Other Heresies: Hungary

• Share

In the fashionable neighborhood of Zugliget, overlooking downtown Budapest, the drabness of Communism seems a world away. Sleek, modern villas nestle beside Italianate mansions along the quiet, winding streets. Well-coiffed women in fur coats promenade upon the snow-dusted sidewalks. The district that housed many of Hungary's pre war magnates now shelters a different breed of plutocrat: the entrepreneurs who have prospered under the country's unique brand of "goulash Communism."

Hungary's 11 million people have long been the envy of the East bloc for their cautious success at replacing at least part of a Soviet-style centralized economy with profit-oriented agriculture cooperatives and carefully administered oases of free enterprise. Along Budapest's glittering Vaci Street, the shelves of well-kept stores and boutiques are stuffed with Western videocassette recorders, luxury clothing and high-tech kitchen appliances. The nearby food markets display long racks of sausage and ham, mounds of fresh winter vegetables and ubiquitous garlands of crimson paprikas. Says a member of Hungary's new economic gentry, a small-time plastics manufacturer known as Jozsef: "Are we rich? By Western standards, no. But here, we are quite comfortable."

That statement by no means applies to all Hungarians, and the comfort that exists has been hard won. Hungary's first experiments with marketplace reforms were crushed during the country's 1956 uprising against Soviet domination. Paradoxically, the man who presided over the suppression of that revolt, Janos Kadar, now 73 and still the country's leader, made today's relative prosperity possible.

Even as he threw rebellious students and workers into prison, Kadar ordered economists to diagram an overhaul for the country. "It was clear that centralized planning had failed," says Ivan T. Berend, president of the Hungarian Academy of Sciences. "If we were to provide a comfortable standard of living, market principles had to be introduced." Unstated by Hungarian authorities was the premise that in return for that comfort the population would live passively under Communist rule.

Unveiled in 1968, the New Economic Mechanism gradually gave factory managers limited freedom from the tyrannies of rigid central planning. Among other things, they could make more decisions about production quotas without the approval of state authorities. Small-scale entrepreneurs were al lowed to open everything from private bakeries to boutiques and restaurants. In the countryside, profit-oriented cooperatives sprang up alongside Soviet-style collective farms. Vendors were allowed to set the prices of vegetables, clothing and many consumer goods freely.

One of the most effective reforms was the official sanctioning of the "second economy." Typically working eight hours a day in a state factory or farming cooperative, Hungarians were encouraged to hold down additional jobs as taxi drivers, seamstresses, restaurant workers or shop clerks. They were also allowed to use their regular workplaces for private after-hours labor in a number of designated occupations. The reforms were roundly successful: between 1968 and 1978 real purchasing power rose more than 50%.