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Hungary Economic Development
When Bethlen took office, the government was bankrupt.
Tax
revenues were so paltry that he turned to domestic gold
and
foreign-currency reserves to meet about half of the
1921-22
budget and almost 80 percent of the 1922-23 budget. To
improve
his country's economic circumstances, Bethlen undertook
development of industry. He imposed tariffs on finished
goods and
earmarked the revenues to subsidize new industries.
Bethlen
squeezed the agricultural sector to increase cereal
exports,
which generated foreign currency to pay for imports
critical to
the industrial sector. In 1924, after the white terror had
waned
and Hungary had gained admission to the League of Nations
(1922),
the Bethlen government secured a US$50 million
reconstruction
loan from the league, which restored the confidence of
foreign
creditors. Foreign loans and domestic capital that had
been
removed from Hungary during the communist revolution
flowed back
into the country, further fueling industrial development.
By the late 1920s, Bethlen's policies had brought order
to
the economy. The number of factories increased by about 66
percent, inflation subsided, and the national income
climbed 20
percent. However, the apparent stability was supported by
a
rickety framework of constantly revolving foreign credits
and
high world grain prices; therefore, Hungary remained
undeveloped
in comparison with the wealthier western European
countries.
Despite economic progress, the workers' standard of
living
remained poor, and consequently the working class never
gave
Bethlen its political support. The peasants fared worse
than the
working class
(see Interwar Period
, ch. 2). In the 1920s,
about
60 percent of the peasants were either landless or were
cultivating plots too small to provide a decent living.
Real
wages for agricultural workers remained below prewar
levels, and
the peasants had practically no political voice. Moreover,
once
Bethlen had consolidated his power, he ignored calls for
land
reform. The industrial sector failed to expand fast enough
to
provide jobs for all the peasants and university graduates
seeking work. Most peasants lingered in the villages, and
in the
1930s Hungarians in rural areas were extremely
dissatisfied.
Hungary's foreign debt ballooned as Bethlen expanded the
bureaucracy to absorb the university graduates who, if
left idle,
might have threatened civil order.
Data as of September 1989
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