Sunday shopping? The Christian Democrats against the multinational chains

It was only yesterday that Viktor Orbán had to retreat, even if only temporarily, on the issue of taxing internet usage. A hundred thousand people were out on the streets of Budapest and elsewhere in the country. Now the government may be preparing the way for a new debacle, although I personally can’t believe they will be so dim-witted.

The Orbán government on paper is a coalition government. Fidesz’s partner is the Christian Democratic People’s Party or KDNP whose chairman, Zsolt Semjén, is Viktor Orbán’s deputy. The funny thing about KDNP is that it is a non-party. It’s like a private club where the party leaders get together now and again, but for over a decade the party has been absent as a separate entity at national elections.

The Christian Democrats don’t disturb much water. Their parliamentary members dutifully vote alongside the Fidesz PMs. In fact, it seems almost random who sits with the KDNP caucus and who with Fidesz. The important thing is that KDNP’s caucus should be bigger than that of MSZP, Jobbik, or LMP. The Christian Democrats don’t contribute much to Fidesz and Orbán’s government. Their main purpose is to provide Christian trimmings to a Christian-national regime. Occasionally, thankfully only very rarely, they come out with ideas of their own. Three years ago they proposed that stores should be closed on Sundays. Good Christian families should attend church instead of shopping in department stores and malls. And the poor workers who are forced to work on Sundays must be protected from those awful foreign capitalists. At that time, the government–where of course the last word is that of Fidesz–refused to introduce the measure, which would have had disastrous consequences for the economy.

Source: Europress / AFP

But these Christian Democrats are tenacious; they don’t give up easily. They came out with a new version of a bill which was leaked to Magyar Nemzet. The proposed bill is an attack on supermarket chains and discount stores owned by international companies because the bill’s provisions would affect only shopping centers and stores larger than 400m². Tobacconists, pharmacies, gas stations, flower shops, newspaper stands, and bakeries would be able to remain open with some restrictions. For example, they could sell their wares only until noon. Restaurants, stores in airports and railway stations, and open-air markets could continue doing business as usual.

But restricting Sunday shopping is not enough for our Christian Democrats. They are upset over those foxy owners of chains who try to sidestep the controversial “plaza stop” law by establishing smaller stores and thus competing with those mom and pop stores the “plaza stop” legislation is designed to protect. They opened stores in buildings that are now deemed to be of historic significance or in world heritage sites. If the proposal is adopted, these intruders would have to vacate their current premises by January 2016.

If the KDNP’s bill on Sunday closings was a bad idea three years, it is doubly so today. The government has enough on its plate: corruption cases, strained relations with the United States, the internet tax, and the growing displeasure of Brussels over the Hungarian government’s flaunting of every rule in the book. This move is blatantly discriminatory against foreign companies.

A blogger who happens to be familiar with the retail trade brought up multiple arguments against the proposal. It is injurious not only to the financial well-being of the stores but also to the employees who receive a higher salary (+50%) for working on Sundays. Stores also often hire outsiders for the weekends. These people are happy to supplement their meager salaries with some extra work. In these chains Sunday is the third busiest day of the week, after Saturday and Friday.

How would people feel about this restriction? The Christian Democrats claim that they discussed the matter with employees and with families who have many children and that they were most enthusiastic about the plan. I doubt that the party is basing its estimates on scientifically conducted polls because I’m almost certain that the great majority of the population would be outraged at the very idea. I talked to people who went through the times during the Kádár regime when everything closed at 5 p.m. and who said how happy people were when stores were open on Thursday nights. Apparently everybody felt liberated when, after the change of regime, stores were open all day long, including Sundays. The Christian Democrats bring up the examples of Austria and Germany where stores are closed on Sundays. But it is one thing to have a long tradition of Sunday closings, to which people are accustomed, and another thing entirely when people who are used to stores being open seven days a week for  the last twenty-five years are now being told that, sorry Charlie, no more family shopping on Sundays.

A couple of online sites offer their readers the possibility to vote on the matter. I checked out both, and a sizable (although again unscientific) majority opposes the measure. On one site: 69%. Another blogger makes fun of the Christian Democrats, saying “nonexistence must be hard for a party.” They feel that they have to come up with something now and again, but they surely picked a very bad time to introduce this bill. I must agree with him. I can already see another 100,000 demonstrators on the streets all over the country if the government makes Sunday shopping impossible.

New infringement procedures: “pálinka” and big box stores

The European Commission most likely waited until the election was over before handing down some bad news to the Hungarian government. The first to reach Budapest was a court ruling on the issue of tax-free “pálinka,” a powerful alcoholic drink made out of various kinds of fruit. The Orbán government’s decision to allow country folk to produce tax-free home brew from fruit grown on their own land came early. It was one of the twenty-two proposals presented by Viktor Orbán to solve the “economic crisis,” and it went into effect on July 1, 2010 despite warnings that it was in contravention of EU law. The announcement that home-distilled pálinka would no longer be taxed was described as the pinnacle of ninety years of struggle for liberation against the backdrop of the tyranny of the state. The “tyranny” referred to was the sensible regulation that owners of orchards who wanted to distill pálinka had to take their fruit to a state distillery and pay tax on the product.

This hasty decision to please Fidesz’s rural voters had all sorts of negative effects. First of all, since these amateur distillers can produce up to 50 liters of pálinka a year without paying taxes, the Hungarian state nowadays receives considerably less revenue from excise taxes on liquor. Second, the professional pálinka producers worried about the hard-won fame of good pálinka, which is considered by the European Union a “hungaricum” and is highly regulated. It must be made from fruits or herbs indigenous to the Carpathian Basin and grown in Hungary. It must be produced and bottled in Hungary, and its alcohol content must be between 37.5% and 86% ABV (alcohol by volume).

To make a long story short, a few days ago the European Court of Justice handed down its ruling: Hungarian home brewers must pay taxes on their products even if they produce no more than 50 liters a year. The reaction? The typical Fidesz one. Instead of telling Brussels’ real objections, they lie and claim that “the bureaucrats in Brussels want to abolish the national heritage of pálinka distillation which is a hungaricum.” Sándor Fazekas, minister of agriculture, called the court’s decision a provocation.

As long as the Hungarian government distorts the rulings of the European Court of Justice we shouldn’t be surprised if the ordinary Hungarian farmer in the countryside accuses the European Union of interfering with the values and traditions of their nation and if he develops a hatred of all those anti-Hungarian foreign bureaucrats. But I guess this is the purpose of the government rhetoric.

The second infringement procedure is about the “plaza stop.”  This particular infringement procedure hasn’t yet ended up at the European Court of Justice and it may never land there because of the extreme slowness of EU bureaucracy. For some background on this particular piece of legislation I suggest reading an old post of mine from November 2011. It started as an LMP draft bill and was then taken up and completely rewritten (and distorted) by the government party. The bill stated that between January 1, 2012 and December 31, 2014 no establishments greater than  300 m² (3,230 ft²) can be built. Real estate developers protested, not without reason. Moreover, the law inflicted economic pain on the country. Hungary was in the midst of an economic crisis in which unemployment was high and the construction industry had almost collapsed. At that time there were at least five such retail outlets in the planning stages. All work on the construction had to be stopped.

Today the European Commission launched an infringement procedure against Hungary over the country’s ban on the construction of “hypermarkets” as it may be against the competition rule applicable in the territory of the European Union. The reaction? The usual Fidesz demagoguery. “The European Commission once again put the interests of large multinational companies before that of the small Hungarian businesses.”

But who is going to defend the Hungarian consumer from the higher prices which are inevitable in smaller retail stores? And what about the variety of goods that only large establishments can offer?  Small, individually owned stores can never compete with chains on price or availability. I know all the arguments pro and con on this sensitive issue, but the fact is that forcibly stopping economic developments that seem inevitable is not good for anyone, including the consumer.

Retail is always changing. Think, for instance, of the mail order catalogs of businesses like Montgomery Ward and Sears that not only revolutionized nineteenth-century retail but also improved the lives of the rural poor and the segregated blacks in the South. That was in the 1870-1880s. Today online companies like Amazon have disrupted retail yet again.

Yes, big box stores tend to squeeze out small retailers just as mail order catalogs were hard on ma and pa stores in the nineteenth century. But this is how modern economies function. The state’s role is not to forbid the normal flow of goods and services but to regulate their activities.