nation states

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

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.