Abstract

"Reinventing Hungary’s Socialist Enterprises: Two Kádár-era Reconstructions"

Philip Scranton, Rutgers University (scranton@rutgers.edu)

One key source of the 1956 uprising in Hungary was the shambolic performance of state enterprises created in the Stalinist years, modeled on Soviet central planning and control methods. The post-Revolt regime installed by the Russian invaders realized that earlier austerity policies had alienated workers and farmers alike, so it determined to downplay heavy industrial investments and emphasize consumer goods and food production as means to legitimize a deeply-unpopular system. The first drive toward this end derived both from the USSR’s obsession with gigantism and from American big businesses’ prosperity – a wave of industrial mergers, both vertical and horizontal, 1962-64, which created state monopolies in dozens of sectors. These failed to yield economies of scope and scale, generating stagnation and complacency instead. Starting in 1965, Budapest planners, economists, and ministry officials undertook a second reconstruction effort, which became known as the New Economic Mechanism. This time, instead of consolidation, decentralization was the watchword, pushing responsibility for profit, quality, marketing, and investment down to the individual factory level. After three years of planning, the NEM debuted on 1 January 1968, but unwinding state monopolies proved a greater challenge than anticipated. In addition, the now-“autonomous” plant managements installed unanticipated policies that privileged their individual interests over the national welfare and the Five Year Plan goals. By 1972, “dogmatists” descended from the Stalinist era discredited the NEM reforms and recentralized economic authority and control. Two reinventions in a decade; two failures, the second just before the global oil shock, resulting in what might be termed “zombie socialism,” a business system dead but still walking.