Although the goal of the newly proposed Common Agricultural Policy (CAP) is to stabilise farmers’ income and revitalise rural society, it continues to disproportionately favour large agribusinesses. Capital concentration pushes small farmers out of business, contributing to rural degradation. Especially impacted are rural communities in the Czech Republic and Hungary due to a combination of their post-communist restitution practices and CAP’s biassed payment distribution favouring the original member states. Rage coming from these localities has been mobilised by both nation’s most popular politicians – Andrej Babiš and Viktor Orbán. They have funnelled rural dissatisfaction into their project of dismantling democratic institutions while using European subsidies to finance their livelihoods.
The Problem with CAP
In 2013, the European Union’s (EU) extensive agricultural policy was liberalized by adopting a flat-rate scheme solely based on hectare size. CAP still accounts for 40 percent of the EU budget, which is paid by EU citizens who contribute €7 a week in taxes and results in higher food prices. Since 2013, the EU issues payments through a two-pillar system. Pillar one (76 percent of the CAP budget), is tied to land size; and pillar two, which is co-financed by the national states, gives governments a free hand in choosing rural development projects to offset the adverse consequences of the first pillar.
The liberalisation of pillar one has led to a disproportionate favouring of bigger agribusiness concerns. Large agribusinesses benefit from economies of scale not available to smaller farms, and they can use the excessive capital – coming from lower costs and higher subsidies – for innovation or buyouts. The problem was underscored in the last Farm Structure Survey conducted by the EU: small and medium-size farms cultivate 78 percent of the land (under 10 hectares) while only receiving 11 percent of CAP support payments. Those structural problems further drive oligomerisation of the sector.
The 2023 CAP reform aims to resolve the problem. It gives national governments higher decision-making power over both pillars. There is a possibility of voluntary capping large beneficiaries and shifting 10 percent of pillar one payments to support small and medium sized farms. The new CAP also gives direct oversight to national governments over pillar two via National Strategic Plans, which the member states draft according to EU aims.
Unfortunately, the new CAP cannot bring an end to the oligopolies. The problem with pillar one is that capping remains voluntary and the definition of small and medium sized farms lies somewhere between 1 and 30 hectares. Allowing 20 and 30 hectares agribusinesses to receive the same aid. The new CAP does not ensure adequate support for small farmers and excludes those who cultivate land smaller than one hectare.
The problem with pillar two is in its assessment model of the subsidies’ performance and eligibility. The same member state will carry those checks, having only one obligation: to inspect at least 1 percent of all beneficiaries. But, when those state inspectors find subsidy inconsistencies, the still undefined penalty will be granted only after three consecutive years of faulty behaviour. With those measurements in place, it is unlikely that significant penalties will be awarded, putting the €95.5 billion rural development budget at the mercy of local ruling political parties.
Despite initial optimism, the unfairness of the CAP persists. Even the European Environmental Bureau is blunt that three-quarters of the €291 billion budget directed to pillar one will go to large agribusinesses.
The research team from the Lithuanian Institute of Agrarian Economics summarised the impacts of the new CAP. According to their assessment, the reform will increase the already large gap between farms inside each member state and between member states. The focus on green modernisation indirectly promotes the purchase of equipment produced in the older member states, with smaller farms having a higher burden to pay. Furthermore, the hectare based payment inflates land prices, making land acquisition and land leasing less accessible to new farmers. The difference in the hectare pay rate between the old and the new member states further distorts the sector’s competitiveness. All in all, the policy does not stabilise most farmers’ incomes amid environmental fluctuations as the intended aim of the policy states.
Even more so, a policy that should salvage the rural population, negatively affects agrarian post-communist societies since the new member states silently accepted lower hectare payments as part of the EU accession process. Among the top three EU countries with the highest concentration of large agribusinesses are the Czech Republic and Hungary, where 89 and 85 percent of all direct payments respectively go to the top fifth of agribusinesses.
The Post/Communist Legacy
Both countries spent decades under communist regimes where privately owned land had been confiscated and put into large collectives and state-owned holdings. After the 1989 revolutions, the agricultural transition took place through restitution and privatisation.
During the Czech Republic’s land redistribution, most of the land stayed in the newly privatised collectives. 66 percent of agricultural land was earmarked to be given back. Most of the original owners were not able to reclaim their land since the new laws were vague enough to enable the collectives’ communist-era managers to avoid executing the handovers.
The coupon privatisation enabled the purchase of entire collectives, ensuring that a handful of wealthy individuals were capable of acquiring those lands. And with foreign investors unable to participate, the late-communist era’s managerial class dominated the wave of land redistribution.
Hungary went through a similar process. However, its consequences lead to a more favourable outcome for rural citizens. One-third of the cooperatives were redistributed via restitution, half of the land was auctioned off, and the remaining 20 percent stayed within state jurisdiction.
The auction’s winners were wealthy former communists, cooperative communist-era managers and cooperative workers. Although foreign investment was prohibited, European investors also acquired large plots of land through so-called pocket contracts. Western-European agribusinesses used Hungarian front-people as Trojan horses to represent them in the agreements. Through this practice, an estimated 14 percent of arable land was redistributed.
The privatisation process was not the only shock for the agricultural sector. Throughout the 1990s, the CAP also produced adverse consequences in post-communist countries. These echoed the EU’s dumping techniques practiced towards the African continent.
Milan Chládek, director of the former Czech agrarian privatisation fund Achilleus, describes the impacts of the CAP on Central Europe: “The liberalisation of the market created harsh conditions for the entire farming sector. Highly subsidised agricultural goods from Western Europe flooded the Czech and Hungarian markets. We had no means of competing with such a subsidised market armed with advanced technology. It forced us to switch towards cash crops such as rapeseed or maze to salvage our living. Yet, many of these small-scale farmers could not efficiently transition, and were forced to sell their land to more extensive holdings.”
Before entering the EU, the economic transition had already transformed both countries. 75 percent of the Czech Republic’s arable soil was controlled by corporate bodies, and only 25 percent was owned by collectives made up of small farmers. Due to the favourable auction scheme, and the state’s retention of 23 percent of the land, large agribusiness owned 45 percent of Hungary’s arable land.
The Unequal Impact of the CAP on New Member States
The privatisation era had already contributed to concentration in the agricultural sector, but the unchanged CAP which neglected those historical developments has now further accelerated the farm consolidation process. After the 2004 enlargement, post-communist countries became part of CAP. Nevertheless, the difference in bargaining power led the new member states to accept asymmetrical subsidies. In the single area payment scheme (SAPS), the allowance for the original member states was one-third higher than for the additional twelve new member states. On average, the hectare subsidy was €156 for a Czech farmer , €139 for a Hungarian farmer, and €698 for a Dutch farmer.
With the 2013 reform, the EU introduced the current payment system for new member states – the basic payment scheme (BPS). Even though the policy reduces the disproportion, the per hectare subsidies for the Czech Republic and Hungary are still 67 percent lower than what Dutch farmers receive.
The unfairness of the system was already on full display in the aftermath of the 2008 financial crisis. The income gaps produced by the system inhibited fair competition between individual farmers and giant holdings.
Data from Eurostat highlights this trend. In 2010, 89 percent of the Czech Republic’s arable land was in the hands of 19 percent of holdings larger than 100 hectares. This number was the highest in the whole EU. In Hungary, 40 percent of farms ceased to exist. This paved the way for large agribusinesses, which accounted only for 1 percent of all Hungarian farms, to own 65 percent of arable land. CAP did little to support rural development. Instead, it helped to create agribusiness monopolies.
The New Electorate
Following Eurostat’s analysis, the year 2010 ignited a societal shift in both countries. The agrarian outrage caused by the degradation of rural life begun to shape the new era in Czech and Hungarian politics.
The two most popular parties share the same root: a dissatisfaction with the liberal order mixed with nostalgia for vibrant rural life, maintained with an iron fist – a longing for shielding autocratic rule that was historically manifested in iron or Christian fists.
The CAP, whose stated aim is to stop the widening gap between cities and villages has failed. It has even accelerated the process. Its promotion of capital concentration pushes farmers off their land. This process impairs rural life because a farmer is in the village’s heart; there is an entire ecosystem surrounding farm production. And when large agribusinesses monopolise agricultural production, they detract from a vibrant rural culture.
In the last three decades, the quality of life in the countryside has deteriorated. Those who stayed work in lower-paid sectors with worse working agreements and have hardly accessible medical care. Ultimately, they are left with shrinking financial resources in places where opportunities are scarce.
The gap is not only seen on salary slips but also on the map. Negative geographic phenomena are accumulating. In rural localities, change is hardly ever positive. Its inhabitants crave security. Their past ‘tradition’ is often seen as the only avenue where solace can be sought, and now the ‘cosmopolitan’ inteligentsia wants to take this away as well. The self-doubt is lurking. In this narrative, ‘we,’ those fighting for our self-determination, are now being left out — labelled as ‘losers’ by those from the capital who blindly idealise the West, while trampling the nation’s interests.
However, there is a fundamental misconception about this electorate: they do not want to belong to the West, but they also do not want to curl back to the East. They are looking for alternative forms of governance, which stand in contrast to the post-89 Western democratic ideal. Something that would provide them with social mobility and prevent the loss of their heritage. Something that would not tear down what they see as their foundations. For this reason, anything from the West, even policies advancing human rights, has to be rejected. The only thing left is a craving for an authoritarian form of anti-establishment rule. This electoral sentiment proves to be vital, rejecting any outside criticism of centralised power, and turning present-day rural societies into a perfect breeding ground for new autocratic leaders.
Both electoral majorities reject radical left ideologies since the communist past is still a recent memory. Yet, the communist past has prevented the scissors of inequality from drastically opening up. To resolve this dissonance, some citizens are willing to accept the idea that the root cause of their subordinate positions comes today from culturally distinct external forces rather than as a product of internal class struggles. Additionally, the communist legacy has left behind many socialist policies that the electorate is used to, effectively limiting the ability of governments to diverge too widely from leftist economic policies. Since both majorities reject radical left ideologies, and the memory of fascist attrocities is fading from the consciousnesses of new generations, the only anti-establishment rhetoric appears to come from the center or the right.
Nevertheless, rural resentment has been leveraged differently based on the past of both leaders and the historical grievances they mobilize. Both Babiš and Orbán’s visions of interwar history, shared with their respective electorates, is one in which their nations were not subjugated to any external force. Yet, there are also important ideological differences in the ways the past is framed.
Babiš uses current rural grievances and ties them to the interwar obsession of Czechs with their unrealised potential. His ideology cannot be anchored in anti-communism since 2,5 million Czechoslovaks (30% of the entire population) were members of the communist party compared to 7% of Hungarians. This is also reflected in the personal history of Babiš, who collaborated with the communist secret service. Additionally, the anger associated with the corruption-ridden privatisation process in the Czech Republic was brought about by the political right. Consequently, with a culturally secure Czech electoral majority living in small cities, and unable to pursue direct opportunities in the west, the main popular ideology has become one that favours governance by a centralist technocracy.
Within this frame, Czech interwar economic glory was trumpeted by its European allies. Many Czechs want to believe that their excellence is repressed by external forces coming from traditional ‘corrupt’ parties or the ‘German-led’ EU, and not through the direct acquiescence of some Czech elites and parts of the domestic population. On that account, Babiš has linked himself with the interwar entrepreneurial hero of Tomáš Baťa, who tried to emulate Ford’s vision of society. Babiš’s movement then offers technocratic solutions based on economic nationalism – the Czech Republic first mentality – promising to bring back past economic glory.
For Orbán, his electorate is mainly rural. Its historical grievances come from the idea of a culturally distinct nation that lost 70% of its territory and subsequently saw its people end-up in neighbouring states. Therefore, nationalism becomes central to Hungarian politics, where the definition of the nation remains flexible. In the post-communist era, the position towards Hungarian minorities in neighbouring states and the state of the Roma minority inside Hungary have been the most significant points of political division. Furthermore, the failed foreign-led privatisation carried out under the aegis of leftist governments in the 1990s and Orbán’s dissident past propelled his party to adopt right-leaning answers to the rural electorate’s grievances.
In Orbán’s framework, Horthy – Hungary’s interwar neo-feudal and Christian-nationalist leader – is hailed for his strength in standing up to the empires wanting to destroy Hungarian integrity, sidestepping the state’s role in perpetrating WWII atrocities. Within this view, interwar anti-Semitic rhetoric is transformed into another conspiratorial scenario where European elites want to destroy Hungarian cultural identity by shifting the status quo in favour of minorities. For this reason, Hungarian territorial claims and a divergent European identity need an anchor, a nationalistic device found in the Christian church.
Witnessing the corrupt privatisation led by reformed communists in the 90s, and the misuse of EU funds by newly established domestic politicians, rural populations in the Czech Republic and Hungary have become inherently distrustful of any politician. Even though citizens were pro-democratic, they have turned against party politics. They know every politician will steal, but they are okay with it to the point when they feel and see a sign of betterment. In the eyes of the ageing countryside, the only force that imposed its demands was the communist iron fist for the Czechs and the Christian church for Hungarians; and they are longing for such power to safeguard their crumbling identity, creating a vacuum for new politicians to emerge.
Even though agriculture generates only 1 percent of the EU’s GDP, its political importance is unquestionable since the political battleground lies between the cities and the countryside. In the Czech Republic and Hungary, the ones who first identified the vacuum were Babiš and Orbán. They have restyled themselves as representatives of rural society battling against the unfair treatment brought upon by failed global economic integration initiated by the reformed communists and now led by the EU.
Babiš – The Politician of Necessity
CAP’s inherent structural favouring of large agribusinesses pushed Andrej Babiš to active politics. His entrepreneurial path is a prime example of an agricultural privatisation winner whose wealth was boosted by the CAP. He is the fourth wealthiest person in the Czech Republic and the largest private employer. Since his business became tied to the state apparatus handling EU subsidies, Babiš used Agrofert’s money to start his political party because a governmental position provides better control over intended legislation than extensive lobbying.
Before his first election cycle, he acquired the most widely read newspaper, dismantling its investigative wing, and used the remaining journalists for smear campaigns against his political opponents.
Babiš focused on the emerging rural electorate. He ran on the image of a successful businessman who would manage the country like his firm — a billionaire who has enough money to not engage in corruption. The party’s program encouraged widespread salary-boosting and increasing education and healthcare budgets, while still promising to lower the inflated governmental deficit due to corruption and insufficient tax monitoring. These rhetorics were new to the electorate. They play on their economic security needs, and Babiš was elected to the Ministry of Finance.
Because of the favourable world economy, salaries were rising, and the Czech government could then cut its deficit without any adverse consequences since the overall economy was in surplus. Babiš then had a surplus of EU subsidies to redistribute to rural heartlands, which he did not hesitate to take credit for. The party’s support increased from 19 percent to 30 percent.
Babiš – The Prime Minister of Greed
In the next election cycle, in 2017, he won and formed a minority government with the support of the Communists Party. As a prime minister, he appointed three Agrofert board members to the State Agricultural Intervention Fund (SZIF), overseeing CAP subsidies.
Another crucial position was occupied by Richard Brabec, a former employee of Agrofert, who ended up controlling the Ministry of the Environment. Under his term, his altered inspection team overlooked Agrofert’s abuses. The latest example was the Bečva river cyanide leak. Brabec’s signatures are on bills advancing biogas subsidies or compensational packages for rising prices of emission credits, both serving the Agrofert’s interests.
In 2005, Agrofert’s profit before taxation was €36 million (adjusted for inflation). Fifteen years later, the pre-tax profit was €213 million. The CAP first pillar subsidies to Agrofert doubled during his first term as finance minister, and the money from the second pillar increased fourfold. These figures persisted throughout his second term, where Agrofert received over €164 million in CAP subsidies. In comparison, the second-largest private recipient – Agro Měřín – collected €41 million during the entire 4-year period.
With this vast increase in profits, the European Commission requested to investigate Mr Babiš’s firm, now run by two trust funds, to bypass the Czech conflict of interest law while he was in office. European auditors found Babiš’s conflict of interest, however, not illegal misuse. They filed the report to the Czech police. They further advised SZIF to halt Agrofert’s subsidies, yet the money kept pouring in as the subsidies were handled according to CAP’s almost non-existent regulations.
Orbán – The Prime Minister of Cunningness
Prior to Hungary’s 2010 elections, the agricultural pocket contract scandal erupted. The Socialist Party linked to the late-communist power structure allowed Viktor Orbán to mobilise the rural dissatisfied electorate to secure a constitutional majority.
With this decisive win, Orbán followed his earlier words, “We have only to win once, but then properly.” Since 2010, he has started the nation’s subjugation.
Orbán, dancing on the edge of legal acceptability, started to dismantle the checks and balances of institutional democracy. Aiming to consolidate political power, Orbán replaced older constitutional judges with his allies through the unconstitutional age cap clause.
Backed by EU funds, the new government has limited municipal decision-making competencies and changed the constitution’s ninth amendment, effectively strengthening the homophobic tenor of the governing party while it also allows for public funds to be transferred into private assets being put into the amendment as a rider. These moves enabled centralised oversight of public and EU money which could be legally transferred from public funds into private assets.
To ensure that Fidesz’ constitutional majority was secured, Orbán halved the size of the National Assembly, changed the election procedure to a single voting system, gerrymandered constituencies ensuring rural areas outvote city districts, and granted ethnic Hungarians living outside the country citizenship. In this new electoral design, each seat is won by the district’s most popular candidate, which favours the most popular party.
With these electoral changes, Orbán was able to secure 2/3rds of parliamentary seats, with 45 (2014) and 49 percent (2018) of the popular vote.
To maintain Orbán’s popularity among Hungarian voters, a broad crackdown on the state’s media took place. National TV channels soon echoed Fidesz propaganda, inflated by information gathered via Pegasus spyware delivered by the Ministry of Justice. In 2014, Fidesz passed a new advertising tax of 40 percent for the most prominent media houses in the country. And with governmental ads pouring public money into the pro-Fidesz press, Orbán’s circle bought up the rest of the private media companies. After the end of the year, pro-Fidesz media controlled 90 percent of the Hungarian press.
With all those steps undermining the oversight of the ruling powers, Hungary was labelled – by Freedom House – as a transitional state, a grey zone between democracy and autocracy.
Orbán – An Autocrat Made by EU Money
Orbán wanted to monopolise decision-making power to secure the state contract process, funnelling EU funds to create a set of his devotees and, as a byproduct, revitalise rural society. Without the EU, Orbán could not show his electorate that things are improving. EU subsidies amount to 2.5% of Hungary’s GDP growth. This number corresponds to 71 percent of the entire country’s GDP increase, and its CAP section with its annual contribution of €588 million (2018) corresponds to 12 percent of the entire 3.5% GDP increase.
Orbán knows how vital these euros are for his regime, and this is why Hungary has a 100 percent subsidy absorption rate, the highest number in the EU. Nevertheless, the misuse is so vast that the European Anti-Fraud Office recorded three times more suspicious subsidies when compared to any other member state. Many of those cases receiving millions of euros are offshore companies with no revenue history. The machinations with EU and public funding are so vast that Hungry is now recognised as the most corrupt country in the EU.
Through this corrupt system, the rest of the State’s arable land (23 percent) has been redistributed in the Fidesz era.
In 2013, the National Land Fund first leased out state-owned land when the previous 20-year agreements ran out. The state media covered it as an opportunity for smaller farmers, but with auctions not properly advertised and favouring those who could acquire sizeable sums of property, most of the land went to new Hungarian oligarchs.
Utilising the 2015 migration chaos, Orbán decided to sell off the leased land. The current lease owners were given priority and got low-interest loans from the Hungarian Development Bank. Fidesz’s inner circle bought 80 percent of the land. Its consequences pushed one-third of farmers (117,000) out of business, making Hungary Europe’s third most concentrated farm structure, with the Czech Republic leading the table.
Just as an illustration, the 1,300 hectares belonging to János Lázár, a newly elected politician who beat the opposition leader Márki-Zay, provided an annual income of €315,900. This figure constitutes solely the money earned without using the arable land for farming purposes. Many Hungarian large landowners sublet their land to small farmers, transforming Hungary’s agriculture into a modern feudalism.
The misuse of public land acquisition and its CAP subsidies is an excellent example of how Orbán uses the EU to build a pro-regime oligarchy. The concentration of capital is seen in the highest places of Hungary’s business. Lőrinc Mészáros, a childhood friend of the Prime Minister, owned assets worth €2 million (2010), yet he is now the richest person in Hungary with a net worth of €1.28 billion. Orbán was instrumental in Mészáros’ rise, as his enterprises won public tenders exceeding €1.56 billion, 83 percent of which came from EU subsidies. A similar story lies behind the 4th richest Hungarian László Szíjj, whose wealth increased four times in the last decade with the aid of EU sides coming from CAP’s second pillar and European Commission – amounting to €2.8 billion.
Orbán – The Protecting Autocrat from EU Money
How is it possible that Hungary’s rural society overly supports Orbán, even though he is hollowing out the countryside? Well, he uses the rising existential insecurities of rural Hungarians in his favour. Orbán guides the existential anxiety to external topics such as migration, the EU, or the Russian war. Something ‘foreign’ which can be moulded by Orbán as he targets the only thing the Hungarian countryside has left – tradition. Fidesz voters care less about economic issues since they cannot influence them. But what they can affect is defending their local identity.
In a world full of chaos, Fidesz is a known safe choice. Any change can be detrimental to a rural society riddled with existential risks. This, again, became instrumental in the last election. Despite the non-level playing field visible in the electoral system, media landscape, pre-election welfare benefits worth €1.7 billion, occasional vote buying, the United for Hungary opposition was not that united.
The six-party block, comprising parties from the entire political spectrum, had its problems, including retaining the previous corrupt prime minister Gyurcsány among its leadership ranks and displaying incompatible ideological views of far-left and far-right parties. Those two factors and war hysteria augmented by pro-Fidesz media caused the outflow of 850,000 voters which also catapulted the ultra far-right Mi Hazánk into the parliament ensuring that Fidesz maintains its constitutional majority and sits at the centre of the political spectrum.
Orbán’s rhetoric is straightforward. Hijacking Hungarian history and using some EU funding to rejuvenate the Hungarian countryside, he has become the gatekeeper and the protector of rural life – you cannot tell Fidesz apart from the state. And the pro-Fidesz media amplifies this message.
The CAP’s Role in Democratic Deterioriation
Hungary’s democratic institutions are under the total control of Orbán. As for Babiš, he lost the last election, where the united opposition parties secured a majority because three pro-Babiš leaning parties did not meet the 5 percent threshold. However, Babiš is still the most popular politician in the country having the biggest chance to become the next president. And with his party maintaining 30 percent of the popular vote, the next parliamentary elections may generate a prime minister who will be installed by Babiš, transforming the Czech Republic into a semi-presidential system.
Both top-tier politicians are not EU sceptics per se; they are the most prominent experts on the EU. They know about the gaps in the EU’s incentive systems, allowing them to advance their self-interest by capitalising on the self-doubt in the hearts of rural citizens. They have created a new autocratic empire sustained by EU money.
Meanwhile, the EU knows about the grand-scale subsidy frauds. Yet, its enforcement mechanisms are toothless when European Anti-Fraud Office issues its reports. For Karel Škácha, the Anti-Corruption Fund’s investigator, the lack of enforceable mechanisms reveals the true intent: “The Brussels priority is to get the money spent. If they were to crack down, they would find problems across the whole EU.”
But the European Commission is waking up; the only way to leverage those regimes is by restricting the authoritarian system’s loyalty tokens – EU funds. The recently triggered conditionality mechanism against Hungary is a clear anti-authoritarian signal. Nonetheless, the possible subsidy cut off will not target the money where preexisting obligations persist – such as the CAP.
While targeting fraudulent subsidies is the right step, it does not elevate the root cause: revitalising rural societies, which are putting leaders with autocratic tendencies into power. And this is where CAP fails. Its inherent flaws reveal whom the EU represents. The EU serves large businesses, guided by neoliberal ideas that predominantly come from the original member states. Their voices were also the most influential when the new CAP was being drafted. The straightforward policy redesign – equal payments across the EU based on average costs incurred in generating the monetary value of agricultural products – would hurt the large beneficiaries. Unfortunately, the EU will not take this step. CAP reverberations will remain to impact the most vulnerable while publicly stating that this policy is salvaging rural society. Until politics becomes genuinely more inclusive, the representational crisis will not be resolved. The EU’s inability to recognise its detrimental part in social fragmentation will further deteriorate the rural trust fuelling Babiš and Orbán’s politics.
About the Author:
Oldřich Šubrt is a political and psychological researcher coming from the University of Amsterdam. He mainly focuses on the political power dynamics and their impacts on citizens’ behaviour. He is also an occasional sociopolitical commentator and audiovisual artist who is transmitting emancipatory attitudes nested in the Czech culture.