Street art depicting Viktor Orbán (2019)
By the end of the Second World War, Hungary’s slide into far-Right politics had left the country in ruins. The civilian population suffered tragically. Hungary, allied with the Axis powers from 1940 on, was one of the countries hardest hit by the Holocaust: around 655,000 Hungarian citizens of Jewish origin perished. Some 300,000 soldiers also died in a disastrous war fought alongside Nazi Germany.
How did the politics of Hungary in the 1930s come to this? Historian Krisztián Ungváry (2013) attributes the rise of the Hungarian far Right to the enormous economic disparities prevalent in the first half of the twentieth century. Hungary, with a population of about 8.6 million at the time, was said to be a country of “three million beggars,” with a large rural population that had essentially no property and survived by working on the lands of others. Then there was the small peasantry, with their tiny landholdings: 60–80% of the population lived at or below the subsistence level, with the bottom 81% drawing only 44% of the income, and the top 0.6% drawing 20% (Ungváry 2013, 120–121). These income disparities were large even by comparison with high levels of inequality in the region.
Most of the urban population was concentrated in the capital, Budapest, which grew to around two million, a gigantic head on the body of a small country which had lost two-thirds of its territory after the First World War. Capitalism was thus concentrated in Budapest and was rather rare in the rural areas. A small but powerful capitalist elite owned much of the wealth in the country, concentrated mostly in the capital.
As Ungváry documents, a lack of social policy meant that poverty, joblessness or old age really meant unmitigated misery. It is not ahistorical to point out the absence of social policy in the Hungary of the twenties and thirties; while Germany had enacted a welfare state since Bismarck, and even neighboring Czechoslovakia had a decent level of social protection.
These enormous disparities were bound to cause social tensions. However, as a consequence of the limited presence of the political Left, the tensions were mostly not articulated in class terms. This was due partly to the actions of the Left itself, and partly to the authoritarian nature of Admiral Horthy’s Right-wing regime (1920–1944). On the one hand, the political Left in Hungary had made an ill-fated entrée into the twentieth century with the Hungarian Soviet Republic of 1919. This caused bloodshed and repression to be associated with the political Left up until today. It also led to the Communists being outlawed during the Horthy regime. Another significant event was the so-called Bethlen-Peyer Pact of 1921, between the Prime Minister and the chairman of the Social Democratic Party. This legalized the Social Democratic Party, but limited their parliamentary seats to 24, regardless of their election results. The Social Democrats agreed not to organize among public sector employees, railway workers, and postal workers. Trade unions were allowed, but they were not allowed to be political. The agreement was meant to be kept secret, but was later published.
As a consequence of these developments, the political Left in Hungary was constrained in the 1930s. Class-based narratives of socioeconomic conflicts remained very restricted in comparison with ethnicist-racist narratives. For historical reasons, the development of capitalism, urbanization, and the emergence of the bourgeoisie coincided in the Austro-Hungarian lands with the influx of Eastern Ashkenazi Jews in the second half of the nineteenth century. Many of them became secular or half secular, while some converted to Christianity. Yet for the most part they were still seen as Jewish by their compatriots. The middle classes of Prague, Vienna, and Budapest were largely of Jewish origin. Ungvári reminds us that around the turn of the century some 7% of the population of Hungary were of Jewish origin, a significantly larger proportion than anywhere in Western Europe. They made up around a fifth of the capital city, Budapest. Their presence in urban occupations related to modernity was even higher. Ungvári illustrates this with a multitude of figures; for example, 59% of doctors, 61% of lawyers, and 48% of journalists, 54% of traders and 38% of engineers were of Jewish origin in 2010 (Ungváry 2013, 20–28). In 1930, 46% of corporations and 78.9% of commercial enterprises had Jewish owners. 85% of top bankers were estimated to be Jewish (Ungváry 2013, 43). The capitalist industrial and financial elite were therefore also portrayed by ethnicist political forces as “Jewish,” rather than “the capitalist class.”
In the absence of a rational, class-based narratives, public discourse in Hungary in the 1930s came to be dominated by ethnicist-racist discourse, which depicted class conflicts as an ethnic or even racial confrontation. More and more political parties sprung up with the “racial justice” agenda; the program of stripping Jews of their jobs, titles, and assets; and handing these over to “hard working majority Hungarians.” In this discursive milieu, it is not surprising that this is exactly what happened during the Holocaust: the titles, assets, and positions of those who had been deported were taken over by individuals in their environment. The absence of a serious class-based narrative led to a human tragedy of unique proportions, which also claimed the lives of a great many Left-wing leaders.
The Social Democratic Left and the Great Depression
The Great Depression of the 1930s made it clear that crises were an integral part of the economic system. Previously, neoclassical economic orthodoxy asserted that capitalism had self-healing properties: in case of a crisis, prices would adjust downwards, extra capacities would be eliminated, and output and employment would return to their previous levels. After long years of depression, however, the promised recovery was not forthcoming. The emergence of Keynesian economics after the publication of the General Theory (Keynes 2007 [1936]) provided one explanation as to why this was the case. Marxian economists, of course, claimed that even Keynesian demand management would not be enough, as there was a long-term trend of self-destruction in capitalism through the declining profit rate.
It would be logical to assume that this massive crisis of capitalism would benefit its principal critics, the political Left. However, this happened in only a handful of countries. The most successful of these were Scandinavian societies, where political representatives of the trade union movement broke through in democratic circumstances and began their political domination that would last throughout the twentieth century. The Saltsjöbaden Agreement of 1938 in Sweden was the symbolic milestone in the construction of the Scandinavian model that successfully coupled social justice with freedom.
Other countries were not so fortunate. The collapse of the Weimar Republic in Germany brought with it the rise of Hitler and the Nazi party, which in turn led to the outright banning of Communists, Social Democrats, and trade unions. The extreme Right offered not only an alleged explanation of the crisis with its racist theories, but a sense of identity (the nation) in a very unstable world, as well as jobs and income through what amounted to military Keynesianism in the form of armaments building in preparation for the coming war. The end result was the Second World War and the Holocaust. Similar developments took place in Italy, Japan, Poland, Hungary, Spain, and a long list of other countries. In fact, the general rule was that it was the extreme Right rather than the political Left that benefited from the economic crisis of the 1930s.
After the war, the Left finally had its chance to implement the welfare state model throughout Europe. Germany returned to its Bismarckian heritage with the social market economy model, which lead to the German economic miracle. The welfare state in France created the “three glorious decades.” The British welfare state, initiated by Clement Attlee, led to the British “never having had it so good.” The Italian welfare state led to “il sorpasso,” the economic overtaking of Britain, as well as lessening North-South disparities in this deeply divided land. All in all, the decades of Keynesian demand management and economic redistribution lead to decades of full employment, high growth without indebtedness, well-functioning democracies, and social justice.
That all changed with the rise of neoliberalism. The paradox of Social Democracy is that in various ways it is self-defeating. On the one hand, it helps reduce class differences and create a strong middle class, which will no longer be interested in redistributive policies. Middle-class people tend to explain their prosperity by their own talent and hard work and are inclined to support the reduction of the tax burden, and thereby undermine redistributive solidarity. On the other hand, the participation of the Social Democratic parties and the trade unions in democratic capitalist politics means that the elites of these organizations become part of the national elite. They become well-paid functionaries, well connected, wealthy, influential, and sometimes even celebrated. Their upper-middle-class living standards will be more aligned with that of the liberal upper middle class than that of the workers and lower-middle-class strata that they are meant to represent. Over time, they will be more inclined toward political battles involving issues of recognition rather than issues of redistribution.
How Neoliberalism Conquered the Left
Neoliberalism is a political movement that aims to roll back the welfare state based on the rhetorical claim that it obstructs the efficient functioning of markets (Mirowski 2014; Mirowski and Plehwe 2009; Streeck 2014; Tooze 2018; Tribe 2009; Davies 2014; Duménil and Lévy 2004, 2011). In the long run, it benefits the upper class by eliminating redistribution, deregulating markets, and creating the conditions for state capture by oligarchs and corporations.
Neoliberalism as a political movement had been started at the Mont Pelerin meeting of 1947 by a handful of Austrian and neoclassical economists such as Hayek and Friedman, who felt they were in a tiny minority in a world dominated by Keynesian economic thinking. Its first political successes were Pinochet’s extreme Right-wing military junta in Chile (Klein 2007) (a great irony, given the neoliberal movement’s constant reference to economic freedom being a guarantee for political freedom), as well as center-right victories in the UK and the United States with Thatcher and Reagan. However, the movement soon captured the political Left as well. Mitterrand’s famous U-turn in 1982 signaled the beginning of this process. It was then ideologized by Anthony Gidden’s Third Way (1999) in the eighties, and brought to power by Tony Blair, Gerhard Schröder, Bill Clinton, Francois Jospin, and many others.
The massive problem with the neoliberalized Left is that it effectively abandoned the core principles that had made postwar Social Democracy effective in creating a just society and a well-functioning political democracy. Instead of turning back the neoliberal revolution, it adapted to it, which left oligarchs and corporations in control of the media and the political process through campaign financing. Lower classes are still denied opportunity, while the super-rich prosper (Piketty 2014).
Neoliberalism brought with it the extreme dominance of neoclassical economics over all other economic schools. Keynesianism was deemed passé. Demand management, high rates of redistribution, universal wage bargaining and minimum wage policies were abandoned. In their place came deregulation, free trade, fiscal conservatisms and austerity, inflation targeting (“the Great Moderation”), tax competition, offshore finance, independent central banks and fiscal councils (i.e., the depoliticization of economic policy), and general convertibility (which lead to international investors become a second constituency for politicians [Streeck 2014]).
In 2008, these neoliberal policies clearly came to a crisis. Deregulation led to extreme financialization, industrial concentration, and often outright fraud. Large banks in the United States and the EU had to be bailed out, disguised as bailing out states in the latter case (Tooze 2018). It became clear that capitalism had been surviving on borrowed time, through the increasing indebtedness of households, firms, states, and the financial sector. Social inequalities had reached unbearable levels. At the same time, environmental devastation and climate change came to be recognized by the majority.
Again, it would seem logical that the political Left, traditionally the primary critics of capitalism, should have benefited from this crisis. However, as developments across the globe indicate, this was not to be. As in the crisis of the Great Depression in the 1930s, the beneficiaries were not left-wing political forces, but the political Right. The institutionalized, mainstream left-wing political parties had slipped too far under the influence of the liberal upper middle class culturally and had become dependent on the financial and corporate oligarchy for their campaign financing. More radical left-wing groups were not able to replace them due to the cultural hegemony (Gramsci 1992) created by mass media, as well as the lack of financial resources.
Instead, socioeconomic tensions once again became ethnicized, and the world witnessed the return of xenophobia, racism, nationalism, and the dominance of radical Right-wing political forces. The antithesis to neoliberalism was not a culturally open social democracy, but ethnotraditionalism, which combined antiestablishment sentiment with traditionalist values.
Hungary After the 1989 Political Transition
Hungary was one of the key countries in the push for democratization in the former Soviet Bloc. The first free elections were held in 1990. A diversity of political forces appeared. The former Communist Party broke into a Socialist and a Communist wing. The former achieved about a tenth of the popular vote, while the latter failed to make it into Parliament.
Surveys from these times, and continuously since then, tell us that Hungarians took for granted that the welfare state-like aspects of state socialism (free and general education, healthcare, pensions, etc.) were a civilizational achievement and would not be rolled back. Rather than unfettered capitalism, voters wanted to open up politically from a one-party system, political repression, closed borders, and the presence of Soviet forces to a political democracy with freedom of the press, open borders, and full sovereignty. There has also been constant popular support for European integration.
Post-transition governments both Left and Right, however, did not respect these popular sentiments. Sadly, the neoliberalized Left here is at least as much at fault as the Right. The first right-wing coalition (1990–1994) even introduced the German social market economy model into the Hungarian constitution, with elections for trade unions, as well as wide-spread wage bargaining.
In 1994, however, Socialist Prime Minister Gyula Horn signed a coalition agreement with the Liberals even though he had a clear majority. The main reason for this was that Socialists were still trying to distance themselves from their Communist past. Long decades of repressive Soviet-style state socialism also made the left-wing label unpopular both in Eastern Europe, even though, as it has already been mentioned, actual left-wing content and ideas remained popular. A coalition with a party made up of former dissidents would serve to prove to the West that they were not about to roll back democracy.
Horn’s Socialists then went full speed ahead with an opaque privatization, selling state assets at depressed prices to foreign investors. An internal challenge by his market fundamentalist finance minister caused infighting and neglect of economic policy. Macroeconomic instability led Horn in 1995 to bring in another market fundamentalist finance minister, this time a more loyal one, who introduced a harsh austerity package that included severe cuts to welfare and education. Hungary had to turn to the IMF to avoid collapse. Bargaining with the trade unions was suspended even prior to the introduction of austerity, and they were not consulted about the package itself. Trade unions MPs were gradually squeezed out of the Socialist Party, causing deep suspicion that lasts until today.
Horn also conspired in a corruption scheme to financially aid the ailing Postabank from the state coffers, using the pension system run by the trade unions as middlemen. The scheme was exposed by the press, leading to a huge loss of face for the trade unions, which then allowed the succeeding right-wing government to close down altogether the union-managed self-governing pension and social security systems.
The neoliberal international environment very much encouraged the Socialists to reform themselves into market-friendly politicians. Had the political transition in Eastern Europe happened in the 1950s or 1960s, former Communists would probably have remodeled themselves into principled old school social democrats, advocating a strong welfare state. In fact, there was even a popular theory at the time that advocated systemic convergence: Eastern Bloc socialist states such as Hungary would gradually open up and democratize, while Western welfare states would gradually introduce community ownership (e.g., Swedish workers’ ownership funds). This convergence never materialized. Instead, the Western Left came to be led by neoliberalized leaders at the time the Soviet Union collapsed. Eastern European former Communists quickly adapted to the situation by advocating a partnership with capital.
The peak of the neoliberal Left in Hungary arrived with the Prime Ministership of the Socialist Ferenc Gyurcsány between 2004 and 2009. A self-professed fan of New Labour, Gyurcsány organized conferences in Budapest with Giddens and other Third Way ideologues. Rather than increasing redistributive expenditure on crucial issues such as education and health care to (at least) EU average levels, he further decreased these as a percentage of GDP. As a consequence of his policies, Hungary became the least socially mobile society in the European Union according to a study by Eurofound (2017). The enormous selectivity in the state healthcare and educational sectors meant that social mobility effectively froze.
How can a nominally socialist government govern in such an antisocial way? The key to explaining this is to see how class-based narratives had been effectively disqualified from political discourse in Eastern Europe (Éber and Gagyi 2015), as alleged legacies of a Communist past. While class-based narratives are a regular part of Western European or US political debates, in Eastern Europe they had been banished. Social stratification was portrayed as not being relational, as in class-based narratives, but rather as a consequence of individual effort which resulted in social “layers.” Even the nominal Left accepted this, which lead it to disregard policies that could have alleviated class differences. The consequence was the end of social mobility.
On top of social injustice, Gyurcsány performed what the Economist called the “worst mismanagement of any post-Socialist economy.” He attempted to counterbalance his initial years of record budget deficits with a sudden shift to austerity, which subsequently brought the economy to a halt. He then tried to counterbalance austerity by unleashing foreign currency-based lending, which led to a massive crisis involving hundreds of thousands of households once the exchange rate of the Hungarian Forint collapsed as a consequence of his economic policies (Király 2019). This happened in 2008, when foreign investors who were apprehensive after the collapse of Lehman Brothers and Dubai’s sovereign wealth fund, turned their attention to Hungary, where the debt/GDP ratio had been rising rapidly. The exchange rate collapsed, the refinancing rate went through the roof, and Hungary would have been the first EU state ever to go bankrupt, had it not been for a massive IMF loan amounting to 20% of GDP. The net real value of the average wage decreased, while the value of the minimum wage was inflated away and dropped far below the subsistence minimum, resulting in the rapid increase of an underclass which came to encompass some four out of ten Hungarians.
Social injustice, economic mismanagement, and an infamous leaked “lie speech” in which Gyurcsány declared to his parliamentary group that they had been “lying day and night,” employing “hundreds of tricks to keep the country afloat,” and “not having the faintest idea” what to do with an economy they had “fucked up big time,” lead to enraged protests and about one and a half million voters deserting the Socialist Party. Their coalition partners, the Liberals, disappeared altogether. The position of the Left in Hungary became extremely precarious. Their reputation had become tainted not only by long decades of repression and subservience to the Soviet Union, but ironically also by its direct opposite in economic terms, long years of neoliberal misgovernance.
At the 2010 polls, Hungarians elected Viktor Orbán as their Prime Minister. He collected around 2.7 million votes, not significantly more than earlier or later. He then went on to win two more parliamentary terms with similar results, while the Left never recovered. Hungary has around 8 million voters. Thus, it is clear that Orbán’s success can be explained by the historic collapse of the Left rather than any special fascination of Hungarian electorate with Orbán’s right-wing extremist politics.
Orbán’s Hungary: Back to the Thirties
Viktor Orbán’s politics hark back to the 1930s. He uses xenophobic propaganda to rally votes against immigrants. He claims to be fighting a “freedom fight” against alleged domination by Brussels, as well as “German economic colonization.” He put posters in the streets of Budapest suggesting that George Soros was plotting against Hungarians, who must come together to protect themselves. His speeches reflect similar conspiracy theories. His international alliances include nationalist leaders such as Salvini, Berlusconi, Erdogan, Putin, Kaczynski, Gruevski, Vucic, Trump, and Netanyahu.
The antisemitic element is clearly part of the anti-Soros rhetoric. Xenophobia is present in his description of refugees, whom he calls “economic migrants.” He has repeatedly made policy speeches that demonstrate that he does not believe the Roma to be part of the Hungarian nation. Most Roma belong to the bottom two income deciles of Hungarian society, far below the average living standards of the non-Roma. The underfinancing of education and health care, resulting in enormous internal disparities in the quality of service, denies the Roma opportunities for social mobility. Thus, ethnicist-racist narratives are once again dominant in Hungary, while class-based narratives are almost absent. Parliamentary political forces do not use class-based rhetoric, which is restricted to New Left intellectual groups and esoteric university faculties. Parliamentary democracy is much restricted in the style of a managed democracy.
Orbán’s liberal critics, such as Ágnes Heller, have tended to put these developments down to Orbán’s person. They have portrayed Orbán’s Fidesz party as the Galapagos Islands of the Western Right, which they saw as centrist and moderate like Angela Merkel. Time, however, proved them wrong. The Western Right had only turned moderate temporarily as a response to social democratic domination after the Second World War. Once the Left defeated itself with their neoliberalized Third Way politics, the Right could return to its original creed: nationalism, patriarchy, homophobia, etc. Brexit, the election of Donald Trump, the Liga in Italy, as well as Orbán’s previously mentioned allies demonstrate this.
Viktor Orbán was not a meteorite who fell one day from the sky to an otherwise faultless Hungarian political scene. His share of votes in the electorate is not significantly higher than that of the political Right elsewhere. His dominance can best be explained by the failure of the Left, just as the Frankfurt School had diagnosed during earlier age, the thirties.
The political Right offers voters a sense of community: that of the nation. It emits a feeling of security by promising to preserve the world “as it once was”: with cultures and nations clearly apart, with whites in supremacy over others, men in control over women, and heterosexuality as the unchallenged norm. All of these are questions of identity and recognition, to which the liberal half of the elite is happy to play the counterparty as long as questions of redistribution are not mentioned (Honneth and Fraser 2004).
The political Left used to offer a different sense of community: that of the People. Through redistribution, it ensured that all would feel a sense of support from the community: the poor, economically exploited women, peripheralized minorities, etc. Nothing summarizes this better than the Nordic concept of the Folkhemmet—the Home of the People. Through neoliberalization in the eighties and nineties, the social democratic mainstream gave up this alternative offer of community. It came to be dominated by upper-middle-class quasi-liberal elites, who would steer clear of questions of redistribution, and would concentrate instead on issues of identity. As a consequence, they abandoned the representation of the lower classes to the extreme Right. Since culturally many in the lower classes are right-wing (nationalist, patriarchal, xenophobic, homophobic, etc.) by default, as a consequence of historical heritage, the abandonment of a class-based narrative by the Left opened up the terrain for massive gains by the extreme Right (Berman 2006).