Hereunder we publish an article by Professor Francis Fukuyama and an open letter which was written by Dr. Zoltán Kovács (State Secretary for Government Communication) as a reply.  Do Institutions Really Matter?
(by Francis Fukuyama)

Over the past decade the mantra in both development studies and comparative politics has been “institutions matter”—that is, you aren’t going to get economic growth or other human development objectives in the absence of institutions like rule of law, transparent and accountable governments, low levels of corruption, and the like.

The empirical basis for this assertion is actually much weaker than many of us would like to think, however. Plenty of countries, beginning with China, have grown very rapidly over the past generation in the absence of what is now called “good governance.” Indeed, the US and Britain charted the industrial revolution with governments that were substantially more corrupt and less capable than they are today.

The questionable relevance of institutions is brought home by the controversy over Hungary’s new constitution, which went into effect on January 1, and which has caused a firestorm of criticism in the European parliament and elsewhere. The document was the product of the electoral victory of Viktor Orbán and his conservative Fidesz party, which since 2010 has controlled more than 2/3s of the seats in the Hungarian Diet and has thus been able to change the Hungarian constitution.

The new constitution weighs in on a number of social issues, for instance by defining life as beginning with conception and marriage as between a man and a woman. Rick Santorum would like this constitution, and part of the criticism from the European left concerns these social issues. While they do not represent my personal preferences, that’s not what bothers me; it seems to me the Hungarians have the right to decide for themselves what positions to take on these issues.

The much bigger threat raised by the Orbán constitution is the weakening institutional checks on executive power, such as the lowering of the retirement age for Constitutional Court judges, eliminating the independence of the Central Bank, and grabbing control of the media regulator, changing the electoral laws to benefit Fidesz, and inserting a series of provisions to weaken legislative control over the budget.

The point about institutions not mattering is this. In terms of the formal powers the new constitution grants the Hungarian executive, they are not greater than those traditionally possessed by a British prime minister. The Bank of England became independent only in 1998; there is no British constitutional court and therefore no judicial checks on legislative power; not just 2/3s but a fifty percent plus one majority in the House of Commons is sufficient to overturn any law in the land, including any protecting England’s fabled press freedoms.

So the real difference between Hungary under Orbán and classic British governments does not lie in the formal allocation of powers in the political system. The problem lies entirely in how those powers are used: nobody trusts Viktor Orbán and Fidesz to use their powers responsibly, as evidenced in the way that the government rammed the constitution itself through the Diet last year, with little willingness to give ground on issues of grave concern to important parts of Hungarian society. Orbán’s behavior betrays an authoritarian thin skin that would rather ban opposition than engage with it. The very act of using Fidesz’s supermajority to embed its policy preferences in the constitution can also be seen as an abuse of power: if it is voted out in the future, a government replacing Fidesz will need a supermajority to change things like the tax rate or the rules on gay marriage which ought to be matters for ordinary legislation.

By contrast, the “democratic dictatorship” constituted by the Westminster system has worked in English history because of the underlying moderation of English politics: while some may have been tempted, few prime ministers have sought to use their majorities to, for example, shut down the opposition press. The new Hungarian constitution is bad not so much for what it is, but what it reveals about the long-term proclivities of its authors.

There are two potential lessons to be drawn from this. First, in contemporary Europe, some of the most important institutional checks on power are those exercised by the EU and the broader international community, rather than anything within Hungary itself. Orbán has made a mess of Hungary’s economy, and he is being called on the carpet by the European parliament, the Commission, the IMF, and a host of other international bodies. This enforcement of democratic norms is one of the important functions that the EU and other international bodies play today.

Second, I wonder about the ultimate utility of tinkering with institutional rules that either add or subtract checks and balances to existing democratic systems. If the political will exists to do something even in a system with a lot of veto players, it will happen; conversely, bad actors can undo even the best-designed institutions. Maybe institutions don’t matter, after all.

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The reply
(by Dr. Zoltán Kovács)

Dear Sir,

Last week you published an article by Francis Fukuyama on your website (“Do Institutions Really Matter?” January 23, 2012). Factual accuracy is a prerequisite for accurate reasoning. As some of Professor Fukuyama’s facts were inaccurate, so too was some of his reasoning.

Firstly, the retirement age of Constitutional Court judges remains unchanged under the new Constitution. With the introduction of a new general rule for the retirement of those holding public office (including “ordinary” judges), special rules for the Constitutional Court and for its judges remain intact. Secondly, although we are currently involved in the process of legal argument with the European Commission, it has not ruled that the Hungarian government is infringing the independence of the Central Bank, let alone “eliminating” it. Thirdly, concerning constitutional control over the budget, the truth is the exact opposite of what Professor Fukuyama states: with the introduction of the national dept “cap” we are not weakening control, but strengthening it.

Last but by no means least, a major inaccuracy undermines Professor Fukuyama’s reasoning on the new electoral law. It is important to emphasize that while the number of seats in the Hungarian Parliament will be halved at the next election, the so-called composite electoral system has been retained. The new electoral law in fact makes it easier for candidates to stand. Furthermore, it makes no sense to talk about the Government “changing the electoral law to benefit Fidesz,” since the 2010 results were completely atypical. In addition, besides winning 53% of the votes cast, Fidesz won a majority in 173 out of 176 individual constituencies. Imagine this result in a “winner takes all” system, as found in the UK or the US! Above all, in democracies elections are decided by the votes of the citizens, not by the specifics of any particular election system.

We respect critical opinion and welcome fair criticism, but it is disturbing to see such an eminent thinker basing his arguments concerning Hungary on factual errors. We shall nevertheless continue to read Professor Fukuyama’s contributions with interest, confident that they will prove as useful in understanding our contemporary world as they have proven to be in the past.

Yours sincerely,

Zoltán Kovács, Ph.D.
State Secretary for Government Communication

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Professor Fukuyama’s blog post was originally posted on January 23, 2012 at http://www.the-american-interest.com and the Editors got Dr. Kovács’s reply on February 3, 2012.

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