POLICY ANALYSIS
How Viktor Orbán’s Hungary Eroded the Rule of Law and Free Markets
Many on the right see Viktor Orbán’s Hungary as a model; in fact, it is a cautionary tale of unrestrained executive power and crony capitalism. Published on March 31, 2026, as Policy Analysis No. 1015 by Johan Norberg, this analysis argues that while some US conservatives view Hungary as a template for the future, the reality is that Orbán’s crude majoritarianism has undermined the rule of law and media freedom to take control of the economy and funnel resources to loyal oligarchs. The dismantling of institutional constraints has gone further than in other modern democracies, and the results have consistently disappointed, even in areas where the government claims success, such as strengthening the economy or increasing fertility rates.
Introduction
Orbán has been praised by figures like Steve Bannon and Tucker Carlson as a moral leader and a model for promoting conservative policies. These supporters often describe Hungary as a bastion of conservative values that has defeated the "woke left" and changed institutions to promote these ideals. While part of Orbán’s appeal stems from a reasonable resentment of EU overreach, his main grievance with Brussels is that it prevents him from enforcing personal preferences, rewarding cronies, and dismantling media freedom. The system Orbán has built is the opposite of the American tradition of limited government, rule of law, and free markets.
When Orbán Was a Liberal
Viktor Orbán was once a classical liberal who advocated for an open society. In 1988, he co-founded the Alliance of Young Democrats (Fidesz), which attacked both the left’s socialism and the right’s nationalism and xenophobia. At the time, Fidesz even defended the support of philanthropists like George Soros. However, after failing to make initial electoral breakthroughs, Orbán shifted the party in a nationalist, conservative direction in the mid-1990s. He abandoned his previous positions on the free market and secularism to adopt religious rhetoric and anti-immigration messages when it became politically convenient. Fidesz returned to power in 2010 with a sweeping 68 percent of parliamentary seats, giving them a constitutional majority to change the "rules of the game".
Falling Down the Ranks
Despite describing himself as a "freedom fighter," Orbán’s tenure has seen a drastic decline in liberties for Hungarian citizens. In 2019, Freedom House reclassified Hungary from "Free" to "Partly Free," making it the first EU member to lose its "Free" status. In the Liberal Democracy Index, Hungary’s performance halved between 2010 and 2024, making it the least free country in the European Union. Similarly, it fell from 31st to 67th in the Human Freedom Index by 2023. Governance indicators for the rule of law, regulatory quality, and control of corruption have all declined significantly.
An Illiberal State
In a famous 2014 speech, Orbán explicitly stated his goal was to construct an "illiberal state," rejecting the idea that individuals have the right to do anything that doesn't infringe on the freedom of others. He argued that individual freedom must be replaced by government intervention and state control, pointing to Russia and China as successful "stars" to emulate. He has since cultivated close ties with Vladimir Putin and Xi Jinping, positioning Hungary as a reliable partner for authoritarian powers rather than Western liberal democracies.
Dismantling the Barriers
Fidesz used its supermajority to dismantle the rule of law, starting with a new constitution in 2011 that was passed without opposition input or a national referendum. The government expanded and packed the Constitutional Court with loyalists while stripping it of its power to review tax and budget decisions. They forced senior judges into retirement and created a National Judicial Office with the power to hire, fire, and move cases to sympathetic judges. Hungary now ranks 123rd out of 143 countries for "Constraints on Government Power" in the Rule of Law Index.
Changing the Rules
Electoral laws were rewritten to favor Fidesz, including abolishing second-round runoffs and introducing "winner compensation" to amplify the seat share of the largest party. The government gerrymandered constituencies and enfranchised ethnic Hungarians abroad—who vote overwhelmingly for Fidesz—while making it difficult for expatriates to vote. Political advertising was restricted to state-controlled media, and the government used tax-funded "public interest campaigns" to flood the media with Fidesz slogans.
Unfree Media
Since 2010, Hungary has fallen from 23rd to 68th in media freedom rankings. The government took direct control of public service media, firing independent journalists and replacing them with loyalists who promote a pro-government agenda. Through state advertising, unbalanced frequency allocations, and regulatory harassment, the government pressured private media owners to sell to Fidesz oligarchs. By 2018, pro-government market share in print and radio was estimated at above 80 percent.
Uncivil Society
Fidesz centralized the school system, taking power away from local principals to direct budgets and choose textbooks. Universities and billions in state assets were transferred to public interest foundations run by Orbán loyalists, ensuring Fidesz maintains control even if they lose an election. The government also targeted NGOs with laws inspired by Russian "foreign agent" legislation and forced the Central European University to leave the country.
Anti-Market, “Unorthodox” Economics
Orbán’s "unorthodox" economic policy involved nationalizing private pensions (worth 10 percent of GDP) and introducing punitive, progressive taxes on foreign-owned banks, telecoms, and retail sectors. The state took control of hundreds of companies in diverse sectors, often redistributing them to government allies. Public monopolies were created for products like tobacco, allowing Fidesz to hand out lucrative concessions to political loyalists.
Our Eight to Ten Capitalists
Orbán believe the economy should be divided among "eight to ten major capitalists" tied to the Prime Minister’s inner circle. Public procurement has been weaponized, with favored businesses six times more likely to win contracts by 2021. Much of this cronyism was funded by EU taxpayers; between 2011 and 2021, just 12 businessmen close to Orbán captured a significant portion of EU-funded contracts. This led the EU to freeze $6.3 billion in funds due to systemic rule of law breaches and corruption.
Subsidizing Family and Religion
While Orbán has spent 5.5 percent of GDP on family subsidies, Hungary’s fertility rate has declined to 1.31 in 2025—one of the lowest in the region and back to 2009 levels. Similarly, despite presenting itself as a bulwark of Christianity, religious identification has plummeted; the share of self-identified Catholics dropped from 38.9 to 29.2 percent between 2011 and 2022.
Conclusion
Critics argue that Hungary has become a "mafia state" where the government uses state coercion to replace market actors with loyal oligarchs. Orbán’s project is not a model of successful conservatism but a cautionary tale of how collectivist and nationalist rhetoric can be used to centralize power and loot resources.
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