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Hungary The Third Economy
A semilegal or illegal "third economy" operated in
Hungary as
it did in other communist countries. Activities in the
third
economy included holding unofficial second jobs,
moonlighting on
vacations and sick leave, performing outside work during
work
hours, dealing in illegally imported or pilfered goods,
lending
money at high rates, renting property illegally, evading
taxes,
and bribing or "tipping" doctors, lawyers, store clerks,
and
others. In a 1983 survey, 60 percent of hospital patients
admitted they had paid their doctors even though Hungary
had free
national health care. Many of those active in the third
economy
had become relatively rich, and tension sometimes arose
between
the third economy's "haves" and the law-abiding
"have-nots." The
press attributed the third economy's existence to three
main
factors: shortages of certain goods and services, an
inflation
rate that made supplementary income necessary, and the
fact that
many enterprises possessed monopolies on certain goods and
services.
Hungary's Economic Research Institute has estimated
that in
the early 1980s Hungarians generated the equivalent of
about US$2
billion per year in unreported income, which equaled about
20 to
25 percent of their total income and 16 percent of
domestic net
material product. The newly enacted personal-income and
value-added taxes were in part an attempt to tax
unreported
incomes, and the government created a special office to
investigate persons who displayed expensive tastes but
reported
relatively low incomes
(see Economic Regulators
, this
ch.). Many
pro-reform economists opposed measures to snuff out
illegal
economic activities, arguing instead for liberalizing
private-enterprise laws to include many activities
considered
illegal.
Data as of September 1989
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