Viktor Orban has been the prime minister of Hungary since 2010. In those 16 years, he has become an international symbol of populist governance, including among officials in the Trump administration. But the specifics of Orban’s economic record have often escaped notice.
Has Orban changed Hungary’s economic trajectory? Does Orban’s concept of national capitalism contradict itself? And what has Orban’s courtship of Russia and China accomplished?
Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.
Cameron Abadi: What sort of economic manager has Viktor Orban been? Has he meaningfully changed the economic trajectory of Hungary in any significant way?
Adam Tooze: Orban’s policy has been a blend of nationalism—really, preference for local Hungarian business, which basically means 13 cronies of his; the Financial Times has done an incredible exposé on this group—and a kind of national populism.
All of this was going, by the standards of Eastern Europe: better than Slovakia, not as well as Poland, not as harsh as the Baltic states, above Bulgaria—kind of a viable path. Then, Hungary hit the internal combustion engines shock (the car crisis in Germany we’ve spoken about on the program), and COVID, and increasing antagonism between Hungary and the EU. Effectively, the EU began to cut off Hungarian funding, which is very large in relation to Hungarian GDP.
The reason why Orban’s grip on power is shaky now—I think by common consent—is that the COVID shock, the slowdown in economic growth, and increasing questions about public finance came together to really pose the question.
Because we talk about inflation and COVID and the 2022 energy shock, but in Hungary at times inflation went as high as 25 percent—very, very rapid inflation. Wages caught up, but nevertheless people are engaged in a frantic race to maintain their standard of living. In terms of real consumption, Hungary has the lowest consumption per capita in the EU. If anyone’s had the privilege of visiting, you’ll know it feels like a middle-income country once you’re outside the hotspots of billionaire oligarch wealth.
So, that’s really the backdrop for the election. It’s a story of big structural issues: the shock of the 2008-2009 financial crisis, the assertion of nationalism, 10 years of what looked like a fairly stable path, and then a series of mounting crises—polycrisis, if you like—since 2020, which the Orban regime has found it increasingly difficult to deal with. This is culminating now in this credible political challenge to Orban and Fidesz, his party.
CA: Is Orban’s idea of national capitalism a coherent concept? On one hand, there’s an insistence on maintaining domestic control over economic production. At the same time, there is an outright dependence on foreign investment. Are those aspects in contradiction with each other?
AT: I think, in fairness, one should say that under capitalism all ideologies are contradictory. Everyone’s positions are contradictory, and Orban’s are contradictory, too. Most countries have some sort of weird complex of national capitalism that doesn’t make a lot of sense. Hey, I’m speaking from the United States mainly. You’re in Germany, which is obsessed with its competitiveness and its trade surplus. People’s economic national ideologies don’t make much sense.
But in Orban’s case, you could say it was particularly glaring, until you start looking into the details of the numbers. It is true that the manufacturing side is heavily dependent on German money, in particular throughout the 2010s. All of the big German car manufacturers built productive sites [in Hungary]. But the interesting thing about Orban’s strategy is its selectivity.
In terms of the overall dependence of its economy on foreign direct investment and foreign financial integration, Hungary was more integrated in the 2000s than it became in the 2010s, which is why they were so vulnerable to the financial crisis in 2008—because people were taking out mortgages in Japanese yen and Swiss francs because it was cheaper to borrow in those currencies, and they got hit by the global banking crisis. So what Orban has done is focus foreign involvement in high-end, encapsulated manufacturing.
Then the crony side is essentially driven by the monopolization of national services, which don’t have to compete in global markets; and construction, which is where you can always do the graft best of all, and which Orban’s quite heavily supported by EU funds as well. At the same time, then you deliver bread and some sort of circuses for the population in terms of steady increases, stability, no more crises, and the promise of robust assertion of nationalism against the IMF [International Monetary Fund] and foreign influence, and increasing employment rates—including government work programs, which ran the unemployment rate down by 2019.
So, it’s quite a complicated architecture of selective engagement with the world economy rather than just a sort of straightforward contradiction between globalization on the one hand and nationalism on the other. But that balancing is what the Chinese do, it’s what [Russian President Vladimir] Putin does. This is what smart national economic policy looks like: this kind of selectivity that you organize and rhetorically shape in different ways. Orban has been nothing if not risk-taking and aggressive.
CA: Part of Orban’s agenda has also involved courting outside powers like Russia and China. Is this just a kind of gadfly politics aimed at the West, or has that actually accomplished something clear for Hungarians?
AT: The guy’s a provocateur, there’s no question, and it plays to his audience to provoke the West. It’s culture war stuff. But we would be falling into the trap of taking our own ideology too seriously if we didn’t recognize the real substance behind this, right?
For all of the East European states, there was a profound dilemma about what to do with the fact that they were nodal parts of the energy network that the Soviet Union built from the 1970s onward. The oil pipelines, the gas pipelines, and the petrochemical businesses and the energy businesses built on those are real, and they’re dotted across Eastern and Central Europe, including Hungary.
So, it’s got one nuclear reactor, and it’s got a Russian pipeline coming through it, and you don’t take that stuff for granted. The vast majority of Hungary’s energy sources are from Russia. That gives you things you can play with, right? You can siphon off graft, you can lower the prices for consumers, you can play a variety of different games with this. And Putin, of course, is very happy to engage in those kinds of deals and very happy to instrumentalize Orban every which way.
The China stuff is much more adventurous and, frankly, also impressive. Hungary became the first European state to join One Belt One Road, and they’ve done some imaginative ideological work, like positioning themselves as the most westerly outpost of Central Asia. Magyar, after all, as a language is like Finnish—one of the least related to the Indo-European language group that there is out there. They claim this sort of cultural singularity, and they have made themselves into a completely outsized hub of Chinese investment.
One could say it’s too soon to tell, because in Hungary, we are seeing the entire gear shift of the global automotive industry play out. They played the German card as hard as they could, with hundreds of thousands of jobs making classic internal combustion engines. Now they have drawn in BYD and CATL, the two champions of the new EV paradigm, who have chosen Hungary as their major hub for investment.
Does that cause some clashing of gears and some transitioning? Of course it does. But that’s because you’ve got this microcosmic environment in which one of the biggest gear shifts in the global industrial system is being played out, and Hungary is in the crosshairs. Everyone else in Europe, honestly, is playing catch-up with the Hungarians to establish a battery supply chain and an ecosystem that compare with what the Hungarians have already built.
Now, I’m not a spokesperson for Orban, but we should not dismiss this merely as culture wars, yanking Brussels’s chain. This is an industrial policy, and Saxony, Thuringia, the north of France would kill to have the investments from China that the Hungarians have been able to attract. Does that come with wedge politics? Is Beijing deliberately calculating that by way of a Hungary they can unhinge any efforts to build a common European front around these issues? Absolutely.
Orban’s perception and the Hungarian nationalists’ perception of their country is that they’ve been dealing with a century of humiliation, right? All the way back to the treaties after World War I, where Hungary was really singled out as in some ways the greatest victim—that’s their narrative of Hungarian history. And this is their chance to gain some leverage, and they are damned if they’re not going to take it.
This is a nationalism with a real kind of determination behind it. And of course, Orban is a cynic in many ways and is hyping this up. But the fact that he can draw on these ideological threads speaks to a powerful national narrative. The bigger point is we shouldn’t read this simply through our own indignant Western European optic. We should understand its powerful logic in its own terms.
CA: People associated with the Trump administration often seem to cite Orban’s Hungary as a political and economic model. What might they be imagining? Ostensibly, the contrast between a global superpower and this much smaller European country is very stark.
AT: This is part of the—some would say craziness, others would say maybe the magic—of MAGA, that they managed to position the United States of all countries as though they were a scrappy, insurgent, middle-income country coming up hard against the powers that be, sticking it to the man.
This whole story about them not being able to do their thing because some bossy bureaucrat somewhere is—you know, it’s completely unhinged. You have Vice President J.D. Vance saying, “Will you stand against the bureaucrats in Brussels?”—as though the bureaucrats in Brussels ever did anything to J.D. Vance.
“Will you stand for sovereignty and democracy? Will you stand for Western civilization? Will you stand for freedom, for truth, and for the god of our fathers? If so, vote not for me, vote for Viktor Orban.” One shouldn’t mock this. Realism isn’t a crucial qualification for good political rhetoric. But it is far-fetched, you have to say, and this seems to me more the Steve Bannon, J.D. Vance kind of line—[those] that maybe care about politics in the Vatican and are in the weeds of this global configuration of power.
It’s very hard to imagine that this plays well with the actual MAGA base. But that Star Wars image, like this scrappy group of rebels at the edge of the empire who are going to fight back and rescue freedom from the overlords—that is a key element of the resentment that drives MAGA logic. In that sense, they really do have an affinity for a country that has received tens of billions of euros from the EU and nevertheless chooses to spit in the face of Brussels.
It’s illogical, but it’s illogical only under the premise of a kind of conventional liberalism that we clearly have to give up if we’re going to understand these kinds of people. That’s clearly not what this is about. But in the minds of the MAGA ideologues, there is some kind of overarching struggle with liberal empire going on in which they are all aligned.
