Financial Nationalism and Democracy: Evaluating Financial Nationalism in Light of Post-Crisis Theories of Financial Power in Hungary

Abstract

Since the global financial crisis, for IPE scholars a core intellectual puzzle is to explain the rise of financial nationalist governments into power and their sustained capacity to pursue financial nationalism in an era when the interconnectedness of global financial markets surpasses any historical level. Financial nationalism is puzzling because of its capacity to redistribute gains from international financial transactions among a larger share of domestic society. This paper, using the example of Hungary, identifies financial nationalism's unexpected achievements through contrasting it with claims of three theories of financial power: structural power of finance, financialization of state institutions, and financialization of everyday life. Specifically, it documents the Hungarian government’s achievement to increase domestic ownership of banks, to importantly enlarge the scope of central banking, and to significantly reduce the credit exposure of a large segment of the Hungarian population. At the same time, it also describes underemphasized critical conditions of financial nationalism’s advancement, at each examined policy domain, namely the diminishing democratic oversight of major financial transformations. Finally, the Hungarian example does not suggest that financial nationalism inherently leads to democratic decline, only that its many impressive economic achievements should be understood within its political context.