The Political Economy of Hungary: Managing Structural Dependency on the West

The chapter argues that the Hungarian economy relies almost exclusively on foreign direct investments. It is shown how governments in Hungary managed this structural dependency. In 2010 the lack of convergence to the West, an extreme lack of social mobility and economic misgovernance during the global financial crisis resulted in the collapse of the Socialist-Liberal coalition of Ferenc Gyurcsány. This left the way open for Viktor Orbán and his Fidesz government. While positioning as anti-neoliberal, Orbán dismantled the welfare system and coupled a neoliberal economic regime with popular mood enhancing measures and crony capitalism. Low taxes and wages shall attract foreign investors in the hope that they will create jobs. It is argued that this model is unsustainable and dependent on external financing from Western Europe and the EU.