mafia-state

The Hungarian government under domestic and foreign pressure

As I’m writing this post thousands are again demonstrating against the government. The crowd gathered in front of the parliament, which one of the organizers called “the puppet show,” and then is heading toward the Castle District, where Viktor Orbán is planning to move. The move will cost an incredible amount of money but, as one of the undersecretaries in the prime minister’s office said, the citizens of Hungary will be really happy once the prime minister moves to quarters befitting his position. Given the mood of these crowds, I very much doubt that that will be the case. The good citizens of Hungary who are out on the street actually wish Orbán not to the Castle District but straight to hell.

The demonstration was organized against corruption but, as usually happens at these mass demonstrations, the crowd went beyond the limited goal of the organizers and demanded the resignation of Viktor Orbán and his government. Fidesz politicians, it seems, have been caught flat-footed. They surely believed that these demonstrations would peter out. Winter is approaching and Christmas will soon be upon us. It was hoped that people would be busy shopping and preparing for family gatherings. But this time they were wrong. Suddenly something inexplicable happened: the totally lethargic Hungarian public was awakened. What happened? After all, the misuse of power and the network of corruption have been features of the Orbán regime ever since 2010 and yet the public was not aroused against its unrelenting abuse of power. Most people knew that Fidesz politicians are corrupt and that they stuff their pockets with money stolen from the public, but they felt powerless to do anything about it.

I see a number of reasons for this change in the Hungarian political atmosphere. I would start with the influence of the book Hungarian Octopus: The Post-Communist Mafia State, edited by Bálint Magyar, in which dozens of political scientists, economists, sociologists, and media experts published articles that presented for the first time a comprehensive picture of the institutionalized corruption which is the hallmark of the Fidesz regime. Fairly quickly the terms “mafia state” and “mafia government” became part of everyday vocabulary, and the government’s dealings came to be understood within the context of The Godfather. The sinister nature of the enterprise was slowly grasped.

A second reason for the optimism and activism was the success of the first two mass demonstrations against the “internet tax.” Viktor Orbán had to retreat. If he retreated once, more demonstrations might force him to reverse earlier decisions. The success of the first demonstrations gave impetus to the others.

Last but not least was the Hungarian government’s own stupidity when it decided to leak the news about American dissatisfaction with the National Tax Authority and the corrupt officials who tried extract kickbacks from at least one American company. Hungarians expected their politicians to be corrupt, but the news that high officials at the Hungarian Tax Authority were also on the take was too much for them. Moreover, they felt that they now have an ally, the United States of America.

According to most observers, U.S.-Hungarian relations are at their lowest point since the post-1956 period. U.S. policy toward Hungary seems to me at least to be finely calibrated. At the beginning we were told about the six unnamed people who were barred from entering the United States. A few days later we learned that the president of the Tax Authority was definitely on the list. A few more days and we were told that the president is not the only person on the list, there are a couple more. Another week went by and André Goodfriend, U.S. chargé d’affaires, indicated that there might be more Hungarians who would face the same fate as the six already on the list. Another few days and we learned from the American chargé that he had given the Hungarian government all the information necessary for investigating the cases. And it was not the “useless scrap of paper” Viktor Orbán pointed to. In plain language, we found out once again that the Hungarian government lies. And yesterday we learned from an interview with Goodfriend that the sin of Tax Office Chief Ildikó Vida goes beyond not investigating obvious corruption cases within her office; she herself was an active participant in the corruption scheme at her office. Of course, Vida is outraged, but she cannot do more than write an open letter to Goodfriend claiming innocence. As time goes by the Hungarian government is increasingly embroiled in a web of lies and Orbán’s regime comes to resemble ever more closely the government of a third-rate banana republic.

The good old days: George W. Bush in Budapest, June 22, 2006

The good old days: George W. Bush in Budapest, June 22, 2006

While the State Department is using the corruption cases as a club, Senator John McCain is pursuing his own individual crusade. The senator, who is no friend of Putin, has been keeping an eye on Viktor Orbán’s illiberal state and found it to be troubling. What we saw two days ago was his frustration that Hungary will again have a political appointee as an ambassador. As he emphasized over and over, Hungary is a very important country that deserves a professional diplomat. His outburst about Orbán as a “neo-fascist dictator” was a bit strong, although Orbán’s system does have features in common with some of the fascist regimes of the past. But the Hungarian charge that McCain is ignorant of the Hungarian political situation is entirely baseless. Once he calmed down, he put it into writing what he finds objectionable about Orbán’s illiberal state. At the time of the release of his statement on Hungary he wrote a brief tweet saying, “Deeply concerned by PM Orban eroding democracy, rule of law, civil society & free press in Hungary.”

Below I republish Senator McCain’s statement on Hungary because I find it important and because it proves that, regardless of what the Hungarian government says, McCain (undoubtedly with the help of his staff) knows what he is talking about.

Since Prime Minister Viktor Orban came to power in 2010, antidemocratic constitutional changes have been enacted, the independence of Hungary’s courts have been restricted, nongovernmental organizations raided and civil society prosecuted, the freedom of the press curtailed, and much more. These actions threaten the principles of institutional independence and checks and balances that are the hallmark of democratic governance and have left me deeply concerned about the erosion of democratic norms in Hungary.

These concerns are shared by many. A ruling by the Venice Commission in 2013 found that Prime Minister Orban’s constitutional changes threaten democracy and rule of law in Hungary, stating that the amendments ‘contradict principles of the Fundamental Law and European standards,’ and ‘leads to a risk that it may negatively affect all three pillars of the Council of Europe: the separation of powers as an essential tenet of democracy, the protection of human rights and the rule of law.’

The Organization for Security and Cooperation in Europe (OSCE) and the Committee to Protect Journalists have condemned Hungary’s media laws, saying that they create a climate of fear and media self-censorship, even after critical changes were made to account for previous complaints from the European Commission. ‘The changes to the Hungarian media law only add to the existing concerns over the curbing of critical or differing views in the country,’ said Dunja Mijatovic, OSCE’s representative on Freedom of the Media.

The European Central Bank has repeatedly warned that Prime Minister Orban’s government is encroaching on the independence of its central bank, calling for him to respect the independence of monetary policymakers and condemning attempts by the government to threaten central bankers with dismissal if they oppose government policy.

And just last month, six Hungarians were banned from entering the United States over alleged corruption. U.S. Chargé d’Affaires André Goodfriend reportedly called the ban a warning to reverse policies that threaten democratic values, citing ‘negative disappointing trends’ in Hungary and a ‘weakening of rule of law, attacks on civil society, [and] a lack of transparency.’

Democracy without respect for rule of law, separation of powers, and the protection of economic, civil, and religious liberties is not only inadequate, it is dangerous. It brings with it the erosion of liberty, the abuse of power, ethnic divisions, and economic restrictions – all of which we have witnessed in Hungary since Prime Minister Orban took power. Prime Minister Orban has justified his actions by calling for a new state model based on ‘illiberal democracy,’ but his vision defies the core values of the European Union and NATO. These alliances are founded not only on the principle of democracy, but also rule of law and the protection of individual liberty and fundamental freedoms. All members must remain committed to these values.

Meanwhile both Hungarian and foreign newspapers are full of stories about the demonstrations and about McCain’s characterization of Orbán as a “neo-fascist dictator.” As the Hungarian prime minister continues to come under attack, both from within and from without, it’s unclear how he will fight back and how effective his counterattack will be. If the proposed Sunday store closings are any indication of the government’s new game plan, the counterattack will be a colossal failure.

The day of outrage: Yesterday’s demonstrations in Hungary

Nowadays anti-government demonstration follows anti-government demonstration in Hungary. And not just in Budapest but in all larger cities and towns. Tens of thousands of people gather each time to express their outrage.

A couple of months ago no one would have predicted such a swift change in the political climate. In fact, critics of the government simply couldn’t understand the population’s passivity. In the last few years Viktor Orbán’s government has done so much harm to the great majority of Hungarians that it was difficult to understand the complacency of the people, the apathy that seemed to have paralyzed the country’s inhabitants. Explanations for this phenomenon varied. Some felt that fear played a large role. The current political players are known to be merciless when it comes to their opponents. Even in private companies people were afraid to voice their opposition to the government for fear that their pro-government boss would fire “the enemies of the nation” right on the spot. Others argued that, given the weakness of the opposition parties, the population was destined to remain passive. After all, they see no alternative to the present regime. People fear chaos if Fidesz’s rule collapses. Another explanation was the nationalistic fervor that was artificially fueled by the government. If it is true, as the government claims, that Hungary is surrounded by enemies, the people have to stand by a government that seems to be defending their national honor.

But all that changed about a month ago. The pent-up resentment and dissatisfaction surfaced with elemental force. The planned introduction of an internet tax was the catalyst. Those young people who had created a virtual community on Facebook and Twitter and who were not paying much attention to the way the government was stripping them of their personal freedom suddenly woke up. Now it was their own space that Viktor Orbán was trampling on. And once they woke up they also realized that this government is planning to organize every facet of their lives, from cradle to grave. They looked around and decided that what’s going on today in Hungary is anything but democracy.

demonstracio, nov. 17

Then there is the matter of corruption, which has been systemic and organized from above. Ildikó Vida, president of the Hungarian Tax Authority, is just one link in the chain that goes all the way to the top. In Hungary everybody is aware of widespread corruption, but once it became known that even the top officials of the tax office are complicit in tax fraud the floodgates opened wide.

Now, let’s talk a little about last night’s event. The organizers of yesterday’s demonstration are different from the ones we came to know in the last few weeks as leaders of the movement. Yet they managed to gather a crowd of about 20,000. There was, however, a strange dissonance between speakers and audience. The youthful orators hate all politicians. They don’t seem to distinguish between politics after 2010 and before. For them the last two and a half decades are all the same. It is time for a “regime change.”

It was enlightening to watch the demonstrators’ response. They were not inclined to bury the last twenty-five years. They did not yell “Down with Bajnai!” or “Down with Gyurcsány!” when the youthful speakers mentioned their names. The crowd got fired up only when Fidesz, Orbán, or Vida were mentioned. None of the signs held up by the demonstrators demanded the removal of all parties, but there were plenty that wanted Viktor Orbán to disappear from Hungarian political life. The speakers and their audience were not in sync. One had the feeling that the audience was not really interested in the speeches. They only wanted to express their “outrage” at what this government has done to them in the last few years.

One of the organizer-speakers had a talk with Olga Kálmán of ATV yesterday right after the demonstration. During the conversation he announced that they want a “new regime,” a “new political system.” When asked about the nature of that system, it became evident that these young people not only don’t have a program, they don’t have an inkling about what a new regime might look like. They only know what they don’t want: corruption, graft, a lack of dialogue between government and the governed, and arrogant politicians. This is good as a beginning but certainly not enough to change Hungarian politics in the long run.

Some of the organizers also displayed a certain naïveté. One of them expressed their desire to “work with all political parties,” including Viktor Orbán and Fidesz. Surely, this young man doesn’t understand the nature of the mafia state and the role of the godfather in that system. The majority of his audience, on the other hand, seemed to understand that one cannot work with this regime. It must go and democracy must be restored. This is what they demanded during their long demonstration in front of the parliament building.

The parties have wisely kept away from these demonstrations, but surely sooner or later the “outraged” public and the politicians of the democratic opposition must find each other because only by cooperating can this regime be toppled.

As for the government’s reaction, Viktor Orbán and his minions act as if nothing happened yesterday. In parliament the two-thirds majority voted on next year’s budget that is full of new taxes and punishing levies on foreign companies the government wants to destroy. Viktor Orbán opened two new establishments, one in Alcsút and the other in Felcsút, the villages of his youth. He visited János Flier’s cattle breeding farm and Lőrincz Máeszáros’s farm where he will raise mangalica pigs. Both “farmers” are considered to be front men (Strohmänner/strómanok) of Orbán. For the time being it looks as if the prime minister hasn’t sensed political danger. If I were in his shoes I would be less cocky. Some people are very angry.

Another “strategic partnership”: This time with Azerbaijan, a model to follow

While we have been preoccupied with American-Hungarian and Russian-Hungarian relations, the dictator of Azerbaijan, Ilham Aliyev, arrived in Hungary for a visit, his third in four and a half years. Not too many high-level western visitors can be seen in Budapest lately, so Orbán must be satisfied with Azeri dictators and the like. Orbán himself is not welcome in western capitals, and therefore his official trips usually take him outside of the European Union and North America. He visited Baku twice, and I understand he will be going again to strengthen the “strategic partnership” he forged between Hungary and Azerbaijan, two countries that have a lot in common: both are extremely corrupt and both are led by autocratic leaders whom outsiders describe as mafia dons.

In September 2012 I wrote three posts (September 1, 2, and 3) on the Orbán government’s decision to release Ramil Safarov, an Azeri army officer, from the Hungarian jail where he was serving a life sentence for the brutal murder of an Armenian officer in 2004. The crime was perpetrated in Budapest, where both men spent a couple of months in a training program organized by NATO’s Partnership for Peace Program. The Azeri government made several attempts to convince the Hungarian authorities to release him into their custody. But because Safarov was considered to be a national hero the Gyurcsány and Bajnai governments, fearing that once Safarov stepped onto Azeri soil he would not spend a minute in jail, denied the requests. Not so the second Orbán government, which in the hope of Azeri goodwill and economic support decided to strike a deal with Aliyev, the Azeri dictator. To this day we don’t know what the Hungarian government got in return for the release of the “ax murderer,” as he is called in Hungary. According to rumors at the time, Viktor Orbán made the decision to extradite Safarov in exchange for the Azeri purchase of Hungarian bonds. The deal was struck under the watchful eye of Péter Szijjártó, and final approval came from Tibor Navracsics, the minister of justice who currently serves as one of the EU commissioners in Brussels. This dirty deal was the beginning of a great friendship between Aliyev’s Azerbaijan and Orbán’s Hungary.

Since then, the Hungarian government has manifested its commitment to closer economic and political ties between the two countries on several occasions. In November 2012 Hungary organized an “international conference” in Budapest to commemorate the 20th anniversary of the establishment of diplomatic relations between Hungary and Azerbaijan. In 2013 Hungary opened a Hungarian Trading House in Baku, and yesterday Viktor Orbán and Ilham Aliyev signed a “strategic partnership” agreement. Apparently this agreement encompasses the following areas of cooperation: energy, education, commercial air transport, tourism, veterinary medicine, and youth and sport. Currently trade between the two countries is insignificant and has actually been falling since 2010. Szijjártó himself talks about Azerbaijan only as a “potential economic partner” of Hungary, a partnership that will be realized once Azeri gas reaches Europe. For the time being, one hears only about the hundreds of scholarships offered by Hungary as a goodwill gesture toward these Central Asian countries. Azerbaijan just gratefully acknowledged 200 scholarships.

As usual, in the joint press conference after the meeting and signing ceremony, Viktor Orbán went overboard, praising Azerbaijan as an “example to follow” (mintaállam). By the way, when Orbán is confronted with foreign dignitaries, he is often visibly servile. He bows just a little too low, which in Aliyev’s case was accentuated by the Azeri president’s height and Orbán’s small stature. He did the same thing when the Chinese prime minister, Wen Jiabao, visited Budapest in 2011.

In his unbridled enthusiasm for the Azeri model, he even praised Aliyev’s father, Heydar Aliyev, the former KGB agent who became president of Azerbaijan after a military coup that overthrew the democratically elected president of the country in 1993. His and his family’s corruption was legendary. After his death in 2003, his son, the current president Ilham Aliyev, took over after a fraudulent election. Since then he has been reelected three times, and he can be assured that he will remain president of the country as long as he is alive: the law was changed that barred repeated reelection of the same person to the post. Wikileaks documents have revealed that American observers compared  the Azeri president to a mafia crime boss. Well, perhaps this is what Orbán had in mind when he spoke of Azerbaijan as an example to follow.

President Ilham Alyev and Prime Minister Viktor Orbán

President Ilham Aliyev and Prime Minister Viktor Orbán

In the afternoon there was an economic forum where Orbán made a speech in which he announced that “countries that have political systems that offer clear and unambiguous leadership to a given community are lucky,” indicating that he considers both Azerbaijan and Hungary among the lucky ones. Aliyev immediately picked up on Orbán’s remarks, adding that “both countries are led along a clear strategy. Hungary is defending its national interests, its independence, and its sovereignty.” How should one interpret Orbán’s reference to “clear and unambiguous leadership”?  I, for one, think that he means that in such a regime no opposition forces could possibly alter the strategy of an autocratic leader. This is certainly true of Aliyev as well as Orbán.

Today HVG posted a short note online teasing an article in its print edition tomorrow, according to which there might be “a thread that connects Baku and Budapest” in the U.S. banning of the six Hungarian officials and businessmen. According to the paper, the case involves corruption surrounding Hungarian government bonds offered for sale to Azerbaijan in 2012. My recollection is that the deal eventually fell through. The Hungarians were apparently hoping that Azerbaijan would pay Hungary back for its release of Ramil Safarov by buying Hungarian bonds through ARDNF, the Azerbaijan State Oil Fund. However,  ARDNF announced on October 9 that it had no intention of buying Hungarian bonds and that it did not plan to invest in Hungary. I still remember all the jokes on ATV about “manat,” the Azeri currency. However, there is always the possibility that some secret deal was struck over the Hungarian government bonds and that perhaps some of the money received disappeared either into Fidesz coffers or into individual pockets. The official announcement of ARDNF might have been intended simply to disavow any connection between the Safarov case and payments received by Hungary. We’ll have to see what HVG came up with.

And here is the latest. According to an unnamed Fidesz source, Viktor Orbán realized that he went too far in embracing Russia, ratcheting up his anti-EU rhetoric, and attacking the United States. According to this highly placed individual, Orbán is planning a change of orientation. From here on he will be a model of cooperation with his western allies. Well, his latest moves don’t support this reorientation. First, he just raised RTL Klub’s 40% levy to 50%, presumably to punish them for reporting negative news about the government on their very popular 6 o’clock news. This huge levy is a serious financial blow to RTL Klub, one that its German parent company, Bertelsmann, will have to absorb. Second, he wouldn’t call Azerbaijan “an example to follow” if he is preparing the ground for a change in his foreign policy objectives. And third, if he were trying to show the U.S. that he is serious about ridding Hungary of corruption, he would tell his minions to relieve Ildikó Vida and her co-workers of their duties. I believe that this piece of news is no more than Fidesz disinformation. At best, it is a new round in his usual “peacock dance.”

The corrupt Hungarian tax authority

Since the fate of the internet tax is still pending, let’s turn to the systemic corruption that has a debilitating effect on the entire Hungarian economy. The existence of corruption on all levels of the administration didn’t escape the attention of the demonstrators who were brought to the street by their concern over the government’s plans to restrict access to the internet through onerous taxation. They protested against the “mafia government” and chanted slogans about thieves who become rich off their own hard-earned money. They deplored the activities of the corrupt officials of NAV, the Hungarian equivalent of the American IRS. NAV spends untold millions if not billions trying to track down small fry while letting the big fish off the hook. Or worse, it is alleged, high officials of NAV receive kickbacks from corrupt businessmen for services rendered. And what is the most disturbing about this whole story is that the highest officeholders of the government party, Fidesz, have known about these fraudulent activities–and have benefited from them–for years.

How can I say with such confidence that members of the government and the party have been aware of these illegal activities for a long time? Almost a year ago András Horváth, an employee of NAV, spilled the beans. He collected evidence that proved that certain crooked businessmen were receiving preferential treatment by NAV. In the wake of Horváth’s revelations nothing happened. After a quick internal investigation, NAV declared that Horváth’s accusations were baseless. And, for good measure, they fired Horváth. Soon enough the police arrived at Horváth’s apartment and took away the evidence.

The fraud that high NAV officials “overlooked” involved all sorts of financial shenanigans that resulted in Hungarian businessmen not paying the admittedly very high 27% value added tax on certain agricultural products like sugar and cooking oil. With that move, and with the active assistance of the Hungarian tax office, these crooked Hungarian businessmen gained a considerable advantage over their main competitor, the American firm Bunge. These Hungarian businessmen were the ones András Horváth was talking about and who are now, after the American revelations, suddenly  in custody. Without the American announcement to ban certain individuals from entering the U.S. these people would still be writing out their fraudulent bills of sale. The thoroughly corrupt Orbán government had no intention of doing anything about the crooked businessmen or, as it turned out, the equally corrupt tax officials. The American ban is invoked only in countries where there is no hope for justice because the government itself is corrupt. Usually third-world countries.

With the American revelations Horváth’s accusations were corroborated. Horváth and Goodfriend obviously were talking about the same cast of characters. But the Americans added another crucial piece of information that Horváth couldn’t have known about: high NAV officials offered their services to the CEO of Bunge for 2 billion Hungarian forints, to be paid to a foundation with ties to Fidesz. In return, they offered a lowered VAT on foodstuffs, a demand of long-standing by the honest producers of sugar and cooking oil. For this sum they also offered to go after Bunge’s competition.

The government’s reaction to all these revelations is fascinating. First, government officials–most notably Mihály Varga, minister of national economy who is in charge of NAV–focused on the corrupt businessmen, ignoring the NAV officials. Why is the Hungarian government accused of doing nothing? After all, three or four people are already in custody. When asked about Ildikó Vida, the corrupt head of NAV who was seen at Vienna’s airport leaving for an unknown destination, he played the innocent. Vida is taking her vacation, to which she is entitled. To the question whether Ildikó Vida is banned from the United States as rumored, Varga announced with a straight face and a hefty dose of the exculpatory conditional, that if she were, surely she would have reported this fact to him as she is supposed to.

Who is this Ildikó Vida? She, like almost all Fidesz bigwigs, lived in the countryside before she entered law school in Budapest. (One reason for the heavy concentration of non-Budapesters among the original Fidesz leaders is that they lived in university dormitories.) Vida was also a member of the by now famous Bibó College which Orbán; Lajos Simicska, former treasurer of Fidesz and now a wealthy businessman; László Kövér, president of the parliament; and József Szájer, a member of the European parliament, attended.

Ildikó Vida at her desk

Ildikó Vida at her desk

As one Hungarian media outlet complained, we know very little about the president of NAV. She does not have a large Internet presence and NAV’s webpage has no biographies of the organization’s top leaders. However, she seems to be a very important person in Orbán’s mafia state.

About a month ago a long study by atlatszo.hu, one of those NGOs who receive money from the Norwegian Civil Fund and whom the government is trying to defund, identified the key persons who “captured the Hungarian state.” Ildikó Vida is among them. She must know about the siphoning of public money into Fidesz coffers and most likely into Fidesz politicians’ own pockets as well. Lajos Simicska, whom Orbán called a “financial genius” but who elsewhere would be considered a criminal, was put in charge of the tax office in 1998 as soon as Orbán won the elections. His job was to get rid of all the incriminating evidence about the illegal financial activities of Fidesz-owned businesses that folded and were subsequently “sold” to people unreachable by Hungarian authorities so their unpaid taxes couldn’t be collected. Ildikó Vida was one of Simicska’s deputies and, once Simicska left a year later, Vida became the head of the almighty APEH, the predecessor to NAV. Most people assume that APEH under Vida was no better than NAV is today. I assume that then, just as now, the tax office serves three purposes. One is to assist certain businessmen close to Fidesz to gain an advantage over their competitors by closing their eyes to their fraudulent activities. The second function is to extract money from business leaders, part of which goes to party coffers through an intermediary, like a foundation. And third, the tax office frightens certain persons and businesses Fidesz does not deem friendly to the party and the government into submission. In brief, the picture is grim–and I suspect we don’t know the half of it.

Gábor Demszky on the illegitimacy of the Orbán regime and on civil disobedience

With municipal elections to be held this Sunday, I decided to devote a post to the political reactivation of Gábor Demszky, lord mayor of Budapest between 1990 and 2010.

After Demszky’s fifth term ended, he not only left political life, he left the country. Prominent members of former administrations learned soon after the 2010 election that avenues for gainful employment in the public sector were blocked. Demszky therefore applied for grants and scholarships abroad and spent three and a half years in Germany, the Netherlands, and the United States. Once he returned, he decided to share his opinions on the present state of politics in the country and in the city.

In early August, when Lajos Bokros was just one of the many candidates for the mayoralty of Budapest, Demszky announced that he would support him since he considered Bokros the best person for the job. Then in Élet és Irodalom he gave a long interview to Eszter Rádai just a couple of days before the democratic parties decided on Bokros as their candidate instead of their original choice, Ferenc Falus. Here he not only talked about why he considers Bokros to be the best man for the job, he also elaborated on the political importance of the mayor of the capital city in the regime change that will eventually take place. In addition, he talked about his conviction that the present regime can be removed only through civil disobedience. Finally, he did not hide his contempt for most of the opposition parties.

So, where should we start? In Demszky’s opinion, the candidate for the job of lord mayor of Budapest must not promise much to the electorate because under the circumstances the city is entirely at the mercy of the central government. The situation was also bad during the first Orbán government between 1998 and 2002, but then at least the city still had some assets. By now, the city has been stripped of all its former wealth as well as its autonomy. What we have now, instead of self-government, is “a modernized form of the council system” that existed in the Kádár regime.

Yet the role of the mayor of Budapest is an important one because the post can be used as a bully pulpit, which gives the mayor an opportunity to represent the opposition toward the central government. He will have to act as a kind of ombudsman who stands up for the interests not only of the inhabitants of Budapest but of all citizens. The mayor of Budapest can have a powerful voice, which gives the man who holds the position political leverage. If the next mayor is a spokesman for the opposition, he might be able to challenge Viktor Orbán for the premiership four years later. And it is only Lajos Bokros who would be able to do that. After all, he once saved the country from bankruptcy. He is an internationally known economist who is strong enough to take up the fight against the mafia state.

Lajos Bokros and Gáboe Demszky at the book launch of Hungarian Octopus, vol. 2

Lajos Bokros and Gábor Demszky at the book launch of Hungarian Octopus, vol. 2

At this point Eszter Rádai reminded Demszky that Viktor Orbán in this case would make a second Esztergom out of Budapest. Esztergom is the place where an independent mayor was chosen instead of the Fidesz candidate for mayor in 2010. The city was punished for it. Not a penny came from the central government to rescue the city that had become hopelessly indebted under Fidesz management in the previous years. Demszky’s answer was that Viktor Orbán did the same thing with Budapest between 1998 and 2002 and yet it was Budapest that won the election for the opposition in 2002. Demszky is not exaggerating. I remember vividly that Fidesz was leading all through the early hours when the votes were pouring in from outside of Budapest but then the late Budapest results started coming in and suddenly everything changed. Fidesz lost the election. Viktor Orbán certainly did not forget the disloyalty of the city.

The conversation moved on to the opposition. In Demszky’s opinion, “the opposition is an integral part of this regime” and all of its sins because it has not stood behind its twenty years of democratic achievements. Since it is not ready to take responsibility for its past, it does not have a future either. It accepts the Fidesz narrative of the “muddled twenty years of transition,” the way Viktor Orbán likes to describe the period between 1990 and 2010. This is the greatest sin a political opposition can commit in confronting a dictatorship. Giving up the praise of democracy and freedom. It denies its most important tradition, liberalism. In fact, the leaders of the opposition want to free themselves of the liberals. The opposition parties “only act as if they are the representatives of the democratic opposition while they have nothing to do with either democracy or opposition.”

Out of the five opposition parties Demszky considers three to be Fidesz appendices: Jobbik, MSZP, and LMP. I guess the relationship of Jobbik and LMP to the governing party does not need further elaboration, but I think MSZP’s inclusion in this category does. In Demszky’s opinion MSZP is not really a party of the left. It never was. The MSZP leaders united only to grab power, but once they lost it they became helpless. That leaves only two parties, Demokratikus Koalíció and Együtt-PM, that Demszky considers bona fide opposition parties. Együtt-PM is so small and weak that it cannot be taken seriously while DK will be, in his opinion, unsuccessful in the long run because it is led by Ferenc Gyurcsány, who is the most divisive politician of the opposition. Gyurcsány is correct when he emphasizes the necessity of a unified opposition party, but one needs more than that.

Those who believe that the Orbán government and its mafia state can be removed by ordinary parliamentary elections are wrong. Naturally, Demszky does not advocate the violent overthrow of the government, but he recommends civil disobedience. One should study Mahatma Gandhi as the Polish opposition did in the 1980s. One must realize that Orbán’s regime ruined the constitutional order, took away political and individual rights, and ruined democratic institutions. The present political system has thus been rendered illegitimate. One needs more than a change of government; just as after Kádár, Hungary needs a regime change.

Demszky admits that at present very few people are ready to stand against the regime openly, but he is convinced that the situation will get to the point that people in large numbers will be ready to resort to civil disobedience. Poverty will only grow and, although at present there are no political prisoners, there will be. Dissatisfaction with the regime will grow. Demszky excludes the possibility of Fidesz’s tight ranks breaking up under the weight of outside pressure: “what holds these people together is power and fear because they know that they could lose everything. They put all their money on one card.”

I think most of us can agree with Gábor Demszky–and Bálint Magyar–that the opposition must concentrate on regime change because by now Viktor Orbán’s system has solidified into a full-fledged regime that Magyar calls a post-communist mafia state. Many of Hungarian Spectrum‘s readers, to judge from the comments, have a very low opinion of MSZP and few believe in its survival. However, when it comes to Lajos Bokros’s role in the regime change, few would bet on him as a contender to replace Viktor Orbán as prime minister of Hungary. Not because he would not be an outstanding prime minister but because a political career cannot be built without a viable political party and Bokros at least at this moment does not have such a party behind him.

But when it comes to Demszky’s main thesis about the illegitimacy of this government and Orbán’s state he is certainly right. The opposition forces should pay serious attention to this fact. As long as they collaborate with the government and with Fidesz in parliament they only help to ensure the survival of the regime.

Bálint Magyar’s post-communist mafia state: front men, transaction brokers, and gatekeepers

Yesterday we left off with a description of the kinds of oligarchs who play an important role in Viktor Orbán’s mafia state. Today we move on to the front men (stróman/Strohmann) and their function in the system. According to Bálint Magyar’s definition, they are people without formal position either in politics or in the economic sphere who “serve as bridges between legitimate and illegitimate realms.”

Magyar identifies two kinds of stróman, political and economic. The political front men are people who originally came from Fidesz itself and were put in important government and parliamentary positions–for instance, president of the parliament and president of the Hungarian Republic. Soon enough the leader extended the circle from which he could choose people for key positions. They were either relatives or close friends, or friends of friends. Such appointees can be found heading the prosecutor’s office and the National Office of Justice. Eventually, he drew from employees of companies owned by members of the political family–managers, accountants, lawyers–to fill posts in the ministries. These people are front men of the poligarchs, only instruments, not autonomous actors. In this mafia state the majority of government officials fall into the category of political front men.

An originally Fidesz-appointed stróman after a couple of years can be removed and replaced by another Fidesz-appointed individual, as we have observed recently. Magyar’s explanation is that some of the original appointees owed their allegiance to top poligarchs, for example, Lajos Simicska and his business partner, Zsolt Nyerges. Because of the internal power struggle that is currently going on between Simicska and Viktor Orbán, several of Simicska’s front men have been removed from important positions, like the Hungarian Development Bank and the Ministry of National Development. Perhaps the best example of such a personnel change occurred a few months ago in the Ministry of National Development which was considered to be the stronghold of the Simicska-Nyerges poligarchic duo. Here, after the election, Viktor Orbán replaced Mrs. László Németh, clearly a puppet of Simicska, with his own man, Miklós Seszták, a crooked lawyer. Seszták then fired 200 people from the staff of the ministry, which Magyar calls a bloodless decapitation.

The economic front men act like proxies of the poligarchs, although oligarchs can also have their own front men if for one reason or other they want to hide their presence in an enterprise. Some of the money accumulated by these people eventually ends up in the poligarchs’ secret bank accounts.

What are the characteristics of the economic ventures of strómans? (1) With practically no capital or expertise they receive large state orders. (2) The increase or decrease of their economic activities depends not on economic but on political cycles. They often receive tenders when they are the sole bidders. (3) They act as gateways to the state. They collect the profits generated by large bona fide companies which themselves would be able to do the job but which are are forced to work as subcontractors. (4) Profits of these companies are much larger than of companies not politically connected. (5) The managements of these companies pay themselves inordinately large dividends. Normally, especially in the case of a new company, most of the profit is reinvested in the firm. But these companies don’t have to worry about business expansion. It is the subcontractor’s headache. (6) While successful companies without political connections often encounter aggressive takeover attempts by the government, the companies of strómans never have to worry about such an eventuality.

In sum, the basic goal of the mafia state is the elimination of autonomous positions in the political, economic and societal spheres and their transformation into a patron-client relationship. The men whose names appear in the regularly published list of the most influential Hungarians are all dependent on the good will of Viktor Orbán, be they politicians, entrepreneurs or university professors.

In addition to oligarchs and front men, there is another group of people Magyar calls transaction brokers who are mediators between the actors in illegitimate transactions. These people are often lawyers who are involved in writing grant applications, for example. They are the ones who have the personal network that can facilitate the transaction between, let’s say, the government bureaucracy in charge of monies coming from Brussels and the applicants. Transaction brokers, mostly law firms and institutes attached to ministries, by now have taken over some of the functions of ministries. They are the ones who actually write legislative proposals submitted by individual members of parliament.

There are two types of transaction brokers. One is the so-called gatekeeper who works from inside the administration and who defends and legitimizes illegitimate businesses. The other is the representative broker who by the size of his business could in fact be an oligarch but who is only an economic stróman.

Finally, Magyar spends some time on the nature of the family’s guard and the secret services. One of the very first decisions of Viktor Orbán after he became prime minister was to create a large force of personal bodyguards misleadingly named the Anti-Terror Center (TEK). In addition, there are private security firms often owned by Fidesz oligarchs that have the support of the police or TEK. Magyar even includes in this category the infamous soccer fans of Fradi, a club headed by government functionaries. These football fans can be mobilized if necessary as they were in the fall of 2006. Fidesz again called them out in 2013 when a few students surrounded the Fidesz headquarters. TEK itself has practically limitless powers. Sándor Pintér, minister of the interior under whom the police force functions, is a stróman of Viktor Orbán.

Viktor Orbán and his old body guard, János Hajdu From major to brigadier general overnight

Viktor Orbán and his old body guard, János Hajdu
From major to brigadier general overnight

Supervision of the secret services, since there are several of them, has always been close to Fidesz poligarchs’ hearts. Magyar recalls that in 1990 when Gábor Demszky became mayor of Budapest he resigned his seat in parliament. The chairmanship of the parliamentary committee overseeing the activities of the secret services thus became vacant. Fidesz insisted that the post should go to one of its own. László Kövér was chosen. Until 2005 Fidesz through this committee managed to keep the secret services under its influence. In 2006 the governing socialists closed the secret services’ avenues to Fidesz by firing a number of people known for their close ties to Kövér and others in Fidesz. These Fidesz loyalists who found themselves without a job established their own private concerns and continued their spying activities through old friends still employed by the government. As soon as Fidesz won the election, these people were immediately rehired. Earlier there was a minister whose sole job was the supervision of the activities of the secret services, but after 2010 Sándor Pintér took over this role. Thus both the police and the secret services report to him.

I still have covered only half of the introductory essay by Bálint Magyar. Time permitting, I will continue my summary sometime in the future. However, I think that today’s and yesterday’s posts give you an idea of how Orbán’s mafia state functions. Dismantling it will not be an easy task when the time comes.

Bálint Magyar’s “systemic characteristics of the post-communist mafia state”

Earlier I published several reports on Bálint Magyar’s theory of the mafia state. In fact, I devoted three consecutive posts, the first of which appeared on June 18, 2013, to his description of Orbán’s system of government as a new kind of autocratic regime. Magyar’s analysis of the current Hungarian political system elicited widespread attention in Hungary as well as hundreds of comments on Hungarian Spectrum.

A few months later (November 2013) Bálint Magyar and Júlia Vásárhelyi published an edited volume of essays written by twenty-two scholars from different disciplines who embrace the theoretical framework Bálint Magyar worked out in the first decade of the century. Its title was Hungarian Octopus: The Post-Communist Mafia State. The book became an instant bestseller. More than 11,000 copies were sold within a few months. It had to be reprinted four times. I wrote a review of it on Hungarian Spectrum. Again the review prompted a lively discussion, some people finding Magyar’s argument compelling while others disagreed with him. In any case, since the appearance of Hungarian Octopus, the concept has been widely accepted by scholars as well as by the left-leaning Hungarian public. Those who are familiar with the workings of the Orbán regime find Magyar’s description of it a perfect fit.

Book Launch of Hungarian Octopus: The Post-Communist Mafia State Source: Népszava

Book launch of volume 2 of Hungarian Octopus: The Post-Communist Mafia State
Source: Népszava

The second volume of Hungarian Octopus has just been published, and it is fascinating. In his introduction Magyar takes into consideration some of the criticisms and additional observations he received during discussions of the contents of the first volume. This introductory essay is so full of information and novel observations that I will most likely have to devote another post to it. But let’s start.

First, Magyar describes the key actors of the mafia state. He begins with the economic-political actors whom Magyar calls “poligarchs” whose ranks include several subcategories: the oligarchs, the front men (in Hungarian stróman/ok), corruption brokers, the family guard/the secret service, and the family privatization of databases. Let me go into some of the details.

Who belong to the class of poligarchs? These are people who attained illegitimate wealth by being members of the political family. Their political power is known but their economic power, their wealth is hidden. They use front men; their money is often hidden in foundations. The chief poligarch is the Godfather–in our case, the prime minister.

Beneath the poligarchs comes the class of oligarchs who began their careers with legitimate business activities and who, as a result of their economic power, acquired political might. In ordinary post-communist states their economic activities are legal, but the way in which they acquire business opportunities often is not. They acquire advantages over their competitors by illegal means. They are, however, more or less autonomous actors. But in Hungary, Magyar argues, the mafia state makes these oligarchs’ autonomy impossible or very limited. As he puts it, “it domesticates” them. They are partly or wholly dependent on the good will of the state.

Magyar distinguishes several type of oligarchs. There are the inner circle oligarchs. They have been close to Fidesz from the early 1990s on, and in part they have accumulated their wealth through their political connections. Currently, they don’t have any political roles but they belong to the small circle of people who are able to formulate policy. A good example of this sub-type is Lajos Simicska. Of course, any of these oligarchs can lose their positions if the Godfather finds their activities objectionable. A couple of the original oligarchs actually ended up in jail when they got involved in illicit activities.

Another sub-category of the oligarchic class is the adopted oligarchs. These people made their wealth during the early murky days of mass privatization, and it was only later that they were adopted by the political family. Their connection to politics now enhances their financial position. Examples of this type are Gábor Széles, owner of the extreme right-wing Magyar Hírlap and Echo TV, and László Baldauf, owner of the CBA chain of supermarkets. These people only serve the policies of the Family;  they can’t influence them.

The next category is the capitulated oligarchs who earlier were quite independent; some were even associated with the other political side. Their capitulation is due to their dependence on state orders. Since they were not considered to be affiliated with the Family in any way, they fell on hard times after 2010. In addition to the lack of orders, the state has all sorts of instruments to make them surrender: the internal revenue service, prosecutor’s office, police. A typical representative of this group is Tamás Leisztinger, who suffered economic hardship already during the first Orbán administration and who by now is the willing or unwilling financier of the prime minister’s hobby, football.

Then there are the fellow traveler oligarchs. These men were the greatest economic beneficiaries of the first twenty-year period after the change of regime. They were sought after by both the left and the right, and they kept an equal distance or equal friendship with both groups. After 2006 the equilibrium between the two political sides shifted toward Fidesz, which forced them to be fellow travelers unless they wanted to lose their preeminent economic positions. Sándor Csányi of OTP and Sandor Demján of Trigánit are perfect examples of this category.

The last two sub-categories are the autonomous and the rival oligarchs. Their numbers are rapidly decreasing. Some of these people are so afraid of the chief poligarch that they dare not support liberal causes at all.

Although I thought I would be able to describe the other key actors of the mafia state today, the story is so intriguing that I don’t want to shortchange you by not covering the details properly. We will continue tomorrow.