The American tradition of a State of the Union address every January appealed to Viktor Orbán who adopted (and adapted) the idea in 1999, shortly before Fidesz lost the national election. Unlike the American president, the Hungarian prime minister had no intention of taking stock of the previous year of his administration in parliament; he opted to address a select audience of his supporters.
For Orbán losing the election was a terrible and unexpected blow, but by the following February he bounced back and decided that he would continue with his annual speech. In office or in opposition, it didn’t matter. So, this is his fourteenth such speech and, let’s face it, after so many years they are becoming a tad boring and the audience is a great deal less enthusiastic. Especially if the affairs of state are not in the best shape. Already last year it was noticeable that the applauses were fewer and briefer. This year the trend was even more obvious to those listening to the speech on radio or watching it on TV.
I was somewhat amused to read today in The Wall Street Journal‘s “Morning Briefing” that “Hungarian Prime Minister Viktor Orban is expected to preview his plans for central Europe’s most volatile market this year in a nationwide address.” Well, he didn’t preview anything; in fact, I very much doubt that he has any viable plan to address the economic problems he himself largely created.
This time around there were no optimistic announcements about the future, only some vague reference to the Hungarian people’s resilience and talents that will ensure success. Eventually. Some time in the future. By contrast, last year he was very specific. He claimed that 2010 was the year of collaboration, 2011 was going to be the year of renewal, 2012 the year of take-off, and 2013 the year of growth. Well, this optimistic scenario doesn’t seem to be materializing. Zoltán Balog, the undersecretary in charge of Roma affairs and Orbán’s spiritual advisor, expressed his hope in his opening remarks that “this year would not be worse than the last.” A modest enough goal.
Just as Viktor Orbán avoided outlining any future plans, he was also silent about the failure of his economic policies. There was no mention of either the European Union or the International Monetary Fund. Naturally, he said nothing about the European Commission’s very serious reservations about the new constitution and the cardinal laws. But he also ignored what he must have deemed an ignominious defeat: that his administration in a complete turn-around had to crawl back to the IMF for a few billion euros without which the whole Hungarian economy will collapse. And there is still no assurance that Hungary will receive this sorely needed line of credit. It all depends on whether Viktor Orbán is ready to capitulate and satisfy the political and constitutional demands of the European Union and the economic requirements of the IMF.
For the time being it is difficult to predict what will happen. A few days ago Magyar Nemzet reported that the Hungarian government’s answer to the demands of the European Commission was almost ready and that Viktor Orbán had made very few concessions. As for the economic demands of the IMF, rumor has it that one of the requirements will be the restoration of progressive taxation. After all, the introduction of the flat tax–the “original sin” as some economists called it–is largely responsible for the budgetary hole that had to be filled with all sorts of extra levies on the banking sector and certain foreign companies. And when even that wasn’t enough, along came the nationalization of private pension funds.
If the rumor is true, Orbán and the IMF will be at loggerheads. In his speech Orbán insisted on retaining his disastrous tax system. According to him a flat tax is the only just tax system. In his rather muddled mind progressive taxation was responsible for the high unemployment rate. Moreover, he contended, his is a just system because if someone works twice as hard he will receive twice as much money. It doesn’t matter how far I try to stretch my imagination I cannot figure out how a wage earner working twice as hard at the office or in the factory will bring home twice the salary because of the flat tax.
Orbán in his speech paid very little attention to the growing segment of Hungary’s poor except to claim that eventually they will be able to catch up to the middle class. Orbán designed his whole regime around the middle class, which in his scheme is the “leading force” of society. If Orbán had made that claim in a Western European or North American context, he would sound like most mainstream politicians. But in Hungary? The middle class in Hungary is not the bulk of society but the upper crust. And the flat tax, as Orbán’s team crafted it, is in effect a reverse Robin Hood tax. It takes from the poor and gives to the rich.
There was an especially telling clue in this speech to Viktor Orbán’s mindset and his plans for Hungarian society. His audience was told not to begrudge the help the government gives to pensioners, which is mighty little in the first place. Because older folks’ votes are necessary to keep the Orbán government in power, which in turn will benefit them.
Otherwise, he blamed the former governments for all the economic and financial troubles of today. He made a spate of inaccurate statements about the previous eight years, including the claim that if Orbán hadn’t lost the election in 2002 today Hungary would be in such excellent financial shape that it would lend money to the IMF. As we know, the real problem facing the Hungarian economy is not the relatively high sovereign debt which, by the way, has grown another 5% in the last few months, but sluggish economic growth and lack of investor confidence.
The government was obviously deadly afraid of violent demonstrations erupting. Whole blocks were closed off around the building where the meeting was held. Members of the police force and the special “terrorist unit” were hard at work to ensure the safety of the prime minister.
After the event concluded and the well-dressed crowd was leaving the premises, journalists stood by to interview those who were ready to talk. The interviewees expressed their total satisfaction with the economic and political situation in Hungary. Women in very expensive furs gushed about the happy state of affairs. Well, yes, I’m certain that 2011 was a very good year for them because they are the real beneficiaries of the flat tax. But they are in the minority, a very small minority.
On the other hand, there seems to be increasing dissatisfaction among those who are the losers in Orbán’s “income redistribution” tax system. I noticed in the last few days that the profile of people who phone in to talk to Klubrádió’s György Bolgár is changing. In the past, the callers were older, better off, and well educated. Lately working class guys are phoning in complaining that they work very hard and still take home only 120,000 forints (about $550) a month. They can barely make ends meet.
Orbán’s promises were empty. No, worse. They were carefully crafted lies. Hungarians may have thought they were going to benefit from a trickle-down economic program. Instead, they learned only too late that in Orbán’s model water flows up hill.