Free enterprise eases the control of collectivism

There's a small ice cream shop on October 6 Street in downtown Budapest that usually has a line out onto the street. It's privately owned. This is just one part of Hungary's thriving small-business sector, its entrepreneurial activities encouraged by a communist government.

At the state-owned Ikarus bus factory in Szekesfehervar, about 35 miles west of here, some of the better employees are offered weekend work under special contracts to ''customize'' big passenger buses to meet the desires of the buyers. The workers make more money than they would on overtime; the company gets more value for its costs. Further, when there aren't enough rail cars to handle bus deliveries, three small private companies bid for contracts to drive some buses to Hamburg for overseas shipment to customers.

These activities, too, are part of an extensive effort to introduce more flexibility, efficiency, and enterprise into a socialist economy. Hungary, a small nation of 10.7 million in the middle of Europe, is engaged in a fascinating economic experiment. It is attempting to mix the advantages of the market system into a basically communist economy - so far with considerable success.

Hungary's Socialist Workers' Party has not given up basic control of the nation. It tolerates only limited dissent. But the party, since Jan. 1, 1968, has been gradually moving to decentralize the economy, make prices more realistic and incentives more effective. The ''New Economic Mechanism,'' as it was dubbed, is seen as a necessity in a nation too small and too short of natural resources to be an industrial power, and thus highly dependent on international trade.

Hungary did try the Stalinist route of forced heavy industrialization after World War II, and it remains stuck today with a loss-ridden steel company and a marginal aluminum works.

''Both industry and services were overcentralized, too big, too slow, too bureaucratic,'' recalled Tamas Ory, general manager of the National Council of Industrial Cooperatives and expert on small business.

The purpose of the New Economic Mechanism, which continues to evolve, is to encourage people to start their own new businesses or, if employed within a state company or cooperative, to exercise more initiative and be more efficient, Mr. Ory explained.

He may sound like an advocate of free enterprise, and, in a way, he is. But some facts should be kept in mind. For instance, state enterprises are still responsible for 93 to 94 percent of Hungarian industrial production. Cooperatives carry out 5 or 6 percent of industrial output on average, although it's as much as 15 to 20 percent in some industries. Private enterprises produce only a tiny fraction of total industrial goods.

Small private businesses and artisans do play a bigger role in the service area, including the retail trade, restaurants, home building, repairs, and so on. Nonetheless, for the whole economy, the private sector only amounts to something like 3 or 4 percent. The small farm plots of people employed in state or cooperative farms and elsewhere amount to another 4 percent.

With something of a pause in the mid-'70s, the government has persistently eased the limits and regulations on small business. More ''reforms'' are on their way. At the start of 1985, state enterprises will get more independence from government ministries to alter their business activities without permission; their top executives are to be elected by employees or their representatives, rather than appointed by the responsible ministry. Further, the system will be altered to force these enterprises to set more prices at world-market levels, i.e., those in the noncommunist nations.

Although small business activities are just that - small - they get special attention in Hungary because they have had much to do with the sharp improvement in the ''quality'' of living (vs. money income).

The raising of pigs and chickens by farmers in their spare time, or the growing of vegetables and fruit by nearly anyone, has assured Hungary of an abundance of food. With competition in the service sector, store clerks are more polite, repairmen more concerned with doing a good job. The nation earns enough foreign exchange through tourism or exports of farm and other goods to import some consumer goods from the West.

''There is an element of choice and variety in the stores,'' a diplomat noted. ''There are no long lines in front of empty shelves. There are new shops, new stands, new restaurants. The entrepreneurial spirit is flourishing. The Hungarians feel like they have made progress. They have become very consumer conscious.''

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