Corruption expert Dávid Jancsics on Hungary’s "flowering straw man system"

May 21, 2017

“In Hungary the world has been turned upside down. A narrow, informal clique runs the state.”

“No other example of such a concentration of power exists within the European Union. A concentrated attack on all that remains of independent organizations, civil organizations, is currently under way. All that remains of democracy are elections held every four years.”

“The Hungary of today resembles an eastern autocracy. Of course, it is not as brutal as model authoritarian states. But discounting physical violence, the system is moving along a distorted path.”

Translation of Attila Buják’s interview with Hungarian corruption expert Dávid Jancsics published under the title “The straw man is a corrupt broker” in the May 18th, 2017 edition of Hungarian print weekly 168 óra (pp. 10-13).

“The gas pipe fitter is not even a symbol but a myth” – Dávid Jancsics, Professor at San Diego State University school of public administration

The construction of the domestic straw man system is the result of a learning process.  Orbán’s first term (1998-2002) was the school of life.  The structure that came into being after 2010 rendered the state the captive of client groups. In Hungary such relations reign for which there is no example in the western half of Europe.  The famous domestic corruption researcher, who is a professor at San Diego State University, believes that in its current state the state is not suited to keeping the corrupt distribution of wealth at bay.  Its function is to convert public money into that of private individuals. Together with co-author István Jávor, who recently passed away, Dávid Jancsics received the Study of the Year award from the American Academy of Public Management.

Attila Buják: Corruption research is a unique field of study. It cannot be analyzed with statistical methods.  Nor can it be measured like the weather.

Dávid Jancsics: Unlike other social phenomena, corruption really cannot be grappled with statistical methods. Though a cliché, we have to accept that we are talking about concealed crimes.  The process works providing every party wins something, secrecy is maintained, and the interests of participants are served.  For this reason it is impossible to demonstrate what proportion of the population is affected by corruption in a given country.

Together with your colleague, István Jávor, you wrote a prize-winning study making use of field work and deep interviews.  Are such means more precise?

If a person finds a credible actor who has insight into matters and is willing to give information, then we can get quite far.  But there is nothing new in this.  As a journalist you are obviously aware of this method.

The ineradicable topos of modern society is the unstoppability of corruption. Does Hungary count as a corrupt country?

Its self-image is unequivocally that. And I think the situation is getting worse. Still, Transparency International’s Perception Index is disputable (we belong to the end of the first third ranked according to the absence of corruption), because it measures public perception of corruption on a global level. The likelihood is that there exists some correlation between public perceptions of corruption and actual corruption.  Obviously, this is superficial. But even here we have been slipping for the past ten years.

An inexorable political fight has been taking place since the millennium.  Our vehemence peaked in 2006 after joining the EU.  Fidesz was adamant when it came to overseeing EU money.

This really stirred up passions.  Every political participant assumes the worst about its rivals.  It soon turned out that the EU has no effective oversight mechanism and the new member states are incapable of holding the actors at bay. Everybody was cautious while Hungary was in the process of joining the EU.  They wanted to put their best face forward. When we joined, we immediately noticed that the EU has no effective institutions guarding against corruption.  On the other hand, the new member states had a large number of rule-evading politicians.  After 2010 came the structure called state capture.  There were plentiful signs of this before: certain groups occupied certain state structures and institutions (for example the prosecutorial services).  At that time this still appeared to be a loose mouthpiece system.  After 2010, in possession of a two-thirds parliamentary majority, it showed itself openly.

Do you not share the fashionable “mafia state” approach?

The father of the idea, Bálint Magyar, believes that the problem with “state capture” is that originally the term was coined for something else.  It is used in situations when the economic actors try to influence legislators in the interest of favorable regulations.  What we are seeing does not resemble this.  The transactions are not initiated by economic actors but by the politicians themselves.  The government tries to bring the worthwhile national few into as favorable a situation as possible.   Not only are favorable decisions rendered, but serious state resources end up in private hands.

All that you claim is brokered by a developed straw man system.

Hungary has always employed dubious economic actors. The gas pipe fitter (Lőrinc Mészáros, Hungary’s fifth-richest person-tran.) is more than a symbol or emblematic public figure. It has a role, a function, and a mythology. Behind the straw men are the real owners. Researchers say this is not a state capture situation.  This is a duplicate state structure, which Bálint Magyar calls a mafia state. The name itself is not significant. This is the kind of corruption that varies from traditional corruption in significant ways.  In the latter, the parties agree in secrecy. Corruption means an exchange in which both parties win. What we see in the straw man system is a complex situation involving the distribution of assets and capital.  A relevant point of view is that this does not take place in the interests of society.  The regulations are made by the central authority, which also defines the system of payment and performance. Because it is necessary to give something. Also characteristic of the system is that the method of legislation is well thought out.  They build in whatever “small gates” they can.

Has the straw man grown into the state institutional system?

The most important, relevant elements. The straw man is a key player. The process is complicated because it is necessary to win through public procurement, receive ownership, and operate it for a certain period of time.  It is also necessary to pay taxes after the money and transfer it while ensuring that the actors behind the straw man remain invisible.  The straw man assumes the risk of corruption in place of his client.

They are not so scrupulous as all that.  The Mészáros works encompass all of public life.

The straw man himself is a corrupt broker. He is a broker between the actors and their future wealth. There are countless variations of this, but the truth is that we have little insight into this.  A straw man can be a homeless person sleeping rough, a security guard, an old friend, a school mate or a grandmother. If we look at the early Közgép (former Fidesz oligarch Lájos Simicska’s main construction company-tran.) we see something huge which hardly employed people in comparison to its revenue. It might have been a brokerage organization. Its task was also to collect and divvy up the business coming in. For this it was necessary to involve subcontractors. The straw man takes care to ensure that the invested money becomes political and media capital and campaign money. András Lánczi declared that providing the national owners access to capital was Fidesz’s sublime task.

How do the straw man and his client divide things?  Does the straw man receive part of the assets or a salary?

We have no insight into this. We see the surface, we see the owners, the wandering property. But as for how the system itself works, all we can do is speculate. It is necessary to know that state capture is “lawful,” the diversion of money is also stipulated by law. This by itself is not enough. It is necessary to control the entire governmental structure and the market actors and subcontractors involved. A network of client-patron relations is built. It is necessary to find actors who can be blackmailed and kept in check.

Is strict centralization a unique feature of the system?

The system is centralized in the extreme which goes against everything characteristic of the modern western state. The governments are decentralized and the decisions are devolved to the lowest level. In Hungary the world has been turned upside down. A narrow, informal clique runs the state.

Oligarch-client wars are rare but still we saw an example of one.

Lajos Simicska is a stiff-necked figure but he has not been a straw man for a long time. Rather a hidden oligarch. But we might also mention Zoltán Spéder’s fall as well as the preventative campaign. Decisions are made by a very narrow inner circle. For long it has not mattered who is minister.  They are puppets. For the longest time we hardly knew who was running the Ministry of Agriculture, who is responsible for public health. There is no point to any of this.

Are the oligarchs free to make their own decisions?

Simicska and crew, for example, were. His people were installed in NAV (National Tax and Customs Administration-tran.) and in the ministries of strategic importance.  Apart from the boss there are a few side players too, such as the (central bank governor György) Matolcsy clan. These can make decisions on their own providing they do not cross certain boundaries.  Orbán also plays them off against one another, and sometimes prunes them back.

Is Hungary in worse shape than other peripheral states in its weight category?

Even if we are not in a worse situation, our condition is more vulnerable. No other example of such a concentration of power exists within the European Union. A concentrated attack on all that remains of independent organizations, civil organizations, is currently under way.  All that remains of democracy are elections held every four years.

Many believed that EU membership would curb corruption.  The money coming in cannot be plundered.

To the contrary. The free money has been an awful experience.  The EU does not know what to do without employing means of compulsion, which it does not want to do. OLAF (Europe’s anti-corruption office-tran.) procedures are complicated, bureaucratic procedures that rarely result in the culprits being punished.  When America expeditiously banned suspected corrupt actors, then they got scared for a minute. That counted very much.

It has often been stressed that however responsible the leading clique may be, public tenders have executers as well.

There are two kinds of samples. There is a narrow economic elite that is stuffed with public money. These are serious figures. This is a client system whose very cell has to be nourished and attended to.  The tobacco retailing concession is the example.  The local potentates got their share at the base of the system, the mayors’ relatives, wives. Joining the circle of favored contractors happens on the basis of party loyalty. Not just anyone can receive orders from local authorities (installing electricity, painting schools, making furnishings).

What effect does the flowering of the straw man system have on the economy?

It causes enormous damage, beginning with the fact that the protectionist state prefers certain areas, even as it neglects others.  Essentially, they are not governing.  Public education and health-care is being bled dry, either deliberately or out of indifference.  The situation is also aggravated by the fact that in place of talented youth, loyal figures come to fill leadership positions.  The economy is becoming less and less reliable.  The monopolistic actors drive up prices.  Economic life is not a market mechanism but rather a competition for loyalty.  Their economic outlook is antediluvian.  The state does not help at all start up branches (informatics, intellectual investments).  Infrastructural projects (road construction, bridge construction) are hotbeds of corruption.

And yet in Hungary it is impossible for anyone to fall on account of corruption. Why is that?

If I look at it from a legal point of view, the key word is a name:  Péter Polt (Hungary’s chief prosecutor-tran.). Whether he is apathetic is a question of perspective.  For the moment, it comes across as “these are stealing, those will steal, so why should I put myself out?”

Over the course of the interviews you spoke with such economic leaders who alleged that 70 percent of the money allocated to big state projects is embezzled. How long can this system be maintained?

There is no rational timeframe.  It is possible to survive everything.  There are things that happen by happenstance.  Maybe we have never seen an example of an undeveloped, stagnating country surviving for decades with low GDP growth and progressive weakening?  A decisive question is whether after 2020 there will be resources with which to finance the system.  If a state institutional network is systemically corrupt to such an extent, if everyone is captive, then sooner or later there won’t be any actors interested in doing away with it.  And in the meanwhile, of course, it will be incapable of functioning.  This is collapse itself.  Even those institutions whose sole purpose is to operate independently are dependent on the National System of Cooperation (NER).  We’re talking about a devilish mixture. There is still no proof that an unexpected event, economic shocks won’t carry it away. NER can endure but it can also collapse tomorrow.

It is a subject for us, but how does it appear from America.

Not nearly as big a deal as those at home think.  The Central European University scandal counted.  Universities have a strong ability to lobby.

You said that Hungary is the country that has traveled the furthest on the road to Putin. Isn’t that an exaggeration?

This is what I think.  The Hungary of today resembles an eastern autocracy. Of course, it is not as brutal as model authoritarian states. But discounting physical violence, the system is moving along a distorted path.

Dávid Jancsics

Professor at San Diego State University school of public administration

General area of interest is public administration, organizational theory, economic sociology.  Specialized research topics are corruption, organizational deviancy, and the development of informal practices in the post-communist region, and the corruption along the US-Mexican border.

He taught qualitative methodology at the John Jay College of Criminal Justice as an adjunct professor.  He is a member of the supervisory committee of Transparency International.