Hungary Building Freedoms Out of Defeat

By John Moody

The year was 1956. On Nov. 4, 200,000 Soviet troops and hundreds of tanks stormed Hungary to crush a daring and bloody uprising, the most direct challenge to Moscow's postwar hegemony over Eastern Europe before or since. Suicide squads lobbed Molotov cocktails, paving stones and sticks at the invaders. Hungarian patriots, some as young as 13, were cut down in hails of automatic gunfire. Their bodies were added to piles of unburied corpses, dusted with lime, that littered the city. Soviet tanks blasted the facades off downtown buildings trying to stop sniper fire from upper windows. In scarcely more than a week the Hungarian dream of independence was over. A puppet government headed by Janos Kadar, 44, set about "normalizing" the country through executions, show trials and brutal repression. The purge made Kadar the most hated man in Hungary and won him the epithet the "Butcher of Budapest."

Three decades later the scene in Budapest could hardly be more changed. The streets once strewn with bodies are jammed with eager shoppers and gaudily garbed Western tourists. Natives and visitors alike stroll the elegant pedestrian mall on Vaci Street, past boutiques stuffed with designer fashions and electronics stores filled with imported stereos and home computers. Relaxing in glossy Vorosmarty Square, they may enjoy coffee and pastry at marble-fronted Gerbaud's cafe. For dinner, they stop at well-appointed restaurants offering rich meals of pork and beef spiced with paprika, groaning dessert carts and good Hungarian wines. By comparison with the rest of Eastern Europe, the life-style in Hungary can be very fine.

Over the years, a unique bargain has been struck between Hungarians and their leaders. In return for conceding Soviet domination of their country, Hungary has been granted special license to dabble in free markets and private initiative. Dubbed "goulash Communism," Hungary's balancing act between socialism and capitalism is Janos Kadar's legacy to his country. In 30 years, his public image has come full circle. If open elections were held tomorrow, Kadar, at 74, would win by virtual acclamation.

Hungary, though, is now at a crossroads, preparing for the inevitable end of the Kadar era even as some of the bloom has gone from its enviable economic achievements. The economy, which during the 1970s grew at a robust 4.5% annual clip, is now slumping, widening the gap between affluent and less fortunate Hungarians. Private and state-run companies are ringing up huge losses, and traditional export markets are shrinking. Says one Hungarian journalist: "The mood is more unsettled and apprehensive in this country than at any time since 1956."

To a remarkable extent, the history of Hungary since 1956 is the story of one man. Born in a rural town that is now part of Yugoslavia, Kadar was the illegitimate child of a peasant woman. As a youth, he made his way to Budapest and was trained as a typewriter mechanic. When the city erupted in 1930 in bloody workers' riots protesting unemployment, Kadar took part in the fighting. The next year he joined the Federation of Young Communist Workers. In 1942, with Hungary under Nazi occupation, Kadar was jailed. In 1949, after the Communists had come to power, he became Interior Minister. But he quickly fell from favor and spent two more years in prison.

After Stalin's death in 1953, Kadar was released and rehabilitated. He was first secretary of the Communist Party in 1956, just before Prime Minister Imre Nagy announced Hungary's withdrawal from the Warsaw Pact. The Soviet invasion forced Kadar, a consummate pragmatist, to a fateful decision: he defected to the Soviet side and returned as the head of a new, Soviet- sponsored regime.

From the beginning, Kadar knew the course he wanted to follow. One of his first moves after taking office was to call in Hungary's leading economists. In strict secrecy, he asked for a politically possible alternative to the suffocating central planning and collectivism that Stalin had imposed on Eastern Europe. The experts' solution: an economy driven by Western-style market forces but couched in the language and trappings of socialism. Kadar shelved the proposal, believing that it was too radical. But in 1968 he introduced, in slightly revised form, the innovations and reforms that had been proposed twelve years earlier.

Known as the New Economic Mechanism, the program shifted a measure of economic decision making away from the state. Factory managers got a larger say in what they produced. Entrepreneurs were encouraged to open small businesses. Farmers were allowed to sell crops on the open market. Without challenging Moscow directly, the ambitious reforms freed Hungary from many of the stifling restrictions that are built into Soviet-style economies.

Today the experiment is seen as a masterstroke. While Hungary's private sector accounts for no more than 5% of the total work force, it generates an estimated 15% to 20% of the nation's GNP. Other East European countries punish moonlighters, but Hungarians are free to take a second job or work for themselves. Farmers have also responded to the lure of profit. Hungary is free of the perennial food shortages that plague Rumania. It is the only net food exporter in the Warsaw Pact, though crop sales were interrupted this year by the Chernobyl nuclear accident in the Soviet Union.

Hungarians enjoy broad personal freedoms, so long as they do not cross the line of outright political dissent. With a few exceptions, they can travel freely to the West. Hungary stopped jamming Western radio broadcasts in 1964; TV viewers regularly tune in to Vienna programming. In addition, the country has more than 1,500 magazines and newspapers, most of them free of direct government control.

+ Even politics has been touched by reform, though not enough to arouse Soviet concern. In last year's elections for the national parliament, at least two party-approved candidates vied for each seat. Notes an economist: "In the Warsaw Pact, we are the happiest tent in the camp."

But that self-satisfaction is now seriously threatened. In the first flush of success, Kadar allowed firms to invest in expensive Western technology. Gross foreign debt has mushroomed to $11 billion, which represents the highest per capita figure in Eastern Europe. Meanwhile, Hungarian textiles and manufactured products, though still cheap by U.S. and West European standards, have been undercut by a flood of low-priced goods from the Far East. Result: the first half of 1986 alone produced a $300 million trade deficit.

Alarmed at the political implications of a sputtering economy, Kadar as far back as 1979 put a brake on imports, including technology. But that left key industries without necessary new equipment. And consumers resisted efforts to limit foreign luxury goods.

On a human level, many Hungarians have proved unable to handle the pressures that go with the freedom to succeed or fail. An estimated 15% of the work force takes sedatives on the job. A survey published in March concluded that half of all workers have trouble falling asleep at night as a result of financial worries. By 1980, one-third of the men eligible for military service had been rejected because of neuroses. Hungary traditionally has had a high suicide rate; it now leads the world with 43.5 self-inflicted deaths per 100,000 people, one-third more than runner-up Denmark.

While Kadar was cannily constructing Hungary's halfway-house economy, he scrupulously followed the Soviet line in matters of foreign policy. Hungarian troops took part in the 1968 Warsaw Pact invasion of Czechoslovakia, and its athletes joined the Soviet-led boycott of the 1984 Summer Olympics. When Soviet Leader Mikhail Gorbachev visited Budapest in June for a Warsaw Pact summit, Kadar guided him through the streets, greeting curious crowds with hearty smiles.

Kadar has also managed to maintain cordial ties with the West. Says one Reagan Administration official: "Relations with Hungary are by far the best in the Soviet bloc. There are virtually no contentious issues."

The guessing about who will succeed Kadar is Budapest's premier parlor game, encouraged by Kadar himself, who like any astute manager knows that prematurely designating a successor causes nothing but trouble for both boss and heir. Karoly Nemeth, 63, is his second in command in the party hierarchy and presumably a contender, though Kadar slyly enjoys appearances that deceive. Other possible candidates: Ferenc Havasi, 57, a chief economic official, who is said to believe that unemployment should be officially recognized; Karoly Grosz, 57, a Kadar disciple; Propaganda Boss Janos Berecz, 57; and Foreign Affairs Specialist Matyas Szuros, 52.

Hungary's next leader will be shadowed and overshadowed by the larger-than- life legacy of Janos Kadar. In one of the great twists of modern history, the onetime Butcher of Budapest has emerged as the outstanding Hungarian figure of the 20th century. Asserts one top party official: "We expect that the Kadar era as an idea will continue even after he has left power." So does Kadar, who puts his trust in the popularity of what he has accomplished, a remarkable tribute to himself and his countrymen and the freedoms built out of that total defeat 30 years ago.

With reporting by Kenneth W. Banta/Budapest