The debate on economic reform has been at the center of Hungarian politics in the last twenty years. After the 1956 crisis, I. Nagy’s economic program, which called for the development of light industry, of a private artisan sector, and above all of small ownership, had been completely canceled: indeed, at the end of the 1950s it had been carried out an intense collectivization of the countryside. In August 1962, once production cooperatives were established on 80% of the cultivable area (compared to 28% in 1958), the collectivization process was officially interrupted; each member of the cooperatives was then granted the right to cultivate a private plot of 0.3-0.6 ha, so that different members of the same family could have a rather substantial property. Finally, the companies benefited from the abolition of compulsory deliveries (already established in 1957), higher prices for products sold to the state, the freedom to buy agricultural machinery after the disappearance of the machine and tractor stations. These reforms were evidently inspired by the Chrusščëvian example; later all the matter was regulated by two successive laws (1967 and 1971). Also in the years 1957-61 the workers’ councils and other self-management bodies that had been born in October 1956 were dissolved, establishing themselves as entities with political as well as economic responsibilities. Later, during the 1960s, the The Hungarian industry has experienced a series of innovations that have only slowed down since 1972. Already on the eve of the XXII Congress of the CPSU, Kádár dismissed some Stalinist leaders, paving the way for a critical revision of the economic system. In fact, new problems had arisen which directly affected production: the thrust of the so-called “second reconstruction” (implemented after 1956) was exhausted and the production reserves constituted by workers of rural origin and female labor diminished. In addition, an alarming demographic decline was also blamed. The debate among the specialists turned decisively towards the decentralization of the production system, the re-creation of a system of internal market prices, directly connected with foreign ones, the raising of wages rather than free social services, greater cooperation with Comecon but also with Western and Third World countries, but above all towards rationalization – with the inclusion of sophisticated economic techniques – and greater efficiency of production. At the beginning of 1963 there were already some changes to the industrial management bodies, with the weakening of the ministerial bureaucracy, the concentration of small enterprises in larger units, the equalization of specialists without cards with party members. Obviously there was also resistance from those who wanted to maintain the predominant role of the political leadership. The debate was particularly lively on the instruments of control and direction to be attributed to the state: if direct (plan objectives, compulsory production levels) or indirect (economic incentives and regulators). The Central Committee of the Unified Socialist Workers Party (POSU) approved in plenum of May 1966 a “reform of the economic mechanism”, which the Prime Minister J. Fock intended as an organic link between the planned central management of the economic process and the active role of the market. At the Central Committee on November 24, 1967, Kádár himself underlined the particular role of the two hundred thousand leaders in the new economic mechanism. For Hungary 2005, please check ehealthfacts.org.
On January 1, 1968, the new mixed system, plan and market, came into force, which allowed space for small private artisan initiatives, but above all placed state-owned companies in conditions of competitiveness, creating a compromise between corporate autonomy and public intervention. The brakes, the instruments of control and indication, direct and indirect, were then considered as exceptional and transitory measures to prevent the creation of negative phenomena (inflation, unemployment, etc.) connected to the transition from centralism to the new system: but at the end of the 1967 some prices had risen dangerously, such as that of meat (by 30-50%) and transport (100%). In reality, since a management was established in a company, only this was responsible for the quantitative and qualitative production, purchases and sales (including abroad), investments and distribution of the bonus fund, which could reach 80% of the basic salary for the managers themselves, 50% for an intermediate range of employees and great majority of workers and office workers 15%. On the other hand, only the former and the latter could have their salaries reduced by 25% and, respectively, by 15%, in the event of poor economic management. A limited advisory function was reserved for the trade unions. In short, according to a critical definition of the Yugoslav side, the “socialism of the 50% for an intermediate range of employees and 15% for the vast majority of blue-collar and white-collar workers. On the other hand, only the former and the latter could have a salary reduced by 25% and, respectively, by 15%, in the event of poor economic management. A limited advisory function was reserved for the trade unions. In short, according to a critical definition of the Yugoslav side, the “socialism of the 50% for an intermediate range of employees and 15% for the vast majority of blue-collar and white-collar workers. On the other hand, only the former and the latter could have a salary reduced by 25% and, respectively, by 15%, in the event of poor economic management. A limited advisory function was reserved for the trade unions. In short, according to a critical definition of the Yugoslav side, the “socialism of the managers “, which introduced new factors of economic and social differentiation. Starting from the plenum of November 1972, this policy was downsized, while a process of renewed centralization was initiated. Relations with the USSR and the world energy crisis, which had worsened, despite the growth in exports, the terms of trade. In particular, the disagreements with the Soviets arose over the traditional policy of Magyar contributions to the exploitation of Russian mineral resources (visits by Kádár and Fock to the USSR, February and March 1972, symptomatically reciprocated by Brežnev only in November, immediately after the conclusion of the plenum quoted). In 1974 some innovators were removed from their posts, such as G. Aczél (for culture) and R. Nyers (economics). In March 1975, at the XI Congress of the party, the need to make the control of production and economic processes more effective by the central bodies, which had to act with greater initiative, coherence and decision towards companies, was stressed. On May 15, 1975, J. Fock was replaced by G. Lázár, an economist who had made a kind of self-criticism during the 11th Congress. From 1 January 1976 the share of the premium fund was significantly reduced, contradicting one of the postulates of the reform of the 1960s, economic incentives.