Shifting away from democracy--Hungary's U-turn.

Author:Kornai, Janos

    Hungary is a small country, poor in raw materials, with a population of only 10 million. No civil wars are being waged on its territory, nor are there any popular uprisings or terrorism. It has not become involved in any local wars, and it is not threatened by immediate bankruptcy. So why is it still worth paying attention to what is going on here? Because Hungary, a country that belongs to NATO and the European Union, is turning away from the great achievements of the 1989-1990 change of regime--democracy, rule of law, freely functioning civil society, pluralism in intellectual life--and attacking private property and the mechanisms of the free market before the eyes of the whole world; and it is doing all this in the shadow of increasing geopolitical tensions.

    Let us consider the ensemble of the following countries: Albania, Bosnia-Herzegovina, Bulgaria, the Czech Republic, Estonia, Croatia, Poland, Latvia, Lithuania, Macedonia, Hungary, Romania, Serbia, Slovakia, and Slovenia. All of these now-independent countries reached a crucial turning point in 1989-1990. Prior to these years, they had functioned as independent states or as separate parts of states within the socialist system, ruled by the Communist party. The structure and pace of the transformations varied from country to country. Severe failures occurred in all of them, including Hungary; one step forward was often followed by a period of regression. However, despite the colorful variations, until 2010 the countries all moved in the same general direction: progress towards democracy and market economy based on the dominance of the rule of law and of private ownership.

    Hungary is the first, and so far the only, member of this group of 15 countries which has performed a sharp U-turn and set off resolutely in the opposite direction. In the 2010 elections the coalition formed by Fidesz-Hungarian Civic Alliance with the Christian Democratic People's Party (henceforth Fidesz for short), led by Viktor Orban, won a landslide victory. Thus began the turn. (2)

    By 2010 Hungary had established the fundamental institutions of democracy--however, with the U-turn their systematic destruction started. It has already been completed to a significant degree.

    In actual practice the executive and legislative branches are no longer separate, as they are both controlled by the energetic and heavy hand of the political leader who has positioned himself at the very pinnacle of power: Viktor Orban. No worthwhile preparatory work on bills is being done either within or outside the walls of Parliament. Parliament itself has turned into a law factory, and the production line is sometimes made to operate at unbelievable speed: between 2010 and 2014 no less than 88 bills made it from being introduced to being voted on within a week; in 13 cases it all happened on the same or the following day. (Scheppele 2012, European Parliament 2013). Without exception, every single attempted investigation of the background of a scandal that has just broken, which would have been carried out objectively by a parliamentary committee with the effective involvement of the opposition, has been thwarted. "Reliable" people close to the centre of power occupy decision-making positions even in organizations which are not legally under the control of the executive branch and which, in real democracies, should serve as a counter-balance to monitor the executive and legislative branches: in the constitutional court, the state audit office, the fiscal council, the competition authority (the office in charge of enforcing pro-competition laws), the ombudsman's office, and the central statistical office.

    The basic institutions of the rule of law had emerged by 2010; however, since the U-turn they have been abolished or significantly weakened (Bozoki 2013). The new Hungarian constitution, replacing the constitution accepted by multi-party consensus in 1989, was drafted by a small group within Fidesz, and no wide public discussion ensued. All protests were completely ignored, and the document was dragged through the defective filters of the law factory in very short order. The text abounds with shortcomings, which were pointed out immediately (and in vain) by both local and foreign legal experts (Scheppele 2013, Halmai 2014). It contained so many clauses serving the immediate political purposes of the people in power that the document, officially called "Fundamental Law," has had to be amended five times. In 2011-2013 the Fundamental Law was complemented by the passing of 32 so-called "cardinal laws," which future parliaments will be able to modify only by a two thirds majority. This collection of laws covers crucially important aspects of the country's life.

    One of the fundamental principles of the rule of law is that no-one, not even those who hold the most power, should be above the law. The law must be respected. In Hungary, the situation has changed: the holders of power are able to elevate any decision to the status of law quickly and without hindrance, at the push of a button. They pass retroactive laws, disregarding the prohibition of such legislation which goes back to Roman times. If they wish to arrange especially generous treatment for an individual or an organization, they pass laws using legal tricks which ensure de facto favoritism.

    Moving on to the juridical branch of the state, the Prosecution Service is a centralized organization in Hungary. In theory, it operates independently from the rest of the government. In practice, however, and that is what is important, the chief prosecutor is chosen by the holder of supreme power, after which there is a purely formalistic appointment by the parliament, which from then on is unable to effectively control him. With a few insignificant exceptions, the investigation of all public scandals and cases of corruption involving individuals close to the present government party has failed to progress beyond the investigative or prosecution phases. The Prosecution Service has, on the other hand, brought its full powers to bear on other economic scandals and cases of corruption in which people belonging to the current opposition are implicated. Dramatic, spectacular arrests are carried out for the benefit of the cameras, which arrive in droves. Compromising facts are often leaked while investigations are still in progress. No effort is spared to make sure that these cases come to court, though it is true that all too often charges have to be dropped in the prosecution phase, for lack of sufficient evidence; in other cases the charges are rejected by the court. And it is noticeable that the timing of a leak, the bringing of charges, or a court hearing coincides frequently with some event on the political calendar: the mine that will destroy a rival's reputation is detonated just before an election.

    We seem to be witnessing a definite attempt by the ruling political group to take control over the courts as well. The President of the Supreme Court, who had been appointed before 2010, was dismissed early, before his mandate expired. A new institution emerged, the National Office for the Judiciary, which from the very start acquired exceptionally wide powers: not only to appoint judges, but also to decide which cases should be heard by which courts. Later, as a result of protests in Hungary and from abroad, the sphere of authority of Office was reduced, but its influence has remained significant. The retirement age for judges was conspicuously reduced from age 70 to 62, below the average age limits, with the result that the older generation was expelled. This affected several judges in leading positions within the judiciary system who had been appointed before the present ruling group came to power, and although this measure was subsequently annulled by the relevant international court, so that the people involved obtained at least moral redress, most of them were not able to return to their previous leading positions.

    Numerous members of the judiciary are unable to escape from the intimidating effect of the government's measures. Some cases which come to court have political ramifications, and impartial experts in the field believe that some judgments are biased in ways that favor Fidesz policies. Nobody ventures to express an opinion about the number of cases involved. What is sure, however (and encouraging), is that the ruling regime has not managed to subjugate the judiciary to the same extent as they have done in other spheres.

    By 2010 private rather than state ownership had become the dominant form of ownership. Since the U-turn, however, private property has become the target of frequent legal, economic and ideological attacks; the weight and influence of the state sector is rising again. The nationalization of private pension funds financed from the obligatory contributions, which was carried out using unique legal tricks, dealt a heavy blow to the principle of respect for private property. A similar form of indirect nationalization took place in the sector of savings and loan cooperatives. The state-owned sector has expanded significantly in the branches of energy, public utilities, transportation, the media and advertising. In these areas the harsh means of disguised confiscation were not so often applied: property rights were bought instead. In many cases the previous owners were forced into a position where they felt they had no other option but to sell their property to the state, and at a price well below its market value.

    The tendency towards nationalization is well illustrated in the banking sector. This sector is burdened by heavy taxes imposed by the government. Laws oblige the banks to remit a substantial part of loans taken out in order to buy real estate, or to build on it. Previously, several large foreign banks...

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