Hungary after 2008: A New Regime of World-Economic Integration

The Hungarian Studies Association of Canada welcomed Dr. Ágnes Gagyi to Congress 2022 for an international keynote session titled Hungary after 2008: A New Regime of World-Economic Integration. At the beginning of her presentation, Dr. Gagyi outlined world-systems and dependency as useful theoretical frameworks to approach this topic. Hungary acts as a semi-periphery; it is a middle power, but plays an important bridge function connecting different markets (e.g., Russia and Western Europe).

Central to Dr. Gagyi’s presentation was this ‘bridge model’ that Hungary established in the aftermath of the 1956 Revolution. Hungary was importing high-level technology from pro-Western capitalist markets, but could not export technological products of the same caliber back to those markets. To pay for these technological imports, Hungarian factories built higher technological inputs into local industrial production (i.e., agrarian machinery), then exported this to markets in exchange for Soviet oil and imports, which were then re-exported to Western markets.

Under this bridge model, socialist marketization was strong, which created the internal and external conditions for hegemony after 1989. Amidst debt crises and privatization in the 1990s, a nationalist, protectionist counter narrative emerged which argued that privatization and the new dominance of Western capital was hurting Hungarians. This counter narrative persisted until the second half of the 2000s.

When the 2008 crisis hit, the Hungarian government asked for a new loan from the International Monetary Fund, and a debt crisis ensued. After 2008, the exchange rate between Swiss francs and the Hungarian foreign exchange depreciated by up to 80%. Hungarians saw normal, working middle-class households going into debt spirals and being left homeless. This was interpreted as an attack on Hungarian families by foreign funds. During the 2010 election, the Fidesz campaign lead by Victor Orbán focused on a “freedom fight against domination” and “respect for working Hungarians,” and the party was elected with a two-thirds majority. Once elected, the Fidesz regime quickly engaged in the centralization of administrative power, exerting strong political influence and control over the media. The Fidesz regime has maintained power since, winning another majority in the April 2022 election.

Dr. Gagyi noted that even with a two-thirds majority governance hegemony, the Fidesz regime is still defined by external dependence. There is hegemonic rule over Hungary, but this regime does not play from a hegemonic position in global capital relations.  The post-2010 economic project of the Fidesz regime sought to empower the state by domestic capital and lower external dependence. However, Hungarian companies still could not produce at the technological level where they could export to Western markets – instead, Western car manufacturers were subsidized to come into the country and generate production. 

A key point from Dr. Gagyi was that the efforts to strengthen the position of Hungarian domestic capital do not occur in a vacuum, but rather in global concentration. Various factors such as political shifts, the rise of China as a player, and disruptions from the COVID-19 pandemic have played a role. Pandemic reorganizations in Hungary saw a “rule by decree” implemented and a politicized emphasis on connections with Russia and China, with Hungary accepting Russian or Chinese-made vaccines earlier than elsewhere. With the war in Ukraine, the Hungarian government has a no intervention policy. At the moment, this has proved beneficial due to Hungary’s dependence on both Russian and Western markets, though this new politicization is threatening the bridge position Hungary has maintained.

Through Dr. Gagyi’s thorough analysis of social movements and economic conditions, the complexities that have led to current-day conditions in Hungary are more apparent. To understand recent developments in Hungary more fully, we must consider the global economy in which it acts as a middle power, acting as an important bridge between markets.