Hungary: the Disadvantages of Geography

Hungarians didn’t settle in wartime America “for the climate”, as Ferenc Molnár famously reminded other exiles in the Plaza Hotel, New York, in 1944. But is climate the reason why today’s Hungarians live where they do? Wars, invasions, rebellions, occupations, and (above all perhaps) peace treaties have moved the country around the map in the centuries since the original Magyar encampment. But the end result is that a highly intelligent people, ethnically, culturally, and linguistically distinct from their neighbors, now inhabit a flat plain with few natural defenses (ideally suited to invasion by horsemen or tanks), surrounded by no fewer than eight countries, of which at least four have a grumbling ethnic or irredentist dispute with Budapest. When the mythical Irishman, giving directions, says “I wouldn’t start from here,” it is seen as a mark of dim-wittedness. So why did Hungarians, perhaps the least dim-witted nation in Europe, outdo him by ending up here (if it wasn’t for the climate)?

Those non-Hungarians in search of an answer to this question should delve into Paul Lendvai’s absorbing biography of his people, The Hungarians (Princeton University Press), significantly sub-titled One Thousand Years of Victory in Defeat. In the millennium just past Hungarians developed great skill at overcoming the disadvantages of geography. They survived wars, civil wars, invasions, colonizations, and occupations – and emerged astonishingly like their original selves. It is no accident that Houdini was of Hungarian descent; well, it is actually an accident, but nonetheless his people are the escapologists of history and geography combined. So how will they escape the disadvantages of their current geo-political situation?

This question, though a perennial one, has suddenly become acute. In 1989 one distorted form of national security and stability was replaced by another and better one with (in retrospect) astounding ease. The period 1989–2008 now looks like a distinct and completed era: the so-called post-Cold War world. As we were living through it – with the uncertainty always inherent in the present – it seemed at times highly unstable and dangerous. The real pains attendant upon economic “shock therapy”; the populist resistance to democratic market reforms; the scandals of corrupt privatizations; the reinvention of Eastern Europe’s old nomenklaturas as new capitalists; the adroit retention of much political power by (barely) “post-communist” parties; the consequent spread of moral disillusionment with the new status quo; and much else – these problems dominated our imaginations.

Looking back, however, the post-Cold War world seems one of steady advance. To oversimplify, NATO expansion and European Union enlargement extended the freedom, security, and prosperity of the West to Eastern and Central Europe. Fears that postcommunist Europe would be disturbed by border disputes, extremism, anti-Semitism, ethnic conflict, and irredentism proved alarmist – with the revealing exception of Yugoslavia outside the Atlantic perimeter. Everywhere else the presence of Atlantic structures – initially, NATO far more substantially than the EU – offered security against these dangers and incentives for democratic and market reforms. That had been true in Western Europe since 1949 when NATO and the Marshall Plan, underpinned by the presence of American troops, meant that no nation could threaten its neighbours and that all could hope to benefit from participation in the relatively open Atlantic economy.

1949 was in certain respects a useful rehearsal for 1989. In both cases, though, some nations took greater advantage of the economic opportunities offered by Atlantic structures than others. West Germany outpaced Britain in the 1950s; Poland and the Czech Republic have pulled ahead of Hungary in the last two decades. Hungary’s relative failure here requires explanation. Was it due simply to random failures of policy? Was it because Hungary failed to produce an economic statesman who equaled Leszek Balcerowicz in Poland or Václav Klaus in the Czech Republic in foresight and determination? Or was it because Hungary’s milder “goulash communism” had corrupted its recipients more effectually than the harsher Polish and Czech varieties and shaped an electorate less willing to give up low-level economic security in order to grasp greater market gains? Probably all three factors played their part. But Hungary’s failure is in the end only relative.

As the post-Cold War world wore on, all the new market democracies showed real economic gains
and the development of new middle and genuinely entrepreneurial classes. Democracy put down
deeper roots with every peaceful change of government. Post-communist nomenklaturas began
to lose influence as their favoured parties shrank, sometimes overnight, and their companies were
taken over or swamped in the European Union’s wider market. The domestic stability resting on
these trends reflected the international stability of a Euro-Atlantic world founded on the West’s
victory in the Cold War and protected by NATO. Russia offered the only possible threat to this
stability in Europe. But Russia was a weak power by every test except energy and armaments.
Besides, it was a quasi-ally of NATO in the Partnership for Peace. Against this geopolitical
background Hungary’s geographical vulnerabilities were at worst little local difficulties, at best
excellent opportunities for trade and tourism.
In short the post-Cold War world was a period of great economic and social advance (outside Europe, incidentally, as well as inside it) and justified optimism. Yet two years ago, in 2008, it came to a sudden and curious end.
Signs and portents of its strange and semi-suicidal death can be seen easily in retrospect: the rise of Vladimir Putin on program of nostalgia for the Soviet Union; the growing gap between the United States and “Old Europe,” especially visible in the diplomatic run-up to the Iraq War; the persistent discomfort of France under all governments with an Atlanticism in which it could never hope to be the dominant power; the cultural evolution of German politics towards a national identity rooted in pacifism, economic strength, and anti-Americanism; the growing dependency of all European countries on Russian energy; the nervous desire of Central and East European governments to maintain a firm and close alliance with the US as a safeguard against Russian revanchism; the many negative effects of the Iraq War, notably the obvious contradiction between Muslim immigration to Europe and European support for the “war on terror”; the resistance of ordinary Europeans to further surrenders of national sovereignty to Brussels, rooted in the absence of any genuine European “demos”; and, finally, Washington’s feckless over-reliance on
monetary expansion and Chinese purchases of US bonds to fund its out-of-control government spending.
All these (and other) developments culminated in two events of 2008 – the Russian invasion
of Georgia on 7 August and the fall of Lehman Brothers on 15 September – that marked the end of the post-Cold War period. Both these events had been more or less invited by Western governments. The invasion of Georgia was preceded by the failure of NATO to offer Georgia and Ukraine a path to membership only a few months previously which told the Russians that they need fear no serious Western response if they engineered a conflict.
The fall of Lehman was preceded by earlier bailouts (of Long Term Capital Finance and Bear
Stearns). But these had not been followed by corresponding changes in budgetary, monetary, or regulatory policy that would have shown markets that the underlying problem of financial excess was being tackled. Letting Lehman go therefore suggested not tough determination to restore stability but merely another kind of fecklessness.
When they eventually occurred, however, both failures signified respectively that the post-Cold War settlement in Europe was no longer sacrosanct and that the liberal system of free trade and free capital movements would now come under attack. They inflicted severe damage on the nascent market economies of post-communist Europe. And they encouraged a further erosion of moral and intellectual self-confidence in Western elites – and thus a further erosion of Atlantic structures of cooperation.
As these events worked themselves out, one had the sense of previously strong institutions and
respected principles suddenly crumbling and dissolving. Days after the Russian invasion, French
President Nicholas Sarkozy rushed to Moscow on behalf of the European Union to settle the
Georgian crisis before the Americans and NATO could intervene in negotiations to mount a
stronger criticism. He reached a deal with Moscow that accepted its partial annexation of
Georgia in return for a Russian promise of partial withdrawal – a promise Moscow has never
fully kept. If the conventional view of America as Mars operating in a Hobbesian world and of
Europe as Venus governed by international rules were correct, the Europeans should have
protested more strongly than the Americans at this flagrant breach of the international rules.
Some did. The following 17 July distinguished Central and East European leaders said they
were themselves “deeply disturbed to see the Atlantic alliance stand by as Russia violated the core principles of the Helsinki Final Act, the Charter of Paris, and the territorial integrity of a country that was a member of NATO’s Partnership for Peace and the Euroatlantic Partnership Council – all in the name of defending a sphere of influence on its borders.” That lament appeared in a letter appealing to President Obama not to neglect the interests, values, and support of the eastern half of Europe in US foreign policy. But it was promptly followed by a second public appeal from former German Chancellor Gerhard Schroeder hoping that Obama would not be influenced in any way by the letter. Though Schroeder is no longer in government (employed instead by Gazprom), the policies of Angela Merkel’s government towards Russia and Eastern Europe seem more or less congruent with his geopolitical advice. The placid economic surface of Russo-German relations has hardly been ruffled by Russia’s authoritarian and neo-imperial drift. The causes and consequences of the 2008 financial crisis can be dealt with only briefly here.
Suffice it to say that it had many causes – China’s exchange rate policy that flooded world
financial markets with massively excess cash; Washington’s efforts to keep recession at bay with monetary expansion; strong political and legal pressures on the banks to reduce mortgage conditions for poor and minority borrowers; financial innovations based on sophisticated mathematics that not even their inventors fully understood; the scandalous failure (not the absence) of regulation over the financial services industry; outright fraud.
The immediate response of most governments and the political Left was to blame the crisis on the absence of regulation stemming from the policies of Reagan and Thatcher. That was false, indeed incredible, but also revealing. It was an example of Rahm Emmanuel’s aphorism that you should never let a good crisis go to waste – a lesson learned also by Hungary’s socialist government which now blamed its own financial profligacy and the pain of Hungarian mortgage-holders on US banks.
In this business of taking advantage, President Sarkozy (again) led the way with his remark that “the state is back.” The state, of course, had never gone away. But the hyper-state of the European Union now seeks not only to expand its regulatory power over financial services (including financial instruments that had demonstrated their true worth in the crisis) within Europe but, in conjunction with others, to craft global regulations over the free movement of capital worldwide. The US still resists. But it has lost its principal ally in world financial politics, Great Britain, now subject to EU financial regulation from Brussels (even though the City of London is Europe’s main financial center).
As one world order disintegrates, another begins to take shape. In these early days we can only catch fleeting glimpses of the “global governance” that is being prepared for us. Mr. Sarkozy, the sorcerer’s apprentice of this emerging world order, has been hyperactive recently in seeking to construct new forms of cooperation to replace the Atlantic structures of the post-Cold War world. When he met in mid-October with Russia’s President Medvedev and Germany’s Chancellor Merkel in Deauville to discuss the establishment of an all-European security architecture – the Americans were conspicuously absent from the table. Sarkozy has also announced in advance that when France takes the chair of the G20, he will push for a new global system of currency coordination to replace the “Bretton Woods” system in which the US is the dominant power and the Dollar is the world’s reserve currency. We seem to be moving inexorably from the liberal market Atlantic world towards one of greater regulation, first of financial services, then of trade, exercised globally by institutions remote from democratic control but responsive all the same to major
governments and transnational institutions of an interventionist and corporatist bent.
This does not seem the ideal future for a country of Hungary’s size and location. It would be less secure in a Europe protected not by NATO but by an All-European security system that included Russia. It would be less prosperous than otherwise in a world trading system in which trade, capital movements, cross-border taxes, and exchange rates were regulated by a financial equivalent of the United Nations. How could Hungary best protect its interests in such a world?
All nations must ultimately depend on themselves. So Hungarians have to resist the constant pressure from transnational bodies, the European Union, and progressive intellectuals to devalue and even demonize patriotism. Love of country is an important factor in strengthening a nation and getting it through difficult times whether of war or finance. Paul Bareau, the Austrian economic writer exiled in London, was amazed to see ordinary British citizens outside banks queuing to send donations to the government to help the country through the 1931 financial crisis. British Prime Minister Stanley Baldwin gave a sixth of his personal fortune to help pay off Britain’s 1914–18 war debt. Shaping a decent and respectable Hungarian patriotism from the many materials available in the nation’s history would not be a difficult task. The Millennium Exhibition of 2000 in Budapest showed that clearly enough. Might it not be revived and sent around the country?
But Hungary, however patriotic, is not Switzerland where money itself is the nation’s patron – and the Alps themselves are military allies against any invader. Hungary must rely for help in war and economics on neighbours – in the first instance, on the well-established market democracies of Poland, the Czech Republic, and Slovakia, ultimately on the string of former communist countries from the Baltic Republics down through Eastern Europe to the Balkans. These nations not only share common security and economic interests. As the July 2009 letter from the Central and East European leaders made very clear, they share a common threat perception and a common set of liberal democratic beliefs (this last now strengthened by the demise of the post-communist left in more and more of these countries). Poland is the leader among these countries in Northern Europe and the Baltic, and it has forged a strong alliance with Sweden to assist Ukraine, Georgia and other “Eastern Partnership” countries. Hungary could play exactly the same leading role in
southern Europe and the Adriatic. But that will require Hungary settling the last few shreds of ethnic and irredentist dispute with its neighbours on generous terms. Fortunately, Viktor Orbán has the patriotic credentials to enable him to make such settlements without inviting charges of weakness (and, not so incidentally, to reduce the radical Right to the single-digit support it suffered during his last period in office).
To what extent does the European Union offer a further line of defense for Hungary? It is vital to realize that the EU is not a religion, nor a new nation, nor a great idealistic cause, nor a token of respectability, but a political arena in which Hungary can advance and defend its interests and those of its regional allies. On trade and economic questions Hungary’s interests are to ensure that trade is as free, common regulation as light, and taxation as low as is prudent and sensible. Within such limits the EU can work well for Hungary, functioning like a large inter-governmental insurance agency to help member-states deal with unforeseen risks that have gone wrong – such as, for instance, the toxic sludge spillage now devastating a whole region of north-western Hungary. But there are also risks associated with the EU about which Hungary should be wary, avoiding for instance the risks of joining the Euro for as long as possible, maybe forever. It is clear from the experiences of Ireland and Germany respectively that debtor nations in Euro-land must
inflict severe deflation on themselves in the absence of exchange rate flexibility while creditor nations can be forced to subsidize their feckless neighbours. The case for delaying Euro-entry is overwhelming for a nation that is just now clambering out from under heavy indebtedness. Thus, Hungary will find its allies among those member-states – generally, the peripheral countries such as Portugal, Denmark, the Baltic States, Poland, and above all the United Kingdom – that have a joint interest in resisting Franco-German dominance, the harmonizing of taxes and regulations (which threaten the competitiveness of the new market democracies), and any further increase in political integration.
One form of political integration in particular is seriously damaging to Hungarian interests – that is the movement towards some form of European defense and security structure separate from NATO. This idea derives in large part from the growing division between the US and the central powers in the European Union and from the rise in anti-Americanism in European politics. It would inevitably weaken NATO which otherwise will remain the principal European security provider. And it is a sister-concept to the Soviet idea of a “Common European Home” that continues to be Russian policy and some form of which may be on the agenda of President Sarkozy.
It hardly needs to be argued that Hungary would be strongly disadvantaged by a security structure that excluded the United States and included Russia. It would putting the fox in the hen coop while the farmer takes an overseas vacation. This is realized not only by Hungarian leaders like Prime Minister Orbán but, as last July’s letter stated with admirably clarity, by almost the entire political leadership of Central and Eastern Europe. Hungary’s final layer of interest, therefore, is to lead its regional allies – and to work with its wider group of “peripheral” allies (within and without the EU) such as Poland and Britain in supporting the transatlantic alliance in NATO and even, where possible, extending it to areas outside defense. This is a potentially formidable alliance. Yet there may be one unforeseen obstacle. In current circumstances, US politics is understandably fixated on curing the nation’s domestic economic problems. There is a still more understandable weariness with the European allies over Afghanistan. There will therefore be a temptation for all three parties (Democrat, Republican, and Tea) to shrug their shoulders, encourage Europe to solve its own problems without US help, and even welcome the gradual replacement of NATO by ESDP as a form of burden-sharing. Indeed, such arguments are increasingly heard in Washington. Yet the division of the liberal Atlantic world into “libertarian” America and “corporatist” Europe surely makes little sense, either geopolitically or geo-economically, in a world of rising powers such as China and India with different ideologies and outlooks. Atlanticist advocacy must therefore be
addressed to American opinion quite as much as to European. And the Hungarians, who have small but highly distinguished diasporas throughout the Western world, are well placed to make the argument.
There is a great deal to play for. The post-post-Cold War world is not yet securely established. Its future shape can still be influenced. And we know from experience that a Europe without Americans would be always on the brink of serious trouble.
After all, they didn’t come here for the climate.