God, Luck and Politics: A Brief History of Graft in Hungary

Corruption is deeply embedded in Hungary, with Prime Minister Viktor Orbán shielded by a cluster of wealthy bosses with close personal and political ties to the leader.

“God, luck and Viktor Orbán certainly played a role in what I’ve achieved so far,” is how Lőrinc Mészáros, the Hungarian Prime Minister’s childhood friend explained his unprecedented business success back in 2014. Three years later, Mészáros became an international sensation as his flagship company made headlines for having the world’s best-performing stock, thanks to its continuous profit from a flood of government contracts.

By 2020, Mészáros has risen from an uncharismatic gas fitter in Felcsút, Orbán’s hometown of 1,800 people, to become Hungary’s richest individual with a net worth of around 1.3 billion euros, according to a Forbes Hungary estimate. He is a symbol of what the Prime Minister calls “the reinforcement of the national capitalist class”, a web of nouveau-riche, government-friendly entrepreneurs with close personal and business ties to senior right-wing politicians’ families.

Mészáros famously once told a journalist who asked about the secret of his success that “maybe I’m smarter” than Facebook founder and CEO Mark Zuckerberg. Opposition figures and pundits simply regard Mészáros as a straw man fronting for Orbán, an allegation both of them vehemently deny. Investigative journalists, however, revealed direct evidence of public money flowing to Orbán’s family through Mészáros’s companies.

“Instead of classic state capture where economic interests take over a weak executive, in Hungary a powerful executive cooperates in a non-transparent manner with business circles that it has itself created. The governing elite and economic actors around it govern as their private interests dictate,” writes the Bertelsmann Stiftung’s Transformation Index (BTI) in its 2020 country report on Hungary, due to be released in March.

This peculiar political-economic system, however, is a relatively new phenomenon in the country.

Shifting forms of corruption

For at least two decades after the democratic transition of 1989-1990, corruption in Hungary largely fit into regional patterns. Recent history of the entanglement between political and economic circles could be divided into at least three periods.

During the 2000s when Hungary was basically a two-party system, “seventy-thirty” was the infamous expression describing behind-the-curtains deals between governing and opposition party blocs. Whoever was in power took the largest share of illicit profit (from shady public procurements and contracts) while making sure that businessmen supporting opposition parties were also well fed with public money.

One of the main architects of this equilibrium was Lajos Simicska, former party treasurer of Fidesz and owner of the largest right-wing media conglomerate. Orbán knew Simicska from high school, the two were close friends and political allies, supporting each other no matter what.

By 2010 with the landslide victory of Fidesz, Orbán’s right-wing party, parliamentary and municipal elections have essentially wiped out Hungary’s socialist and liberal parties from every position of power and influence. Previous ”seventy-thirty” agreements became obsolete. Simicska, after carefully managing Fidesz’s economic hinterland for two decades, had the ambition to finally manage the affairs of the Republic of Hungary, despite never having been elected.

The second period lasted between 2010 and 2014, when Simicska indeed became the most influential person in Hungary, resulting in a somewhat still classic type of state capture. He had enough power to pick or dismiss cabinet ministers and to influence legislation through controlling individual Fidesz MPs submitting new bills for him, which gradually put him on a collision course with Orbán.

From 2015 until 2018, Simicska waged a turf war against the Prime Minister by throwing his support behind the far-right opposition party Jobbik and lost. After the 2018 elections, Lajos Simicska, an oligarch who fell out with Orbán, closed two openly anti-government newspapers (among them Magyar Nemzet, whose last edition is pictured above) and a radio station – a triumph for the prime minister.Then the third period began.

The age of the ‘national capitalist class’

“He was smarter than any of us,” a young Orbán said of Simicska in an early interview in the late 1980s. Lőrinc Mészáros, who took over most of Simicska’s former companies after the oligarch opted for an exit in 2018, is a different breed. So are other members of the newly-established national capitalist class, but none of them are likely to become as powerful and independent as Simicska used to be.

Their complete subordination to the Orbán government’s political will is best represented by how Mészáros and all other right-wing businessmen and corporations owning influential outlets simultaneously ditched their media assets worth millions of euros. They transferred their media ownership rights to a newly set-up non-profit foundation which is overseen by a governing body full of Orbán loyalist appointees. As BTI’s country report explains: “more than 400 titles, including most flagships of Fidesz’s media empire, were transferred to the central European press and media foundation (KESMA) in November 2018. This consolidation occurred as oligarchs linked to Fidesz donated their media shares to the foundation in quick succession”.

By 2020, the wide-ranging business empire of Mészáros and his lieutenants – sometimes defected managers of former Simicska-companies – includes interests in sectors as diverse as construction, agriculture, energy, media, finance, property holdings or tourism. A common thread is that these industries’ success is heavily reliant on government contracts, subsidies and favorable regulations. As a result, none of the “national capitalists” are able to go against the executive power’s will without risking everything they own. Another rebellion like Simicska’s is more than unlikely.

On the other hand, none of them are capable of producing high added-value products or are able to export and compete in the global market, thus raising big questions about their contribution to Hungary’s economic success.

First published on Euractiv.com