Hungary's Bold Experiment

Let a hundred flowers bloom, plus capitalist carrots and corn

The shops along the streets of Budapest bulge with fresh apples, lettuce, cucumbers, carrots and cabbages. Meat shelves are well stocked with beef, poultry and pork. Why does such plenty elude other Communist countries but grace small, landlocked Hungary, one of the most resource-poor nations in Eastern Europe? The answer lies in the government policy of emphasizing investment in all forms of agriculture and in the thousands of small family plots that citizens till after their shifts on state and cooperative farms. Profits from their off-hours efforts are theirs and theirs alone, and high vegetable prices keep them happily gardening. Says Odön Kallös, co-president of the Hungarian Chamber of Cormmerce: "Now we not only tolerate family plots, we encourage them."

The privately grown produce is part of the "new economic mechanism" that has made Hungary the Communist world's best-run economy. For the past dozen years the nation's planners have been gradually loosening the state's once rigid grip on the economy and even adopting some trappings of Western-style incentive-based capitalism.

To be sure, Hungarian free-marketeering has not reached the point where Monetarist Milton Friedman has become a regular guest at the Budapest Hilton. But some of the changes are dramatic. Hungarian economists, for example, openly deride the socialist pricing mechanisms that set the cost of goods by bureaucratic fiat rather than by supply and demand. The price of more and more items, including vegetables, meat and about 60% of manufactured goods is now allowed to rise with demand.

Incentives are most attractive down on the farm. Managers of collectives are told to run their operations like businesses, with profits rather than production quotas as the goal. The program has worked well: Hungary is the only major consistent net exporter of wheat and corn in Eastern Europe. At the Soviet Party Congress last month, Chairman Leonid Brezhnev told delegates that the whole Communist world should learn lessons from Hungary's agricultural policy.

Industries are also now allowed to have more flexibility. Managers are forced to earn a profit, and that dictates a number of capitalist management techniques that heretofore have not been a part of any Communist "workers' paradise." Year-end bonuses, usually automatic, have been withheld from lazy workers. At the Raba Works, a heavy-machinery factory in Gyōr, several hundred people were fired for inefficiency, although all were quickly placed in new jobs at nearby plants. A few concerns have even gone bankrupt Hungarian-style; a tractor factory near Budapest was liquidated by the government after heavy flows of red ink.