A massive economic crisis has brought political forces which pretend to represent a new conservative dispensation to power both in Turkey and in Hungary and might serve as models for other countries in their respective region. Though the two governing parties – AKP and Fidesz – present themselves as a new beginning, their policies display continuity with earlier neo-liberal policies. The respective continuities and ruptures of the two national conservative projects and the power blocs which sustain them merit a comparative analysis (cf. Göker 2012: 43).

In Turkey, AKP was voted into government after the very severe economic crisis in 2001. The hitherto political establishment had suffered a severe erosion of legitimacy after a sequel of economic crisis and chronic instability of coalition governments. In subsequent years, AKP centred its discourse on “stability”. With increasing shares, it has been returned into office twice. In 2010, Fidesz gained 52.7% of the votes and a comfortable two thirds majority in parliament. This majority has enabled Fidesz to change laws at will and to change the constitution. Fidesz’s main competitor, the Socialist party, lost much support in the wake of the severe economic crisis that started to affect Hungary in 2008 and in the wake of a chain of corruption scandals. The comfortable majority and the political void on the left have enabled Fidesz to initiate much more radical changes than during its first government at the turn of the century.

The economic and political crisis presented a chance to the two right-wing parties to present themselves as the bringers of a new era. In the sphere of accumulation strategies and economic policies, however, much of the old remained in place. In both countries, financialisation has been a central feature of the models of accumulation since the 1990’s. Financialisation has been based particularly on relatively high interest rates. An overvalued exchange rate was used in order to combat high inflation. It led significant current account deficits which were financed by capital imports. Capital imports have been attracted by relatively high interest rates, in Hungary, already in the 1990’s by FDI-friendly policies as well. Until 2001, foreign capital did not play an important role in Turkey’s banking sector. For many of the huge Turkish conglomerates, banking was one of their key activities. In Hungary, the externalisation of the banking sector started already in the 1990’s. Today, only one domestically-owned bank (OTP) is left. However, domestic Hungarian companies were to some extent able to profit from the growth of domestic consumer and real estate credits (e.g. construction) that were fuelled by external indebtedness. The externally-owned banks, especially Austrian banks, pushed domestic credits denominated in foreign exchange (euros and Swiss francs). They financed the credit expansion by refinancing it abroad. In this way, they shifted the exchange rate risk to their customers. To customers, foreign exchange credits seemed to be attractive because of their lower interest rates. In the pre-crisis period, about 60% private credits were denominated in a foreign currency (Astrov/Pöschl 2009: 356, Fig. 5, cf. Andor 2009: 289). The indebted Hungarian middle class became extremely vulnerable to devaluation. In pre-2001 Turkey, this exposure did not have a comparable dimension.

In Hungary, the model of accumulation has had a second pillar as well – export industries. Since the early 1990’s, Hungary’s export industrialisation has been almost exclusively built on foreign capital (Drahokoupil 2009). It is closely integrated with Germany’s productive system. It relies heavily on imported inputs. This characteristic is shared by the Turkish manufacturing industry. However, Turkish industry is to a larger extent domestically owned and it is more inward looking. The trade balance has tended to be deeper in the red figures in Turkey than in Hungary. Periods of exchange rate overvaluation have had more serious effects on the Turkish trade balance and current account than on the Hungarian one. While the negative trade balance usually has been the major source of Turkey’s current account deficit, it is the extremely negative income balance, especially profit remittances, which has turned into the major cause of Hungary’s current account deficits. This is the consequence of the extreme reliance on foreign capital. In 2008, Hungary’s deficit of the income balance already reached ca. 8% of the GDP (Astrov/Pöschl 2009: 357, tab. 6).

While the Turkish regime of accumulation could be characterised as being based on dependent financialisation with export industries playing a secondary role, the Hungarian model was a combination of dependent financialisation and dependent export industrialisation. The role of domestic capital groups was significantly higher in the Turkish than in the Hungarian models. Both models were very vulnerable to crisis because the overvalued exchange rate had negative effects on productive development and the current account and were very reliant on capital imports. Due to their high foreign exchange debts, the Hungarian middle class was directly exposed to risks of financial crisis. This vulnerability has given a special bent to Fidesz anti-crisis policies.

The financialisation has resulted in both countries in a number of financial crises since the 1990’s. These crises tended to be more severe in the Turkish case. Therefore, the political watershed in Turkey occurred already in 2002, while this point was only reached eight years later in Hungary.

Hungary was the first EU country to apply for an IMF credit during the present international crisis. The then social-liberal government did so already in autumn 2008. The drying up of capital inflows put the Forint under pressure. As László Andor (2009: 286) points out, Hungary was the first East European country to suffer from a speculative attack. The Hungarian currency depreciated. The indebted middle class immediately felt the effect of rapidly rising costs of servicing their euro and Swiss francs credits. The Hungarian subsidiaries of the Western banks faced the prospect of a rapid increase of non-performing real estate loans. The key target of the IMF/EU support was the restabilisation of the exchange rate. This was the key priority of the Western banks which did not want to see a depreciation of their assets in Hungary and feared a rapid growth of non-performing foreign exchange credits. In later arrangements, foreign banks agreed to stabilise the refinancing of their subsidiaries in the region. A stabilisation of the exchange rate, however, was not only the priority of the foreign banks, but of the domestic indebted middle class as well (Becker 2010).

The IMF and the EU demanded “classical” austerity policies from the Hungarian government which acceded to the demands. Austerity focused on restrictive budget policies (esp. social transfers) and wage policies (directly in the public sector). Thus, policies proved to be pro-cyclical. The recession hit the indebted middle class harshly as well. It exacerbated the debt problem. Though Hungary achieved a temporary and shaky stabilisation of the exchange rate to the euro, the Swiss franc as a flight currency continued to appreciate strongly both against the euro and the forint. Hungarian Swiss franc debtors were in dire straits.

A wave of social and political discontent swept Fidesz to a crushing electoral victory in 2010. Fidesz economic policies have been guided by a class project centred on the upper middle class and the relatively weak domestic bourgeoisie. It is clearly anti-labour, but it has entailed limited, but serious conflicts with international capital in the service sectors though it has not infringed on the interests of foreign manufacturing companies. It has changed the tax system. It abolished the progressive income tax system and introduced a flat income tax of 16%. This is a neo-liberal text book tax policy. It favours the upper midd
le class and penalises low income groups. Small firms received tax relieves. The Fidesz government financed these measures by introducing temporary special taxes for highly monopolies branches with hardly any presence of domestic firms (like banking). In addition, the government de facto reversed the privatisation of the pension system which had proved to be very onerous to the budget. These policies met with massive protest from international corporations in the sectors concerned. Because of the special tax on banking, IMF and EU suspended the payment of the last instalment of the then programme already in July 2010. The European Commission has initiated legal procedures against some of the measures. And in February 2012, the European Commission threatened to freeze 495 million euros of the cohesion funds that were earmarked for Hungary because it does not regard Hungary’s budget policies as sustainable (Becker/Lesay 2012, Göker 2012: 42).

The Fidesz government has entered into conflict with West European, especially Austrian banks in a second field, too. It introduced a temporary programme to repay foreign exchange credits at preferential exchange rates that reflect roughly the pre-crisis levels. Though only part of the customers could make use of this programme, Western banks incurred substantial losses. In addition, they see Fidesz policies in this field as a dangerous precedent for the region. Extremely high foreign exchange debts exist as well in the Baltic countries and almost all Southeast European countries.

Fidesz has brought conflict lines between the (upper) middle class and domestic capital with some fractions of international capital into the open. The field of conflicts is limited, but the conflicts are real. In this limited field, Fidesz self-professed nationalism has an economic dimension. However, Fidesz has in no way questioned the FDI-based export industrialisation model. Its anti-labour policies are clearly in line with both the interests of foreign manufacturers and local small- and medium scale capital.

AKP economic policies have reflected a significantly higher degree of continuity with the predecessor governments than Fidesz policies. The Bağımsız Sosyal Bilimciler (BSB, 2007) put this succinctly: “Farklı hükümetler tek siyaset” – different governments, one policy. AKP continued the structural neo-liberal reforms of their predecessors, until 2008 uninterruptedly as part of IMF programmes. These policies are clearly biased in favour of capital interests and against labour. The economic policies included a re-regulation of the banking sector. The role of external banks significantly increased, as did FDI generally. Public procurement regulations were drafted in a way that took the interests of domestic capital in account. Urban development policies clearly reflected the interests of specific domestic companies. Though the share of construction in private Fixed Capital formation was not as extreme as in the immediate pre-crisis years (around 35%), it started raise again after a very significant fall in the immediate wake of the 1999/2001 crises (BSB 2007: 36, tab. IV.11). As Gülten Kazgan (2012: 273 f.) points out, domestic demand increases relied increasingly on rapidly increasing consumer indebtedness. Thus, Turkish financialisation increasingly adopted a feature of the financialisation process in Southern and Eastern Europe of the pre-crisis years which proved to be particularly prone to crisis (Boratav 2011: 124 ff.). However, it did not replicate the high foreign exchange component Hungary and other East European countries. After a devaluation in 2001, the TL started to appreciate again. This proved to dampen inflation, but led to a significant increase of the current account deficit. This was financed by capital imports. AKP returned to the growth model “autonomous capital movements – growth – current account deficit” (BSB 2007: 55) though with a partly modified outlook.

This model proved to be very vulnerable in the present crisis. In the last quarter of 2008, massive capital outflows hit the model at its core. GDP contracted massively, the TL temporarily depreciated. However, Turkey was perceived by international financial corporations as part of the “emerging markets” which proved generally to be less vulnerable to crisis. In addition, Turkey offered relatively high interest rates. These circumstances permitted a return to the pre-crisis model. Fuelled by credits, domestic demand increased again. The Turkish economy displayed very high growth rates in 2010 and 2011. This growth, however, has relied heavily on rapidly increasing domestic and external private debt. Private household debt increased by 29,4% in 2011 alone (Bakır 2012: 4). The current account deficit has grown to about 10% of the GDP in 2011 (Capital 2012, 44). As Ümit Akçay (2012: 159 ff.) points out, the high trade deficits made government circles reconsider Turkey’s industrial policy. Since 2008, official documents have put more and more emphasis on the need to reduce import dependence of intermediary goods. The recently revealed regional and industrial development strategy reflects this preoccupation. It promotes the local production of hitherto imported intermediary goods. However, it is mainly confined to fiscal stimuli aimed at individual enterprises (Dünya 2012: 3). It is not based on sector policies which would further import substitution systematically and would imply a direct role of the state. It remains to be seen how effective the chosen approach will prove to be.

The relatively high growth rates have permitted the AKP government to balance the interests of external capital, the large domestic capital groups and smaller domestic capital groups which are more closely linked to AKP relatively smoothly. Due to increasing indebtedness, the middle class could increase its consumption level. AKP managed to create the illusion of stability which permitted it to enlarge its electorate. However, this stability rests on more than shaky foundations. AKP even increased some vulnerabilities of that model, e.g. private indebtedness.

Economic policies of Fidesz and AKP reflect different social blocs. It is due to the different ownership structures that Fidesz is more strongly focused on the upper middle class. Specific features of Hungary’s financialisation (particularly the high exchange rate debts of the middle class) have led to conflicts with fractions of foreign capital that are largely absent in Turkey. Fidesz nationalism has an economic component which has not an equivalent with AKP.

Though both governments have displayed a clear class agenda in their economic policies, the political debates and conflicts have to a significant extent shifted away from “class politics” (Yalman 2004: 69). They have become dominated by the ideological programme of AKP and Fidesz. At the symbolical core of both parties, there is a variety of nationalism that is defined in narrow ethnic and religious terms: Turkish and Sunni for AKP, Hungarian and catholic for Fidesz. In both cases, the belonging to the “true” national community is defined by criteria which combine ethnicity and religious denomination. In Turkey, AKP has produced a new variety of “Türk-İslam sentezi” (Turk-Islam synthesis) giving more emphasis to the second part of this synthesis. Nevertheless, the so-called Kurdish question has remained a key axis of political conflict. Though AKP has displayed more tactical flexibility in dealing with the “Kurdish question” than its predecessors, the basic tenets of state policies have remained in place. In Hungary, ethnic minorities enjoy a considerably higher level of formal recognition than in Turkey. The Roma face, however, extreme levels of social and economic marginalisation. Whereas, Turkey, Kurdish activism is often depicted a threat to “national security”, impoverished Hungarian Roma communities are often portrayed in the dominant discourse as being hotbeds of criminality. They face time and again acts of violence and open intimidation by activists of t
he extreme right. Some Fidesz politicians have made statements with anti-semite colouring as well. Fidesz faces a strong challenge from the extreme right by the fascist Jobbik party. AKP and Fidesz also share a commitment to traditional family values and a corresponding conservative view on the gender division of labour (cf. on Hungary, Göker 2012: 42). In Turkey, female labour market participation has fallen significantly over the last years.

Both AKP and Fidesz defined their political identity against the hitherto establishment – against Kemalism in Turkey, against social-liberal forces in Hungary. In both cases, these political cleavages go back into history. Both parties position themselves offensively against the left. Anti-communism is a central element of Fidesz political identity. Its main competitor for many years, the Socialist Party, has its organisational roots in the years of state socialism.

AKP has needed many years to wear down the well-entrenched Kemalist power structures in the military apparatus. Last year’s referendum on some amendments of the 1982 constitution, which is a legacy of the military regime, can be regarded as watershed in this power struggle. One of the amendments terminated the immunity of perpetrators the 1980 coup d’état. In April 2012, the process against two key actors of the 1980 coup, Kenan Evren and Tahsin Şahinkaya, was opened. This process has a clear political dimension. As E. Fuat Keyman (2012) pointed out in a recent comment in Radikal Iki, the process is not focused on human rights violations. With the 1982 constitution being by and large still being in force, he argues, “the process has not an appropriate legal infrastructure”. The institutional order is still largely the heritage of the military regime. The AKP government has continued the logic of neo-liberal institutional reforms which has been initiated in the 1990s (e.g. the formation of more and more independent supervisory bodies, central bank independence; cf. Akbaş 2012). A debate on a new constitution has begun. However, AKP lacks a majority that is sufficient to draft it alone.

Politically, Fidesz found itself in a much more comfortable position than AKP. It has not had to contend with powerful rivalling power centres. Nevertheless, it contemplated opening judicial procedures against the Socialist Party out of an anti-communist agenda. So far, this has not happened. However, politicians of the Socialist Party face investigations on corruption charges. Fidesz has spared no efforts in order to make its control of the state apparatus as complete as possible. Inter alia, it amended the media law in order to strengthen its control over the media. It has curtailed the power of the constitutional court in some areas. And it took steps to get a stronger influence on central bank policies. Most importantly, it could draft a new constitution on its own. The new constitution has three key features: First, it begins with the entrenchment of the historical symbols of Hungarian national conservatism. Secondly, it strengthens rule based neo-liberal policy making procedures in key areas, esp. fiscal policy. Thirdly, it gives Fidesz power in key institutions long beyond the (present) legislation period. Thus, the constitution is a blend of conservative and neo-liberal elements. In Hungary, there have been strong protests against the authoritarian tendencies of the Fidesz government. The protests are focused on the issue of democratic rights because the oppositional forces are divided on social issues. These criticisms have found an echo in other EU countries. The European Union has only taken really vigorous steps in regard to what it perceives an infringement of central bank independence in Hungary. This is one of the few institutional measures that openly question the neo-liberal recipes. The neo-liberal policy changes which the constitution enshrines as well are, however, in line with the dominant trend in EU policy making. Thus, the conflict with the EU is clearly circumscribed to specific areas.

Both AKP and Fidesz display a significant degree of continuity with the neo-liberal state project, though providing it with a partially modified legitimating base. Fidesz has deviated in some areas of policy making from standard neo-liberal policies. These deviations have their roots in the specific form of the present economic crisis in Hungary, in the attempts to attenuate the effects of the crisis on the Hungarian upper middle class and to promote more generally the interests of the relatively weak domestic capital and the upper middle class. The forms of Hungarian economic nationalism seem to have their roots in the relative weakness of domestic propertied classes vis-à-vis international capital.

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