How far can economic liberalization be permitted to spread into the circumscribed political framework of the communist state? It is an old question and one which, lately, Hungary has increasingly explored. Hungary has come up with with some typically pragmatic answers.
After the painful lessons of the Hungarian revolution of 1956, Hungarian development has been based on far-reaching economic reform (which even the Russians are beginning to emulate) but on only modest - and always closely watched - political liberalization.
By East European standards, even the latter has meant considerable openness in public affairs, flexibility in cultural policy, and a mild approach to intellectual dissent. Pragmatism and caution have succeeded on two counts:
* In promoting a market economy with strong and profitable links to the world outside Comecon.
* In winning a measure of public credibility which did not seem remotely possible when the Soviet Army put down the 1956 revolt and Janos Kadar was installed in office.
Dissent is under rather more pressure than it has been for some time. During the past year the editor of an ideologically controversial monthly, popular among students, was dismissed, and several well-known writers were censored.
There has been a steady crackdown on the small but lively Budapest intellectual group behind a flow of clandestine writing often touching on political topics embarrassing to the government and its allies.
But this has to be seen in the Hungarian context: Two leading figures in this samizdat group could still travel to Italy to take part in an East-West peace-movement forum. Five hundred students could subject the deputy minister of culture to a grueling 21/2-hour debate over their demand that the dismissed editor of the monthly Mozgo Uilag be reinstated.
More sensitive issues for the regime have been Hungarian sympathies with Poland's Solidarity movement and growing concern about Romania's treatment of the 2 million Magyars in Transylvania.
If Mr. Kadar felt goodwill for Solidarity's initial aims, it was quickly diffused by the concern that it might cause Soviet intervention. That, in turn, could have had grave repercussions for Hungary's own reforms.
On Transylvania, the Hungarian leader says nothing can be gained by ''answering (Romanian) nationalism with (Magyar) nationalism.'' Referring to difficulties faced by ethnic Hungarians in Czechslovakia as well as in Romania, the party newspaper Nepszabadsag notes that ''not everything the government does (in this field) takes place in public.''
To some extent the recent tightening is a reflection of what official Budapest sees as a still transitional stage in the Soviet Union. But this concern did not preclude a frank debate on the Chernenko succession only two weeks after the event. The 90-minute radio discussion was unusually candid even by Hungarian standards.
Hungarian reform this past year has been spelled out by an experienced Hungarian diplomat and former ambassador to Moscow, Matyas Szuros, who has been head of the Party Committee's Foreign Affairs Department since 1982.
His argument is that alliance membership within the Soviet bloc does not preclude a small state (like Hungary) developing an independent foreign policy based on its own interests. This, of course, still embraces the security of alliance and its obligations. But the communist world no longer has a Moscow-based international like Joseph Stalin's Comintern or its successor, the Cominform. Nor, say the Hungarians, is there a place for one today when diversity is unavoidable.
While acknowledging their loyalty to the Warsaw Pact and Comecon, the Hungarians see both organizations as vehicles to harmonize bloc interests with the particular national interests of members. This is the first time a bloc member has set national interests on a par with common interests.
Hungarian economic reform relies greatly on the country's extensive relations with the West and with nonaligned countries. In the past six months Budapest has welcomed American, British, West German, and Italian leaders. A member of the International Monetary Fund (IMF) and the World Bank, Hungary also has upgraded relations with China and has sought an umbrella trade agreement with the (West) European Community.
Until the Russians find a way of harmonizing their own relations with the West, there will be a question mark over Hungary. Its internal reform draws it into increasingly close association with the West, and an independent foreign policy - however essentially pro-Soviet - still carries risks.