Commentary 18 April 2017

It is Time for International Investors to Speak Up About Hungary’s Assault on Democracy

by Thorsten Benner, Wolfgang Reinicke                  The Washington Post

Earlier this month, German President Frank-Walter Steinmeier warned against an assault on civil society and academic freedom in the heart of Europe. “Europe must raise its voice,” he declared.

He was referring specifically to the predicament of the Central European University (CEU) in Budapest. The same day Steinmeier made his speech, the Hungarian parliament passed a law with the sole purpose of driving CEU, a private university accredited in both Hungary and the United States, out of the country. The lawmakers approved the measure using a fast-track procedure with zero consultation of those affected by the law. From start to finish, the whole parliamentary process took just two days.

The Hungarian American businessman and philanthropist George Soros founded the university in 1991 in the hope that it would cultivate and defend the values of the open society in Central Europe after the collapse of communism. Now CEU has become the latest target of Hungarian Prime Minister Viktor Orban’s campaign to build what he calls an “illiberal new state on national foundations” inside the European Union. To this end, he has sought to hollow out the rule of law, harassed media and nongovernmental organizations, and pursued hate campaigns against migrants and Islam.

His latest move has earned Orban strong criticism from unexpected quarters. The U.S. government has come out strongly against the prime minister’s efforts to destroy CEU despite his early support for Donald Trump during the U.S. presidential campaign. In the European Parliament, other members of the European People’s Party (EPP) group, which includes Orban’s Fidesz party, have condemned his assault on the university. German Chancellor Angela Merkel and her own party, which is a linchpin of the EPP group, have harshly criticized him.

The only key players to have remained silent are the many European and U.S. multinational corporations — such as Audi, Daimler and General Electric — that have a large presence in Orban’s homeland, and whose factories, research and development centers, and logistics hubs form the backbone of Hungary’s economy.

Since it joined the E.U. in 2004, Hungary has successfully attracted foreign investment thanks to its good infrastructure, skilled workforce and proximity to markets. Seventy-five percent of all industrial investment in Hungary comes from foreign multinationals.

Despite Orban’s nationalist and anti-globalist rhetoric, he has rolled out the red carpet to multinationals in the industrial sector because there are no Hungarian alternatives that could possibly take their place.

He has achieved considerable success. German companies alone employ 174,000 Hungarians, a massive figure in a country of 10 million people. Daimler has just invested about a billion euros in a new plant in Hungary. Audi is the second-largest employer in Hungary. Any slowing or interruption of Audi’s production has an immediate impact on Hungarian gross domestic product. Orban is aware of the company’s importance. In late 2014, during the production launch of an Audi model, Orban said: “Hungary is today inconceivable without the presence of Audi.” Audi chief executive Rupert Stadler reciprocated the affection: “We feel at home in your country.”

For Orban, such public statements are an important part of his efforts to shore up his legitimacy at home — especially now that he is increasingly under attack for cronyism and corruption. The leaders of foreign corporations who participate in such events thus unwittingly make themselves accomplices of his deepening authoritarianism.

It is time for these companies to change course. Multinational corporations have a particular responsibility within the E.U. They profit from the E.U. common market, which is embedded in a framework of shared liberal democratic values. They cannot turn a blind eye when political freedom is being eroded even as they continue to benefit from the four economic freedoms of the common market. Foreign investors need to clearly speak up against Orban’s authoritarian agenda and his assault on independent civil society and media.

Companies should also re-orient their corporate social-responsibility activities. It is not enough to invest in prestige infrastructure projects such as the “Audi Arena,” a multipurpose event center in Gyor. Foreign multinationals would be better off pooling their corporate social-responsibility resources to support independent media and civil-society organizations, an urgently needed antidote to Orban’s program of Putinization in the heart of the E.U.

Precisely because other governments (such as Poland’s) are following Orban’s lead, it is crucial that foreign investors end their silence. It is unlikely that they will change course without significant public pressure. Until now, multinational corporations have had to face few critical questions about their relationship with illiberal leaders such as Orban. Civic groups committed to open-society values and the media should put an end to this cozy state of affairs. Executives from companies such as Daimler and Audi need to start hearing the question: “So where do you stand on Orban’s illiberal state?”

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This commentary was originally published by The Washington Post on April 18, 2017.

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