When Hungarian Prime Minister Viktor Orban announced that yet more products would be price capped in grocery stores by government decree, it was clear from the start that this was more about power and control than about combatting inflation.

Following a nationalistic playbook, it looks like Orban is using price caps to make business untenable for foreign-owned grocery chains, hoping they will decamp the country and leave his connected friends with their own monopolies. This has been a decade-long plan, chasing every corporate chain not owned by a Hungarian outside their borders.

That he would pursue this specific policy, which will lead to severe shortages for grocery customers and fuel the over 20% inflation rate, making consumers worse off, reveals how much he’s willing to sacrifice the livelihood of Hungarian households for his delusions.

Cronyism

The Orban playbook has now been played out for quite a while. It begins, as always, with a boastful policy to “help” his countrymen. But it always ends with a friend, colleague, or crony of Orban gaining a monopoly to enrich themselves at the expense of everyone else.

It all began over a decade ago when Hungary introduced a moratorium on opening supermarkets larger than 400 square meters. This was widely seen as helping the domestic chains. Any other chain could only open by following a tedious administrative process in which the government would approve (but usually deny) larger grocery stores.

Amid the pandemic, further burdens were put on larger retailers to mount the pressure. For example, businesses with over 1 million EUR net revenue were obliged to pay higher taxes progressively, in addition to paying corporate taxes. As most Hungarian-owned stores are organized as franchises, only a few were affected by this extra tax burden. The foreign chains, however, were the prime target.

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