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Hungary Kadar's Reforms
The Revolution of 1956 discredited Hungary's Stalinist
political and economic system and sent a clear warning to
the
leadership that popular tolerance for its policies had
limits,
and that if these limits were exceeded, popular reaction
could
threaten communist control. In response, regime leaders
decided
to formulate economic policies leading to an improvement
of the
population's standard of livings. Pragmatism and reform
gradually
became the watchwords in economic policy-making,
especially after
1960, and policymakers began relying on economists and
other
specialists rather than ideologists in the formation of
economic
policies. The result was a series of reforms that modified
Hungary's rigid, centrally planned economy and eventually
introduced elements of a free market, creating a
concoction
sometimes called "goulash communism"
(see Economic Policy and Performance, 1945-85
, ch. 3).
In late 1956, the party named a committee of mostly
reform-minded experts to examine Hungary's economic system
and
make proposals for its revision. The committee's report
marked
the first step on Hungary's road to economic reform. Its
proposals presaged many of the changes implemented a
decade
later, including elimination of administrative direction
of the
economy, introduction of greater enterprise autonomy,
cooperation
between private and collective sectors in agriculture,
economic
regulation using price and credit policies, and central
planning
focused only on long-term objectives. However, the
committee's
proposals were never really implemented. Some observers
suggested
that the party had solidified its power so quickly that it
no
longer needed to enact such drastic measures; others
claimed that
Soviet leaders opposed such reform until they ensured that
the
party (on November 1, 1956, renamed the Hungarian
Socialist
Workers' Party--HSWP) had consolidated its power and
demonstrated
a clear need for a fundamental economic change. During the
chaos
of the revolution, Hungary's collective farms lost about
two-thirds of their members. Many left to become private
farmers.
In July 1957, Kadar appeased hard-liners in Hungary and
abroad by
agreeing to recollectivize agriculture, and in early 1959
the
drive began in earnest. The regime combined force and
economic
coercion with persuasion and incentives to drive peasants
back to
the collective farms
(see Agricultural Organization
, ch.
3). The
government abolished compulsory production quotas and
delivery
obligations and substituted voluntary contracts at good
prices.
It also permitted profit-sharing schemes and programs to
promote
technical innovation. The regime allowed peasants to
retain
sizable private plots and ample livestock and to choose
between
collective or cooperative farms. The farms also received
substantial government investments. As a result, Hungary
became
the only country with a centrally planned economy where
crop
output increased as a result of collectivization. By 1962
more
than 95 percent of all farmland had been collectivized
either in
the form of state farms or cooperatives. The
collectivization
drive deflected the hard-liners' criticism of Kadar for
his
advocacy of reform, and problems with the program's
implementation, including excessive coercion of the
peasants,
later helped Kadar oust the hard-line agriculture
minister.
By the early 1960s, Hungary was ripe for a political
shakeup . Khrushchev had consolidated his position in the
Kremlin and
had begun a second wave of de-Stalinization, thus leading
Kadar
to believe that the Soviet leadership would support
political
changes in Hungary. Kadar replaced Ferenc Munnich as prime
minister (who had served in that position since January
28,
1958), and thus assumed the top government post, as well
as the
leadership of the HSWP. He then dismissed other hard-line
officials. Kadar's consolidation of power led to a more
flexible,
pragmatic atmosphere in which persuasion took on greater
importance than coercion. Kadar relaxed government
oppression and
released most of those imprisoned for participating in the
revolution. Soon Hungary became the leader of the reform
movement
within the Soviet alliance system. Kadar intended to
provide the
regime with some legitimacy and political stability based
on
solid economic performance. The Soviet Union demonstrated
its
support with its decision to withdraw its advisers to the
Hungarian government.
Kadar next sought a modus vivendi with the population,
summarizing the new policy with the slogan "He who is not
against
us is with us." As part of this "alliance policy," in 1961
he
denounced the practice of making party membership a
prerequisite
for jobs demanding specialization and technical expertise.
Kadar
sought to remove opportunists who had joined the party
solely for
the status and economic benefits that membership
conferred.
Rather, Kadar wanted to open the government and economic
enterprises to talented people who were prepared to
cooperate
without adhering to party discipline or compromising their
political beliefs.
At the Eighth Party Congress of the HSWP in November
1962,
Kadar supporters replaced Stalinists and incompetent
officials in
leading party positions. The congress also called for
higher
party recruitment standards, for elimination of political
and
class considerations in university admissions, and for
allowing
nonparty members to compete for leading public positions.
Although the party still had influential conservative
members
after 1962, the Eighth Party Congress removed them from
the
party's policy-making core. As a result of these changes,
by 1963
Kadar had acquired genuine popular support.
Plans for reforming the centrally planned economy
steadily
took shape after the Eighth Party Congress. Central
Committee
secretary Rezso Nyers, who supported a comprehensive
reform
rather than continued piecemeal adjustments to the
economic
system, took charge of economic affairs. The regime also
appointed committees to prepare reform proposals. By 1964
the
government had identified problems in the economy,
including
excessive investment, decreases in output and labor
shortages in
agriculture, misuse of inputs, hoarding of materials, and
production of unsalable goods. Since the Treaty of
Trianon,
Hungary had depended on foreign trade, and in the early
1960s the
government placed top priority on improving the trade with
the
West and the Comecon countries. Despite improving the
terms of
trade, however, by 1964 Hungary had accumulated a serious
trade
deficit, and the government could not slow imports without
cutting material supplies and personal consumption.
Officials
realized that because Hungary had to boost exports, it
would have
to meet the needs, quality standards, and technological
requirements of the world economy.
Data as of September 1989
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