Edit Zgut

Since Fidesz and Law and Justice (Prawo i Sprawiedliwość, PiS) started their authoritarian remodeling in 2010 and 2015 respectively, the quality of democratic governance has fallen the most in Hungary and Poland out of of any of the Member States in the European Union (V-DEM, 2021). These two governments have been playing a quite efficient “cat and mouse game” with the European Union. Despite that, the EU has developed a rich toolkit to address rule of law and democratic deterioration, including the Rule of law Conditionality Regulation. However, so far it has not constrained democratic breakdown in Hungary or Poland (Halmai, 2018). The example of these countries has proven that they can “fly beneath the radar” of the EU by using considerable informal power.

Besides the legal power vested in the offices they have – as Prime Minister of Hungary and leader of PiS and Deputy Prime Minister of Poland respectively – both Viktor Orbán and Jarosław Kaczyński have created additional sources through which they can cement political power. They have set up their own configuration of associates to serve their political purposes. This has had a profoundly negative impact on the quality of institutions, while shifting different forms of state capture and clientelist corruption to a new gear in both countries.

Every regime type works through a combination of formal and informal practices, but hybrid political regimes or regimes with considerable democracy deficits are in particular characterized by informal institutions. In order to grasp the essence of democratic deterioration in CEE, we need to look beyond the formal institutions into the informal side of politics. 

While robust research (Meyer, 2008) has shown that undemocratic, illegitimate, often mutually reinforcing informal practices undermine democracy in CEE, most studies of backsliding in these countries (e.g. Bozóki and Hegedűs, 2018; Pech and Bárd, 2019; Sadurski 2019) have centered on formal institutional changes that have undermined democracy. They pay little attention to informal power.

One of its manifestations is political clientelism that has been traditionally defined as “the proffering of material goods in return for electoral support (Stokes, 2011). It is the distributive criterion of electoral support that distinguishes clientelism from other materially oriented political strategies, such as pork-barrel politics.  It could be classified both as interpersonal relationship and party-directed patronage (Graziano, 2006).  Personalistic awarding of jobs, and contracts, and public policies that favor private allies without constitutional responsibility also fall into this category.

Clientelism also carries a high risk of corruption. Sajó (2003) has discussed the two concepts under one roof by claiming that corruption has become the foundation of the Post-Communist region’s clientelist social structure. He conceptualized this state-centered phenomena as “clientelist corruption,” a “form of structural corruption” which should be distinguished from the discrete individual acts of corruption.

By narrowing the concept of non-democratic informality, I conceptualize the informal exercise of power as uncodified, informally enforced interactions of the government that create an uneven playing field to its benefit. It includes various forms of clientelist exchange which create a system of dependence not only within the clientelistic circles closely allied with the regime, but also between the broader society and the government.  Most importantly, this informal exercise of power is often used by the government in a coercive way to consolidate control over the state and the society.

Why is it so prominent in CEE?

In the words of Klíma (2019),  the post-1989 development was structurally embedded in the environment of both the communist legacy and the post-communist transition. Structural factors such as a lack of division of power,  extraordinary interconnection of the public and private spheres, and the absence of a strong civil society and middle-class all accelerated pro-clientelist conditions.

But this structural embedding does not explain the informal nature of politics in CEE on its own. Despite the common assumption in the democratization literature that EU integration has had a beneficial effect on democratic consolidation (Vachudova, 2005), the accession procedure seems to have actually encouraged non-democratic forms of informality through its conditionality policy.  As Slapin (2015) argues convincingly, “under certain conditions, the reforms required of would-be members could have the perverse effect of undermining the establishment of legitimate law in transitional democracies”.  While the Copenhagen conditions were supposed to ensure that new Member States would not undermine the democratic and/or economic fabric of the EU, the literature (Pridham, 2009) emphasizes the prevalence of a ‘box ticking’ mentality in a very top-down and deadline-dominated fashion. Drastic reforms were accepted on a large scale, but national governments failed to actively enforce them.

This dual legacy is intertwined with the willingness of the Hungarian and Polish governments to weaken the rule of law and undermine institutional checks and balances that have made the state vulnerable to systemic corruption.  Consequently, informal exercise of power prevails through three main domains in Hungary and in Poland: informal distribution of decision-making power via clientelist corruption, media capture, and electoral clientelism.

Informal distribution of decision-making via Clientelist corruption

Top-down clientelist corruption centered around PM Viktor Orbán

In order to understand the nature of Viktor Orbán’s regime, it is worth reading a classic Hungarian novel written by Zsigmond Móricz. The book, entitled “Relatives”, tells a story about a fictional town that is a hotbed of systemic corruption and a clientelist network of provincial nobility between the two World Wars in Hungary. After 30 years of the democratic transition, its thesis statement about feudal dependency applies to contemporary Hungary more than ever: “In a certain way, everybody depends on the government”.  

Decision-making often prevails outside the formal institutional framework with the involvement of actors without constitutional responsibility, including the close relatives of the Prime Minister. While these decisions are often formally taken in accordance with national legislation, the Hungarian government is instrumentalising the law to fit the authoritarian goals of the regime.

It has been building up an exclusionary business-state-party alliance that allows access to public procurement – including EU-funded projects – for a very limited number of actors. Various “economic empires” have arisen under the names of  Lőrinc Mészáros, György Matolcsy,  István Tiborcz (Orbán’s son-in-law), István Garancsi, Antal Rogán and János Lázár, based upon their personal loyalty to the Prime Minister.

These companies that are centered around the government typically win in segments of the public procurement market characterized by higher corruption risk, lower control of corruption, and lower intensity of competition. Formally, most of them are independent business actors who eventually became an integral part of the patron’s informal  network, where decisions are not made within the formal bodies of the government. With the help of these actors, the regime has successfully captured the most important sectors of the economy (including the banking, the agriculture and the telecommunications sector) by 2021. As Magyar and Madlovics (2020) eloquently put it in their recent book, a single patronage network has been built in which controlled state institutions and individuals close to Orbán are able to accumulate more wealth than any other networks could before 2010 when Fidesz returned to power.

The Prime Minister’s family members are among the primary beneficiaries of this system. Investigative journalists revealed in 2020 that the mining company of Orbán’s father, Dolomit Kft., offers its products at a significantly higher price – sometimes 60 to 70 % higher – than its main competitors when it is a supplier for state investment projects (Zöldi, 2020). His companies have accumulated significant wealth since 2010.

After the outbreak of the COVID-19 pandemic, political favoritism and corruption shifted into an even higher gear. The corruption risk in public procurement grew considerably after 2010, and in 2020 it reached its highest level since 2005. Ahead of the upcoming elections in 2022, these trends have further accelerated as Viktor Orbán has begun building a parallel power structure via public funds, the operation of which depends on people loyal to him (K-Monitor, 2021).  This is an opportunistic reallocation of state resources by establishing longer-term access to them wherever it is possible.

The key feature of the system is centralizing and monopolizing corruption and blurring the boundaries between the state and the private sector. Although the Fundamental Law states that “Property may be expropriated only exceptionally and in the public interest, in cases and in the manner prescribed by law, with full, unconditional and immediate compensation,” enterprise takeovers have also become more frequent. One case indicative of the regime was the economic empire of Lajos Simicska, a former ally of Orbán, which was worth approximately HUF 60–80 billion, and ended up in the hands of Lőrinc Mészáros  in 2019. 

Pressure on different scales has reportedly been put on economic stakeholders who are independent of the government. One of the most notorious examples is László Bige, a Hungarian fertiliser magnate and the 10th wealthiest person in the country, who claimed to have been threatened by state authorities to sell out his business to oligarchs close to the Prime Minister. Currently, he is under house arrest for allegedly selling fertiliser below the counter price to a distributor in 2010 and then sharing the proceeds (Király, 2021).     

Nepotism and political clientelism around PiS

The Chairman of the ruling PiS party has always believed that the real power and efficiency of the state depends predominantly on personal and informal relationships.  Accordingly, Poland has become a textbook case of informal distribution of decision-making and executive power. Policymaking under the PiS government was always guided by the leader of “Nowogrodzka” (the symbolic name of the street in Warsaw where the PiS headquarters is based).

The formal organizations and procedures of the state often do not determine how political decisions are made; instead, real decision-making authority is wielded through the informal practices of Kaczyński. This has not changed meaningfully after he joined the government in November 2020 in order to keep in check the Minister of Justice and Chief Prosecutor, United Poland leader Zbigniew Ziobro, and to manage conflicts within the alliance. Although he is only Deputy Prime Minister and the Chairman of the Committee of the Council of Ministers for National Security and Defense Affairs, Kaczyński independently makes important decisions, and members of the government are strongly dependent upon their relationships with him.

Although Poland avoided oligarchization, PiS has become a quasi-oligarchical network linking political and corporate power, and an important dimension of its new economic policy was the so-called corporate governance (Jasiecki, 2018).  The government has used this process to distribute a large number of jobs to loyalists, many without professional experience, by lowering the requirements to fill certain posts. While this was an approach also taken by previous governments, it has shifted into a new gear under PiS.

According to publicly available company registers, at least 900 people from the PiS community – family members, friends and colleagues – found employment in state-owned companies, including, among others KGHM, PKN Orlen and Azoty. The majority of these employees are linked to Prime Minister Mateusz Morawiecki, who managed to extend his political power via state-owned companies and institutions with the help of Kaczyński (Mikolajewska, 2021). 

This clientelist exchange also contributed to helping maintain the parliamentary majority of PiS in 2021. Due to the long-standing conflicts, and then split, with Jarosław Gowin’s Agreement party, PiS provided incentives to MPs to join the governing party in the Sejm. Financial incentives range from well-paying parliamentary positions to senior management positions in state-owned companies. Representative Lech Kołakowski, for example, returned to PiS by being offered a monthly salary of PLN 35,000 (more than 7620 EUR ) at Bank Gospodarstwa Krajowego. Małgorzata Janowska, who left PiS in June 2020, also rejoined the ruling party after her partner, Andrzej Legeżyński, was appointed as the head of a company in the predominantly state-owned Polish Energy Group (PGE) (Stankiewicz, 2021). This is crucially important for Kaczyński’s majority now that Gowin and his party have been pushed out of the coalition. With the help of Adam Bielan, one of Kaczyński’s new allies who left Gowin’s party last year, five more representatives – Marcin Ociepa, Wojciech Murdzek, Anna Dąbrowska-Banaszek, Mirosław Basque and Grzegorz Piechowiak – have joined PiS to maintain power.

The coercive element of Polish clientelism has become more frequent over the past years.  Low-intensity coercion takes various non-physical forms and can be presented to the world as the enforcement of the rule of law rather than repression. Since the pandemic crisis started, PiS has used appointments to different positions not only as a source of incentive but also of coercion. Political allies and opponents have also been pressured by clientelism. This was reflected during the parliamentary vote on animal rights in autumn 2020. Jan Maria Jackowski, a PiS senator, revealed that one of his colleagues was explicitly threatened that if he did not vote in accordance with Kaczyński, his family members would lose their jobs (Dziubka, 2020).

Another function of state-owned companies is to financially boost special funds and agencies of the regimes that operate outside of the official structures of public administration. Allocated large amounts of money to spend and with no public restrictions or financial controls, they are potential hotbeds of misuse of public funds. One of the most prominent has been the Polish National Foundation (PNF), which has become a transmission belt for the main narratives of the PiS government. Established in 2016, and heavily subsidized by state enterprises such as PKN Orlen, it is a unique platform with a troubling lack of transparency. Its formal aim is to promote Poland abroad; however, in 2017 it organized a controversial billboard campaign in the country to promote the government’s judicial reform (Wojtczuk, 2019). The PNF is a typical example of a semi-formal, semi-informal tool: it has a legal basis but many of its actions have been designated as unlawful by courts, albeit without consequences (Makowski, 2020).

Although economic resources cannot be reallocated in a fully personalized way like in Hungary, the Polish procurement system is also exposed to irregularities. Poland has the highest rate of so-called single-applicant tenders in the EU: only one entity submits an application to 46% of tenders. OLAF estimated that 19-23% of Polish public procurements might be vulnerable to corruption (Zgut et al., 2018)

Media capture

Informal distortion of the Hungarian media market

Another means of consolidating power and creating an uneven playing field is the informal capture of the media. While media businesses linked to governing parties enjoyed strong market positions well before Fidesz was elected in 2010 (Polyak, 2016), the Orbán government has used powerful individuals and companies in an unprecedented way to silence critical media outlets. It has created a top-down centralized system that is built upon a clientelistic network of media ownership. 

Besides Mészáros, the pro-government media portfolio is currently dominated by Árpád Habony, the Prime Minister’s advisor;  Ádám Matolcsy, the son of the president of the Hungarian National Bank; György Matolcsy, former minister of finance;  Mária Schmidt, director of the House of Terror and a close associate of Viktor Orbán; and István Garancsi, a construction entrepreneur and a personal friend of Orbán (Bátorfy and Urbán, 2020) While there is no direct pressure on editorial lines, and the journalists are also not being threatened physically, Hungary qualifies as a classic state capture where journalists can not hold those in power to account due to conflicts of interests with the owners of media groups.

But the key to informal centralization was the creation of the Central European Press and Media Foundation (KESMA) under the supervision of Orbán.  Despite making no sense from a business point of view, 470 pro-government outlets “voluntarily” donated their highly valuable assets to a newly formulated, centralized foundation in 2018. Journalists in this empire would never risk reporting any information that would shed negative light on the government, let alone systemic corruption issues related to the Prime Minister’s family. The establishment of KESMA demonstrated that Hungary has become a very classic example of informal media capture as these cronies have never been true owners of these media outlets.

Moreover, the government created a huge chilling effect on the advertisement market. Besides the fact that it weaponized state advertisement to fund pro-government media and sideline non-governmental outlets, foreign investors avoid advertising in media independent of Fidesz.

Conservative weekly newspaper Magyar Hang has been unable to sell advertising space to numerous multinational companies operating in Hungary. As one of my interviewees noted in November 2020: the representative of the biggest German automotive company has openly admitted that although the readership of the newspaper is its “target audience”, the company would not risk business privileges received from the Orbán government.

Similarly, before it was taken over, index.hu tried to sell advertising space to large telecommunication and retail companies but was rejected because they were concerned about their relationship with the government. It is unclear whether the behavior of these business actors is due to direct pressure or because of fear of economic or tax-related consequences. However, it is indicative of the informal power Orbán exerts on business actors by creating a huge chilling effect on the market. It is embedded into the broader context of Germany’s role in supporting hybrid authoritarian regimes. As Kelemen (2020) noted, EU membership helped autocratic regimes access financing in a more indirect sense, by encouraging the inflow of Foreign Direct Investment.

The “repolonization” of the media

Jarosław Kaczyński also perceives foreign ownership as a threat to national sovereignty (Czuchnowski and Kublik, 2020). He has been claiming for years that the majority of the press is under the influence of foreign (mainly German) actors, and he demanded the “re-polonization” of the media. Clientelist media ownership started to gain significant importance in his regime too.

Besides rewarding administrative positions, state-controlled companies serve multiple strategic roles in this clientelist ecosystem. PiS has started to use powerful individuals aligned with the government to control media outlets that are independent of the executive branch.  State-owned PKN Orlen purchased the Polska Press media organisation from its German owner media group Verlagsgruppe Passau. Daniel Obajtek, a close political ally of Kaczyński, now controls 20 out of Poland’s 24 regional newspapers, more than 120 local magazines, and 500 online portals with an outreach of 17 million users (Konopczynski, 2021).

While Orlen described the acquisition as “a strictly business investment”,thereby rejecting any link with politics, these state-controlled companies are generally key to capturing the media in other informal ways. Obajtek already replaced the entire management of the publisher despite the fact that the Warsaw Competition Court has meanwhile suspended the exercise of ownership of PKN Orlen. A Russian Gazprom-style maneuver is part of the preparation for the 2023 elections, with Kaczyński himself appointing Dorota Kania as the new, politically reliable editor-in-chief for these local papers (Czuchnowski and Kublik, 2021).

Capturing the referees significantly helped PiS in this regard. While the Polish competition authority immediately gave the green light to PKN Orlen’s transactions, it did not allow Agora, the publisher of the largest opposition daily, Gazeta Wyborcza, to buy Eurozet Radio.

Between the pro-government and the government critical media, there is a group of  platforms that would not openly spread PiS propaganda but avoid direct confrontation by tuning down criticism towards the government.  Polsat television is the most important in this group.  Its owner, Zigmund Solorz, has various business interests not only in the media but also in the banking, telecommunications, and energy sectors.  There was also a significant share of the Polsat group which together accounted for one-third of the spending (33.2%) of the state-owned companies. With the help of state-owned companies, the government boosts the supportive private media outlets financially on the market.  When it comes to television, 92.6% of the advertising expenditure of state-owned companies was channeled towards two groups –  TVP (the public broadcaster) and Polsat (Kowalski, 2021).

Electoral clientelism

Coercive vote-buying in Hungary

In addition to violating the fairness of elections through media capture, both regimes have developed new informal methods to tilt the playing field during elections. Empirical research by Mares and Young (2019) showed that the government successfully uses state resources – notably the workfare program – as a coercive tool during elections to increase support for Fidesz. Empirical research (Mizsur, 2021) shows that it could secure 5-6 mandates for the ruling party, without which Orbán could not get a constitutional majority.

Intimidation and threats to withdraw social benefits were common practice in the last elections, impacting the most vulnerable citizens and particularly the Roma. Józsefváros (the 8th district) became a “laboratory” of Budapest in this regard, where Fidesz involved a local, influential Roma entrepreneur in vote buying in the 2019 municipal elections. This person monopolized the local construction market until 2019, and provided job opportunities only for those who were willing to vote for the nominee of Fidesz,  Sára Botond, in the elections.

This informal network facilitating coercive vote-buying procedure is usually extended by members of the citizens police who employ intimidation tactics among the most deprived local citizens. Although election observation missions have called the electoral process in Hungary free but unfair (OSCE ODIHR, 2018), these issues remain undressed by ODIHR because intimidated people are just too afraid to share such information.  Thus, this coercion is much more difficult for international observers to identify than direct election fraud.

Poland: instrumentalizing COVID to tilt the playing field

Elections in Poland met the most important democratic criteria up to the parliamentary elections in 2019. Then the 2020 presidential election marked a “dramatic change”.Held after the outbreak of the coronavirus pandemic, there have been serious doubts raised about the fairness of the contest. 

Rafał Trzaskowski, the opposition’s candidate, did not have equal opportunities in the race with Andzrej Duda. While the President took advantage of state resources with his presidential trips during the campaign, his opponent’s moves were significantly limited by the coronavirus lockdown. The state and PiS’s nominee were inseparable, with high-ranking officials conducting campaign activities and mobilizing state resources to support President Duda. For example, free fire trucks were promised to settlements with less than 20,000 inhabitants. A profound example of the misuse of state resources was when the Agriculture Social Insurance Fund disseminated to 1.3 million households a letter from the president in which he expressed his support for Polish farmers (Flis, 2020). 

In addition, the funding of Duda’s social media campaign was quite opaque; one of the largest contractors, HyperCrew, was funded by a company (czysta3.vc) that had previously received state support from a public institution responsible for research and development (Kaczprzak, 2021). The Polish Catholic Church also mobilized significant resources on behalf of Duda. Its support for PiS mostly occurs in small parishes where party posters and leaflets are often displayed in churches. As another interviewee noted, the lack of separation between the state and the church in this regard is most evident in smaller municipalities.

The institutional environment built by PiS since 2015 also ensured that it could rely on the Supreme Court’s approach to evaluate electoral issues, as when it approved the deal to postpone the 2020 presidential election, skewing the playing field further to the benefit of the party. Although the opposition could compete for the executive power in a meaningful way, due to the above mentioned features of the election, the competition was grossly unfair.

The EU could and should do more

Informal exercise of power has a profoundly negative impact on democracy by further undermining trust in democratic institutions, reducing accountability, distorting the representation circle, and leading to unfair provision of public services. Paying greater attention to these regimes’ use of informal exercise of power is important because the EU has been designed in a way that it can mostly address formal institutional changes through its rule of law instruments (Gora and Wilde, 2020).

The Article 7 procedure has proven incapable of forcing the Hungarian and the Polish government to comply with the core values as spelled out in Article 2 of the Treaty on European Union (Kochenov, 2021). One of the most significant innovations of the EU is the recently approved mechanism that can punish violations of the rule of law with the withdrawal of funding. However, although the European Parliament has ensured that the Rule of Law Conditionality Regulation is not as vague as it risked being, it was significantly watered down under the leadership of Germany’s Presidency of the Council of the EU.  In addition, its implementation has been delayed due to the non-binding Conclusions of the European Council meeting in December 2020. The Hungarian and Polish regimes managed to implement a deferral clause so that they could tie up the Regulation in litigation before the Court of Justice of the European Union. Now that this case has been heard by the EU’s Court, in October 2021, a final decision should be made by the beginning of 2022 in an accelerated procedure.

But the problem in relation to Hungary is that instruments like the Rule of Law Conditionality Regulation typically target specific violations of EU law and cannot grasp the cumulative effect of many small legislative changes, or Orbán’s use of informal power to drive democratic backsliding. Whereas the Article 7 procedure is structurally unsuitable to constrain Member States due to its unanimity requirement, it is also insensitive to some forms of informal power in the grey zone of legality. For example, while integrity of elections is within the scope of the procedure, Article 7 does not extend to coercive vote-buying and intimidation of voters in Hungary. It also entirely ignores the dimension of clientelist corruption in Poland. On top of that, slow EU procedures, mainly dominated by the exchange of correspondence in the name of “dialogue”, give further leeway and more time to autocrats to change the system.

One of the lessons the EU should have learned in the last decade is that Viktor Orbán has become a master at formally complying while substantially undermining democracy in an informal way.  He can play hide and seek in a deeply legalized environment in which the EU institutions are based on transparency and accountability, with a lack of political will in certain Member States to penalize others. As Kochenov and Bárd rightly put it, the Council of the EU is the firmest of all the institutions turning a blind eye to the rule of law problem itself, let alone the issue of informal power that remains under the radar of the EU.

For example, although the Commission launched an infringement procedure against Hungary, following the Hungarian Media Council’s decisions to reject Klubradio’s application on the use of radio spectrum, in a too little too late fashion, it did not prevent “the death by a thousand cuts” explained above through which the regime captured the media in a decade.

When it comes to Poland, the EU institutions are occupied with multiple procedures related to the ongoing overhaul of the judiciary, but are not yet addressing the issue of misused public funds, or media capture, among others. Delaying disbursement under the Recovery and Resilience Facility was a landmark and overdue decision against both Hungary and Poland. But the EU institutions should immediately address clientelist corruption risks also with regard to the Kaczyński  regime.

This is especially needed because the Polish government is catching up with its Hungarian counterpart: Mateusz Morawiecki is taking note of Viktor Orbán’s “peacock dance” of symbolic compliance. Although PiS now says it will formally dissolve the Disciplinary Chamber, the government would change the structure of the entire court system in a way that PiS will be able to discipline judges at a lower,  regional level. It might create the illusion of a real concession, while the regime does not have to give up its autocratic goal to capture the referees.

Orbán and Kaczyński will not stop proceeding by these informal means.  Therefore, undermining democracy with various informal tools will not disappear any time soon from within the EU – in fact, quite the contrary is true.  Worrying recent developments in Bulgaria and Slovenia suggest that other ruling parties across Europe have learned a great deal from Hungary and Poland, which is that the EU institutions have not been able to prevent determined governments from going down the road to authoritarianism.

Therefore, a combined holistic approach is needed from all EU institutions: prevention, immediate legal action, and an efficient suspension of EU funds. First, having a rich toolkit, including a  single market scoreboard, the EU Commission could and should do more against national-level clientelist corruption on technical grounds. Secondly, due to its direct responsibility in competition law and state aid –  two areas that have been abused by Fidesz – the Commission should also bring more infringement actions related to media capture.  Thirdly, it is important to increase informal pressure on autocratic Member States in the European Council, where key actors such as Germany have the greatest political and economic leverage. Another lesson that should have been learned is that dirty compromises do not prevent democratic backsliding at all, but rather the opposite.

Edit Zgut is a political scientist and a doctoral researcher at the Institute of Philosophy and Sociology at the Polish Academy of Sciences.  She is a Rethink.CEE fellow at the German Marshall Fund and a DemocraCE fellow at Visegrad Insight.