Today I’m returning to Viktor Orbán’s so-called interview with Zsolt Bayer on Echo TV last Friday because the prime minister uttered a few sentences that might have an impact far beyond the fortunes of Lajos Simicska, the object of his ire.
I should emphasize that during the conversation Lajos Simicska’s name was never mentioned, but it wasn’t necessary to name Orbán’s old friend. Everybody in the audience knew whom they were talking about.
Zsolt Bayer wanted to know why the two old friends fell out. We know from Simicska himself that he disapproved of Orbán’s pro-Russian turn in foreign policy. Moreover, although in the past he had been supportive of Orbán’s domestic agenda, he was not willing to follow Orbán on a road that would lead to a Putin-style autocracy. Naturally, Orbán had to offer another explanation for his quarrel with Simicska. He could have come out with an explanation that might even have rung true. He could have said that Lajos Simicska, who has several media properties, became furious at the government’s plans to introduce high levies on advertising. Hence the fight. Indeed, Simicska made no secret of what he thought of the advertising tax. But Orbán didn’t choose this route. Instead, he came up with an utterly implausible story.
Orbán explained that there was a very simple explanation for the strife between the government and the media owners. These media oligarchs are also large landowners, whose interests will suffer under the provisions of the new law on land use (May 1, 2014), which prescribes that only 20% of all arable land can be in the hands of landowners who own or lease more than 1,200 hectares of farm land. No one who has followed the Simicska story could possibly believe a word of this, but why then did the prime minister come up with such a tale? Népszabadság suspects that Orbán used the occasion to announce his newest targets, owners or co-owners of large landholdings.
It is not easy to find one’s way in the labyrinths of EU agricultural policy and its implementation in Hungary. One thing is sure, a lot of money is spent on agricultural subsidies. Hungarian farmers will receive 350 billion forints in SAP (single area payment) subsidies every year between 2015 and 2020. A large landholding is considered to be anything over 1,200 hectares. There are 525 such agribusinesses in the country. Until now they received 20 billion forints per annum in SAP subsidies, but from here on they will get nothing. Those whose holdings are between 1,037 and 1,200 hectares will get 5% less than before. All the “savings” will be given to those who raise livestock or who grow vegetables, agribusinesses that are more labor intensive. According to the estimates of the ministry of interior, such a restructuring may result in 50-70,000 new jobs, something most experts doubt.
It is true that Lajos Simicska and some of his fellow oligarchs, like Zsolt Nyerges, Sándor Csányi, and Tamás Leisztinger, do have very large landholdings and that until now they received enormous sums of money from Brussels. Just last year they pocketed close to 16 billion forints in subsidies. But moving against the large landholders may have some serious consequences. Currently, about half of all available land is in the hands in agribusinesses cultivating more than 1,200 hectares, an arrangement that currently serves the market adequately. Government interference in that structure might result in dislocations in the market place. Moreover, farmers of small- and middle-size holdings are chronically short of capital, so this government policy might hurt the efficiency of Hungarian agriculture.
There is another problem. Since Hungarian law forbids the concentration of very large landholdings in one hand, the majority of the 525 large farms are actually owned by smaller farmers who jointly cultivate large tracts. With the elimination of these “collective” farms, thousands of small farmers might be hurt. Moreover, these farms, which are well equipped with agricultural machinery, often perform tasks for really small farmers who can’t afford expensive machinery for their plots.
Apparently, as is customary in the Orbán government, policy makers are not worried about any of this. If these owners have to leave, some new ones will come. But, as experts rightly point out, these newcomers might not have the expertise, the knowledge of the market, or the equipment necessary to continue farming in an efficient, market-friendly manner.
Such a restructuring of Hungarian agriculture is no insignificant matter. These 525 large farms produce one-fourth of Hungary’s agricultural output and employ 50% of all agricultural workers. They produce 40% of the livestock and almost half of all sowing seeds. So, if something goes wrong with this great plan, and I’m almost sure that it will, there can be serious consequences. It is a well-known fact that a larger concentration of landholdings usually results in greater efficiency and hence lower prices. As it is, Hungarian farmers complain that they are unable to compete with foreign products, which can be sold at lower prices even with the cost of transportation.
Of course, this is not the only problem with the law on landholdings. After taking a good look at the law, the European Commission decided that there were some serious deficiencies in it. From the relatively short article on the subject, it looks as if one of the objections of Brussels centers on the non-Hungarian ownership of land. That was pretty well expected from commentaries on the law by people familiar with the position of the European Union. What seems to me of greater significance is that the European Commission has problems with the very definition of the word “farmer” (gazdálkodó). It is so narrowly defined that very few people could ever qualify for the position. Moreover, the law seriously interferes with the freedom of property owners who can sell their lands only to “farmers,” i.e., only to those who themselves would cultivate the land. Such undue interference in civil property transactions, in my opinion, is unacceptable. Otherwise, it’s a jolly good law!