Michael Ignatieff is brilliant. He did, in 2011, lead the Liberal Party of Canada to its biggest defeat in living memory, but his subsequent retreat from politics has been to the great benefit of his other callings as an academic and champion of human rights.

Earlier this year, in characteristic off-the-cuff style, he gave a lecture titled: ¡°Is liberty divisible? The challenge of illiberal democracy and capitalist authoritarianism¡±. At first glance, this sounds jumbled ¨C surely he meant to refer to capitalist democracy and illiberal authoritarianism? But no. Ignatieff was addressing the strange new polity that has emerged since the fall of the Berlin Wall in 1989: capitalist in economics, authoritarian or illiberal in politics and nationalist in ideology.

He was speaking in Budapest at Central European University, as part of its Frontiers of Democracy initiative. CEU is not one of the region¡¯²õ mouldering, cash-strapped state universities. It is upmarket, graduate, private and dedicated to ¡°transforming the closed communist inheritance¡±.

The university was founded in 1991 by the Hungarian-born, now American, multibillionaire George Soros. Over the past quarter-century, Soros has poured a substantial part of his fortune into civil society initiatives, with a particular focus on education in Central and Eastern Europe. His investment well surpasses the cool billion pounds he made by short-selling sterling one Wednesday in 1992 (his role in Black Wednesday also earned him the memorable nickname of ¡°the man who broke the Bank of England¡±). Soros is CEU¡¯²õ honorary chairman and was at Ignatieff¡¯²õ talk.

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Ignatieff recognises that in 1989 many incorrect assumptions were made about the future. Liberal belief then was that open society, democracy and economic globalisation would advance hand in hand. In the event, the global march of democracy and capitalism has given rise to a new breed of authoritarian state ¨C not just the well-known examples of Russia and China, but many other countries that are also showing an inclination towards illiberalism, ranging in scale from what Ignatieff politely calls ¡°a little bit¡± in Hungary, Romania, Bulgaria and some other Balkan states to ¡°quite a lot¡± in Turkey.

These countries contrast with the more robust democratic consolidation further north, in post-communist Poland, the Czech Republic and the Baltic states, for example. Often, illiberalism occurs because a ¡°deep state¡± survives from previous times, even from before the advent of communism. In such states, liberty is often split in two, with toleration of a range of private freedoms, such as property ownership, travel, study and even personal opinion, contrasting with a curtailment of public freedoms, such as open political expression and the accountability of officials. This division can act as a sort of ¡°safety valve¡± for illiberal regimes, aiding their perpetuation.

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In this analysis, a new jurisprudence arises, distinguishing between rule of law (such as an independent judiciary) and rule by law (guaranteeing administrative or procedural regularity, for instance). Capitalism and inward investment require only the latter, Ignatieff explains, to ensure that ¡°the contract sticks¡±. Such law can be used by regimes to manage capitalist competition, to reward loyalists, to expropriate challengers and even to renationalise critical assets (as Vladimir Putin did with energy). Thus, in such regimes, ¡°all wealth becomes dependent upon connection with state power¡±.

The obvious risk of these developments is systemic corruption, Ignatieff observes. The regime compensates for the public distaste this arouses with heightened nationalism, which starts as an effective internal rallying cry but becomes a mechanism by which adversaries become enemies and opponents become traitors. The concomitant risk of this toxic mix of corruption and nationalism can be regional destabilisation, which, in the case of some of the states identified as ¡°a little bit¡± illiberal, he suggests, could even require intervention from the European Union. Ignatieff gives the example of Hungary¡¯²õ lingering desire to reclaim Transylvania from fellow EU member Romania.

Is there an effective curb on such regimes? Ignatieff is relatively optimistic because, in the end, economic liberalisation breeds participatory middle classes who weaken the authoritarian hand. Because of their capitalist base, these states are also vulnerable to international economic pressure ¨C as seen in Russia¡¯²õ current travails.

Perhaps, concludes Ignatieff, the optimism of 1989 was not completely misplaced: ¡°Liberal democracies, premised on the indivisibility of freedom, are more resilient ¨C more resilient to shocks,¡± he says. ¡°They contain, channel and respond to discontent more effectively than more authoritarian models.¡± Not unexpectedly, he reasserts his belief in liberal pluralism as the basis of society, provided that private and public freedoms remain ¡°soldered¡±.

So, what has all this to do with ÖйúAƬ? Well, for one thing, CEU, with its impeccable liberal credentials, launched its Frontiers of Democracy initiative last September partly in response to a frontier emerging just down the road, at Hungary¡¯²õ grandiose parliament building. In the view of CEU¡¯²õ president, John Shattuck (Bill Clinton¡¯²õ ambassador to the Czech Republic), the initiative is a test of something that too many universities have lost: moral purpose. Through its lectures and seminars it depicts not just the toolkit of democratic possibility of the future, but also seeks to establish what should and what should not be invoked in democracy¡¯²õ name.

Like Ignatieff, Viktor Orb¨¢n, the 51-year-old Hungarian prime minister and possible 2017 presidential candidate, has lived many lives. He was a fearless founder of the Alliance of Young Democrats (known as Fidesz), who, in the heady summer of 1989, publicly called on the Russians to leave (although Hungary remains beholden to them as its main energy provider). He was ¨C briefly ¨C a student of British liberal thought at the University of Oxford, and was even a vice-president of Liberal International, the international federation of liberal political parties. But more recently, he has lost his faith in liberalism and transformed into a daring, often popular, conservative.

One day last July he explained why. He was speaking at the Summer Free University and Student Camp, held each summer at B?ile Tu?nad, a picturesque Hungarian-ethnic spa town in the centre of Romania that has, since 1990, provided the forum for dialogues between different Hungarian groups; it has also been the site of the occasional robust exchange between Hungarians and Romanians (in 2004, for example, Orb¨¢n proclaimed that the state of democracy in Romania rendered it unready for EU membership). He observed that a liberal Hungary had not maintained its public assets very well, and had been incapable of preventing injurious levels of national and family debt. Indeed, liberal democracies ¡°will probably be incapable of maintaining their global competitiveness in the upcoming decades,¡± he claimed.

Instead, a new form of the Hungarian state was needed, ¡°capable of making our community competitive in the great global race for decades to come¡±. Orb¨¢n committed to ¡°a work-based society that¡­undertakes the odium of stating that it is not liberal in character¡± because ¡°the Hungarian nation is not simply a group of individuals, but a community that must be organised, reinforced and, in fact, constructed¡±.

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Controversial: the education policies of Viktor Orb¨¢n¡¯²õ government have been greeted with protests

It was the examples he cited of ¡°stars¡± among today¡¯²õ competitive nations that caused the most international consternation, however: Singapore, China, India, Russia and Turkey. How could these systems that are ¡°not Western, not liberal, not liberal democracies and perhaps not even democracies¡± nonetheless be so successful?, he asked.

For Orb¨¢n, the individualistic liberal principle that ¡°everything is allowed that does not infringe on [someone else¡¯²õ] freedom¡± was not a suitable foundation on which to build the new Hungarian society. Rather, the key principle underpinning Hungarian public and private life should be ¡°not [to] do unto others what one does not want others to do unto you¡±.

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The spectre of illiberalism, raised last summer by Orb¨¢n, reverberated beyond Hungary again last October with his government¡¯²õ announcement of a special tax on internet data use, including a levy on individual usage. The US government promptly claimed that Hungary was ¡°undermining democratic values¡±. After a wave of popular internal opposition, the tax was hurriedly withdrawn.

Even chillier was the reception given to Orb¨¢n¡¯²õ nominee for Hungary¡¯²õ sole position on the 2014-19 European Commission. Tibor Navracsics, his minister of justice during 2010-14, was rejected by a scrutiny committee of MEPs, who objected to his membership of a government that had eroded civil liberties (¡°Viktor Orb¨¢n¡¯²õ ¡®butler¡¯ will not serve in EU education role¡±, Times ÖйúAƬ, 9 October 2014). But, after further wrangling, Navracsics ¨C once a scholar at the University of Sussex ¨C was appointed commissioner for education, culture, youth and sport.

Writing to Navracsics last November, the Commission¡¯²õ new president, Jean-Claude Juncker, reminded him that the areas in his brief have ¡°substantial societal and political significance¡­While locally and nationally rooted, education, culture and civic participation are perceived by EU citizens as a key component of our shared European identity and values.¡±

Nor would the German chancellor, Angela Merkel, let Orb¨¢n off the illiberal hook. Visiting Budapest in early February, she gave him that stare previously reserved only for Silvio Berlusconi, and told him that the words ¡°illiberal¡± and ¡°democracy¡± did not go together. Merkel sees liberal democracy as an indivisible, even fused, concept and that is certainly the sense of Article 2 of the EU Treaty, on union values, to which all member states have subscribed. (It will be interesting to see what Merkel and other EU leaders make of the UK government¡¯²õ illiberal post-election pledge to scrap the 1998 Human Rights Act and curtail benefits or mobility of some EU citizens.)

Orb¨¢n¡¯²õ ¡°illiberal democracy¡± speech capped a four-year roller-coaster ride for Hungarian universities since he became prime minister in 2010. Many of the changes, or proposed changes, that he has overseen have tested the liberal resolve and residual autonomy of universities. Government funding has declined, with an institution¡¯²õ own revenues now expected to cover about two-thirds of total expenditure. As in the UK, new arrangements regarding tuition fees, loans, scholarships and admissions have often pushed the cost of ÖйúAƬ on to students and their families. Yet these changes have not lessened the controlling hand of the state.

Domestic student numbers have declined sharply; student and staff mobility, once predominantly inward, is now moving in the opposite direction; and there has been a calculated shift in government support both towards private institutions and towards centrally mandated ¡°structural transformations¡±. Nearly 30 foreign ÖйúAƬ institutions now also operate in Hungary. An updated government strategy last autumn squashed any expectation of increased government funding, recommending instead that universities continue down the road of income diversification.

Days before Orb¨¢n¡¯²õ Free University speech, the Hungarian parliament approved a new system for administering state universities. While restoring a university¡¯²õ right to elect its own academic leader (the rector), it established an administrative chancellor for each university, who is appointed by the prime minister and responsible to the state minister of human capacities. The university chancellor is responsible for all non-academic staff, leaving the rector only to appoint sub-professorial academic staff (professorships are still awarded, and terminated, by the nation¡¯²õ president). Most crucially, the rector needs the approval of the chancellor for the resourcing of academic initiatives ¨C a sure area for clashes of authority.

However, despite the command by Orb¨¢n¡¯²õ Fidesz party of a large parliamentary majority, the prime minister has not had an easy ride pushing his changes through. In autumn 2012, he hypothesised a fully ¡°self-financing¡± ÖйúAƬ system. He has since rowed back from that goal but has continued to push for cuts in expenditure. Central to this plan, and prompting massive student opposition in 2012-13, was the virtual elimination of state-funded places in popular but ¡°over-supplied¡± fields such as law, management and economics.

For universities, the deeper question remains of how much their purposes require democratic or liberal values in their sustaining societies. Corvinus University of Budapest¡¯²õ Hungarian ÖйúAƬ 2014 Strategic Progress Report, issued in January, describes Hungary¡¯²õ ÖйúAƬ as middle-ranking, ¡°in line with its level of economic development¡±. This is quite a contrast with a decade before, when Hungarian universities were often the region¡¯²õ acknowledged leaders and were adjudged to be closing in on the EU average. In that regional comparison, Hungarian research now sits below that of Slovenia and in approximately the same band as Poland and the Czech Republic.

Meanwhile, over the past decade, league tables of the ¡°best global universities¡± show the persistent presence of universities from illiberal regimes, and few seem to question their ¡°best university¡± credentials. °Õ±á·¡¡¯s World University Rankings 2014?15 show seven in the global top 100: four in China (including Hong Kong), two in Singapore and one in Turkey. What¡¯²õ more, many other top 100 institutions have established campuses in avowedly illiberal countries in recent years, particularly in the Middle East.

But disciplinary distinctions are stark. THE¡¯²õ top 100 universities for engineering and technology include 10 from Orb¨¢n¡¯²õ illiberal regimes (six from China, two from Singapore, one from Russia and one from Turkey). But the corresponding top 100 for humanities and arts subjects has only three from illiberal countries (one from Singapore and two from China ¨C although both are in Hong Kong). Not surprisingly, subjects rich in interpretation, speculation and diverse opinions (subjects more likely to test the boundaries of academic freedoms) appear rarely to do well under authoritarian regimes.

Sadly, the former communist states of Eastern Europe are absent from these disciplinary league tables. Except for one: Ignatieff¡¯²õ host, CEU, which makes it into the top 100 social sciences list. Given Orb¨¢n¡¯²õ intention to construct a new Hungarian society, the CEU president¡¯²õ recent pledge to uphold his university¡¯²õ moral purpose ¨C to debate and establish what future democratic societies should be like ¨C is surely being put to the test right now.?

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Malcolm Gillies, a former Times ÖйúAƬ columnist, was vice-chancellor of London Metropolitan University from 2010 to 2014 and of City University London from 2007 to 2009. During the 1980s, he was a Hungarian Government Scholar.