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The political economy of illiberal politics in Central and Eastern Europe

Paper session, Society for the Advancement of Socio-Economics Annual Meeting, Development Today: Accumulation, Surveillance, Redistribution, 18-20 July 2020, Amsterdam. Convenors: Gabor Scheiring, Adam Fabry

Overall abstract for the session


Since the 2008 global economic crisis liberal democracy has been facing increasing challenges around the world. From the Brexit vote in the UK to governments of Trump and Bolsonaro in the US and Brazil respectively, the retreat of liberal democracy has led to the rise of ‘illiberal politics’. These illiberal ‘turns and swerves’ (Bustikova and Guasti 2017) have led to a wide-ranging academic discussion about the potential causes and implications. The literature on illiberalism has three dominant strands: one focusing on the cultural backlash against liberalism (Inglehart and Norris 2016), a second focusing on the lack of elite loyalty for liberal institutions (Mudde 2017), and a third political-economic approach highlighting the tensions between globalisation and democracy that might engender illiberal politics (Rodrik 2018).


Some of the most paradigmatic cases of illiberalism can be found in Central and Eastern Europe. An erstwhile ‘poster boy’ of democratic transition, Hungary has emerged as a vanguard example of the illiberal backlash that is sweeping the region. The emerging political science consensus treats Hungary under the leadership of Viktor Orbán’s Fidesz party as a hybrid, competitive authoritarian regime (Bozóki and Hegedűs 2018). Research has also shown that the authoritarian practices of the Hungarian state are tightly linked to the preceding crisis of liberal democracy under the aegis of neoliberal capitalism (Fabry 2019; Scheiring 2019). Under the Law and Justice Party government, Poland has been following a similar, though not identical path, fuelled by the revolt of disgruntled working-class and rural constituencies against the postsocialist liberal hegemony (Kalb 2018). Similarly, the Czech Republic is also showing signs of ‘democratic de-consolidation’ (Guasti 2018), although, this illiberal swerve has not led to a full-blown illiberal turn so far (Bustikova and Guasti 2017). Slovakia, meanwhile, represents a case of ‘contained illiberalism’. Although it experimented with a variety of illiberalism under the governments of Vladimir Mečiar (Haughton), and while nationalist-populist parties are also currently represented in parliament (Stanley 2017), Slovakia has so far not returned to an illiberal state formation. Finally, the case for the weakening of democracy in Romania based on the Social Democrat’s conflict with the anti-corruption apparatus is more contested and, after June 2019 completely invalidated by the rollback of those measures following electoral outcomes.


The session advances our political-economic understanding of illiberal politics by presenting comparative case studies, identifying divergent and convergent trends. The papers situate illiberal politics in the context of neoliberal globalisation and show how illiberalism emerges as a response to the tensions of transnational capital accumulation. At the same time, by zooming in on individual cases, the papers also highlight how local social classes and domestic political arrangements translate these global tensions into locally specific political-economic formations and discourses. The papers represent a multidisciplinary political economy perspective, highlighting that seemingly disjointed manoeuvres by members of the political elites, cultural transformations and the local experience of global economic transformations are connected, and reinforce each other in producing various forms of illiberal politics.


Gabor Scheiring, Adam Fabry

Varieties of dependency, varieties of illiberalism: A comparative political economy of the crisis of democracy in East-Central Europe


Gábor Scheiring


While liberal democracy is facing increasing challenges around the world, some of the most paradigmatic cases of the new illiberal ascendance are located in East-Central Europe. Hungary is a case of strong illiberalism, Poland is a case of weak illiberalism, Slovakia is a case of contained illiberalism, and the Czech Republic has so far not embraced illiberalism, but experienced the rise of managerial populism. How can we explain these convergent and divergent tendencies? The ECE countries can be classified as dependent market economies. Some researchers were critical concerning the prospects for dependent development; however, most comparatists emphasised that dependent industrialisation through foreign direct investment (FDI) in the manufacturing sectors acts as a catalyst for economic upgrading and democratic consolidation. Whatever the benefits of the East-Central European dependent development model, the current crisis of democracy in Hungary and Poland demonstrates that some expectations were over-optimistic.


This paper contributes to the discussion on the economic fundamentals of illiberalism by exploring the relationship between the varied ‘situations of dependency’ that countries in East-Central Europe experienced as they integrated into the global capitalist economy and the varieties of the illiberal countermovement. Building on the concept of disintegration rooted in the dependency and structuralist economics literature, the paper analyses how international integration led to different levels of internal social and economic disintegration and how this destabilised democratic social coalitions. The different ways of managing dependency shaped the opportunity structures for illiberal countermovements, leading to a strong illiberal social coalition in Hungary, weak illiberalism in Poland, contained illiberalism in Slovakia, and managerial populism in the Czech Republic.


Domestic strategies of managing dependency differ, so do the historical legacies of political struggles, resulting in various forms of democratic crises in dependent economies. Although well-managed dependent development might indeed be socially and economically productive, a key lesson of the paper is that if policymakers expect foreign investment to solve every problem, then dependent integration could lead to internal disintegration, which opens up the political opportunities for illiberalism. Thus, dependent development as a strategy of global integration is a double-edged sword, which might open up opportunities for socio-economic development, but it also might increase the chances of an illiberal backlash. Understanding the challenges related to this strategy requires an analysis that connects global economic processes to local social classes and political arrangements.


Keywords: dependent development, illiberalism, populism,East-Central Europe


The return of economic nationalism? A comparative study of the economic policies pursued by Hungary and Romania after the 2008 global economic crisis


Cornel Ban and Adam Fabry


In recent years, we have witnessed a resurgence in economic policies that claim to prioritise ‘national interests’ over international integration and cooperation. Examples include the imposition of tariffs foreign goods and politicians (US), withdrawal from international organisations and treaties (Israel, UK, US), more restrictive immigration policies (Australia, most EU states, US) and controls on foreign direct investment (EU, US). Such moves have caused liberal economists, mainstream politicians, and pundits to raise alarm bells about the alleged ‘return of economic nationalism’.


This paper contributes to ongoing debates on economic nationalism and illiberalism by analysing the economic policies pursued by the governments of Hungary and Romania in the wake of the 2008 global economic crisis. Since being catapulted back into power in 2010, on a popular backlash against austerity, the national-conservative Fidesz government, led by Viktor Orbán, has pursued ‘unorthodox’ economic policies in order to boost economic growth and defend national sovereignty. For example, the Fidesz government has introduced special ‘crisis taxes’ on banks, large retail companies, and telecommunications companies (all of which are foreign owned), centralised the country’s private pension system worth more than $14 billion), and promoted the expansion of Hungarian investment in neighbouring countries. While such moves have been criticised by neoliberal organisations, such as the EU and the IMF, they have taken little concrete action against the Orbán regime. Romania, in contrast, played a more economically orthodox card until 2017, when the rise of a left-nationalist economic faction inside the ruling Social Democrats ushered in more wage-led growth and adopted, half successfully, financial repression measures that included a Hungarian-style tax on bank assets. Unlike in Hungary, this was a short-lived project, with greater political contestation ushering into government neoliberal political forces that rolled back the left nationalist offensive.


Employing a critical political economy approach, the paper asks to what explains the return of economic nationalism, and to what extent nationalist economic policies represent a break with neoliberal common sense, or whether they instead rearticulate it, producing a specific variety of neoliberalism that skilfully combines the central tenets of neoliberalism with authoritarian measures.


Keywords: neoliberalism; economic nationalism; illiberalism; Hungary; Romania


Political Dynamics of Dependent Capitalist Development in Post-Crisis Central and Eastern Europe


Alen Toplišek


Only a decade or so after accession to the European Union (EU), there has been a notable shift in the political direction of Central and Eastern European (CEE) economies. As the literature on the political economy of Central and Eastern Europe has established, most countries in the region have carved out a specific model of capitalist development that is dependent on foreign direct investment for growth and technological upgrading, while relying on skilled, but cheap labour. However, this growth model has been under increasing strain after the Great Recession, with the adoption of austerity measures, lower domestic public investment (especially in the Baltic countries), a decrease of capital inflows and the rise of populist nationalism. Problems were further compounded by the perception of domestic populations that wages were too low and that established political parties are incapable of making the economy work for ordinary people.


Although populist nationalist parties were already at the helm of CEE governments in the 1990s and 2000s, their impact on the economic policy-making only became more pronounced as the financial crisis dented the intellectual credibility of neoliberal orthodoxy, espoused by most political elites across Europe, and dented the authority of EU institutions. Whether it is the imposition of special taxes on the sectors of the economy dominated by foreign investors, the nationalisation of strategic sectors, undermining central bank independence or breaching EU rules on competition in the single market and state aid, CEE governments after the crisis have showed readiness for more state activism that challenges EU political and economic norms.


In this paper, I will analyse how governments in CEE after the crisis are responding to the challenges posed by dependent capitalist development in the region. From a comparative perspective, I will be interested in whether a higher degree of transnationalisation/foreign dominance in the economy during the post-communist transition corresponds with the role of the state as an anti-dependence agent in economic policy after the 2008 financial crisis. This relationship will be investigated through the prism of the political dynamics between the member state and its economic policy decisions and the EU institutions. In this way, the paper speaks to both the comparative politics and political economy literature, as well as the literature on contesting Europeanisation in CEE.


The paper will be structured in the following way. The paper first (1) establishes the dependent position of CEE economies in wider European political economy by engaging with the literature on dependent market economies (DMEs) and varieties of capitalism (VoC) (Johnston and Regan 2018), while underlying the role of the EU in shaping the developmental trajectory of the CEE economies in 2000 and 2010s. It then (2) analyses the cases of member states infringing upon the EU state aid and internal market competition rules by using the EU State Aid database. In the final section, the paper (3) explains the factors underlying the variation in the pattern of the political dynamics of dependent capitalist development in CEE by focusing on three cases: Hungary, Poland and Slovakia.

Keywords: dependency, Central and Eastern Europe, European integration, populism, growth models


Illiberalism, new authoritarianism and the welfare state: Hungary and Poland compared


Noemi Lendvai-Bainton


The rise of ‘illiberal democracy’ in East-Central Europe with strong nationalism and populism coupled with radical neoliberal economic policies brings about new ways of negotiating the economic, the political and the social in a post-2008 landscape. This contemporary insurgence, which has variously been conceptualised as new authoritarianism, authoritarian neoliberalism, or authoritarian capitalism capture the fundamental reconfiguration of socio-economic governance and the role of the state. The aim of the paper is to conceptualise the role of the welfare state and forms and practices of social sharing in illiberal Hungary and Poland between 2010-2019.


Using the work Wendy Brown which calls attention to the way in which new authoritarianism has to be understood within the ‘effects of neoliberal reasons – its expansion of the domain and claim of the private for persons and corporations alike, and its rejection of the political and social (as opposed to market) justice’ this paper will interrogate the varieties of welfare state discourses in Hungary and Poland. Brown traces the effect of neoliberalism in its work of freedom being submitted to market meanings, and ‘a radically extended reach of the private, mistrust of the political, and disavowal of the social, which together normalize inequality and disembowel democracy’. For Brown the political formation of an ‘authoritarian freedom’ rests upon the notion of a familial rather than market warfare on democratic principals and institutions, and placing ‘exclusion, patriarchism, tradition, nepotism, and Christianity as legitimate challenges to inclusion, autonomy, equal rights, limits on conflict of interest, secularism, and the very principle of equality’. Authoritarian neoliberalism then is also a process of redeployment of rights, away from individuals towards corporations, work, property, capital, families, churches, whiteness. The welfare state is at the heart of both the familial as well as the market warfare on democracy and as such it requires a close inquiry into the discourses and effects of rising authoritarianism in Hungary and Poland.


Keys words authoritarian neoliberalism, nationalism, populism, Hungary, Poland



References

Bozóki, András and Hegedűs, Dániel (2018), 'An externally constrained hybrid regime: Hungary in the European Union', Democratization,25 (7), 1173-89.

Bustikova, Lenka and Guasti, Petra (2017), 'The Illiberal Turn or Swerve in Central Europe?', Politics and Governance, 5 (4), 166-76.

Fabry, Adam (2019), The Political Economy of Hungary: From State Capitalism to Authoritarian Neoliberalism (London: Palgrave Pivot).

Guasti, Petra (2018), 'Swerving towards deconsolidation?', in Astrid Lorenz and Hana Formánková (eds.), Das politische System Tschechiens (Wiesbaden: Springer Fachmedien Wiesbaden), 39-62.

Haughton, Tim (2001), 'HZDS: The Ideology, Organisation and Support Base of Slovakia's Most Successful Party', Europe-Asia Studies, 53 (5), 745-69.

Inglehart, Ronald and Norris, Pippa (2016), 'Trump, Brexit, and the Rise of Populism: Economic Have-Nots and Cultural Backlash', (Harvard Kennedy School, Cambridge, MA: HKS Faculty Research Working Paper Series No. RWP16-026).

Kalb, Don (2018), 'Upscaling Illiberalism: Class, Contradiction, and the Rise of the Populist Right in Post-socialist Central Europe', Fudan Journal of the Humanities and Social Sciences, 11 (3), 303–21.

Mudde, Cas (2017), 'Populism: An Ideational Approach', in Cristóbal Rovira Kaltwasser, et al. (eds.), The Oxford Handbook of Populism (Oxford: Oxford University Press).

Rodrik, Dani (2018), 'Populism and the Economics of Globalization', Journal of International Business Policy,2018 (1), 12-33.

Scheiring, Gábor (2019), 'Dependent development and authoritarian state capitalism: Democratic backsliding and the rise of the accumulative state in Hungary', Geoforum, Published online: 5 September 2019.

Stanley, Ben (2017), 'Populism in Central and Eastern Europe', in Cristóbal Rovira Kaltwasser, et al. (eds.), The Oxford Handbook of Populism (Oxford: Oxford University Press).

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