Viktor Orbán at Tusnádfürdő/Baile Tusnad

I just finished listening to Viktor Orbán’s 56-minute speech at Tusnádfürdő/Baile Tusnad in Romania. He had a large, enthusiastic audience despite the heat. Applause was especially loud and long when Orbán talked about his fight against multinational companies, banks, and the European Union.  In the audience one could see very young children who, though they most likely didn’t understand a word, were enthusiastic nonetheless. It seems, however, that not everybody was equally impressed. The camera stayed focused for a fairly long time on a man who seemed to have fallen asleep, and I heard later that a couple of men threw tomatoes at Orbán on his way out from the camp site.

Source: MTI / Photo László Beliczay

Viktor Orbán made sure that his audience doesn’t forget about next year’s election. He began his speech with a reference to it and at the end stressed the importance of his staying in power and continuing the policies that will lead to a complete transformation of Hungary’s political and economic system.

It seems that once Orbán comes up with a pet theory about the political and economic functioning of the universe, and he has a large inventory of them, he simply cannot let it go. In fact, in every new speech that touches on one of these theories he ratchets up his rhetoric and makes increasingly indefensible statements. For instance, his original theory about the decline of the West has by now become a prediction of a political and military clash between the West led by the United States and Asia led by China. By now he makes no secret of his intense dislike of the United States and accuses it of “trying to prevent other countries from catching up with it.”

Or, a few months ago he talked about the dominance of larger member states over the smaller ones within the European Union. By now this observation has morphed into the conviction that the “great powers” actually exploit the small ones by siphoning financial and human resources away from the smaller countries. The chief culprit here is again the United States. Hungary’s goal is to prevent such an exploitation and brain drain. This is in fact the essence of Hungary’s national strategy. To stop the great powers and use this new world’s opportunities to Hungary’s advantage.

After a rather lengthy and debatable historical treatise starting with World War I, he reached his favorite subject, the present financial crisis which in his opinion cannot be solved by the European Union. The institutional framework of the Union, the Commission, the Parliament “are unfit to handle the historical challenges facing us.” Orbán’s remedy is to shift the locus of power to individual nation states because only they are capable of overcoming the present crisis.

Orbán rarely passes up an opportunity for double-talk. This time he quoted a line from Sándor Kányádi, a Hungarian poet from Transylvania who had a line referring not to clear to what that “the dog is the same, only the chain was changed.” Of course, he immediately added that the change that occurred then wasn’t as simple as “left the tanks and came the banks,” as István Csurka claimed in the early 1990s, but “there is something to it.”

Then came a rather confused explanation of the differences between the gross national product (GDP) and gross national income (GNI). GDP is the market value of all officially recognized final goods and services produced within a country in a given period of time. GNI, a less familiar concept, consists of personal consumption expenditures, gross private investment, government consumption expenditures, the net income from assets abroad, and gross exports of goods and services after deducting gross imports of goods and services and direct business taxes.

Hungary’s GNI, Orbán claimed, is greater than its GDP. The difference, some two trillion forints annually, is moved abroad by banks and foreign companies. When national governments are in power, he argued, the difference between the two economic measures shrinks; when the socialists and liberals govern, the gap widens.

Let me stop for a moment. According to data published by the Hungarian Central Statistical Office, this claim is inaccurate. The Budapest Business Journal  wrote in September 2010: “The gap between nominal GDP and GNI widened each year between 2003 and 2007, from HUF 871 billion or 4.6% of GDP to 6.9%, but has narrowed since, dropping to HUF 1,721 billion or 6.4% of GDP in 2008 and to HUF 1,303 billion or 5% in 2009, the figures show.”

Why the gap between the GNI and the GDP in Hungary? According to Orbán the explanation is simple: “We created this wealth and it disappeared” abroad. He admitted that Hungary couldn’t manufacture cars on its own and therefore if Mercedes Benz makes a profit and takes this profit out of the country it is legitimate. After all, they provide job opportunities. But the banks are different. They amassed unreasonably large profits and therefore the bank levies are justified. These banks as well as the utility companies are siphoning money of the country. Again, let’s stop for a minute. It is a well-known fact that the foreign banks have been pumping money into their Hungarian subsidiaries for a number of years. That is the reason they haven’t gone under yet.

After this harangue against foreign companies and banks he listed eleven accomplishments he is proud of. I do not have the space, nor is it even worth the effort, to list them all. However, a couple of points that he made in connection with these accomplishments are worth noting.

One is his belief that if a country’s national debt is 90% or more of GDP there can be no economic growth. This mistaken notion most likely comes from a since largely debunked study by Carmen Reinhart and Ken Rogoff, two otherwise respected economists. The study, called “Growth in a Time of Debt,” claimed that economic growth slowed rather dramatically for countries whose public debt crossed the threshold of 90% of the gross domestic product.  Unfortunately, they made some errors in their calculations. The most serious was their failure to include years of data that showed Australia, Canada, and New Zealand enjoying high economic growth and high debt at the same time. More can be read about the Reinhart-Rogoff study here. It seems that whoever told Orbán about the correlation between national debt and economic growth knew about the study but not about its “Excel coding errors.”

Among the laundry list of accomplishments I found reference to an odd economic theory which even Orbán admitted was unique. As he put it, “as regards this question everybody is on the other side and we are the only ones on this side.” Well, that is frightening enough. So, what was Orbán talking about? Those on the other side claim that economic growth must come first and that this growth will then foster higher employment. But Viktor Orbán is convinced that exactly the opposite is true. First, one creates jobs, and this job creation will create economic growth. He claims that this is precisely what happened in the United States in the 1930s. Alas, it is a well known fact that it wasn’t Roosevelt’s public works program that managed to pull the U.S. economy out of the great depression. But Orbán is convinced that the same strategy will work in Hungary although even he has to admit that the two situations cannot be compared because the United States was rich enough to start building railroads and such while Hungary, being poor, can only employ public workers to dig ditches. How 300,000 ditch diggers can lead Hungary out of the economic crisis remains a well-kept secret.

We might think that these primitive economic notions are frightening, but Orbán received his greatest applause when he said that Hungary is following a road on which he is completely alone. Where that road will take the country I hate to think.

Viktor Orbán, the economist and the foreign policy expert

The consensus in Hungary is that Viktor Orbán’s speech before the Hungarian diplomatic corps and representatives of the foreign embassies was more muddled than usual.

Contrary to what I thought yesterday, Orbán didn’t read his speech that lasted, by the way, almost an hour but spoke extemporaneously. Since he hardly ever dares to speak at such length without a written text, he has little practice in the art of spontaneous oration. That might be one reason for the confused nature of his message.

The second reason is, and I guess this is the real problem, that foreign policy, international relations, diplomacy are not strong suits of the Hungarian prime minister. Unfortunately, due to Viktor Orbán’s political omnipotence, Hungarian foreign policy is entirely within his purview. A mini foreign ministry was created inside the Office of the Prime Minister; Foreign Minister János Martonyi can either twiddle his thumbs or try to explain away Orbán’s alienating statements.

First, some general observations about the speech. Orbán looked less haggard than usual. Perhaps the reason for his healthier countenance was a four-day vacation in Croatia accompanied by his body guards. The newspaper report made no mention of his wife and children. What it did mention was that he insisted on having a room in which he could watch a Hungarian sports television station and MTV!

Viktor Orbán claimed that, before delivering the speech, he consulted with Péter Gottfried, an old hand at the Foreign Ministry who served almost all governments since the change of regime and currently foreign policy adviser to Orbán. Mind you, he was already in a high government position during the Kádár regime. Gottfried seems to have warned the prime minister to stay clear of certain subjects, but Orbán didn’t listen. Perhaps he should have.

I was somewhat surprised about Orbán’s repeated claim that those present, including he himself, were at one time or another “intellectuals,” “members of the intelligentsia.” The implication was that, due to his intellectual prowess, he is a better judge of the current economic and political situation in the world than (mercifully unnamed) others.

He also tried to be funny, but his sense of humor always has an edge to it. It often involves the degradation of someone else. In this case the butt of his jokes was János Martonyi. Right off the bat he announced that “the danger no longer exists that the foreign minister will give the prime minister’s speech [but] if some of the questions require his competence he should without any fear take part in this consultation.” Isn’t that generous of him!

At least this year he allowed the European Union flags to be displayed, unlike last year Népszabadság, Photo Simon Móricz

The complete speech, unfortunately without his responses to the questions, is now available on the prime minister’s website. It is unfortunate because some of the juicier remarks about Russia, Germany, and the United States were delivered during the question-and-answer period.

In the body of the speech he spoke at length about the accomplishments of his government. Allegedly he dwelt on this subject only because he is supposed to follow tradition, but he is never shy when it comes to his alleged achievements. The list he offered to the ambassadors was the usual fare, complete with the usual lies.

We know that the national debt is not lower today than it was three years ago. We know that Hungary’s self-financing through the financial markets is more expensive than getting a loan from the IMF and the EU. We know that the IMF loan is not “dole.” We also know that the situation of the forex borrowers is not solved and that unemployment didn’t decrease.

After his lengthy introduction Orbán began talking about the financial and economic crisis of the European Union and pondered the nature of this long-lasting recession. The outstanding question, according to him, is whether this particular crisis is just one of those periodic crises characteristic of market economies or whether it is the beginning of a permanent and steady decline of the European Union. He didn’t give a specific answer to this question, but given Orbán’s earlier references to the decline of the West, we can be pretty confident that he considers the current economic situation in Europe the beginning of the end.

But if this is Orbán’s “Spenglerian” vision, the rest of the speech is pretty incomprehensible because he began talking about the necessity of a strong eurozone on which Hungary is economically dependent. Right now it is the sluggish eurozone that is holding Hungary back. In brief, Hungary’s poor economic performance in the last three years is due to the failures of those Brussels bureaucrats who don’t seem to understand that it is Viktor Orbán who has the key to success. They are stuck in the mud; they keep insisting on the same rules and regulations for everybody and they call this “predictability.”

Yes, we know that the unpredictability of Hungarian legislative moves over the last three years wreaked havoc on every facet of life in Hungary and that it especially did a lot of harm as far as foreign and domestic investments were concerned. Companies never knew what was coming next. One day levies on banks, the next day on telecommunication companies, the following day on utility companies, one can go on and on. But, claims Orbán, the crisis will never end without what he calls “selectivity.” You select your victims almost at random. According to Orbán, this unpredictable behavior is the secret of his success, without which the western nations will never in this stinking life (büdös életben) get out of this crisis.

He outlined another theory of his, again connected to his being an intellectual. The European Union made a mistake when it waited until 2004 to allow the ten central-eastern European nations to join the Union. If it had moved in 1995, it is possible that the EU could have completely avoided the financial crisis brought over the Atlantic from the United States. He put forth this theory based on the current situation. If we look around in the European Union, only those countries that joined the Union later show any economic growth. (He conveniently forgot about Hungary’s track record.)

And finally, he talked about his conflicts over sovereignty with the European Union. The media describe this conflict as a war of independence. Actually he likes this term, but he is not fighting against the European Union but is fighting for the maintenance of a correct balance between union and national rights. The EU cannot change the rules. Right now a stealth attempt at federalization is taking place. Of course, this is also nonsense because the founders of the European Union from the very beginning envisaged ever closer relations among the member states that might eventually result in a United States of Europe.

Out of this mumbo jumbo I tried to figure out what Orbán really wanted to say. Basically, he condemned both the methods and the economic principles that politicians and economic experts in the European Union apply. They are dead wrong in demanding predictability and traditional remedies. With these policies they retard the Hungarian economy and the economies of other Eastern European nations that are the engines of growth in Europe.

With this attitude the cold war between Hungary and the rest of Europe will not come to an end any time soon. Unless, of course, the Hungarian people become tired of their intellectual prime minister next April.