The Fatal Flaw of Central Europe’s Illiberal Democracies

LONDON – Street protests in Budapest against new legislation governing overtime work – quickly dubbed the “slave law” – highlight the vulnerability of the illiberal democracies that have emerged in Central Europe. The law, introduced without any consultation, seeks to limit labor costs and mobility in order to keep foreign direct investment (FDI) – and jobs – in Hungary. It also benefits employers, including the new, politically connected elite that surrounds Prime Minister Viktor Orbán.

But there is more to the story. The divisive nature of the region’s illiberal governments precludes consensus-building, and has so weakened academic freedom and independent institutions that creative policy responses to economic challenges are being stifled. As a result, the only feedback mechanism in the region is demonstrations and civil disobedience. The vast protests now confronting Orbán’s regime may be just a taste of things to come.

The conditions now facing the region would be difficult to manage for even the most nimble and open of governments, let alone the ideologically blinkered illiberal regimes of Hungary and Poland. Central Europe’s labor markets are tight and labor shortages abound. Unemployment has dropped while real wages have risen markedly (though their levels are still below the average for advanced European Union countries).