Viktor Orbán at Tusnádfürdő/Baile Tusnad

I just finished listening to Viktor Orbán’s 56-minute speech at Tusnádfürdő/Baile Tusnad in Romania. He had a large, enthusiastic audience despite the heat. Applause was especially loud and long when Orbán talked about his fight against multinational companies, banks, and the European Union.  In the audience one could see very young children who, though they most likely didn’t understand a word, were enthusiastic nonetheless. It seems, however, that not everybody was equally impressed. The camera stayed focused for a fairly long time on a man who seemed to have fallen asleep, and I heard later that a couple of men threw tomatoes at Orbán on his way out from the camp site.

Source: MTI / Photo László Beliczay

Source: MTI / Photo László Beliczay

Viktor Orbán made sure that his audience doesn’t forget about next year’s election. He began his speech with a reference to it and at the end stressed the importance of his staying in power and continuing the policies that will lead to a complete transformation of Hungary’s political and economic system.

It seems that once Orbán comes up with a pet theory about the political and economic functioning of the universe, and he has a large inventory of them, he simply cannot let it go. In fact, in every new speech that touches on one of these theories he ratchets up his rhetoric and makes increasingly indefensible statements. For instance, his original theory about the decline of the West has by now become a prediction of a political and military clash between the West led by the United States and Asia led by China. By now he makes no secret of his intense dislike of the United States and accuses it of “trying to prevent other countries from catching up with it.”

Or, a few months ago he talked about the dominance of larger member states over the smaller ones within the European Union. By now this observation has morphed into the conviction that the “great powers” actually exploit the small ones by siphoning financial and human resources away from the smaller countries. The chief culprit here is again the United States. Hungary’s goal is to prevent such an exploitation and brain drain. This is in fact the essence of Hungary’s national strategy. To stop the great powers and use this new world’s opportunities to Hungary’s advantage.

After a rather lengthy and debatable historical treatise starting with World War I, he reached his favorite subject, the present financial crisis which in his opinion cannot be solved by the European Union. The institutional framework of the Union, the Commission, the Parliament “are unfit to handle the historical challenges facing us.” Orbán’s remedy is to shift the locus of power to individual nation states because only they are capable of overcoming the present crisis.

Orbán rarely passes up an opportunity for double-talk. This time he quoted a line from Sándor Kányádi, a Hungarian poet from Transylvania who had a line referring not to clear to what that “the dog is the same, only the chain was changed.” Of course, he immediately added that the change that occurred then wasn’t as simple as “left the tanks and came the banks,” as István Csurka claimed in the early 1990s, but “there is something to it.”

Then came a rather confused explanation of the differences between the gross national product (GDP) and gross national income (GNI). GDP is the market value of all officially recognized final goods and services produced within a country in a given period of time. GNI, a less familiar concept, consists of personal consumption expenditures, gross private investment, government consumption expenditures, the net income from assets abroad, and gross exports of goods and services after deducting gross imports of goods and services and direct business taxes.

Hungary’s GNI, Orbán claimed, is greater than its GDP. The difference, some two trillion forints annually, is moved abroad by banks and foreign companies. When national governments are in power, he argued, the difference between the two economic measures shrinks; when the socialists and liberals govern, the gap widens.

Let me stop for a moment. According to data published by the Hungarian Central Statistical Office, this claim is inaccurate. The Budapest Business Journal  wrote in September 2010: “The gap between nominal GDP and GNI widened each year between 2003 and 2007, from HUF 871 billion or 4.6% of GDP to 6.9%, but has narrowed since, dropping to HUF 1,721 billion or 6.4% of GDP in 2008 and to HUF 1,303 billion or 5% in 2009, the figures show.”

Why the gap between the GNI and the GDP in Hungary? According to Orbán the explanation is simple: “We created this wealth and it disappeared” abroad. He admitted that Hungary couldn’t manufacture cars on its own and therefore if Mercedes Benz makes a profit and takes this profit out of the country it is legitimate. After all, they provide job opportunities. But the banks are different. They amassed unreasonably large profits and therefore the bank levies are justified. These banks as well as the utility companies are siphoning money of the country. Again, let’s stop for a minute. It is a well-known fact that the foreign banks have been pumping money into their Hungarian subsidiaries for a number of years. That is the reason they haven’t gone under yet.

After this harangue against foreign companies and banks he listed eleven accomplishments he is proud of. I do not have the space, nor is it even worth the effort, to list them all. However, a couple of points that he made in connection with these accomplishments are worth noting.

One is his belief that if a country’s national debt is 90% or more of GDP there can be no economic growth. This mistaken notion most likely comes from a since largely debunked study by Carmen Reinhart and Ken Rogoff, two otherwise respected economists. The study, called “Growth in a Time of Debt,” claimed that economic growth slowed rather dramatically for countries whose public debt crossed the threshold of 90% of the gross domestic product.  Unfortunately, they made some errors in their calculations. The most serious was their failure to include years of data that showed Australia, Canada, and New Zealand enjoying high economic growth and high debt at the same time. More can be read about the Reinhart-Rogoff study here. It seems that whoever told Orbán about the correlation between national debt and economic growth knew about the study but not about its “Excel coding errors.”

Among the laundry list of accomplishments I found reference to an odd economic theory which even Orbán admitted was unique. As he put it, “as regards this question everybody is on the other side and we are the only ones on this side.” Well, that is frightening enough. So, what was Orbán talking about? Those on the other side claim that economic growth must come first and that this growth will then foster higher employment. But Viktor Orbán is convinced that exactly the opposite is true. First, one creates jobs, and this job creation will create economic growth. He claims that this is precisely what happened in the United States in the 1930s. Alas, it is a well known fact that it wasn’t Roosevelt’s public works program that managed to pull the U.S. economy out of the great depression. But Orbán is convinced that the same strategy will work in Hungary although even he has to admit that the two situations cannot be compared because the United States was rich enough to start building railroads and such while Hungary, being poor, can only employ public workers to dig ditches. How 300,000 ditch diggers can lead Hungary out of the economic crisis remains a well-kept secret.

We might think that these primitive economic notions are frightening, but Orbán received his greatest applause when he said that Hungary is following a road on which he is completely alone. Where that road will take the country I hate to think.

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Minusio
Guest
On my visit to Hungary I was at another party (in a countryhouse near Visegrad) last night. The participants were all friends and many were members or pensioned members of institutes of the Hungarian Academy of Sciences. Details are no longer really discussed. One can observe two things: (a) There is a strong drive – at least for older people – to leave it all for private live. The consideration for those who struggle and have a hard time to make ends meet is clearly limited even in this group of academics. The Jewish part of the group cared more – and were the more well-to-do. But none of them liked Orbán’s politics. (b) Even educated people are less informed than me on many issues. As they are quite educated I think this had to do with the fact that they have no habit to use information in a critical and discretionary way – regularly. This means that not every educated Hungarian will spot a lie – although could figure out that almost all of them is losing out. Many speak French and German, but not English – to their own disadvantage. A big naivety prevails. Observations OT: After French… Read more »
Member

Some basic math. Tappanch is our resident numbercruncher, s/he will correct me.

So what is the big deal with going to 50% debt from 80%? Why are we expecting a miracle from that? The current bond rate is 5-6%. So a not so wild assumption is calculating with the same for the the current debt (mind you they are paying off the IMF that is cheaper).

To finance the debt we need the 4-5% of the GDP every year. If the debt drops to 50% we will gain 2% of the GDP buy paying 2% less interest. This much the GDP easily fluctuated in the past, up and down, for many reasons, and nothing perceivable happened. We didn’t buy BMW’s when the GDP was up and our children didn’t start selling apples on the streets when it was down.

It’s not the debt it’s how do you use it. The first thing the country should do when the debt drops and your creditworthy is … GET LOANS.

Why people believe this moron? They didn’t go to elementary school to learn basic arithmetics? Educated Hungarians my butt. It’s an oxymoron like the scottish danish.

Viktor Pal
Guest

Powerful entry.

Po'K
Guest

Applause was loud and long. Presumably he picked up votes. Top Dog.

Po'K
Guest

Assuming the 400 000 readers of HVG know the difference between GDP and GNI they wont have any impact on those I saw watching “Victor” in Tesco.

LwiiH
Guest

Minusio :
So we can see her again “the withdrawal into the private” as we did during Kadar and in the GDR.

Interesting, I think I’ve noticed this change but tll now I didn’t really know what it was. I attributed to fear but its deeper than that,it’s the return of an old habit. How sad!
The logic behind the economics is just so child like its scary.. It’s a duck, no, it’s a witch, burn her!!!

Po'K
Guest

The Economist 2013 July 20 p. 76
Hungary’s GNP growth is one of the highest in EU….higher than Germany

gdfxx
Guest

A couple of observations about this really ambiguous speech:
1. Orban basically re-declares the Juche theory for Hungary, first declared by North Korea’s dictator, Kim Il Sung for his country. The results – in North Korea – are not very heartwarming.
2. Orban contradicts himself when one one hand he describes China as a new world superpower, but on the other hand he ignores the fact that the Chinese economy became this strong as a result of all the investments into manufacturing by Western industrialized countries; this is the kind of investment Orban wants to stop, based on his nationalist-populist “economic theories”.
3. There was one statement that Orban made that I think is correct: the one about people voting based on their pockets. I have a hunch that this in fact will be his undoing, eventually.

Po'K
Guest

For one educated Hungarian try
Gabor Vattay

LwiiH
Guest

I wonder how well it would go down if Merkle packed up kit and crew and held a rally in Alsace?

Wondercat
Guest

Prof Balogh, your thoughts, please, on the implications of IMF loan pay-back ahead of schedule — it will demonstrate, of course, that Hungary no longer is a “colony”; but what other effects may this action exert?

Po'K
Guest

Orban’s economic ideas are not too similar to Juche which is a closed system.
?? neo-Mercantilist

Po'K
Guest

Online registration for 2014 elections opens for Hungarian Romanians on 2013 August 1.

LwiiH
Guest

Wondercat :
Prof Balogh, your thoughts, please, on the implications of IMF loan pay-back ahead of schedule — it will demonstrate, of course, that Hungary no longer is a “colony”; but what other effects may this action exert?

It’s unbelievable how childish the thinking is.. lets take a piss out of the multi-nationals and the banks, pay back the cheap money early because all of these interests are exploiting the country. Oh, don’t look over here at the bond market, nothing to see here… move along, move along.. we’re only buying expensive money from those same foreigners that are exploiting us…. don’t worry, we’ll be able to pay it back once growth returns to 6-7%…

Marcel Dé (@MarcelD10)
Guest

LwiiH :
I wonder how well it would go down if Merkle packed up kit and crew and held a rally in Alsace?

Actually, it’s the rally inviting Mz Merkel. It is called a speech at the European Parliament, and it’s been a while since she last gave one. 🙂

Joke aside, it is not uncommon today for French politicians running for the presidency to give speeches to French citizens living in London (est. pop. between 100,000 and 300,000). Sarkozy did it in 2007, Hollande in 2012. As most probably do not hold dual citizenship they can’t vote for national elections in England as well, which makes it slightly different.

Also, it isn’t uncommon either for campaign meetings to be held in Paris, Lyons or Marseilles during Algerian, Tunisian or Moroccan elections. In that case, there’s a lot of dual nationals. Yet it is seldom the leading candidates giving the speeches, and never (if my memory’s right) the incumbents. Another slight difference.

This is where you can see the beauty of OV’s neo-Szalámitaktika: if you slice the szalámi thin enough, you’ll find similar slices elsewhere. But if you consider the sum of the parts, it is unprecedented.

Po'K
Guest

Ceausescu is a closer tyrant than Hitler or Kim Il Sung but Orban is a long way from him. Talk to people in Cristuru Secuiesc…about people being wrapped up in barb wire and left on a roof

Po'K
Guest

Orban may net 500 000 votes from Romania

Po'K
Guest

Orban = 2 706 292 voters
three times his closest rival

petofi
Guest

Wondercat :
Prof Balogh, your thoughts, please, on the implications of IMF loan pay-back ahead of schedule — it will demonstrate, of course, that Hungary no longer is a “colony”; but what other effects may this action exert?

It beggars the mind that no one questions the ludicrousness of paying off a loan at 4% while selling government bonds at 6 and 7%….What’s at least as bad is that the opposition doesn’t have the wherewithal
to highlight such nonsense in the media.

tappanch
Guest

Po’K :
Orban = 2 706 292 voters
three times his closest rival

Po’K seems to know the exact results of the 2014 election a year ahead.
The Orban government must have voted on the election results in a secret meeting.

“State secret until 2513” 🙂

By the way, will international and other independent observers be allowed to watch the entire process of getting and counting the votes from abroad?

In the draft Fidesz law, they excluded foreign observers – I do not know what kind of law they enacted at the end. There were about 4 new election laws and amendments in the last three years, expect more.

Po'K
Guest

The figures are 2010 election, sorry for the lack of clarity.

Po'K
Guest

Maybe the non-voters will decide the 2014 election.

Member

Hungary outstanding amount and historical data with the IMF can be viewed here: http://www.imf.org/external/np/fin/tad/exfin2.aspx?memberKey1=415&date1key=2013-07-29

Po'K
Guest

Dr Balogh thank you for comment. I cannot understand it. 1/2 of 2010 vote is 1 35 000. But did not opinion polls give Orban 24% ? 24% of electorate is 2m

An
Guest

Sure, I wonder if the income that Hungarians working abroad send home to support their families is counted in the GNI… if yes, it’s sure to grow 🙂 Hungary is becoming more and more like Mexico: families supported by family members working abroad.

Shame-Of-Hungary
Guest

Only an intellectually challenged Orban can ignore the news, and run again in 2014 elections.
He can ignore his bad record, but the voters must wake up and throw him out in 2014.

spectator
Guest

Mutt :
It’s not the debt it’s how do you use it. The first thing the country should do when the debt drops and your creditworthy is … GET LOANS.
Why people believe this moron? They didn’t go to elementary school to learn basic arithmetics? Educated Hungarians my butt. It’s an oxymoron like the scottish danish.

This is the whole point of a loan – of course, only in case if one has elementary understanding of business-management.
Running a country successfully isn’t that much different from a well managed business: you take a loan and invest in whatever needed to increase your productivity, your income, this way the loan literally pays itself, while the investment giving more opportunity to employ more people, etc.

Taking a high cost loan to pay off a significantly cheaper one, while one saving money from investments – hence strangle economical growth – and even boasting about how good it is, come on, people, how inadequate retard someone must be..?

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