The new east-west divide in Europe is not just about authoritarian regimes defying the rule of law. It is also down to smartly crafted economic appeals.
The rise of authoritarian populists in Hungary and Poland has shocked the European Union, forcing it to contemplate new procedures to ensure compliance with the rule of law. But these regimes have an enduring electoral appeal to many voters, including those naturally inclined to the left. Why?
Our research shows that central and east European populists have developed a new approach to social policy, based on past conservative models, which can be encapsulated in the old Vichy slogan, ‘work, family, fatherland’. Developed in Hungary and Poland, it is now spreading across Europe.
Responding to decades of neoliberal economic policies, these populist parties advance a nationalist programme. This seeks to build up domestic as against foreign capital, and support indigenous versus migrant workers, addressing native population loss through ‘pro-family’ measures. The pitch is to protect ‘ordinary people’ from ‘liberal elites’, while growing the economy through economic self-rule and a conservative developmental state.
Before the 2008 global financial crisis, populist governments went along with neoliberalism. But afterwards they began to take a new approach. Hungary led the way, after Viktor Orbán’s decisive 2010 election victory.
National capitalist class
Orbán labelled his economic policy the ‘eastern winds’ approach, looking to the fast-growing Asian economies. He called for renationalisation of certain companies, mostly in strategic sectors, as well as new taxes on foreign banks, insurance companies and international supermarket chains, and domestic labour-force activation. While he approved of foreign investors who brought jobs to Hungary—particularly high-skilled manufacturing jobs, as with the German car companies—in other areas he developed a national capitalist class connected to his party, creating many ‘near-to-Fidesz compan[ies]’, often by disenfranchising prior owners. He denounced the west as decadent and obsessed with money and outlined a future ‘work-based society’, creating a massive jobs programme for the unemployed, run by Fidesz mayors.
In 2019, Orbán announced social policies encouraging Hungarian women to have more children. He sought to address Hungary’s low fertility rate, of 1.45 children per female, rather than importing immigrant labour. The plan offered a lifetime exemption from personal income tax for women who bore and raised four or more children. Women under 40 who marry for the first time and have worked for at least three years are eligible for a €31,700 ‘childbearing’ loan at a discounted rate, which is forgiven as they have children. The government also announced subsidies for larger families purchasing larger cars and grandparents providing care, as well as more childcare places.
Critics took aim at the expense of Orbán’s policies and the conservative, nationalist vision implicit within them. But while his populism has been ‘anathema to young, cosmopolitan Hungarians’, other voters gave Orbán a comfortable plurality of votes (and a majority of seats) in parliamentary elections in 2014 and 2018. One study by a government-related think tank showed that net real wages increased in Hungary by 59 per cent between 2010 and 2018, mainly because changes in the tax structure reduced income taxation, increased (foreign) capital taxation and broadened the tax base, causing an additional 2.5-3.0 per cent of gross domestic product to flow to households.
After winning parliamentary elections in 2015, Poland’s Law and Justice (PiS) government followed Hungary, with a conservative programme which claimed to protect Poland from its exposure to foreign capital. Yet recent PiS election victories show that it expanded beyond its traditional conservative base, attracting voters using economic appeals. Some of these voters previously supported post-communist left parties, which lost support as PiS grew.
PiS appealed to citizens in small towns and poorer regions of ‘Poland B’, who felt left behind by neoliberalism. Under its economic plan, the government imposed a levy on banking and insurance in 2016, expanded domestic bank ownership from 30 to over 50 per cent and merged oil and gas companies to create a ‘national champion’. PiS sought foreign investment for a vast $10 billion airport outside Warsaw, including a plan to connect it to all major Polish cities by high-speed rail, so that its benefits would reach the entire country. PiS also sought to stem youth emigration by exempting all workers under 26 from income tax.
The party’s objectives to foster ‘family values’ natalism and build up the ‘Polish nation’ came together in the signature PiS social programme, Family 500+, launched in 2017. This provided a generous family allowance of $144 a month per child—equivalent to 40 per cent of the minimum wage—for a family’s second and each subsequent child. It was later expanded to cover a family’s first child as well. PiS funded Family 500+ through new taxes on banks and large businesses, following the Hungarian model, as well as improved tax collection in a growing economy. In addition, it reversed the previous government’s increase in the retirement age and created new drug benefits for the elderly, while establishing an affordable-housing programme. It sought to limit employer use of short-term ‘junk contracts’ and raised the guaranteed minimum wage.
The ‘liberal order’ did not deliver what it promised in 1989 and it created a demand for change. After the global financial crisis, central- and east-European populists turned to conversative models, adopting the idea of a ‘developmental state’ to increase the competitiveness of the economy and pursue social justice in the interest of the ‘nation’.
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Populism now poses an important challenge to the left in central and eastern Europe and beyond. How does it respond to the increasing demand for economic policies which provide social rights and protections to those left behind by the neoliberalism of the last forty years?