 on the territory of the Samsung plant in Göd. Péter Szijjártó, minister of foreign affairs and trade communicated this step as a key move in the governments’ efforts to tackle the economic effects of the crisis, compensating 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” – he 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 also allows national and county governments to overwrite local regulations on construction and environmental protection. By the end of April, the government engaged in a large 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.

Labor

Crisis measures that help labor’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. While more than half of households have savings worth less than three months of reproductive costs, benefits for the job search period in case of losing employment has been sustained at the former short period of 3 months, covering 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.

Shortages of protective gear and unsafe working conditions have been protested by several unions, from pedagogical cadres being forced to carry out graduation exams at the time when the number of infections is expected to peak, to healthcare and social workers bearing the weight of the pandemic under the 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 (including forbidding hospitals to provide public information) serves to suppress public awareness on the actual state of the healthcare system and the epidemic, while the regime also uses the emergency state to roll out a previous plan on reducing the number of hospital beds.

Besides many workers at home, Hungarians who sought work abroad as part of a new migration wave in response to the recent reproduction crisis also lost their jobs in Western Europe and returned to Hungary in the past month, before the closure of the borders. Tens of thousands, who are daily commuters to abroad also feared losing their jobs, but Western national governments eased border closures after a few days, to allow Eastern agricultural and care workers to take work again. The lack of protection in these cases – from the possibility of physical distancing to the lack of formal contracts that would allow for health insurance – already caused international scandals, and exposed a layered distribution of labor and security in Europe.

Rural regions where poverty had been trickling down along the geographic hierarchies of post-socialist polarization particularly suffer under the effects of the lockdown. A source of cheaper migrant labor during the past years of extraction-based boom and labor shortage, 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, but also reflects a selectivity due to generally low levels of unionization and the divergence of different unions’ positions within the economy. Unemployment and aspects of reproductive needs and conflicts that fall outside of the workplace – from the crisis of care work to domestic violence or rural famine – show that labor 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 article has been 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. A next article will present the main lines of its activity.

 

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