Too Much Money in Hungary

Germany’s Orbán Problem

European politics makes strange bedfellows. Take the European People’s Party (EPP), for example, the coalition of centre-right parties, which has good chances of winning the highest share of votes in the upcoming EU elections.

Viktor Orbán. Talinn, September 2017.

Commission President Jean-Claude Juncker is a member of the EPP. And so is Hungarian Prime Minister Victor Orbán, who recently started a campaign accusing Juncker of plotting to flood Europe with migrants.

That is a strange state of affairs, to put it mildly. In the EPP, there has long been a discussion over Victor Orbán’s membership. But for years, nothing was done. Attacking George Soros in antisemitic hate campaigns, as Orbán’s government had done previously, was apparently acceptable.

It was only when he added Juncker into the mix that Orbán seems to have crossed a line. After long negotiations, Fidesz was suspended from the EPP in late March — not expelled, but temporarily suspended. A final decision will be made after the European elections.

Hungary has been the black sheep of the European Union for a while now. Last September, the European Parliament voted in favour of triggering Article 7 sanctions procedures against Budapest, as it had against the Polish government the year before.

Victor Orbán’s government is accused of violating the central values of the Union by targeting independent media, attacking NGOs and other civil society institutions, and increasingly seeking to control Hungary’s judiciary.

Of course, these violations are only the tip of the authoritarian iceberg. Orbán’s Fidesz party holds a majority in the Hungarian parliament, and it is using this power to rapidly transform the country.

What Orbán describes as “illiberal democracy” looks increasingly like incipient fascism– including state-guided hate campaigns against foreigners, Muslims, and other minorities.

Most worrisome is the return of officially propagated antisemitism, in the form of constant propaganda-campaigns against George Soros.

Considering these depressing realities, it is truly astounding that Fidesz is still a member of the EPP. Indeed, Orbán is not as far removed from Europe’s august centre-right mainstream as many would like us to believe.

In Germany, Angela Merkel’s own party, the Christlich Demokratische Union  (CDU), has long had close relations with Victor Orbán, through the Christlich-Soziale Union (CSU), the CDU’s Bavarian branch.

Manfred Weber, the European People’s Party candidate for Commission president, happens to be vice-chairman of the CSU.

In 2018, Orbán was a guest of honour at the Christian Social Union’s annual party conference, and in 2018 the CSU-chairman in the German parliament Alexander Dobrindt congratulated “our friend Victor Orbán” for his great electoral success.

When the EU parliament voted to trigger the Article 7 process, not a single Christian Social Union lawmaker except Manfred Weber voted for it.

Only now, weeks before the European elections, has Orbán finally have crossed a line and elicited mild criticism from the CSU.

The Bavarian conservatives traditionally represent the farthest right-wing of the political mainstream in Germany. In recent years, the party has deliberately sought to fashion itself as a right-wing critic of Angela Merkel’s supposedly liberal migration policies.

That is certainly one reason for their great sympathy for Victor Orbán.

But equally important is the following: “Hungary’s favourable geographic location, well-trained workforce, good infrastructure, and international integration of its economy, make it one of the most attractive economic locations in the region.”

This quote is taken from the website of the Osteuropa Verein der Deutschen Wirtschaft, the Eastern Europe association of German industry.

Hungary is of central importance for Germany’s economy, especially for German carmakers. Among the four biggest companies in Hungary, three are German: Mercedes Benz, Audi, and the Bosch Group, which also produces parts for the car industry.

When the Orbán government introduced a new law in December, which dramatically curtailed labour rights, Hungarian activists dubbed it the “slave law” — but they also referred to it as “Lex Audi” or “Lex BMW”.

The law raised the legal number of overtime hours to 400 in a year and allowed companies to delay payments up to 3 years.

Hungary’s main unions demanded the law be dropped and sought to negotiate with the government. They even started a strike committee to organise a possible general strike. But nothing came of it. Only 10% of Hungarian workers are union members.

Fidesz has an overwhelming majority in the Hungarian parliament, and for years now it has been using its power not only to curtail civil rights and attack liberal institutions but also to radically do the bidding of big business.

The Orbán government attacked unions and labour law, slashed the welfare state, reduced corporate taxes to the lowest level in the EU, and lavished investors with state subsidies.

All employers in Hungary benefited from these reforms — and many of the largest employers in Hungary happen to be German corporations.

Orbán won the election after the economic 2008 economic crisis, which hit Hungary hard. He campaigned on an “anti-globalist” ticket, promising to promote re-industrialisation and reaffirm Hungarian control of its national economy.

And while many sectors of the economy are today controlled by oligarchs, many of whom are connected to Orbán personally, the biggest beneficiaries of Orbán’s nationalist course is the German car industry.

It was no coincidence that right when the new “slave law” was passed, BMW announced a 1 billion euro investment in a new production plant near Debrecen. The new legislation was perfectly tailored to the needs of German carmakers.

Just-in-time production and low labour costs ( read low wages) are just as important as a supremely flexible and compliant workforce that can be activated at a moment’s notice.

This fact was underscored by a strike early this year in an Audi factory in the Hungarian town Gyor. Even though the strike lasted only a week, Audi factories in southern Germany had to shut down production, because they were missing parts manufactured in Gyor.

That’s how closely tied together these value chains are, and why an extension of overtime rules is so valuable to German industry.

The workers in Gyor won an astounding 18% pay increase.

This points to another central reason why the new overtime law was implemented: employers in Hungary have been struggling with labour shortages, resulting in upward pressure on wages.

Hundreds of thousands of Hungarians, especially young people, have left the country and sought work in richer parts of Europe.

At the same time, Orbán’s highly xenophobic government does not allow immigration to fill the gaps. The result is an ageing, shrinking population, and an increasingly depopulated countryside.

In spite of high growth numbers in recent years, many Eastern European countries are marked by low wage economies and high levels of emigration.

For German industry, on the other hand, the fall of the Iron Curtain and the EU’s eastward extension in 2014 has been a boon.

It opened up large export markets and investment opportunities (large parts of the Polish media, for example, are owned by German companies); but it also provided a great reservoir of labour for German capital.

Especially German carmakers, who have sought to adapt themselves to the pressures of global competition by lowering their labour costs. Eastern Europe has played a central role in this strategy.

Just a few hours away from the factories in Bavaria, where the final product is assembled, huge numbers of workers in Hungary, Slovakia and the Czech Republic work in German automotive plants or those of suppliers. They are forced to accept low wages and working conditions that would be unacceptable in Germany.

Germany’s car-industrial complex is a behemoth that has been largely responsible for its economic success in recent years. In 2018, it had revenues of nearly 425 billion euros.

The automotive industry employs directly or indirectly more than 800 000 people (which is almost 10% of the population!) and is accountable for 7.7% of all of Germany’s GDP.

The Dieselgate Scandal and slow adaptation to new technologies, such as electric and self-driving cars, might spell trouble for German carmakers in the long run. But so far, their model of hyper-globalised, export-driven growth has worked well for Germany.

In German car factories, especially in the south of Germany, you will find some of the most secure and well-paid industrial jobs in the world.

In the minds of most Germans, these jobs typify the virtues of the German’s “social market economy”: in contrast to the ultra-liberal Anglo-Saxon model, so the story goes, German corporations take care of their employees.

Like all pretty stories of national pride, this one is not really true. In fact, neoliberal deregulation of the labour market has hit Germany hard in recent decades.

This goes for the automotive sector as well, where an ever-smaller number of well-off core employees is supplanted by a highly flexible, low-wage workforce.

In addition, German carmakers have merely outsourced labour exploitation abroad, the most extreme examples being found in Central and Eastern Europe.

One might call this European economic integration. But going by the relative size and power of each party, it might be more accurate to state that Hungary has been integrated into the German economy.

This creates some uncomfortable questions about Victor Orbán’s place in German politics.

Orbán is the archetype of the anti-globalist strongman. He and his trademarked “illiberal democracy” embody what could lie ahead for European politics if all goes wrong.

Viktor Orbán came to power in the wake of severe social and economic dislocation, promising to “take back control”. But his nationalist, anti-globalist course has only intensified the pressures of global capitalism.

To obscure this fact, his government has provided Hungarians with an antisemitic scapegoat, on which all social ills can be projected. These rootless cosmopolitans and “globalists” are George Soros, and now increasingly also the EU bureaucracy.

Germany likes to view itself as the defender of liberal norms and values in Europe. But the market speaks a different language. German elites might find Orbán’s steady drift into fascism unpleasant and counterproductive, but he is still an asset.

In our political language, we are used to simple opposites. There is the progressive European Union and the liberal centre on the one hand, and their opponents, the savage “populists” on the other.

In order to explain Europe’s regression to nationalism, it might be more fitting to speak of a complex dialectic: between neoliberal economic policies and fascist reaction.

Purported opposites, they are, in fact, two sides of the same coin. Viktor Orbán’s politics, or so we understand it, and German investment in Hungary.

Photograph courtesy of the Estonian Presidency. Published under a Creative Commons license.