Adam Fabry, The Political Economy of Hungary. From State Capitalism to Authoritarian Neoliberalism

In his book, Adam Fabry deploys and advocates for a Marxist political economy approach to theorizing the transformation process of Hungary, other Central and East European countries, and the USSR. Although he focuses on the political economy of Hungary, he suggests that his analysis can be treated as a case study that can also be applied to the other countries. By providing a framework for a different understanding of the transformation process than that of the dominant neoliberal and institutionalist scholarly interpretations, the book emphasizes certain continuities between the period prior to the regime change in 1989/90 and the period that followed.

Fabry acknowledges the contributions made by the aforementioned dominant approaches in the academic literature to the understanding of the transformation process in Central Eastern Europe and the USSR. He maintains, however, that instead a Marxist political economy approach is needed to overcome what he identifies as methodological, empirical, and theoretical shortcomings in the existing accounts. By applying such an approach himself, Fabry contextualizes the current, what he calls ‘authoritarian-ethnicist neoliberalism’ (1), a model whose main figure is the serving prime minister of Hungary, Viktor Orbán. He depicts Orbán’s Hungary against the backdrop of the neoliberal restructuring of the capitalist world economy that started in the 1970s.

One important departure from the dominant approaches is how Fabry understands the economic system of the countries on the eastern side of the so-called Iron Curtain. He belongs to a line of social scientists who argue that the Soviet-style systems, such as the one in Hungary between 1945 and 1989/90, were state capitalist rather than socialist or state socialist, because they reflected dirigiste trends, in other words a growing influence of the state on the national economy. Describing the importance of the state in several forms of capitalism, Fabry illustrates the similarities between what were considered to be state socialist economies and state capitalist economies of the period, such as the countries referred to as the Asian Tigers, that is South Korea, Taiwan, Singapore, and Hong Kong.

Arguing against exogenous accounts of the neoliberal transformation of what was known as the Eastern bloc, Fabry analyzes the gradual ascendancy of what he refers to as ‘proto-neoliberalism’ in Hungary before the regime change of 1989/90. Contrary to views that neoliberalism was imported from ‘the West’ he demonstrates that it was largely developed in Hungary itself by reform economists and reform-orientated political elites. Two important sources to support this thesis are his case study of the Financial Research Institute, the influential think tank of the Ministry of Finance, and the analysis of the ‘Turnabout and Reform’ document published in 1987. The latter was a programme of radical economic reform written by a group of experts at the Financial Research Institute, among them Lajos Bokros, famous for planning and overseeing the largest austerity programme in post-transition Hungary, which was introduced in March 1995 and dubbed the ‘Bokros Package’. Other experts were György Surányi, the former president of the National Bank of Hungary, now CEO and chairman of the CIB Bank, and György Matolcsy, the current president of the National Bank. Fabry refers to the activities of these three economists in order to show how ‘late Kadarist technocracy’ (50), a term he borrowed from Erzsébet Szalai, transferred their influence and power to the post-1989 era. ‘Turnabout and Reform’ called for ‘comprehensive, radical, democratising, decentralising, and deregulating market reforms’ (57), a change of ownership relations, and macroeconomic restrictions. In addition, the programme envisaged that reforms would not to be limited to the economy, but rather would be extended to ‘other areas of society, including political institutions’ (57).

The author points out the importance of both the political and economic coercions involved in the neoliberal transformation process, and examines their main aspects. On the one hand this was privatization, which was perceived by neoliberal economists, international financial institutions, and Western governments as a ‘universal panacea’ for rapid transformation. On the other hand this referred to foreign direct investment, widely accepted by policymakers as the solution to foreign debt, productivity enhancement, and job creation. Fabry points out that one crucial social actor is often overlooked in analyses of the transformation process: labour. He duly draws attention to the impact of neoliberal transformation on the lives of workers, who have been at the losing end of the political-economic changes. By examining Hungary’s trajectory since 1990, Fabry suggests that the regime of capital accumulation, seen as the ‘poster boy’ of neoliberal transformation, has, in fact, been rife with contradictions and limitations resulting from, among other factors, dependancy on foreign capital and export-led growth. Neoliberal policies have been the leitmotiv of all post-1990 governments, notwithstanding their claim to represent different ideologies.

An important turning point in the Hungarian political landscape was in 2007/2008, in the aftermath of the global economic crisis. The crisis contributed to the rising anger among the Hungarian public over free market capitalism, liberal democracy, and EU membership as central tenets of the transformation of Central Eastern Europe. The Hungarian Socialist Party and the Free Democrats as the principal advocates of Hungary’s ‘variety of neoliberalism’ for the first two decades after the 1989/90 regime change were defeated by the nominally anti-neoliberal political Right. According to Fabry, however, Orbán, the prime minister of Hungary since 2010, broke with neoliberalism only in his rhetoric. On the contrary, Orbán’s governance actually reinforced neo-liberalism and produced an idiosyncratic variety. In describing the differences between Fidesz’ neoliberalism and the neoliberalism pursued by his predecessors, Fabry argues that by combining some of neoliberalism’s central tenets with authoritarian and ethnicist politics, Orbán created what he himself refers to as an ‘illiberal democracy’.

Fabry’s book, alongside a small but growing body of Marxist, neo-Gramscian, world system theory based social science approaches to the analysis of the political economies of the Central East European countries, makes a much needed contribution to the understanding of the consequences of postsocialist transformation. Although written to academic standards, it is not only the scholar who will benefit from this book. Its accessibility in terms of language, clarity, and length makes it a good choice for readers also outside academia who seek to understand the contradictory political and economic landscape of Hungary, as well as the other countries that once constituted the ‘Eastern bloc’.