Social Scientist. v 17, no. 194-95 (July-Aug 1989) p. 8.


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K.K. DAS GUPTA*

Reflections on Economic Reform in Hungary

In this paper an attempt has been made to examine a few of the important conceptual issues and practical problems of the Hungarian economy since the introduction of the New Economic Mechanism in 1968. In the process, the debate on the nature of the Hungarian plan model, implications of the structural changes of micro-economic organs in different branches, the direction of the regulatory mechanism in the present period, characteristics of the second economy, factors responsible for adoption of 'tranquil* agricultural policy and the controversy on the issue of full employment in socialism have been analysed for identifying mainly the qualitative dimensions of the present reform in Hungary.

It is assumed at the very beginning that in the broad sense of the term, Hungary is a. centrally planned economy with its own specificities. As is well-known, the NEM (the New Economic Mechanism) in Hungary in 1968 did not abandon central planning although obligatory plan targets were removed from medium term and annual plans. Also, directives and economic levers of the pre-NEM period were replaced by 'economic regulators', which were instruments of control of an indirect nature but were, in the final analysis, extremely important for guiding the national planned economy. From the days of NEM, the character of the Hungarian plan model became such that it 'preserved central planning, but changed its sphere of operation and methods. Instead of compulsory directives, market relations and market prices were established. The central plan was compulsory for the government but not for the firms. Thus the former, instead of compulsory orders and laws, tried to use indirect economic regulators to influence and direct firms' activities.'1

The first point that must be kept in mind when analysing the nature of 'market relations' and 'market mechanism' in Hungary is that these two expressions do not have the same meaning as in market economies. Today, when the Hungarian leadership is contemplating introduction of a new set of reforms for the management of the economy, it is advocating wider market mechanism through empowering the enterprises by proper legislations and also encouraging these to partici-

* Gokhale Institute of Politics and Economics, Pune.



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