Ángyán says the Agro-Chamber’s “integrator” proposal will finish off family farms

June 29, 2017

Dr. József Ángyán (Photo: MTI)

“Let’s go down to Felcsút, the Boss wants to see us,” Dr. József Ángyán recalls Sándor Fazekas telling him in February 2010. Fazekas had spent months courting Ángyán, a renowned agricultural scientist, picking his brain on issues ranging from rural development and agricultural policy to farming cooperatives.

With less than half a year to go before Hungary’s 2010 national elections, there was no doubt that Fidesz would win. The new administration needed someone like Ángyán to lend an air of legitimacy to its agricultural policies. For Ángyán, it was the opportunity of a lifetime.

Hungary’s rural countryside had for decades suffered the consequences of Soviet-style farming collectives, the transition to a market economy and globalization. It became increasingly difficult for family farms to generate a livable income producing food and other crops. The country’s family farms desperately needed the proactive assistance of state, but that assistance never materialized.

Ángyán had spent the better part of three decades researching, teaching, and advocating on behalf of a sustainable agricultural sector for Hungary’s rural countryside. In particular, his advocacy focused on seeing agriculture restored to its role as the mainstay of rural Hungary.

In late 2009, Sándor Fazekas began appearing at events where Ángyán spoke about the policies needed in the Hungarian countryside. The two had known each other from their work as MPs in the National Assembly. Ángyán noticed Fazekas at one such event and greeted him.

Fazekas told Ángyán that “The Boss” – Prime Minister Viktor Orbán’s nickname in Fidesz circles – had sent him down to the forum to put some plans together on rural development. He then asked whether Ángyán could help, and Ángyán invited him to the institute he helped found some twenty years earlier. In January 2010, the two spent a day going over policy ideas for agriculture and rural development.

One months later, Fazekas took Ángyán to meet “The Boss” in Felcsút, Orbán’s home town. The three men discussed what Fidesz’s agricultural policy would be after the election. That was where Ángyán learned that Fazekas would be the Minister of Rural Development, and was himself offered the position of undersecretary.

“When the three of us sat down in Felcsut, we began by discussing what needs to happen in the rural countryside,” Ángyán remembers. “To my surprise, Orbán started reciting everything I had told Fazekas [months earlier]. At one point, Orbán turns to Fazekas and tells him to tell me what Fidesz’s program for the rural countryside will be.”

According to Ángyán, Orbán expected Fazekas to repeat from memory everything Ángyán had told him months before.

“It was an interesting situation because it appeared to me as though Fazekas was being tested,” Ángyán recalls.

“Fazekas had to take this test in front of his boss by repeating what he had learned while sitting next to the person who taught him the material, the man that would be his subordinate,” Ángyán says, chuckling. “Orbán was well prepared. He knew which buzzwords would catch my attention. He is a very clever man in this respect. They told me everything I wanted to hear.”

According to Ángyán, the three men agreed on the state taking an active role in helping small Hungarian family farms unite to form cooperatives — a scheme Ángyán says has produced excellent results in Western Europe, and would have been a suitable continuation of Hungary’s so-called “Ant cooperatives” which existed during the interwar period.

“The Western European model for farming cooperatives demonstrates that families have excellent opportunities to live sustainably off their land,” he says. “Just look at the living conditions of a Swiss, German, or Austrian farming family. Families working lands sized 30, 60 or 100 hectares are able to pool their resources for certain tasks to increase their profitability for their overall farming activities — from acquiring equipment, processing, to sales. The profits from these cooperatives flow back to the families. This model works.”

The farming cooperative scheme agreed to by the three men would do miracles for Hungary’s small family farms.

By forming cooperatives from the bottom up, the farmers would be able to pool produce and resources. This, in turn, would put the farmers in a better position to compete united on the market. The cooperatives would also make it easier for farmers to organize processing operations, acquire machinery, and seek favorable financing.

“Profits from these joint enterprises don’t stop at the cooperative but instead flow back to the family businesses that created the cooperative,” Angyan says.

The two-hour discussion ended with the three men agreeing on a plan for the countryside, a plan for small- and medium-sized family farms and a rural development and agriculture strategy.

Ángyán says he waited until just before the elections to respond. On one hand, he had no ambitions to serve in government, despite serving for four years as a Member of Parliament. On the other, he felt he could not live with himself if he turned down the opportunity to apply the knowledge accumulated over a lifetime.

Ángyán tells the Beacon he remembers addressing a protest of farmers in Budapest in 2005, and he thought this would be the chance to deliver on the promises he had made to them.

Days before the election, Ángyán informed Orbán through Fazekas that he would take the job.

In government

Early on in the second Orbán government (2010-2014), Ángyán could see that something was not right.

After taking up his post, he set about establishing the legal framework to help small Hungarian family farms. This, however, clashed with the intentions of the government which, Ángyán soon learned, was keen to work out an agreement with Hungary’s “national capitalists”.

This class of “national capitalists” – a term popularized by Orbán – represents Hungary’s economic national champions, corporations led by individuals, families, and interest groups with close ties to the prime minister. Those who belong to this group are often the main beneficiaries of economic protectionist, semi-feudal, and corrupt policies meant to put foreign corporations, or in this case, western agro-businesses, at a disadvantage. With respect to agriculture, the success of these groups often comes at the expense of Hungarian family farms.

Ángyán says Minister of Rural Development Fazekas would approach him with pre-written laws handed to the government by interest groups representing “agriculture oligarchs”.

It was clear to the new undersecretary that the government wished to strike a “compromise” in the form of strategic partnerships with Hungary’s large national capitalists instead of proactively assisting family farms.

“Ninety percent of today’s so-called national capitalist class are simply thieves,” he says. “They stole our shared national assets, all that was nationalized in the previous system…. Our common purse was also looted, as I found when I analyzed how the subsidies were being distributed to certain business groups. In other words, the source of their wealth came from looting the national assets and the common purse. This is what I told Fazekas. These guys are gangsters! This is not a reformed class of intellectual national capitalists or Széchényi’s who gave up their wealth to build a bridge across the Danube! Hogwash! The opposite is true! They are crooks! They looted the common purse and now they are in the position where they have the money and the wealth. But Fazekas insisted that the government must reach a compromise with this group — and I think this deal was mutually beneficial to both sides. This group of business speculators provide financing for politicians, who in turn shape laws, the budget, and institutions of the government for the purposes of further enriching this class through the looting of the country.”

Operating vast estates on thousands of hectares of land, these agro-oligarchs oversee enormous produce production and livestock operations. They control everything from production to processing and sales, Ángyán says. Their close ties with government officials help them obtain EU and state subsidies far beyond what is available to small farmers.

“As an undersecretary, I performed an analysis to compare the employment capacities of family farms versus the national capitalist large estate system. Today, roughly half of the agricultural area in Hungary is dominated by these large estate systems. These are usually corporations employing people through employment agencies. Sometimes they refer to themselves as family businesses. But a real family business operates with the members of the family. These large estates are not that. Sure, there is a Csányi family and a Mészáros family but their estates have nothing to do with real family farms,” Ángyán says.

In comparing the employment capacity of the large estate system versus small family farms, Ángyán found that the latter – operating on the same amount of land as the large corporations – employ nearly four times more people than the large estate system.

According to Ángyán, the large estates are purely profit-oriented, which means their operations increasingly rely on automation and cutting the cost of employment. By contrast, many family farms have been owned/operated by members of a single family for generations for the purpose of providing a livelihood for the family.

Remaining true to the agreement he made with Fazekas and Orbán in 2010, Ángyán and his colleagues began work on the government’s National Land Strategy — an official program still featured on the government’s website.

By 2012, Ángyán realized he would not be able to pursue policies the three men agreed upon in 2010 because of the government’s biased treatment in favor of Hungary’s agriculture oligarchs. He resigned his post as undersecretary but remained in the ruling party parliamentary group. That same year, the government proposed the third modification to Hungary’s two-year-old constitution — a modification to the land laws.

According to Ángyán, Orbán showcased the proposed constitutional modification during a Fidesz parliamentary group meeting.

Ángyán says that when he reviewed the document, it became clear to him that the government had absolutely no intention of adopting the policies the three men discussed back in February 2010.

As a Fidesz MP, Ángyán was the only one to vote against the constitutional modification — a move that incurred a HUF 225,000 fine from the parliamentary group and sharp rebukes from his colleagues.

The third constitutional modification set the stage for the government to carry out what Ángyán says was “the exact opposite” of what he, Fazekas, and Orbán had discussed.

The constitutional modification introduced a new term — “integrated agricultural production systemization”. According to the modification, a cardinal law (one requiring a two-thirds vote in parliament) would have to be adopted to set the parameters for this new system.

That same year, Ángyán started researching the extent to which individuals and families with close ties to politicians were being offered extremely lucrative land lease agreements and agricultural subsidies. In 2015, Fidesz set about privatizing Hungary’s state-owned agricultural lands. This, too, became a focal point for Ángyán’s research. But it was during this same period that the ruling Fidesz-KDNP party alliance lost its two-thirds supermajority in parliament.

Now, more than four years after the third constitutional modification was adopted, the National Chamber of Agriculture – whose chairman is Fidesz MP Balázs Györffy – proposed what the “integrated agricultural production systemization” cardinal law should look like.

According to the proposal, integrators can only be those companies with which the government has entered into strategic partnership agreements. But only a select few large Hungarian agricultural companies with close ties to the government would ever receive the “integrator” status.

According to the National Chamber of Agriculture’s “integration contract” proposal, the integrators would be given a leg-up in the agriculture sector because the law would bestow upon them benefits to which small farmers would not be entitled. Furthermore, their special legal treatment would effectively constitute a top-down approach to integrating small family farms (referred to as “the integrated” in the proposal).

The special treatment

After entering into the strategic partnership agreement with the government, the large agro-businesses will be able to offer loans, co-sign and serve as the guarantor of loans, broker financial services, purchase debt claims, and manage loan portfolios— all without the permission of the National Bank of Hungary (which is responsible for the regulatory oversight of the financial industry).

Furthermore, the integrators’ tax base can be decreased by five percent of the value of the purchased products/goods and services rendered (all within the framework of the integrator contract) providing profits are placed into a separate “risk fund”. This fund could be used to eliminate risks from fulfillment of the integrator services, and research and development.

Any investment undertaken by the integrator (exceeding HUF 1 billion/USD 3.5 million) must be regarded as high priority from the standpoint of the national economy, which means that the process of applying for grants and state subsidies is to be fast-tracked, with the ministry itself responsible for issuing all permits, thereby bypassing lower authorities.

According to Ángyán, the groundwork for this new system was already in place as early as 2015 when every agro-business entity belonging to Hungary’s richest man, OTP CEO Sándor Csányi, entered into a strategic partnership with the government.

Why is this bad for small family farms?

Ángyán asserts: “Those who don’t receive these benefits, because they don’t receive the same government treatment as the integrators, lose out.

“If small farms join together as cooperatives and jointly undertake production, processing, and sales, they would all enjoy the benefits when the profits flow back to the family. Conversely, these large corporations, which enjoy a monopoly because they organize the integration from the top down, become the centers of profit and take the profits out of the integrated system. What’s more, those companies lose out which do not qualify for the benefits offered to the integrators. The government has already decided who the winners will be.”

The small farms will be forced to work with integrators because they will really have no other way to get their produce to market, he says.

For the small family farms, the integrators will become the only providers of equipment, seeds, machinery, financial services, and income. Ángyán says that in the long run, as the profits are sucked away from these families, the land and assets of the integrated will likely end up with the integrators.

“This law will serve to play the sector over to the biggest agro-oligarchs, the likes of Csányi and Mészáros,” a businessman with insight into the sector tells the Beacon.

So why would the small family farms go along with this?

The National Chamber of Agriculture’s proposal would be a cardinal law, meaning it requires two-thirds support from parliament. But if Ángyán is right that small family farms employ four times more people than the large estates of Hungary’s agro-oligarchs, why don’t the small farmers just protest the law?

Ángyán says he sees two reasons why small farmers cannot openly challenge the law.

First, they are too financially exposed. Challenging those in power would mean they open themselves to being listed as “unsympathetic” to the government. He says it has been common practice for the government to prepare “lists” of those challenging its decisions. This, in turn, would lead to the blacklisting of the small farms, putting in jeopardy their ability to receive state subsidies for their respective farming operations. By today’s standards, that means their immediate destruction. They would lose what little they have managed to create for future generations.

Second, there are no real groups to advocate on behalf of small farmers. Hungary has no political party representing smallholders, and the main agriculture sector interest groups have been co-opted by Fidesz and large agro-businesses.

The National Chamber of Agriculture has said the proposal might be debated in parliament as early as autumn 2017. But, for the time being, Fidesz is still two seats short of a two-thirds supermajority.

“They might just have to buy two or three MPs but that won’t be hard because they have experience with that,” Ángyán says.

In retrospect, Ángyán feels like he was used: nothing from the National Land Strategy ended up happening. There is no family farm law, the land law does a poor job of placing limitations on the amount of land a family can own, there is no law regulating how much land can be used for what purposes, and there is no legal framework for an honorable cooperative system in Hungary.

He paid dearly for his foray into politics during the second Orbán government.

Following his departure from government (and subsequent activism) in 2012, he formally left the Fidesz parliamentary group in 2013 after the land law constitutional modification was adopted. In 2014, he stepped out of lawmaking. All the while, the government practiced a scorched-earth policy with Ángyán.

A world-renowned educational organic farm he helped create more than two decades ago in Kishantos was ploughed under when the government unlawfully seized the land the farm was situated on and revoked public benefit status of the center working the land.

The renowned Environmental and Land Management Institute at Saint Stephen’s University, a department he helped found and worked at for almost a quarter century, was also shut down.

Despite having worked for the Orbán government, Ángyán maintained his credibility throughout the past several years by being an independent advocate of Hungary’s countryside. He was the first to expose the government’s practice of favoring agro-businesses over small farmers with regard to agricultural subsidies and the privatization of state-owned agricultural lands.

Out of government, Ángyán’s days are spent working in his garden. In the winter he feeds the birds and spends time with his five grandchildren. But he has not given up on his work. He continues to map out how the agricultural land leases (between 2012-2015) and the privatization of state agricultural lands (2015-2016) went to serve the interests of Hungary’s agro-oligarchs, and how these policies have ruined Hungary’s rural countryside and the families that live there.

“Maybe in 50 years someone will be curious about how this happened,” he says.