Financial nationalism is on the rise. Countries ranging from the United States, Russia, China, and Taiwan, to Bolivia and Hungary embrace financial nationalist policies although to varying degrees. For scholars, a core intellectual puzzle is to explain these governments’ 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.
However, this paper also describes an underemphasized critical condition of financial nationalism’s advancement, at each examined policy domain, namely the diminishing democratic oversight of major financial transformations. Exposing the details of bank domestication, the corrupt conduct of the central bank, and the unchecked spread of informal money lending among the poor, the paper argues that financial nationalism as it is pursued in Hungary weakens the capacity of democratic institutions. The domesticated banks controlled by oligarchs, provide financial support for such investment that increase government’s control over the media, curb academic freedom, and increase political dependencies of business actors. It also builds up financial hierarchies among the poor in villages by constraining their freedom to vote at municipal and national elections.
Finally, the Hungarian example does not suggest that financial nationalism inherently leads to a democratic decline, but that financial nationalism’s many impressive economic achievements should be understood within its political context.