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

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 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.