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Academic Freedom in Hungary’s Authoritarian State Capitalism

Article by Dr Gabor Scheiring

February 18, 2019

Academic Freedom in Hungary’s Authoritarian State Capitalism

Authoritarian leaders find it hard to tolerate independent voices, and academic freedom is no different. After Prime Minister of Hungary Viktor Orbán announced the year of the ‘culture war’, the government effectively banished Central European University from Budapest. The prestigious research institutes of the Hungarian Academy of Sciences are next in line. The pretext is the need for boosting innovation. However, the truth is that governmental policies under Hungary’s authoritarian state capitalism go against knowledge and innovation, and lock the country into an economy specialised in low value-added precarious production. After summarising recent developments on academic freedom, the article puts these into the context of Hungary’s economic model.

From democratic backsliding to academic unfreedom

The recent governmental attack on the Hungarian Academy of Sciences (HAS) is part of a broader political crackdown on democracy, independent institutions, and academic freedom. In 2010, following eight years of the Socialists-Liberal coalition being in power, Viktor Orbán conquered the Parliament with a sweeping electoral success. He started off a massive restructuring of political and economic institutions. The new Parliamentary majority unilaterally passed a new constitution and has, over the years, systematically dismantled the system of checks and balances, starting with the constitutional court and most recently the judiciary in general.[1] State propaganda campaigns, with a budget ten times bigger, than the total budget of the opposition, directly underpin Fidesz-propaganda[2], state-owned companies graciously fund loyal civil society groups organised from above[3], while attacking independent NGOs.[4] Hungary is the first country in the European Union (EU) that is no longer categorised as free by Freedom House.[5]

Significantly increasing political control over university affairs, the government placed all universities in the country under the supervision of so-called chancellors in 2014. In Hungary, universities are headed by the rector, elected by the senate of each university, a position similar to the vice chancellor in the UK. The chancellors are appointed directly by the Prime Minister, with the minister for education acting as their superior, not the rector. They have significant decision-making authority in strategic, organisational and financial issues. Rectors were thus left overseeing educational and research matters – as long as they do not involve financial questions. Although there is no direct control over what university staff does in terms of teaching and research, the increased political dependence has created an environment prone to soft censorship. Last summer, the government went further and banned gender studies from universities, the first time an EU member state has unilaterally barred universities from issuing degrees in a certain subject. The male-dominated Fidesz government has a deeply conservative, outdated vision about women’s role in the household and see women as living wombs tasked with reproducing the nation. Viktor Orbán’s right-hand man, László Kövér, once infamously declared “We don’t want the gender craziness. We don’t want to make Hungary a futureless society of man-hating women”.[6] Beyond the obvious culture war dimension of this attack, anti-genderism is also used to bolster support among working-class voters. There is no word for gender in Hungarian, which in itself makes the gender movement suspiciously elitist for many.

In April 2017, the Hungarian Parliament passed a law which regulates the status of foreign universities operating in the country and modifies the National Higher Education law (also known as Lex CEU). The government used this regulation to stymie the functioning of Central European University (CEU), an institution that has long angered Orbán.[7] CEU was founded in 1991 by Hungarian-born investor George Soros, with the mission to promote the values of democracy and open society. Over the years, CEU has emerged as one of the best universities in the region, until it became one of the prime victims of Hungary’s authoritarian turn. The government stripped CEU of the right to issue US degrees in Hungary, thus forcing CEU to move most of its degree programmes from Budapest to Vienna.[8]

Attacks on the Hungarian Academy of Sciences

The Hungarian Academy of Sciences, founded in 1825, is the dominant research organisation in the country and a major centre of cultural life. It employs 5000 people, including 3000 researchers. It consists of multiple parts, from a library through to a publishing house and a membership-based academic body. The research network of the Academy comprises 15 independent research centres, involving 44 basic-research institutes as well as more than 130 research groups at universities co-financed by the Academy, accounting for one-third of all scientific publications produced in Hungary. This network was thoroughly reformed in 2011–12 by President József Pálinkás, a scholar and former conservative minister of education, giving it its current form, also introducing a new scientific performance evaluation and increasing the role of tender-based financing. Until now, the Academy was allocated an independent budget, and strategic decisions about the direction of research were made by the researchers and the heads of research institutes.

The latest attack on the Academy began with a smear campaign against researchers at the Academy. An article in conservative magazine Figyelő a pro-government mouthpiecelisted all researchers at the Centre for Social Sciences who study immigration, gay rights and gender, attempting to ridicule their work.[9] The article claimed that the research at the Centre is politically suspicious and argued for greater governmental insight into the Academy’s work. In parallel, the government created a new ministry, the so-called Ministry for Innovation and Technology, led by Minister László Palkovics. This was followed by a decree approved by the Parliament in July 2018, which ordered a complete restructuring of the organisation and funding of academic research at the Hungarian Academy of Sciences. The decree also ordered an evaluation of the Academy’s research centres to be finished by March 2019, the outcome of which will determine which institute stays open, which ones will be merged with a university or closed.

However, the sincerity of this evaluation was put in doubt as the government also announced that from 2019, the Academy’s 28-billion forint (US$98-million) research budget will be transferred to the Ministry for Innovation and Technology – without waiting for the results of the evaluation. In December last year, Innovation Minister László Palkovics said that the Ministry would release funds from the academy’s budget for the salaries of the academy’s researchers for the first 3 months of 2019 until the “new structure and financing model” for research is put in place.[10] At the same time he also said that the Ministry will continue to withhold running costs for the institutes in this period and that the Academy should secure the money for overheads from other academy resources and through external (mostly EU) applications.

After April, the entire funding of the Academy will be based on applications. The Ministry divided the entirety of science into four sections: (1) secure society and environment; (2) industry and digitalization; (3) health; (4) culture and family. Social scientists and humanities researchers are expected to apply for financial support under the ‘culture and family’ heading. The funding of these fields will also be slashed by about 40%. However, in addition to the cuts, the call for proposals – that will redistribute the money taken away from the Academy – will not only be open for the research institutes of the Academy, but also for other universities and state-funded research institutions. The whole system is put together in three months, and although the evaluation criteria of the 4,000-words ‘applications’ requested by the Ministry are unclear, we know that they will be judged by a body under the direct control of Palkovics’s Ministry.

Understandably, this whole procedure infuriated the staff and the leadership of the Academy, who point out that the whole manoeuvre of the government is illegal, as the 2019 budget accepted by the Parliament guarantees the funding of the Academy. However, the Academy is not completely hostile to the reforms. The Presidium of the Academy declared that “Based on the results of the audit, we are ready to make the necessary structural changes”, at the same time rejecting sacrificing social sciences at the altar of fake economic innovation.[11] However, the views of scientists have not been appropriately taken into consideration. Péter Somogyi, a HAS academic who is based at the University of Oxford, UK, says that the Ministry’s actions have created an atmosphere of uncertainty and fear.[12]

Facing a government unwilling to change its policy, the employees of the Academy have launched a solidarity campaign[13] and welcomed a spontaneous demonstration that formed a human chain around the Academy of Sciences building in Budapest. Despite growing international solidarity[14], the EU has done nothing to stop the process. Notwithstanding the occasional condemnations here[15] and European Parliament (EP) resolutions there[16], overall, European elites have been paralysed by Orbán’s attacks on academic freedom. Article 7, triggered last year by the EP, was never really meant to lead anywhere, and the European People’s Party (EPP) keeps Fidesz among its members. In December 2017, the European Commission referred Hungary’s higher education law to the European Court of Justice on the grounds that infringes on the rights of universities, but the court has not yet discussed the case, allowing CEU to be banned from the country. European academics, all Jean Monnet Chairs, have also previously decried the EU’s ‘inaction in the face of the Hungarian government’s attacks on CEU’ in an open letter to the President of the EU council.[17] Recently, the EP has voted to tie the new EU budget to the rule of law, but we have yet to see how this will play out in the future.

Authoritarian state capitalism against the knowledge economy

The government’s pretext for the massive overhaul of the funding and organisation of science is the need to promote innovation and increase the country’s global competitiveness. But is that really the case?

Through a series of overt and covert measures, the government has indeed attempted to prop up capital accumulation, also for transnational investors, but especially for national big businesses[18]. Among others, the government eliminated the second tier of the corporate tax (previously 19%) and introduced a flat 9% tax in 2016. In reality, the largest corporations pay much less tax due to various tax incentives and allowances offered by the government, so that the government calculated with an effective tax rate of 5% for the 2019 tax year.[19] The largest companies are able to reduce even this level with intra-company transfer pricing and other mechanisms. The actual corporate tax paid by 30 of the largest companies in Hungary on their income before taxes is only 3.6%.[20]

The Orbán-regime has significantly increased the subsidies to large corporations. Between 2004 and 2010, the total value of subsidies was 130 billion forint ($456 million), between 2011 and 2018 this has grown to 347 billion forints ($1.22 billion). The state has also signed Strategic Partnership Agreements with the largest, mostly transnational corporations in the country, altogether 79 until the end of 2018. This helped to pacify transnational business engaged in technology-intensive production. In fact, the editor of Budapester Zeitung, a leading German-language newspaper in Hungary, said in a report by WirtschaftsWoche that 90% of German investors in Hungary would vote for Orbán.[21] As long as German big business enjoys Hungary’s authoritarian state capitalism, it is unlikely that the EPP – dominated by German conservatives – will step up against Fidesz, or the EU would enact substantial measures against the Hungarian government. Angela Merkel was rather friendly in February this year at the latest meeting of the Visegrád 4 (the political grouping comprising the Czech RepublicHungaryPoland and Slovakia), avoiding any criticism of the Hungarian government’s attacks on academic freedom.

Although these measures might be able to bolster the support of the government among local and international elites, they have not been enough to improve the country’s innovation potential or its international competitiveness. In fact, many of the government’s measures were explicitly directed at reducing the knowledge intensity of the economy. The government’s most important aim is to make big money and to make Hungarian big money happy, the ignorance towards education is a direct result of that. Hungarian national capital is overwhelmingly located in low-skill, non-tech sectors of the economy: construction, agriculture, retail, as well as non-tech industry manufacturing basic materials. To increase their production, these companies need low-payed low-skilled workers.

László Parragh, chair of the Organization of the Hungarian Chamber of Commerce and Industry, one of the central lobby groups of Hungarian national capital and a major figure behind the government’s educational reforms, proudly asserted, “We have been partners in crime with the government”. Although, he thinks that economic rationality would have necessitated the compulsory education age to be reduced to 15.[22] Altogether, the state slashed education spending from 5.4% of GDP to 4.9% between 2009 and 2016 (EUROSTAT, 2018b), reduced the compulsory education age from 18 to 16, and also curtailed state-funded higher education, which led to a 15% decline in tertiary school enrolment from 2010 to 2016.[23]

If promoting innovation and increasing the country’s global competitiveness was really the goal of the government, it has done very poorly over the past eight years. The economy’s declining innovation-potential led to a decrease in the share of high-tech goods in the export since 2010, with a continuous decline in the country’s economic complexity index, an indicator created by researchers at the Massachusetts Institute of Technology (MIT) to measure the knowledge intensity of an economy.[24] Focusing on low-skill labour also did not help to close the productivity gap between Hungarian and transnational corporations. In fact, it has slightly grown from 2.96 in 2010 to 3.14 in 2015 (a foreign-owned company produces 3.14 times as much added value per employee as a nationally owned company) according to my estimates based on data from the EU’s FATS database.[25] The post-2010 government has thus effectively locked Hungary’s economy into a model specialised in low value-added precarious production, the exact opposite of an innovation-led knowledge economy.

Instead of genuine concern for innovation, the government’s aim is more likely purely political. The reorganisation of the Hungarian Academy closely follows Putin’s attack on the Russian Academy of Sciences in 2013–14 and echoes Erdogan’s purge of dissenting intellectuals.[26] The goal is to reduce the Academy to an innocuous ‘academic club’ of mostly retired members, while the government gets a free hand in allocating scientific funding. When successful, these attempts will contribute to cementing Orbán’s power and increase the stability of Hungary’s variant of authoritarian state capitalism.

[1] The New York Times, 2018b. Hungary’s Judges Warn of Threats to Judicial Independence. Benjamin Novak and Patrick Kingsley, The New York Times, 2 May 2018, URL: https://www.nytimes.com/2018/05/02/world/europe/hungary-judges-independence.html 

[2] Atlatszo.hu, 2018. Hungarian government spent €40 million on anti-Soros propaganda in 2017. Katalin Erdélyi, atlatszo.hu, 4 February 2018, URL: https://english.atlatszo.hu/2018/02/04/hungarian-government-spent-e40-million-on-anti-soros-propaganda-in-2017/

[3] Hungarian Spectrum, 2017. Fidesz’s very own ‘NGOs’ stuffed with public money. Éva Balogh, Hungarian Spectrum, 13 May 2017, URL: http://hungarianspectrum.org/2017/05/13/fideszs-very-own-ngos-stuffed-with-public-money/

[4] The New York Times, 2018. How Viktor Orban Bends Hungarian Society to His Will. Patrick Kingsley, The New York Times, 27 March 2018, URL: https://www.nytimes.com/2018/03/27/world/europe/viktor-orban-hungary.html

[5] Freedom House, 2019. Democracy in Retreat: Freedom in the World 2019. Washington DC: Freedom House. URL: https://freedomhouse.org/report/freedom-world/freedom-world-2019/democracy-in-retreat

[6] Zsubori, Anna, 2018. “Gender studies banned at university – the Hungarian government’s latest attack on equality”. The Conversation, 9 October 2018. URL: https://theconversation.com/gender-studies-banned-at-university-the-hungarian-governments-latest-attack-on-equality-103150

[7] Enyedi, Zsolt, 2018. “Democratic Backsliding and Academic Freedom in Hungary”. Perspectives on Politics, 16(4), 1067-1074. doi:10.1017/S1537592718002165

[8] CEU, 2018. CEU Forced Out of Budapest: To Launch U.S. Degree Programs in Vienna in September 2019. Press release, 3 December 2018, Central European University, URL: https://www.ceu.edu/article/2018-12-03/ceu-forced-out-budapest-launch-us-degree-programs-vienna-september-2019

[9] Science|Business, 2018. Orbán allies target Hungarian social scientists, in battle with Academy of Sciences. Florin Zubașcu, Science|Business, 22 June 2018. URL: https://sciencebusiness.net/news/orban-allies-target-hungarian-social-scientists-battle-academy-sciences

[10] Science|Business, 2019. Government continues crackdown on academic freedom in Hungary. Florin Zubașcu, Science|Business, 22 January 2019. URL: https://sciencebusiness.net/news/government-continues-crackdown-academic-freedom-hungary

[11] Science|Business, 2019. Government continues crackdown on academic freedom in Hungary. Florin Zubașcu, Science|Business, 22 January 2019. URL: https://sciencebusiness.net/news/government-continues-crackdown-academic-freedom-hungary

[12] Nature, 2018. Hungary’s government throws science academy into turmoil. Alison Abbott, Nature, 17 December 2018. URL: https://www.nature.com/articles/d41586-018-07440-8

[13] Hungarian Academy Staff Forum (HASF) website, URL: https://adf2019.wordpress.com/english/

[14] Hungarian Free Press, 2019. Alberta’s Wirth Institute in solidarity with Hungarian Academy of Sciences. Hungarian Free Press, 12 February 2019. URL: http://hungarianfreepress.com/2019/02/12/albertas-wirth-institute-in-solidarity-with-hungarian-academy-of-sciences/

[15] Science|Business, 2019. EU vice president decries ‘systematic pressure’ on academic freedom in Hungary. Florin Zubașcu, Science|Business, 31 January 2019. URL: https://sciencebusiness.net/news/eu-vice-president-decries-systematic-pressure-academic-freedom-hungary

[16] Inside Higher Ed, 2018. EU Acts Against Hungary, Citing Academic Freedom. Elizabeth Redden, Inside Higher Ed, 13 September 2018. URL: https://www.insidehighered.com/quicktakes/2018/09/13/eu-acts-against-hungary-citing-academic-freedom

[17] See the whole latter at https://verfassungsblog.de/europes-shameful-silence-an-open-letter-to-eu-leaders-from-jean-monnet-chairs/

[18] Scheiring, Gábor. 2018. “Lessons from the Political Economy of Authoritarian Capitalism in Hungary”, Transnational Institute, Challanging Authoritarianism Series, No 1, April 2018. Amsterdam. URL: https://www.tni.org/en/publication/lessons-from-the-political-economy-of-authoritarian-capitalism-in-hungary

[19] Menedzsment Fórum, 2018. Here is the proof that Hungary is a Tax Haven (In Hungarian: ‘Íme a bizonyíték, hogy Magyarország adóparadicsom’). Zoltán F. Baka, mfor.hu, 5 July 2018, URL: https://mfor.hu/cikkek/vallalatok/ime-a-bizonyitek-hogy-magyarorszag-adoparadicsom.html

[20] G7.hu, 2018. 30 of the largest multinational companies could siphon off 48 billion forints each year from Hungary (In Hungarian: ‘Évi 48 milliárd forintnyi társasági adót trükközhet ki az országból 30 magyarországi multi’). Péter Bucsky, g7.hu, 12 November 2018, URL: https://g7.hu/piac/20181112/evi-48-milliard-forintnyi-tarsasagi-adot-trukkozhet-ki-az-orszagbol-30-magyarorszagi-multi/

[21] WirtschaftsWoche, 2018. Deutsche Firmen in Osteuropa: Geschäfte machen beim Europafeind. Simon Book, WirtschaftsWoche, wiwo.de, 30 January 2018, URL: https://www.wiwo.de/my/politik/europa/deutsche-firmen-in-osteuropa-geschaefte-machen-beim-europafeind/20903608.html

[22] 168ora.hu, 2017. László Parragh: I admit that we have been partners in crime with the government (In Hungarian: ‘Parragh László: Tettestársak voltunk a kormánnyal’). Attila Buják, 30 November 2017, 168 óra, URL: https://168ora.hu/itthon/parragh-laszlo-tettestarsak-voltunk-a-kormannyal-13254

[23] World Bank, 2018. World Development Indicators, 1960 – 2017. Available online at http://data.worldbank.org/data-catalog/world-development-indicators (last accessed on 07 December 2018), The World Bank.

[24] MIT, 2018. Economic Complexity Rankings (ECI). The Observatory of Economic Complexity, MIT Media Lab, last accessed on 20 December 2018, URL: https://atlas.media.mit.edu/en/rankings/country/eci/?year_range=2011-2016

[25] EUROSTAT, 2018a. Foreign affiliate statistics (FATS). Eurostat Foreign affiliate statistics (FATS), Last update: 22 February 2018, URL: http://ec.europa.eu/eurostat/web/structural-business-statistics/data/database

[26] Zgut, Edit, 2019. Orbán’s Next Victim: the Hungarian Science Academy. The Visegrad Insight, 11 February 2019. URL: https://visegradinsight.eu/orbans-next-victim-the-hungarian-science-academy/

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