Orbán’s Informal System – Always in Motion


The 2022 general election will be the first in 16 years in Hungary that has not been decided before the campaign even starts: Viktor Orbán might score his fourth victory in a row, but due to the cooperation of six opposition parties, he might lose, too. One thing looks certain: neither side will have a two-thirds mandate in Parliament.

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In an earlier article we addressed the question of what the opposition could do in such a scenario, given that the incumbent ruling party seems to be preparing for what they hope might be a temporary period in opposition. Any potential new government’s actual ability to govern would be hindered not just by Fidesz loyalists leading nominally independent institutions, but also because high-value state assets have been transferred into private hands and can therefore be used by Hungary’s current rulers even if they are forced into opposition.

The concept of the “deep state” or a “puppet master” is generally used as a description for suspicious circles exerting power this way, and the well-known populists of recent times, such as Donald Trump or Viktor Orbán, have spread conspiracy theories relying on these very concepts. Now it seems the latter is actually working on building a “deep state” that is very tangible and over which he has control. Nevertheless, we should not think that he started building it solely because he fears an election loss. His whole political career has essentially been built on informal power.

Universities into public benefit foundations

In late April, the National Assembly approved a law transferring around 70% of the Hungarian higher education sector into the hands of public benefit foundations, and the state gave assets worth thousands of billions of forints to these organizations, led by personnel handpicked by Fidesz. The legislators did not even hide the fact that their goal was to make the foundations independent of any government.

Naturally, this process started much earlier. Corvinus University was the first to be managed by a public benefit foundation, and since that “pilot project” was implemented with little resistance, it was all the more surprising that the decision to transfer the University of Theatre and Film Arts (SZFE) into the hands of another foundation led to substantial protests, including the students’ occupation of the university premises.

In December, the ruling party’s parliamentary supermajority amended the Fundamental Law for the ninth time, creating the constitutional basis for the privatization of state assets and their transfer into the hands of public benefit foundations. The constitutional amendment specifically mandated that decisions on the creation, operation and abolition of public benefit foundations, as well as decisions on how they perform their tasks, can only be made by a two-thirds majority in the National Assembly. Thus, as long as Fidesz has a supermajority, it has free reign, but after the election in spring 2022, the foundations are likely to be untouchable regardless of who is in power.

Most of Hungary’s higher education sector was given to the newly-established public benefit foundations during the few months after the amendment passed – only a few institutions remain in the hands of the state, including the historic Eötvös Loránd Science University or the National University of Public Administration, which was founded under Fidesz’s rule.

The most recent corruption report from K-Monitor and the Hungarian Civil Liberties Union emphasized that while the state is transferring considerable assets and public benefit tasks to foundations – such as running higher education or, in the case of university clinics, providing patient care – it will have little power in ensuring that these public benefit tasks are performed sufficiently. The boards of the foundations managing these considerable assets are not directly accountable to the state and the members of the board cannot be replaced – the state essentially gave up all its rights as founder and gave them to the boards themselves.

After the first set of board members are selected for these foundations, the state or the government cannot recall them, even if the board does not sufficiently perform its tasks and not even if the foundation manages the assets it received fraudulently. This is especially outrageous because the law lays down basically no rules on conflicts of interest for such board members.

According to some analyses, around 40-50% of such board members have direct ties to Fidesz and the government, and another 20% have indirect ties to the party. The board members’ names in and of themselves contradict the government’s claim that the reform was needed to guarantee the independence of the higher education institutions from the cabinet and to preserve the universities’ autonomy. Strong personal ties between the foundations and the current ruling party, in fact, are designed to guarantee Fidesz’ influence.

How much public money would become “foundation-owned” is currently impossible to estimate. One example: A single foundation (Mathias Corvinus Collegium) received a capital injection of EUR 279 million through one decision just months after it was handed 10% of the stocks of Hungarian Oil and Gas Public Limited Company (Mol) and a Hungarian multinational pharmaceutical and biotechnology company, Gedeon Richter Plc.

Not only universities

Such efforts to “transform” public funds are still ongoing, and not just in the case of higher education institutions. In recent times, castles, holiday resorts, ports, land, clinics and cultural institutions have been handed over to public benefit foundations. The launch of a concession-based public procurement tender for managing and developing the entire expressway network for the next 35 years would have an even more significant effect. The government is looking to reach a deal on that decision before the end of 2021.

Before 2010, Fidesz used anti-privatization rhetoric, and after entering government, they re-nationalized several sectors successfully. Now they are reversing the process: they transform state (and municipal) assets into assets held by foundations that are guaranteed to be controlled by Fidesz-loyalists.

Fidesz seems to be preparing for an electoral loss while working on ensuring that it will only hand over the keys to governance, not the actual power to govern – like lending somebody a car that is out of gas. There is, however, another aspect to consider.

Always in motion

Many believe that one of the prime minister’s main advantages lies in his “HR policy”: he promotes people until he feels they are growing too big, at which point he clips their wings or plays them against each other so they weaken themselves. He does this – most of the time – without weakening their loyalty to him.

Orbán’s position is never primarily institutional, therefore, but is built on informal power. This is confirmed by the fact that governmental decisions about amendments and new laws are not made chiefly in the ministries, but by a non-transparent, small circle around the PM, and the situation was the same during his first premiership between 1998 and 2002.

An even better example is how the government-controlled media empire has been built. This “construction” started during Fidesz’s years in opposition, when several Fidesz-friendly figures, portraying themselves as independent businessmen, either bought, founded or managed several media outlets. When the time came in 2018, they “voluntarily” gave their media portfolios to the media giant called Central European Press and Media Foundation (KESMA), for free. This revealed the “secret” everyone already knew: Viktor Orbán had always held influence over those approximately 500 media outlets from the very beginning.

If power is not exercised institutionally, then public funds cannot be expected to remain under formal state ownership either: without bureaucratic rules, the taxpayers’ money can be used more easily and freely in an informal system. The machine must always be in motion – in such chaos – only the puppet master can be allowed to stand firmly on his feet, he is the only one who sees what is actually happening.

This is what Orbán is doing and always has done: he is transforming everything, and if he stays in power and these new structures start living their own lives, he will reshuffle them once again.