Transcript
What is Hungary to us or we to Hungary?
Hi, Paul Krugman here. A Saturday morning update ahead of the big election in Hungary taking place tomorrow. The eyes of the world are upon Budapest.
It’s a little odd that Hungary is so much the focus of a lot of people, myself included. It has about the same population as New Jersey, about a quarter of New Jersey’s GDP.
It’s not a big place, but it’s symbolic. It is a role model for right-wing authoritarians everywhere. It still formally has the institutions of democracy, but has for the past 16 years been a one party state — ruled by a right-wing authoritarian ethno-nationalist regime that enforces its will partly by rigging elections, partly through an extensive system of crony capitalism that rewards its friends and punishes its enemies.
In other words, it’s a MAGA kind of place. It’s what they would like to do to the United States, although with less sophistication and more brutality.
Donald Trump has been frantically trying to keep Viktor Orban in power, largely in ways that demonstrate that he really doesn’t understand how the world views him. Sending JD Vance to campaign for Orban is not helpful to Orban. It’s a boost to the opposition. Spewing frantically on Truth Social about how important it is that Orban win is, again, a gift to the Hungarian opposition.
The system is still very rigged in Hungary, but there’s pretty good reason to hope that the popular wave against Orban and Fidesz is so large that it will sweep away all of the rigging that they’ve imposed to try and keep themselves in power.
We’ll all be watching the polls eagerly tomorrow. What struck me, however, as something new is that lately, at the very end, Trump is now saying, oh, elect Orban and I will help you out economically. And just yesterday, he put up a post saying that if Orban is re-elected, that the Economic Might of the United States will come in to aid Hungary and its well-deserved prosperity and all of that.
Which is interesting because it’s an illustration of the megalomania, the delusions of grandeur that really afflict the current U.S. administration, a complete inability to have a sense of the limits of American power.
What Hungary is to us or what Hungary is to MAGA is clear, but what are we to Hungary? Look at Hungarian trade. It is a relatively open economy, which depends a lot on its role as a relatively low-cost manufacturing platform, which it has been able to maintain despite the crony capitalism and all of that.
Where does Hungary export to? Well, about 80% of its exports go to either the European Union, or Britain has a little bit on top. So essentially the democracies of Western Europe are where 80% of Hungarian exports go. How much does it export to the United States? 3.5%. Basically, Hungary, for practical purposes, does no business with the United States.
This is mostly about gravity: The “gravity equation” in international trade says among other things that trade depends very much inversely on the distance between countries. Hungary is in the middle of Europe. It’s going to inevitably do a lot of trade with Europe. And that’s even larger because the special role that Hungary has taken is that of being a a manufacturing platform for relatively low-wage pieces of the European manufacturing sector. In a way, kind of like Mexico is for North American manufacturing.
By the way, the fact that German companies in particular have invested a lot in Hungarian production is a large part of the reason that the European Union has been so derelict in trying to rein in Orbán and his destruction of democracy. But in any case, the point is that there’s just no way that the United States is going to be an important economic partner for a small country in the middle of Europe. It’s a complete misunderstanding of how big, how important, how powerful the United States is.
It is in a way kind of the economic counterpart of imagining that the United States can easily effect regime change and bludgeon Iran into submission. This is not who we are. It’s not our role. We are not big enough. We are not the sole global superpower. And in any case, being a superpower isn’t what it used to be. So all of this will be ignored by the Hungarians.
The one thing that may happen is that the clear message that Trump favors Orban may be the straw that breaks the camel’s back, maybe the final, tipping point that removes Orban from power.
I’m not counting any paprika chickens before they’re hatched. There is a kind of a nightmare here about what happens if there’s a clear attempt to simply overrule, defraud the Hungarian electorate, not just the rigging that has worked so far, but something even more extreme. And then will the Europeans ever live up to their own values, their own ideals?
I hope we don’t come to that point. But anyway, whatever is happening, one thing that’s clear is that U.S. economic partnership or lack thereof with Hungary doesn’t make a damn bit of difference.
