Why Soviets take notes on Hungary's economic reforms
Vienna — Hungary - whose limited free-enterprise approach to a communist economy has attracted interest in the Kremlin - is the one Eastern bloc country entering 1983 with a good prospect of staying afloat financially.
Poland remains on the brink of economic collapse, and other East European states show signs of serious strain under recession and domestic dogma.
Hungary is a small but gamely pragmatic Danubian country that lacks almost all essential raw materials and must live on world trade and outside credit.
Like Poland, East Germany, and Romania, it is heavily in debt to the West. (In fact, with only 10 to 11 million people and an outstanding debt of some $8 billion, it has the largest per capita borrowings in the Eastern bloc.)
Hungarians, like the others, have had to tighten their belts. Consumer prices have risen. The Hungarian budget for 1983 projects the lowest growth rate since World War II.
But parallels stop there, thanks mainly to a decade of market-minded economic reform that has put - and keeps - the country in the more viable shape its Comecon allies may well envy.
A major factor is a high-technology agriculture, based on imports and know-how from the West that have been maintained despite the hard-currency shortage. These have helped make Hungary a significant exporter to four wheat-deficient bloc countries, including the Soviet Union.
The Soviets in recent years have watched Hungarian farming progress with growing interest. Since the late Leonid Brezhnez at a party congress in Budapest held the Hungarian model up as an example for the rest of the bloc, there has been a steady stream of Soviet farm specialists to Hungary.
The Soviets in fact are now modeling four big poultry-factory farms on the highly successful Babolna state farm in western Hungary.
This ''tradition'' seems likely to be carried on by Brezhnev's successor, Yuri Andropov.
He was Soviet ambassador in Hungary at the time of the 1956 uprising. The Hungarians openly credit him as being a decisive influence in convincing the Kremlin that the subsequent reform program of Janos Kadar (who still holds power) was the only way to pacify and stabilize the country as a secure member of the Soviet alliance.
Visiting Budapest in summer, this reporter found the Hungarians quite convinced - and extremely satisfied at the prospects - that Mr. Andropov would be the next leader of the Soviet Union. The Hungarians were as anxious about the economic outlook as any in the Eastern bloc.
Unfairly, the Hungarians thought, given their long established credit-worthiness, they were getting the same cold-shoulder credit treatment from Western banks as other East-bloc countries in the freeze that followed the imposition of martial law in Poland.
With their reserves uncomfortably low, Budapest's bankers were worried that, like Poland and Romania, they might have to ask the West for a rescheduling of their debts. Leading officials made no secret of their deep concern.
''We have to face up to the always politically sensitive question of reduced living standards,'' one said. ''There can be no question of raising them - we may not be able to keep even present levels.''
Since then, Hungarians have had to eat somewhat less. But they still eat well , thanks to better supplies and a better distribution system than elsewhere in the bloc.
Moreover, the overall picture has brightened considerably since then. International bankers have come to see at least that there was no reason to put Hungary in the same bag as less efficient Poles and other East Europeans and that Hungary itself was patently sticking to the common-sense policies in its battle to stay solvent.
The breakthrough came in mid-August when it was seen that the country had chalked up a trade surplus of $200 million in the first seven months of 1982, compared with a deficit of twice that amount only a year or so previously.
A month later, negotiations began for a stand-by credit from the International Monetary Fund (IMF). Hungary had joined only in May. (The only other Comecon country to have joined the IMF is Romania.) Poland has sought membership but there are uncertainties on both sides.
Budapest's way of tackling its problems goes a long way toward meeting IMF loan requirements. In November, the fund extended a $600 million credit that is expected to help Hungary double or even treble its present hard-currency surplus through the coming year.
It will not be easy. But domestic and Western experts believe it possible through the budget and investment cuts and a moderate but substantive squeeze on domestic consumption and real earnings.
In addition to the boost from the IMF, just over a billion dollars worth of new credit has come from both the Western central banks and Western commercial banks. Altogether this gives Hungary some $1.6 billion worth of timely support as well as the fillip of renewed Western confidence.
By contrast, East Germany and Czechoslovakia - long the bloc's ''fat cats'' in terms of consumption - are both in the doldrums. And neither is doing much about it except to tighten centralization and introduce superficial changes to make it work more effectively.
Both of those countries formerly thrived as industrial ''metal eaters.'' They were also the bloc's biggest meat eaters, with per capita intakes of 90 and 84 kilograms, respectively, which is considerably more than some Western countries consume.
For 10 years of so-called normalization following elimination of the 1968 reform movement, the Prague regime relied on consumer carrots to stifle popular political discontent. But those ''carrots'' began to disappear in 1979 with the first of three years of agricultural decline.
Last fall, the harvest suffered yet again for lack of spare parts for farm machinery. Instead of the flexibility of Hungarian farming (which includes encouragement to the free sector) and putting hard currency where it was most needed, Prague simply exerted more controls from the center, often at the expense of the remnant of small, noncollectivized farms that had been showing better results.