pdfVolume 4 Issue 4 CONTENTS

Zsuzsanna Varga

Opportunities and Limitations for Enterprise in the Socialist Economy

The Case of the Budapest Agricultural Cooperatives


To this day, there is widespread consensus in the secondary literature on agriculture in the socialist countries of the Soviet sphere according to which the “Termelőszövetkezet” (agricultural cooperative) in Hungary represented a unique path of development that diverged significantly from the Stalin kolkhoz model. In this article, I examine this process, focusing on the example of Budapest, the Hungarian capital. The natural features of the city (poor soil quality, land divided into small plots) did not really favor agricultural production. Furthermore, in the 1950s, the factories of the city offered higher wages, thus luring workers away from agriculture. The market pressures of the labor force set in motion a process of adaptation in agriculture. In comparison with the rest of Hungary, in Budapest the expansion of the sphere of non-agricultural activity of the agricultural cooperatives began earlier, and cooperative members were paid in cash instead of according to a Soviet-style model of remuneration based on work units. In response to the consumer demands of the population of Budapest, several innovative forms of vertical and horizontal integration emerged. I emphasize in my article that, in the case of the agricultural cooperatives, the important elements of entrepreneurial management took form before the introduction of the so-called New Economic Mechanism, for the most part as consequences of initiatives coming from below. Since these innovations were implemented before the relevant changes to the law had been made, a great deal depended on how the superior organs of government handled the lacuna between law and practice. In the 1960s, the agrarian lobby managed to exert sufficient influence on the government to prompt lawmakers to adjust the laws to conform, retroactively, to practice. In the 1970s, when the brakes were being put on the economic reforms, this phase displacement became a vulnerable point. Economic and administrative measures and even steps involving criminal prosecution were taken to limit the entrepreneurial independence of the agricultural cooperatives.

Keywords: collectivization of agriculture, communist regime in Hungary, divergence from the kolkhoz model, cooperatives, New Economic Mechanism


To this day, there is widespread consensus in the secondary literature on agriculture in the socialist countries of the Soviet sphere according to which the agricultural cooperatives in Hungary represented a unique path of development.1 In the course of my research, which has focused on the primary phases and the dynamics of the shift away from the kolkhoz model, I have noticed that there were significant local differences in this process. As I examined the regional particularities of this process, I began to study the agricultural cooperatives that came into being in Budapest more closely.2 The conditions were somewhat unusual. The quality of the soil and the plots was below average for the country. The arable land was divided into many parcels. If one also takes into consideration the fact that the vast majority of their members initially not only did not bring any lands to the agricultural cooperatives but also did not really have an understanding of agriculture, it becomes quite clear that there was little rational reason for creating the cooperatives. It is hardly coincidental that for years they operated at a loss, and during this period the membership was continuously changing. This tendency began to change in the mid-1960s, and by the mid-1970s the Budapest agricultural cooperatives were among the “wealthiest” in Hungary.3 Agriculture became an increasingly marginal part of their operations. They were active in food preparation and processing, as well as the engineering industry, chemical engineering, light industry, and an array of services. They created joint ventures with other agricultural cooperatives and collaborated with state enterprises. They had partnerships with numerous Western countries. As I studied this interesting process of adaptation, I became increasingly preoccupied with the question of what actually took place in these cooperatives. What internal and external factors might help us better understand this distinctive socialist “success story”?

In order to understand the history of the Budapest cooperatives, one must know a bit about the Stalinist model, which was the model for the leadership of the Hungarian Communist Party when it came to the transformation of agriculture in Hungary.4 In order to understand the Stalinist system of Soviet agriculture, one must go back to the late 1920s, at which time the Soviet Communist Party’s leadership decided to espouse a concept of economic development in which fast-paced development of heavy industry and military industry was a priority. Since the Soviet Union was unable to use foreign credit in order to implement this model, it turned to domestic resources. The income made from agriculture represented the most important internal resource.5 The compulsory delivery system and policy of price control ensured that the producer (the farmer) kept none of the profits made from his product. At the same time, the producer had to pay asymmetrically high prices for industrial products, and the gap between the prices of agricultural products and industrial products widened dramatically. Thus, agriculture became a kind of “inner colony.”

As a consequence of collectivization, a system came into being that ensured concentrated diversion of income from agriculture, as well as supervision and control over and discriminatory treatment of agricultural producers. The sovkhoz, or state farm (a contraction based on the Russian words, transliterated, sovetskoye khozyaystvo, or state ownership), was regarded as the most developed operational model. The other form of collective agriculture, the artyel (which became known as the kolkhoz, a contraction based on the Russian words kollektivnoye khozyaystvo, or collective ownership), was considered an inferior form of ownership, since it was based on group ownership by its members.6 Because of the different forms of ownership, workers belonging to the state sovkhozes were categorized as workers and therefore had a guaranteed monthly salary. In contrast, the incomes of members of the kolkhozes depended on the success (or failure) of cooperative farm. The success of a kolkhoz only became clear after it had fulfilled its obligations to the state (made obligatory deliveries, paid taxes, and made payments on loans) and set aside reserves for the upcoming year. The members of a kolkhoz received payment once a year. At the end of an economic year, whatever remained after obligations to the state had been met was divided among the members (for the most part in the form of produce).7 The 1935 kolkhoz model charter made this all compulsory.

The fact that the large agricultural estates (the kolkhozes and the sovkhozes) fulfilled their obligations to the state by delivering produce (in part through the system of compulsory deliveries and in part as a way of paying the machine and tractor stations for the work that was done with machines) also served to eliminate any ties between money and goods in this sector of the economy. The authorities also used payments in kind as a means of eliminating the role of money. The resources that were needed in order to ensure continuous production were distributed as allocations and remittances, like the investments of capital between the economic organizations.

Drawing an analogy with the material relationships between parents and children, János Kornai characterizes this degree of paternalism using the pair of terms “in kind allocation / passive acceptance” and “in kind allocation / active demand.”8 He links the qualitative change that took place in the relationship between the state and the micro-organization to the New Economic Mechanism.9 The Hungarian economic reform, which was introduced on January 1, 1968, was part of a wave of reforms in the socialist bloc that began gathering strength in the mid-1960s.10 The New Economic Mechanism constituted the end of an important stage in the history of the agricultural cooperatives. My research suggests that in their case, there was an important turning point in the previous era as well, specifically 1956, because of the abolition of the system of compulsory deliveries. For this reason, in this essay as in some of my other writings, I regard this as a significant milestone in the history of the agricultural cooperatives and divide this history into sections accordingly. In the first part of my inquiry I examine the characteristic features of the agricultural cooperatives of Budapest before 1956. In the second part, I consider the developments that took place after 1956. In the third, I examine the period following the introduction of the economic reforms.

Caught betwixt the Plan Targets and the Obligatory Regulations of the Kolkhoz Model Charter

In 1948/49, agricultural cooperatives began to be organized in Budapest and the rest of Hungary.11 The creation of the cooperatives in Budapest was justified with the contention that they would significantly improve food supplies for the industrial work force, which was becoming increasingly concentrated in the urban center. Three types of agricultural cooperative were permitted (types I, II, and III). Initially, all three functioned within the legal framework as farming cooperatives. The difference between these three types of cooperative groups lay in the amount of communal production and the manner in which the yield was shared.

The first agricultural cooperatives to be established in Budapest were of the third type, which most closely resembled the kolkhoz and which was regarded as the most developed.12 However, this did not mean that the founding members were so “ideologically advanced” in their thinking that they abandoned private farming and immediately decided in favor of the highest level of joint ownership or cooperation. Rather, in general workers in agriculture who had little or no land (and who often had come to the capital from rural parts of the country) came together in the hopes that, as beneficiaries of state support and lower taxes, they would have a better life, even if they would be obliged to make compulsory deliveries to the state. They were also thus able to get access to the state reserve lands, which was an important consideration. The market gardeners, milkmaids, and fruit-growing farmers who brought their produce to the Budapest markets showed no interest whatsoever in joining the cooperatives.13

After Greater Budapest was created in 1950 (which meant the administrative addition of 16 villages and 7 towns to the city and hence a dramatic increase in the size of the arable lands belonging to the capital), it seemed even more reasonable to put these lands to large-scale use. Farming was only done on a significant scale in the outer districts of the city.14 During the April 24, 1951 sitting of the Budapest Party Committee of the Hungarian Workers’ Party, the results of the collectivization campaign were summarized as follows:


An acceleration of our socialist development in the field of agriculture also took place in the capital in the first quarter of the year. In addition to the 11 agricultural cooperatives, with the assistance of the party committee the district councils helped the working peasantry of Greater Budapest form another 14 agricultural cooperatives.15

In the spring of 1951, of the 25 agricultural cooperatives in operation in Budapest, 13 were type I cooperatives. 986 families were living on them, and they had a total of 1,181 members and 5,873 cadastral yokes (one cadastral yoke equaled 0.57 hectares) of land, some 80 percent of which (4,665 cadastral yokes) was cultivated.16 These cooperatives constituted a very loose form of association, in which the members performed only the ploughing and sowing of the soil communally. The other tasks involved with husbanding the land were done individually. Every member had a claim to the harvest. They had to make contributions to cover the common costs of the cooperative and to ensure adequate reserves.17 Only one type II agricultural cooperative was formed, a so-called average distribution cooperative. It consisted of 10 members and lands totaling 100 cadastral yokes, 62 of which were cultivated.18

There were 11 type III agricultural cooperatives in Budapest, the so-called communal cooperatives, which were regarded as the most developed organizational form. 8 had been in operation since 1949. 3 were created as a result of a campaign in the autumn of 1950. They were home to a total of 486 families and had 603 members and a total area of 2,759 cadastral yokes, of which 82.7 percent (2,281 cadastral yokes) was cultivated. In the spring of 1951, the shared livestock consisted of 246 cattle, 76 horses, 687 swine, and 556 fowls. This alone indicates that the vast majority of the members had come from poor peasant backgrounds.19

It is worth examining in some detail the system of rules that governed the type III agricultural cooperatives, because this system exerted a decisive influence in the course of later developments, when the cooperatives became independent. The system was based on the kolkhoz regulations adopted in the Soviet Union in 1935, which remained in effect until 1969. According to these regulations, the members of the group turned the lands under their cultivation over for cultivation by the cooperative, whether the lands in question were in their possession or merely rented. They were given ground-rents in exchange. An individual family was permitted to maintain ownership of a household plot not more than one and a half cadastral yokes in size, though this included the area of the garden around the house. A household was also permitted to have a specified number of livestock.20 Beasts of burden, however, had to be turned over to the cooperative, as did farming implements, such as carts, sowing machines, plows, harrows, etc. The cooperative was obliged to pay a sum equivalent to the value of these things. Work groups and brigades of 6 to 10 people were created to perform the labor, and they worked together throughout the year under the supervision of a work group or brigade leader, whose instructions had to be followed. The members of the group were given a “work unit” in exchange for their labor, as was the Soviet model. A detailed table was issued in order to simplify the calculation of the “work unit,” though that time no one was obliged to take it into consideration.

The work unit served not only as a means of quantifying labor, it also was the foundation on which work was assessed as well.21 The brigade leaders would keep written record in the work unit book of how many work units a member had earned for work done in the course of the year. At the end of the economic year, the member would be given a share of the cooperative’s income on the basis of this written record. To be more precise, wages were only divided among the members of the cooperative after the cooperative had met its obligations to the state. As I have noted, the state acted as a proprietor, although the cooperative was not technically in its possession.22 The division of income on the basis of the remainder principle (i.e. on the basis of what remained after obligations to the state had been met), a system that was based on the Stalinist model, made it possible for the state to enforce its claims. But the cooperative was left to deal with the consequences. It is hardly coincidental that I often heard from members and leaders of cooperatives statements the essential gist of which was, “indeed the cooperative was a stepchild in comparison with the state farms.”

Among the consequences of this situation, the most serious for the members of the cooperatives was simply the fact that their income was unpredictable and constantly changing. Most of them responded by doing the minimum amount of work required in the cooperative to be entitled to the right to maintain a household agricultural plot. They provided for their families by cultivating their household plots and they were able to search for other occasional work in the area.23

In Budapest, where the members of a cooperative had significantly more costs on a monthly basis (transportation, utilities, etc.), the household plot was a less effective solution, especially for those who joined cooperatives with their own land, but not as gardeners. They needed cash. Furthermore, if a member of an agricultural cooperative in Budapest was not content with his income, he could get on a tram or bus and, within the space of a few stops, find work that would provide a regular monthly wage. Because of the forced industrial development of the first five year plan, there was a serious dearth of workers.24 Thus, no matter how strenuously the architects of the planned economy strove to eliminate market forces, the labor market continued to exert a strong influence, particularly in Budapest. This soon created serious problems. A report of the agricultural division of the Executive Committee of the Budapest Council issued in 1951 contained the following observation:


When closed, the accounts showed a deficit everywhere. This was because we were not able to ensure employment for the members in the wintertime, since the agricultural cooperative neither set aside money for this period nor had other forms of income, many of the members left the cooperative and found employment in factories.25

The Ministry of Agriculture reacted to the fluctuations in the cooperatives by increasing the severity of the regulations according to which they functioned. In 1951, they introduced a regulation according to which one could only leave a cooperative three years after having joined.26 In 1952, a resolution of the Council of Ministers raised the number of obligatory work units to 120 in general and to 80 for a woman with a small child. In the section of the resolution that dealt with work discipline one finds statements like the following:


Members must go to work regularly. […] For every day missed, 1-2 work units must be deducted from the work units of members who, in spite having been warned, do not go to work regularly. […] As of May 1, 1952, members of the agricultural cooperative can only undertake work outside of the cooperative with the written permission of the president or the director of the cooperative.27

The roots of the labor force problems lay in the fact that, because of the restrictive regulations, the cooperative had no say over how the products it created or the income from the sale of those products were used. Furthermore, the agricultural cooperative had no independence with regards not only to the division of income, but also in fundamental questions of production and cultivation. The instructions that were given by the Agricultural Cooperative Main Division of the Ministry of Agriculture concerning what the cooperatives should produce (and how much) were passed on by the Agricultural Department of the Budapest Council to the farms. The central crop plans also specified when the cooperatives should begin the work related to the various stages of cultivation. Given this, it is perhaps not surprising that in the 1950s cotton was included in the cooperatives’ obligatory crop plans, alongside wheat.28 As a perfectly logical corollary of the state’s paternalism, the cooperatives were not permitted to own their own machines. The Budapest machine and tractor station did the machine work for the cooperatives. This put the cooperatives in a very dependent, vulnerable position, since the machine and tractor station was not able to address the various problems that arose, often at the same time, on the two-dozen or so farms, and delays could cause considerable losses for the cooperatives.29

Every important question in the lives of the agricultural cooperatives was determined from above and outside. The cooperative was not even able to decide on simple matters, such as how many rubber boots the members would need for the autumn and winter months. Important questions, for instance who would serve as the president of a cooperative, were also not entrusted to the members. Leaders were usually assigned from above. The party center or the authorities in the ministry decided which member of the trusted cadre would be placed at the head of a given cooperative.30

In 1952, following a summer drought, these restrictions created a situation of crisis. The compulsory deliveries were also dramatically increased, as were the taxes that had to be paid by the cooperatives, and this also played a role.31 It was also significant that, at the time, it was not only so-called kulaks who were offering their lands to the state, smallholders and petty landowners were also trying to rid themselves of their plots. Faced with this situation, the state sought to procure produce from the agricultural cooperatives in order to compensate for the decline that had been brought about by the drop in productivity by individual farmers. In this context I would again mention the analogy drawn frequently by the subjects of my interviews, who likened the agricultural cooperatives to a stepchild. The state treated the cooperatives as if it were the owner and were able to dispose as it sought fit of a given cooperative’s produce and income. The state farms also enjoyed the advantages of state paternalism, since the state helped them when they were faced with financial difficulties and were unable to pay workers their minimum wages. In contrast, the agricultural cooperatives were left on their own by the state to deal with such problems, problems which in fact were caused by the multifold intervention of the state, for instance, a production structure that was not suitable to particularities of a given cooperative, the division of income on the basis of the remainder principle, or the insufficient knowledge of the leaders who had been “parachuted” into their positions from above.

Faced with these pressures, the agricultural cooperatives saw a potential solution in the expansion of their sphere of non-agricultural activities. By creating so-called ancillary enterprises, they hoped to provide work and income for their members that would complement earnings from agricultural production, which was obviously very seasonal.32 This was not easy, however, given the strict constraints of the regulations, since according to the philosophy of the Soviet kolkhoz, an agricultural cooperative could focus exclusively on primary agricultural production. This Soviet idea was foreign to the agrarian traditions in Hungary, but it caused a particularly large number of problems in the case of the cooperatives of Budapest. These farms, which dealt primarily with the production of vegetables and fruit, quite naturally would have liked to have prepared at least some of their products for the market and perhaps even to have had the chance to sell them.33

In the wake of the changes that began to be implemented following the death of Stalin, the assessments of the agricultural cooperatives shifted as part of the politics of the “new course.” The government of Imre Nagy, in order to prevent or at least curb the unravelling of the cooperatives, introduced numerous discounts.34 As part of the changes that were being made to agrarian politics, more emphasis was put on adapting to local circumstances, and this entailed a change in the assessments of the ancillary enterprises of the cooperatives, which at first meant the preparation, processing and sale of foodstuffs associated with agricultural production.

A separate governmental decree regulated the creation of ancillary enterprises in agricultural cooperatives, officially in order to increase the incomes of the members.35 The agricultural cooperatives could create ancillary enterprises individually and collectively, but only if these enterprises had some kind of connection to agricultural work and did not hamper the fulfillment of the primary tasks of production. The use of a foreign workforce was strictly forbidden, though it was possible, exceptionally and only with permission, if there was no one among the members of a cooperative with the proper expertise. The work that was done in the ancillary enterprises could only address the demands of the civilian population if there was no similar local industry and the executive committee of the council gave its consent. The decree distinguished between three types of ancillary enterprise:

1. production based (for instance, tree nurseries, mushroom growing, tile firing, stone mining, etc.)

2. processing (distillation, milk processing, grinding, etc.)

3. ancillary enterprises in the service industry (vegetable stores, flower stores, milk and dairy stores, etc.)


The fact that, in the free atmosphere of 1954 (not long after the death of Stalin), some 20 new forms of endeavor were being pursued in 63 ancillary enterprises clearly indicates the eagerness of the Budapest agricultural cooperatives to take initiative.36 In 1955, 49 essentially agricultural ancillary enterprises and landscaping divisions were in operation. Commercial trade took place in 56 market stands or businesses. The Budapest agricultural cooperatives maintained 36 vegetable and fruit businesses, 17 ornamental plant stores, and 3 milk and dairy businesses.37

When, with the forced resignation of Imre Nagy in the spring of 1952, the “new course” politics came to an end, the Budapest leadership rushed to declare its solidarity with the dogmatic line, which again was gaining strength. This is clearly discernible in the way in which the cooperatives were castigated for the work done in ancillary enterprises:


In many of the agricultural cooperatives, 30 percent and in some cases even 40 percent of the annual income is made not off agricultural production, but the work done in ancillary enterprises and direct speculative activity. In our agricultural cooperatives, people are engaged in every kind of trade, from making square rules to selling stockings, and yet comrades, we do not need agricultural cooperatives that prosper at any cost, that have let’s say an openly capitalist spirit, but rather cooperatives that operate according to strict regulations and grow stronger and develop on the basis of their own work.38


From then on, the expansion of the sphere of activity of the agricultural cooperatives became a question of both economic and political significance. The principles on which the criticisms of the cooperatives were based (the criticism of their profit orientation) remained a salient part of the debates concerning their sphere of activity over the course of the next several decades.

Increasing Scope of Action after 1956

Though it is not frequently characterized from this perspective, the 1956 Revolution was an important watershed in the history of agriculture in Hungary. The Kádár government, which rose to power in the wake of the Revolution with Soviet support, soon realized that while industrial production had essentially come to a standstill because of a general strike, any confrontation with the peasantry, which essentially was in possession of food supplies, would have unforeseeable consequences. In the interests of rapid consolidation, the new government was prepared to address the principal concerns and grievances of the peasantry. It put an end to the system of compulsory deliveries (which, indeed, had already been repealed once by the government of Imre Nagy) and it permitted members to leave or even dissolve the agricultural cooperatives.39 Two-thirds of the agricultural cooperatives in Hungary were dissolved, but this included only one of the cooperatives in Budapest.40

The most impactful of the measures that were taken was the elimination of the compulsory delivery system. By taking this step, the government put an end to an element of the planned economy that until then had been beyond question. After the system had been repealed, the state could only procure food supplies if it were prepared to pay realistic market prices. Thus instead of relying on compulsion as it had done earlier, the state used market incentives and structured its relationships with the individual producers, cooperatives, and state farms so as to meet address the interests and concerns of the producers. The rehabilitation of the agricultural marketplace, however, was limited, because prices were still determined not by the forces of supply and demand, but by the mechanisms of state price control.41

Thus the economic environment in which the agricultural cooperatives functioned changed drastically, but perhaps even more significant was the fact that they were given a chance to make changes to the regulations that governed them. In the power vacuum that emerged in late 1956 and early 1957, government control of the agricultural cooperatives slackened, since the party and state institutions were caught up in the processes of their own restructuring. Taking advantage of this, agricultural cooperatives across the country made important changes to their basic regulations. These initiatives, which came from below, can be divided into two main groups.42

The agricultural cooperatives sought to obtain more independence from the party and state institutions that interfered from the outset in their operations. This was made easier by the fact that there was a drastic reduction in the number of people working in the council apparatus, including people in the agricultural divisions. The agricultural cooperatives sought to make themselves independent of the machine and tractor stations by purchasing their own mechanical equipment. At first, it seemed as if they would have the support of upper echelons of government.43 Taking advantage of the opportunity, in 1957 the agricultural cooperatives purchased 8 Zetor tractors.44

The cooperatives sought, furthermore, to make adjustments, adapt to local circumstances, and assert control over the regulation of their own internal affairs, first and foremost the organization of production and labor and the system of wages and pay.45 This was true of the agricultural cooperatives that continued to function in Budapest. As they had been unable, because of the restrictions of the kolkhoz regulations on which they were modelled, to ensure their members an income that would have competed with the wages offered in the factories of the city,46 they saw a potential solution in the expansion of their sphere of activities.47 This enabled them to compensate for the fluctuations in income that were caused by the seasonal nature of production and provide advances for their members the whole year through.

One of the first initiatives of the seven agricultural cooperatives in Budapest came in late 1956 and early 1957 with the creation of distilleries. The discarded or unsold fruits that were piling up in the food shops and canning factories of the capital provided an ideal foundation for the production of spirits.48 These distilleries did a great deal to alleviate the serious financial problems faced by the agricultural cooperatives and enable them to pay their members regular monthly advances. In general, advances were made every month, but in some cooperatives they were made twice a month. The amount of the advances was set by the Agricultural Cooperative Main Department of the Ministry of Agriculture, and it could not exceed 60 percent of the anticipated value of the annual work unit. Later, the agricultural cooperatives asked the Agricultural Department of the Central Committee to allow them to raise this limit to 80 percent.49 The fact that at the time the Agricultural Division of the party center was more supportive of initiatives coming from below than the Ministry of Agriculture played a role in this. I will address the tensions that existed between the two a bit later in this article.

The agricultural cooperatives used other means in their attempts to address the problems that had arisen because of the work-unit system of remuneration. The principal problem was that, according to this system, a member of a cooperative as not motivated to work attentively and effectively, but rather sought to acquire as many work units as possible as quickly as possible with the mere appearance of work. This led to unusually dire problems in the agricultural cooperatives of Budapest, since, given the role the cooperatives played in providing food supplies for the population of the city, most of the work involved vegetable gardening, floriculture, and livestock farming, all of which are particularly labor intensive.

A system of work units based on efficiency and results began to be used in places where the products of labor were the most easily quantified. “Thus [these kinds of work units] were used first in the brandy distillation ancillary plants, where the members working in the distillery were given work units on the basis of the gross number of liters of alcohol produced.”50 In 1959, the Champignon mushroom cooperative in the X. district of the city introduced this system. The work of the different groups of laborers, who were physically separate from one another as they worked in different places, could be clearly measured. Units of laborers shared in the profits on the basis of the number of mushrooms gathered, i.e. the value of the yield of their work.51

Sometimes cash bonuses were also made. This form of remuneration was the most effective in branches of agriculture in which the results of a worker’s labor could be the most clearly quantified. Several agricultural cooperatives used this system effectively in dairy farming. For instance, in the Dózsa Agricultural cooperative in the XVII. district, a dairy farmer was given a specific sum in forint—not additional work units—on the basis of the amount of milk produced.52

In some of the agricultural cooperatives in Budapest, for instance the Kinizsi and Beloiannisz cooperative in the XI. district, the cooperative on Bécsi Boulevard in the III. District, and the Táncsics cooperative in the XX. District, a system of hourly and daily wages was used instead of work units.53 This represented the most radical departure from the kolkhoz principles of remuneration, since it completely eliminated the work unit by making the amount of time spent working (measured in days or hours) the basis on which work performed was assessed. The agricultural cooperatives tried to make monthly cash advances in compensation for days or hours of work (in other workers, as a divergence from the remainder principle, workers were not compelled to wait until the end of the year for payment), regardless of regardless of their economic fortitude.

These approaches to remuneration seemed suitable as a means of mitigating fluctuations in the agricultural cooperatives, though because they constituted a departure from the regulations of a kolkhoz, they led to heated debates among the people who crafted agricultural policy, who were preparing to complete the process of collectivization. The Ministry of Agriculture, which was led by Imre Dögei (who represented the dogmatic line), opposed these initiatives from below because they would provide members with an income (whether it be money or payment in kind) over the course of the year, before the cooperative had met its obligations to the state. Thus, the agricultural cooperatives were getting around the remainder principle. This principle was, after the practice of compulsory deliveries, the second most powerful tool used by the state to enforce its interests. According to Dögei, the use of alternative forms of remuneration would undermine the ability of the cooperatives to fulfill their obligations, in particular their obligations to the state. Even more disconcerting, in his view, was the fact that the initiatives taken by the cooperatives were a departure from the regulations of the kolkhoz model (and particularly the work unit), which was regarded as unchangeable. In contrast, the Agricultural Division, headed by Lajos Fehér (it functioned alongside the Central Committee), contended that the new solutions, which created new incentives for workers, would motivate the members of the agricultural cooperatives to take a greater interest in improving production from the perspective of both quality and quantity, and this was very much in the interests of the state.54

The Budapest leaders found Fehér’s reasoning more persuasive, as the following citation concerning the concluding phase of collectivization shows:


The introduction of a system according to which income was shared and bonuses were paid on the basis of the final product and output contributed to the creation of a favorable mood. In most places, the members of our agricultural cooperatives joyously welcomed the introduction of the new system of division of income. […] The fact that in most of the cooperatives advances on work units were paid every month also helped foster a love of work and a good general mood.55


However, all over the country the process of collectivization was accompanied by problems (drops in production, the migration of important segments of the workforce) so dire that the party leadership found itself compelled to confront the gravity of the risks it would face if it were to return to the dogmatic agricultural policy that had prevailed before 1956. At the beginning of 1960, Dögei was dismissed from his position at the head of the Ministry. Dögei was replaced by Pál Losonczi, an innovation-minded agricultural cooperative president.56 Under Losonczi, a distinctive approach to problem solving was adopted. Every year, at the beginning of the year, the Ministry would disclose the remuneration strategies and solutions that—while they were in violation of the legal provisions—would create incentives for the members of the agricultural cooperatives. With the introduction of these semi-legal measures, the scope for action of the cooperatives increased step by step, which contributed to growth in income for their members.57

The agricultural cooperatives of Budapest adapted well to this new atmosphere of “anything that has not been expressively forbidden is permitted.” Production in the ancillary enterprises was particularly lively. In the XX. district, for instance, each of the agricultural cooperatives pursued significant endeavors, in addition to traditional agriculture. The three cooperatives stored and packaged potatoes, which would be one of the staples of the winter diet for the city. Several cooperatives used their sandy areas for the production of sand and in doing so gained land that could be used for agricultural cultivation. In the Sasad cooperative in Buda, for example, alongside cultivation of plants and livestock farming (the main branches of enterprise), ancillary enterprises also came to play important roles. The latter included distillation, preserves, a tile workshop, a limestone mine, a landscaping enterprise, an automobile plant, and a maintenance workshop. There was also an artificial flower workshop in the cooperative, and the cooperative shops sold wreaths and flowers.58 The spread of these kinds of ancillary enterprises contributed to the creation of forms of undertaking that were distinctly market oriented.

Government decree 3004/3/1960 (XI. 17.) gave the work of the agricultural cooperatives a new direction. The decree concerned state support provided for the cooperatives, but it also addressed questions concerning the auxiliary and the processing plants, as well as the cooperative construction brigades. According to the decree, the primary responsibility of the construction brigades was the completion of the shared construction projects of the cooperative, the renovation of the buildings used by its members, and the construction of new dwellings for its members. If there was no local industry in the given community, the ancillary plants were allowed to continue operation for the members and the local population without having to obtain the express permission of the authorities.59

By the beginning of 1961, the complete socialist reorganization of agriculture in Hungary had been completed. According to official statistics, in Budapest there were 25 agricultural cooperatives in operation with a total of 17,114 cadastral yokes and 3,469 members.60 While collectivization had been effectively implemented, dire problems of production arose, and the country was compelled to import both breads and meat.61 The leaders of the Kádár regime were compelled to confront the fact that, without the proper mechanization of agriculture, the country would remain very much in need of the members of the agriculture cooperatives and their families as a labor force, but at the same time they recognized that the classic Soviet kolkhoz model did not provide the necessary material incentives for this labor force. Under pressure from the agriculture lobby, which formed around Lajos Fehér (secretary of the Central Committee of the Hungarian Socialist Workers’ Party and a member of the Political Committee),62 the party leadership gave its consent for the adoption, at least temporarily, of a solution which rested on the use of household plots and a system of remuneration that addressed the failings of the work unit system.63 In Budapest, the household plots were not as significant a factor as they were in the more rural parts of the country. The primary goal was to convert to a system of wages paid in cash. As a consequence of this, the Budapest agricultural cooperatives soon realized that, whatever clever solutions they might devise to replace the work unit system, the impact of these innovations would be limited as long as the remainder principle remained in force. A trifling quantity remains trifling, however equitable its distribution.

In the first third of the 1960s, Fehér and his circle, having confronted the limitations of the solutions that were being proposed from below, crafted a comprehensive agricultural reform plan that outlined all of the financial, legal, and administrative measures that would have been necessary in order to begin to address the various challenges. The implementation of these measures, however, was postponed for various reasons.64 When the upper echelons of the political leadership finally reached a decision regarding the New Economic Mechanism, these agricultural reforms lent a significant dynamism to the process. Since the agriculture lobby had a clearly outlined platform for reform, it soon came forward with concrete suggestions, and thus in 1966 and 1967, i.e. before the actual introduction of the New Economic Mechanism, important reform measures were already underway.

Of these measures, Law III. of 1967 was among the most significant. It contained innovative steps based on the concepts of self-management and equal rights.65 The agricultural cooperatives were granted the right to make decisions concerning their incomes. They were no longer bound to planning, and thus could reach their own decisions concerning cultivation and working plans. They would have to deal with the economic consequences of their decisions. The law also stipulated that the agricultural cooperative was not simply an independent legal entity, but, furthermore, an entity with no legal superior (no trust, or territorial or production management). I.e. it represented itself in all respects.

In order for independent enterprise management to emerge, it was first important to ensure the necessary financial background. As I have mentioned, the agriculture lobby realized that the difficulties of material incentivizing could not be addressed, neither from the perspective of individual members nor from the perspective of the cooperative as a whole, as long as the system of pricing failed to reflect accurately the costs and the yield. Thus, prices were raised and credit concessions were made in 1966/67 with the aim of providing the foundations for self-financing, or in other words of transforming the majority of the cooperatives into “independently managed enterprises.” This meant, quite simply, that returns from sales would guarantee regular salaries for the members of the cooperatives and, from then on, the cooperatives would have the necessary resources to ensure adequate circulating capital, funds to replace fixed capital assets that had been used, and funds to procure some of the implements necessary to increase production and repay loans that had been taken out for this purpose. At the same time, revenues were not sufficient to cover the investments entirely. Investment policy was one of the main limitations on the entrepreneurial independence of the agricultural cooperatives, and it was a tool that was quite deliberately kept in the hands of the regime.66

This all affected the members of the cooperatives, since numerous changes were introduced in the distribution of income as the cooperatives came to resemble independent enterprises. Perhaps the most important of these was the elimination of the system based on the remainder principle. The 1967 law stipulated that wages paid to members over the course of the year would be considered a cost of production by the cooperative. It also specified that these wages took precedence over the demands of the state and recovery of the material costs of production. These measures created a fundamentally new situation with regards to incentives for the members of the cooperatives. With the creation of a legal foundation for regular salaries, a new approach had come to prevail, according to which the members of a cooperative (like other workers) were guaranteed a predetermined wage based proportionally on work performed and paid regularly and continuously.

It is worth noting that, of the local initiatives that had already become part of common practice in the cooperatives (though they were departures from the kolkhoz model) and that, with the adoption of the new law, were made part of legal practice, most concerned remuneration, the organization of production and labor, and household farming. The decree concerning the implementation of the law addressed remuneration as well, but it allowed for the use of any form of remuneration that corresponded to the principles of socialist distribution.

The transformation of the agricultural cooperatives into increasingly independent enterprises also meant organizational restructuring with regards to economic decisions, as jurisdiction was transferred from bodies of state oversight to the cooperatives themselves, which until then they had only exercised self-management as a matter of form. Earlier, the spheres of activity of the cooperatives had been determined essentially in an administrative manner by the district councils, the enterprises with which they had concluded contracts, and the local offices of the bank, which had used political pressure at times, but usually had relied on economic tools, such as loans and offers of support (or withdrawal of support).

In recognition of the transformation of the cooperatives into semi-independent enterprises, the 1967 law brought to an end the earlier narrow restrictions that had limited their sphere of activity. According to the new regulations, in addition to agriculture, the cooperatives could also pursue food processing, acquisition, sales, and services. A cooperative could use its implements, buildings, and equipment to perform tasks and provide services to address the needs of its members and their families, but also other cooperative and state enterprises, institutions, societies, and the general population.

The Situation after 1968: “If the Yields of a Cooperative are Bad, That Is Suspicious. If they are Good, That is Even More Suspicious.”

The secondary literature on socialist economic history has tended to emphasize, as one of the distinct features of the New Economic Mechanism, that it gave the socialist economic organizations a striking degree of independence. My research suggests that, in the case of the agricultural cooperatives, the important elements of entrepreneurial management were not introduced as a result of the New Economic Mechanism, but rather had emerged earlier, in large part as a consequence of initiatives from below. These solutions, which had been crafted in the course of everyday practice, had gradually shifted from the “tolerated” category to the “supported” category (the cultural politics of the Kádár regime classified things as “tiltott, tűrt, támogatott,” or “forbidden, tolerated, and supported”) thanks to the pragmatism of the agriculture lobby. The 1967 law provided legal recognition and protection for these innovations. This interesting prologue explains why the field of agriculture, and within agriculture, the cooperatives, were able to adapt the most rapidly to the situation that emerged following the introduction of the New Economic Mechanism.67 The Presidium of the Alliance of Budapest Agricultural Cooperatives, a new organization responsible for the defense of the interests of the cooperatives, offered the following assessment of the pre-1967/68 period:


The opportunities ensured by the new law pertaining to the agricultural cooperatives have significantly furthered the emergence of independent, entrepreneurial farming, in spite of the fact that individual laws and economic regulations, passed with delay, temporarily hampered work. […] The cooperatives’ yields over the past year demonstrate the soundness of the measures that were taken as part of the reform of the system of economic management. The leaders and members of the cooperatives understood its aims and were able to take advantage of the tools it provided, and it created a favorable political and economic environment for their operations.68

By 1968, as a consequence of a process of unification that had been underway, only 14 agricultural cooperatives remained in Budapest.69 Alongside the increasing specialization that took place over the course of the decade, the dynamic development of the ancillary enterprises of the cooperatives was also striking. The revenues brought in by these enterprises grew in terms of net and gross earnings more rapidly than the revenues brought in by the basic activities of the cooperatives (in 1968/68, for instance, they grew by 130 percent), and they jumped from 20 percent of the cooperatives’ total income to 47 percent.70

The Óbuda agricultural cooperative pursued a wide range of endeavors in the III. district, Szentendre, Pomáz, and Csobánka. The president of the cooperative, Ferenc Varga, offered the following explanation for its successes:


The various endeavors undertaken in addition to the basic activity [of the cooperative] are wide-ranging. Industrial undertakings comprise revenues from an array of products and manifold services. In addition to the production of foodstuffs, within the framework of other industrial undertakings the mine, the metal works, and the workshop in which elements used in buttons, rubber, ironworks and concrete are made are also turning out products, and we are also engaged in packaging, automobile and refrigerator repair, motorized winding, cleaning, and other service industries. Of the industrial endeavors, export packaging has the largest volume.71


In the first half of the 1970s, fifty-five units were involved with domestic trade enterprises in this agricultural cooperative alone, including a flower shop, a grocery store, a clothing store, and a seed shop.

Providing foodstuffs for the population of the capital remained one of the primary responsibilities of the Budapest cooperatives, in spite of the fact that the revenues brought in by work done in agriculture and food processing constituted only a small percentage of the total income. With regards to the needs of the population of Budapest, the most substantial contributions made by the cooperatives involved vegetables, poultry, mushrooms, and flowers. Their entrepreneurial spirit was quite evident in these enterprises. They endeavored to sell as much of their products as possible (for instance poultry meat, eggs, milk, and mushrooms) in their own stores or market stalls, and not to state enterprises.72 At the time, the agricultural cooperatives in Budapest had 135 stores of their own (74 of which were grocery stores, while the other 61 were flower stores).

Construction work done outside the cooperative was also part of the cooperatives function of addressing the needs of the population of Budapest. They were commissioned by the councils to build schools and kindergartens and renovate and make repairs to residential buildings. Their contributions to the service industries were similarly important. For instance, they set up several automobile repair shops.

As a consequence of the expansion of the scope of activity of the cooperatives and the shifts in the ways in which taxes and fees were levied, in 1968 the Budapest cooperatives had to pay some 120 million forint to the state, in comparison with 38 million in 1967. Of this, 70 million went to the city council (as property tax, income tax, and sales tax), 41 million more than in 1967. Because of changes that were made to the system of social insurance and security and the growth in the number of people working as part of the cooperatives, their direct costs in taxes and fees paid to the state grew by more than a factor of four.73

These data clearly demonstrate that by the end of the 1960s, the agricultural cooperatives of Budapest were in a process of dynamic growth because of the successes of their ancillary enterprises. Similar processes were underway in the agricultural cooperatives nationwide thanks to their successful adaptation to the New Economic Mechanism. The members of the cooperatives profited, but so did the population in general and the regime itself.

In light of this fact, it may seem surprising that at the beginning of the 1970s a press campaign was launched according to which the agricultural cooperatives had achieved their successes not through hard work and judicious adaptation, but rather by swindling, defrauding, and speculating. The criticisms targeted the ancillary enterprises first and foremost, thus it is not surprising that the Budapest cooperatives were put in the spotlight.74 According to one of the most frequently repeated contentions, staff and workers in the industrial units were given so much in the way bonuses and various benefits that, combined with their wages, these forms of remuneration vastly exceeded the hourly wages earned by workers in state enterprises who performed essentially the same tasks, even taking into consideration the benefits these workers were given. This allegedly led to income inequalities between the Budapest cooperatives and the industrial enterprises. Furthermore, by offering better pay and benefits, the agricultural cooperatives effectively lured skilled workers away from the state sector.

Népszabadság (The People’s Freedom), the main newspaper of the Communist Party in Hungary, participated intensively in the campaign against the agricultural cooperatives. On February 3, 1971, for instance, it printed an article according to which, between 1968 and 1971, the Shared Independent Agricultural Industrial Enterprise (Mezőgazdasági Ipari Közös Önálló Vállalat, or MIKÖV), a joint venture of the Vörös Október (Red October) and the Sasad cooperatives in Budapest, had illegally paid an innovation fee of more than 500,000 forint to its trade partners, in exchange for which its trade partners were to place an order for the enterprise’s low-quality products. After the inquiry had been completed, the Central People’s Control Committee (Központi Népi Ellenőrzési Bizottság, or KNEB) issued a report denouncing MIKÖV. The newspaper article, however, did not end here:


It is comforting, then, that the process of holding to account has begun in this matter. It is nonetheless perplexing, however, that until the public interest announcement was made, for years the people at the enterprise of the two cooperatives in question, who are now being held accountable, were able to pursue their business dealings without hindrance. How was this possible? A swindler or a fraud can always pop up in an industrial plant and try his luck to see if he can illegally get his hands on a higher income without working. But no one can profiteer like this for years at a single enterprise or an industrial plant turning out billions in production value. The fate of such a half-million forint sum is soon exposed. Why? Alongside other safeguards, first and foremost because the internal and external system of control is strict and consequential, and it effectively protects public funds.

Perhaps no one is monitoring this agricultural cooperative enterprise? Formally, a board of directors consisting of leaders of the two founding agricultural cooperatives exercises control over the legal supervision of this enterprise, as well as the executive committee of the Agricultural Division of the Budapest Council and the Ministry of Agriculture and Food. Nonetheless, in practice extensive opportunities were available for underhanded dealings that infringed on public interests.


It is worth noting the conclusions reached by József Sólyom, the author of the article:


Such fine agricultural cooperatives as Sasad and Vörös Október should never have given their names (or their money) to such a dubious enterprise. But since they did, they must now take careful note to obeying the laws strictly, lest anyone violate them. […] Today there is plenty of money in these cooperatives not only for bread, but for spreads as well. This case should shock them: they can avoid problems like this if they really do keep their own enterprises under strict control, if they thoroughly audit the finances and management of their cooperatives. This lesson should be put to good use, and not only by the agricultural cooperatives involved.75


This attempt to sway public opinion was part of a larger political struggle the essential question of which was the continuation or the repeal of the 1968 reforms. The agricultural cooperatives found themselves in the crosshairs of the supporters and the opponents of the reforms. One side characterized them as a positive example to be followed, while the other pointed to them as proof positive of the negative effects of the reforms.

A campaign of persecution was launched against the agricultural cooperatives the essential point of departure of which was that indeed the cooperatives had achieved their successes dishonorably, by swindling and breaking the law. According to the accusation, the forbearing conduct of the leaders of some of the cooperatives, who paid no mind to ethical or political considerations, had encouraged violation of the law. Allegedly, this indulgence was plainly obvious in the excessive wages that were paid to staff, the efforts that were made to lure workers away from other sectors of the economy, the pursuit of various lines of work without the proper permission from the state, laxity when it came to financial records, and creative interpretations of the law.

In the first half of the 1970s, police and judicial proceedings were launched against more than 1,000 leaders of agricultural cooperatives. Nationally, this meant 10-15 percent of the total number of people belonging to this group.76 My research has shown that the first step was always a so-called people’s control investigation. Historians of the Kádár era have devoted little attention to this organ of government, which was created in 1957, though it was active all over the country and played an array of roles, all the under direct supervision of the party.77 From the perspective of the agricultural cooperatives, the organs of people’s control were particularly significant because, after 1967, given the fact that the cooperatives enjoyed a larger degree of independence than they had earlier, in principle no other body of government had the right to inspect the ways in which they managed their affairs. One should add, at the conclusion of an investigation the people’s oversight committees could propose disciplinary proceedings that might also involve having to pay compensation. In more serious cases, they were obliged to file reports with the police and the prosecutor’s department.

Every year, the party leadership set the work plan for bodies responsible for the people’s oversight. In 1972, the Central People’s Control Committee examined the transport activities of the agricultural cooperatives. It is worth noting that, while this investigation involved 39 cooperatives nationwide, 13 of them were in Budapest.78 In the first half of the 1970s, the recurring themes of the people’s oversight investigations included abuses by the ancillary enterprises, the illegal or improper use of state support, and violations of storage contracts. There were also many inquiries that focused on closing account balances and document forgery. According to my calculations, the number of investigations launched by bodies of people’s control rose continuously until 1975, and a growing proportion of these inquiries ended in criminal denunciations.79

The Budapest agricultural cooperatives, which were regarded as allies of Lajos Fehér and were under close scrutiny by the party, were not spared the attacks, the gravity of which varied.80 In some cases, the leaders of a cooperative were “only” issued a warning at the conclusion of a people’s control investigation. If abnormalities were discovered to have taken place, a cooperative had to pay compensation to other farms. Sometimes show trials were even launched against the leaders of a cooperative. The Rozmaring (Rosemary) Cooperative had acquired a good reputation for its high-quality flower stores, and not only in Budapest, but in the (not exclusively socialist) countries of Central Europe to which it sent its exports.81 The president, Alajos Kovács, was known as an entrepreneurial leader eager to succeed. He was a member of the presidium of the National Council of Agricultural Cooperatives, and he had a good relationship with Lajos Fehér, one of the leading figures of the economic reforms. The Rozmaring trial was very clearly a show trial, as is made plain by the fact that articles disparaging the cooperative were printed in the dailies well before the decision of the court had been reached. The following excerpt gives a good sense of the tone of these articles:


Some of the staff of the cooperative […] cautioned the president many times: if he continued to lead the cooperative in this manner, he would find himself on the accused bench. President Alajos Kovács, however, did not believe this: ‘Exaggerated administration, strict regulation,’ he said, ‘would weaken the effectiveness of trained leadership.’ In the Rozmaring Gardening and Agriculture Cooperative—as is now clear—bribery was one of the most important tools of effectiveness: this criminal gang’s business venture flowered for a long time. The leaders of the cooperative, who according to the indictment caused damages to the national economy of almost one-million forint, are now waiting in custody for their trial to begin.82

In the autumn of 1976, when the article cited was printed in Esti Hírlap (Evening News), several leaders of the cooperative, including the president, had already been in custody for months. One might well wonder why a person like Alajos Kovács, who was known all over the country, needed this. He himself later shared the following recollections in an interview:


Returning to the interrogation: it’s quite true that they were able to keep you in a state of stress. A real criminal would have laughed at the whole thing, but this was not my situation. Once they had dictated whatever they felt was important, they put it in front of me for me to sign it. In all sincerity I didn’t even read it. They did not cause me any physical harm, but the feeling of helplessness […] I cannot express the atmosphere. They had learned how to create this atmosphere very well. It would be slanderous of me to say that they were not civilized police. They never maltreated me. […] But the atmosphere that they created, one cannot express it. A neurotic or inexperienced person breaks under it.83

The president had a shrewd grasp of what was at stake at the time when he was being held in custody. As the study of similar trials makes clear, the accused were held in custody for long periods of time as a general matter of practice. This was in part simply because the process of gathering the evidence in support of the accusation (which had been hastily cobbled together at the order of the regime) was slow. This was one reason why the police strove to prompt the accused to confess. Many agricultural cooperative presidents spoke in interviews of the tools that were used in the investigation stage of the proceedings. At first, the attorney who had been given the task of serving as Kovács’s defense had tried to persuade him to confess, as indeed did his cell mate, who had been recruited by the regime.84

I came across many instances of infringements of the rights of the accused, not only in the investigation stage, but also in the courtroom proceedings. For instance, exculpatory witnesses were hardly called to testify. Even more importantly, criminal law, which was modified in 1971, created numerous channels for interference, which allowed for judicial bias—and therefore political pressures—to prevail.85

In the end, in the trial that was launched against the Rozmaring Cooperative charges were brought against 22 people and 120 witnesses were called to testify. The hearing in the court of first instance lasted from November 23, 1976 to March 15, 1977. On December 21, 1977 the High Court of Justice issued its ruling.86 It found Alajos Kovács not guilty of any crimes committed as part of a conspiracy to commit unlawful acts and also not guilty of the crime of breach of trust. He was reprimanded only for having failed to take adequately resolute measures to ensure compliance with the rules concerning the handling of enterprise documents. In other words, he was found not guilty. However, in order to find some justification for having held him in custody for months, the court imposed a fine of 20,000 forint, which it regarded as paid in exchange for time spent in remand. In the meantime, of course, he had lost his position as president and the Rozmaring Cooperative had been merged with another cooperative, and a new president had been chosen for the new, larger cooperative that thus had come into being.87

The criminal proceedings that were launched against the leaders of agricultural cooperative clearly demonstrate that the demands that were made concerning market forces and efficiency at the time of the New Economic Mechanism never became (and never could have become) as important as the unchanging ideological precepts. Figures within the regime were able to take coercive measures against the agricultural cooperatives and their leaders by referring to the leading role of the working class and the superiority of the state-owned sector of the economy.


* * *


The three decades of agricultural history presented in this essay clearly demonstrate that the successful adaptation of the Budapest agricultural cooperatives depended in part on the extent to which they were able to free themselves from the limitations of the kolkhoz model and in part on the responses of the representatives of power when initiatives that were raised from time to time from below overstepped the regulations prescribed by law. In the 1960s, in part in response to the pressures of the agriculture lobby, the leading organs of the cooperatives addressed this lacuna between law and practice by making changes after the fact to the regulations in order to make them better correspond to the challenges faced in practice. In the 1970s, when the brakes were being put on the economic reforms, this phase displacement became a vulnerable point. Economic and administrative measures and even steps pertaining to criminal law were taken to limit the entrepreneurial independence of the agricultural cooperatives. Unfortunately, this took place at a time when, following the dramatic leap in the price of oil worldwide, effective adaptation to market forces would have been more important than ever if the regime had seriously hoped to salvage the Hungarian economy.


Archival Sources

Budapest Főváros Levéltára [Budapest Municipal Archive] (=BFL)

XV.20. Microfilm.

XVII.130 Documents of the Budapest People’s Control Committee, 1957–1989.

XXIII.110. Documents of the Executive Committee of the Agricultural Division of the Budapest Council, 1950–1978.

XXXV.95.a. Documents of the Budapest Committee of the Hungarian Workers’ Party, Leading bodies, 1948–1956.


Magyar Nemzeti Levéltár Országos Levéltára [National Archive of the Hungarian National Archive] (=MNL OL)

XVII-2-a Documents of the Central Control Committee, 1957–1989.

XX-10-e Head Criminal Court Division of Supreme Prosecutor’s Department, 1952–1996.

M-KS-276.f. Documents of the Hungarian Workers’ Party, 1948–1956.

M-KS-288.f. Documents of the Hungarian Socialist Workers’ Party, 1956–1989.


Primary Sources


Esti Hírlap [Evening News], 1976.

Figyelő [The Observer], 1961.

Magyar Közlöny [Hungarian Gazette], 1948, 1954.

Magyar Nemzet [Hungarian Nation], 1962.

Népszabadság [The People’s Freedom], 1957, 1971.


Mezőgazdasági termelőszövetkezeti törvény. Földjogi törvény [Agricultural Cooperative Law. Law Concerning Land Rights]. Budapest: Közgazdasági és Jogi Könyvkiadó, 1968.

Törvények és Rendeletek Hivatalos Gyűjteménye [Official Collection of Laws and Regulations], 1951, 1952, 1956.


Interview with József Pál, June 8, 2011 (in the possession of the author)


Budapest Statisztikai Évkönyve [Budapest Statistical Almanac]. Budapest: KSH, 1962, 1977.

Mezőgazdasági Statisztikai Zsebkönyv [Agricultural Statistical Pocketbook]. Budapest: KSH, 1976.

Vass, Henrik, and Ágnes Ságvári, eds. A Magyar Szocialista Munkáspárt határozatai és dokumentumai 1956–1962 [Documents and Resolutions of the Hungarian Socialist Workers’ Party]. Second, augmented edition. Budapest: Kossuth, 1973.


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Schlett, András. Sziget a szárazföldön. A Bábolnai Állami Gazdaság története 1960 és 1990 között [An Island on the Mainland. The History of the State Farm in Bábolna between 1960 and 1990]. Budapest: Szent István Társulat, 2007.

Sipos, Levente. “Reform és megtorpanás. Viták az MSZMP agrárpolitikájáról (1956–1958)” [Reform and Baulking. Debates on the Agrarian Policy of the HSWP, 1956–1958]. Múltunk 36, no. 2–3 (1991): 188–97.

Swain, Nigel. Collective Farms Which Work. Cambridge: Cambridge University Press, 1985.

Swain, Nigel. “Eastern European Collectivization Campaigns Compared, 1945–1962.” In The Collectivization of Agriculture in Communist Eastern Europe. Comparison and Entanglements, Edited by Constantin Iordachi and Arnd Bauerkämper, 497–534. Budapest–New York: CEU Press, 2014.

Varga, Ferenc. “Szövetkezet a főváros peremén” [Cooperative on the Edge of the Capital]. Gazdálkodás 26, no. 11 (1982): 46–52.

Varga, Zsuzsanna. “Hatalom, büntetőjog és termelőszövetkezetek Magyarországon az 1970-es években” [Power, Criminal Law, and Agricultural Cooperatives in Hungary in the 1970s]. Jogtörténeti Szemle 5, no. 4. (2003): 10–21.

Varga, Zsuzsanna. “Kiútkeresés az agrárszektor válságából az új szakasz (1953) idején” [The Search for a Way out of the Crisis in the Agrarian Sector during the New Phase (1953)]. Századok 148, no. 1 (2014): 117–32.

Varga, Zsuzsanna. “The Impact of 1956 on the Relationship between the Kádár Regime and the Peasantry, 1956–66.” Hungarian Studies Review 1–2 (2007): 155–76.

Varga, Zsuzsanna. Politika, paraszti érdekérvényesítés és szövetkezetek Magyarországon 1956–1967. [Politics, the Assertion of Agrarian Interests and Cooperatives in Hungary, 1956–1967]. Budapest: Napvilág, 2001.

Varga, Zsuzsanna, “Why is Success a Crime? Trials of Managers of Agricultural Cooperatives in the Hungary of the 1970’s.” Hungarian Studies Review 2 (2013): 149–76.

Viola, Lynne. “Collectivization in the Soviet Union: Specificities and Modalities.” In The Collectivization of Agriculture in Communist Eastern Europe. Comparison and Entanglements, edited by Constantin Iordachi and Arnd Bauerkämper, 49–78. Budapest–New York: CEU Press, 2014.

Wädekin, Karl-Eugen. “The Soviet Kolkhoz: Vehicle of Cooperative Farming or of Control and Transfer of Resources.” In Cooperative and Commune, edited by Peter Dorner, 95–116. Madison: The University of Wisconsin Press, 1977.


Translated by Thomas Cooper

1 One finds a clear example of this in an essay included in a recently published comparative collection on the subject, in which Nigel Swain identifies four different types of collectivization in the Soviet-dominated countries of Central and Eastern Europe: abandoned in Poland and Yugoslavia; Stalinist in Romania and Albania; Neo-Stalinist in Czechoslovakia, the GDR, and Bulgaria; and Hungarian, which constitutes a case of its own. Nigel Swain, “Eastern European Collectivization Campaigns Compared, 1945–1962,” in The Collectivization of Agriculture in Communist Eastern Europe. Comparison and Entanglements, ed. Constantin Iordachi and Arnd Bauerkämper (Budapest–New York: CEU Press, 2014), 499–502.

2 My reserach on Budapest cooperatives was supported by the Political History Institute.

3 Their net revenues, calculated according to units of land, were more than ten times the national average. The incomes that they were able to ensure for their members and staff were 33 percent higher than the national averages for cooperatives. Budapest Statisztikai Évkönyve (Budapest: KSH, 1977), 172; Mezőgazdasági Statisztikai Zsebkönyv (Budapest: KSH, 1976), 139.

4 The name of the communist party in Hungary changed several times. Between 1945 and 1948, it was the Hungarian Communist Party (MKP). Between 1948 and 1956, it was the Hungarian Workers’ Party (MDP). After 1956 and until its fall in 1989, it was the Hungarian Socialist Workers’ Party (MSZMP).

5 Stephan Merl, “The role of agriculture in Soviet industrialization,” in Communist Agriculture. Farming in the Soviet Union and Eastern Europe, ed. Karl-Eugen Wädekin (London–New York: Routledge, 1990), 3–22.

6 Lynne Viola, “Collectivization in the Soviet Union: Specificities and Modalities,” in Iordachi and Bauerkämper, The Collectivization of Agriculture, 49–78.

7 Thus, only subsequently did it become clear how much what had been bought in over the course of the year was worth. The system was given the name remainder principle precisely for this reason. Robert William Davies, The Soviet Collective Farm, 1929―1930 (Cambridge, Mass.: Harvard University Press, 1980), 131–70.

8 For a detailed discussion of this see János Kornai, A hiány (Budapest: Közgazdasági és Jogi Könyvkiadó, 1980), 575–78.

9 János Kornai, A szocialista rendszer. Kritikai politikai gazdaságtan (Budapest: HVG, 1993), 496–532.

10 In the middle of the 1960s, economic reforms were introduced in many of the countries of the socialist bloc in order to address the failings of the planned economy. In 1965, the so-called Kosygin reform was launched in the Soviet Union. In Hungary, the New Economic Mechanism significantly curtailed the role of central planners and gave enterprises a greater degree of independence. The reforms in Hungary, which created a blend of planned economy and market economy, represented the most radical shift in economic management in the bloc. For more on this, see Christoph Boyer, ed., Zur Physiognomie sozialistischer Wirtschaftsreformen. Die Sowjetunion, Polen, die Tschechoslowakei, Ungarn, die DDR und Jugoslawien im Vergleich (Frankfurt am Main: Max-Planck-Institut für Europäische Rechtsgeschichte, 2007); Paul G. Hare, Hugo K. Radice, and Nigel Swain, ed., Hungary: A Decade of Economic Reform (London: Allen and Unwin, 1981).

11 József Ö. Kovács, “The Forced Collectivization of Agriculture in Hungary, 1948–1961,” in The Collectivization of Agriculture in Communist Eastern Europe, ed. Constantin Iordachi and Arnd Bauerkämper (Budapest–New York: CEU Press, 2014), 211–21.

12 Budapest Főváros Levéltára (=BFL) XXIII.110. 1.d. Agricultural Cooperative Affairs, 1950–51. Summary report on the data of the agricultural cooperatives and agricultural cooperative groups. 1950. July.

13 Marietta Boross, “Bolgár és bolgár rendszerű kertészetek Magyarországon 1870–1945,” Ethnographia 84, no. 1–2 (1973): 29–52; Judit Hirkó, “A piacozó rákospalotaiak a 19–20. században (1850–1945),” Első Század 8, no. 2 (2009): 61–85.

14 Miklós Horváth, Budapest története a forradalmak korától a felszabadulásig (Budapest: Akadémiai Kiadó, 1980); István Nyékes, Budapest mezőgazdasága (Budapest: Magyar Mezőgazdasági Múzeum, 1959), 27–31.

15 BFL XXXV.95.a.ő.e. 34. Official report of the April 24, 1951 sitting of the Budapest Executive Committee of the Hungarian Workers’ Party (until June 15, 1954, the Budapest Party Committee).

16 BFL XV.20. 74. Vol. 25. Official reports of the sittings of the Executive Committee of the Budapest Council, April 3, 1951. Report on the development of the Budapest agricultural cooperatives and the state of the harvest.

17 14 000/1948. (XII. 18) government decree on the organization and operational regulation of the agricultural cooperatives. Magyar Közlöny no. 278 (1948).

18 Plowing and sowing were done collectively when they involved plants with which the work could be done using machines. The work that was done tending to the plants over the course of the year could be done by each individual worker on his or her own field, but the executive committee of the group checked to be sure that the work had been completed. Harvesting was done both in groups and individually. Threshing was done as a communal task. The costs that arose were borne by the members of the cooperative in proportion to their sowing areas, and members were apportioned a share of the net income according to this system. 14 000/1948. (XII. 18) Government decree on the organization and operational regulation of the agricultural cooperatives. Magyar Közlöny no. 278 (1948).

19 BFL XXIII.110. 2. d. Agricultural Cooperative Affairs, 1950–51. Report on the livestock of the groups of type III. agricultural cooperatives. March 1951.

20 A member of a cooperative was allowed to keep as part of his household livestock one cow, one calf, five sheep or goats, one or two swine (depending on the size of the family), and an unlimited number of fowl, bees, and rabbits.

21 For a detailed discussion of the problems and failings of the work unit system, see Nigel Swain, Collective Farms Which Work (Cambridge: Cambridge University Press, 1985), 42–44.

22 Karl-Eugen Wädekin, “The Soviet Kolkhoz: Vehicle of Cooperative Farming or of Control and Transfer of Resources,” in Cooperative and Commune, ed. Peter Dorner (Madison: The University of Wisconsin Press, 1977), 95–116.

23 Magyar Nemzeti Levéltár Országos Levéltára (=MNL OL) M-KS-276.f. 74/10. ő.e. Report for András Hegedűs on the problems of work discipline in the agricultural cooperatives. May 1952.

24 Mark Pittaway, The Workers’ State: Industrial Labor and the Making of Socialist Hungary 1944–1958 (Pittsburgh, University of Pittsburgh Press, 2012), 144–73.

25 BFL XV.20. 74. Vol. 25. Official reports of the sittings of the Executive Committee of the Budapest Council, April 3, 1951. Report on the development of the Budapest agricultural cooperatives and the state of the harvest.

26 18.010/1951. (I. 20.) decree of the Ministry of Agriculture on the promulgation of the regulations of the independent agricultural cooperative and the operational regulations of the agricultural cooperative groups in a unified system. Törvények és Rendeletek Hivatalos Gyűjteménye (1951): 619–28.

27 1.009/1952. (IV. 24.) decree of the Council of Ministers on the economic stabilization of the agricultural cooperatives and the strengthening of work discipline. Törvények és Rendeletek Hivatalos Gyűjteménye, vol. 1 (1952): 231–34.

28 BFL XV.20. 74. Vol. 16. Official reports of the sittings of the Executive Committee of the Budapest Council, January 17, 1951. Approval of the detail of the 1951 operational plan of the agricultural cooperatives under the supervision of the Budapest Municipal Council.

29 János Honvári, A gépállomások története, 1947–1964. A gépállomások és a magyar mezőgazdaság gépesítésének története 1947–1964 (Győr: Távtan, 2003), 375–401.

30 Interview with József Pál, June 8, 2011. At the beginning of the 1950s, Mr. Pál had overseen the Budapest agricultural cooperatives as an official at the Agricultural Cooperative Main Division of the Ministry of Agriculture.

31 Until 1950/51, the compulsory deliveries required of the agricultural cooperatives were smaller than the compulsory deliveries required of poor peasants. However, as of 1951/52 they began to grow rapidly. For more on this, see Gyula Erdmann, Begyűjtés, beszolgáltatás Magyarországon 1945–1956 (Békéscsaba: Tevan Kiadó, 1993), 116–27.

32 Initially, this term (ancillary enterprises) meant only the processing and sale of foodstuffs from agricultural production. Later, as the sphere of activity of the cooperatives grew, it came to include machine shops, servicing workshops, the construction brigade, etc. Several different terms were used in Hungarian, but I use this term consistently in this article.

33 A 18.010/1951. (I. 20.) However, they could only take their products to the market after having fulfilled their delivery and sales obligations to the state. BFL XXIII.110. 9. d. State farms, agricultural cooperatives, 1952.

34 Iván Pető and Sándor Szakács, A hazai gazdaság négy évtizedének története 1945–1985. I. Az újjáépítés és a tervutasításos irányítás időszaka 1945–1968 (Budapest: Közgazdasági és Jogi Könyvkiadó, 1985), 250–57; Zsuzsanna Varga, “Kiútkeresés az agrárszektor válságából az új szakasz (1953) idején,” Századok 148, no. 1 (2014): 117–32.

35 39/1954 (VII. 15.) Council of Ministers decree concerning regulation of the activities of the auxiliary and processing plants. Magyar Közlöny (1954): 132.

36 BFL XXIII.110. 22. d. Agricultural cooperative affairs, 1954.

37 BFL XXIII.110. 25. d. Agricultural cooperative affairs, 1954.

38 BFL XXXV.95.a. 5. ő.e. Official report of the February 11, 1955 sitting of the Budapest Executive Committee of the Hungarian Workers’ Party.

39 Törvények és Rendeletek Hivatalos Gyűjteménye (1956): 62. Brought to an end the compulsory sowing plans, the obligation to obtain permission before slaughtering an animal, and the obligation to provide fat following the private slaughter of a swine. Ibid. 68–69, 263–65.

40 The number of cooperative members dropped by half, leaving only some 1,000 members of an original 2,000. The loss of land was not this dramatic, since most of the cooperatives farmed on state reserve areas. At the same time, however, the drop in the number of livestock was significant, a drop of some 60 to 70 percent. BFL XV.20. 74. Vol. 189. Official reports of the sittings of the Executive Committee of the Budapest Council, March 1, 1957. Report on the situation of agricultural production and the agricultural cooperative movement.

41 Pető and Szakács, A hazai gazdaság, 433–39.

42 Zsuzsanna Varga, Politika, paraszti érdekérvényesítés és szövetkezetek Magyarországon 1956–1967 (Budapest: Napvilág, 2001), 17–57.

43 The Agricultural Division of the party center supported this initiative from the outset, while the dogmatic leaders of the Ministry of Agriculture opposed it. Levente Sipos, “Reform és megtorpanás. Viták az MSZMP agrárpolitikájáról (1956–1958),” Múltunk 36, no. 2–3 (1991): 188–97.

44 BFL XV.20. 74. Vol. 191. Official reports of the sittings of the Executive Committee of the Budapest Council, May 24, 1957. The transformation of the Budapest Machine and Tractor Station.

45 MNL OL M-KS-288. f. 28/1957/2. ő. e. County reports on the basis of instruction 20/B/1957 of the Ministry of Agriculture on the reexamination of the organizational, economic, and political circumstances of the agricultural cooperatives. May 1957.

46 Attila Csaba Kondor, “Iparpolitika és iparfejlesztés Budapesten az 1960-as években,” in Budapest az 1960-as években, ed. István Feitl (Budapest: Napvilág Kiadó, 2009), 65–80.

47 The Agricultural Policy Theses that were issued in the summer of 1957 were also supportive of expanding the sphere of activities of the cooperatives. Henrik Vass and Ágnes Ságvári, ed., A Magyar Szocialista Munkáspárt határozatai és dokumentumai 1956–1962 (Second, expanded edition) (Budapest: Kossuth, 1973), 102–22.

48 BFL XV.20. 74. Vol. 204. Official reports of the sittings of the Executive Committee of the Budapest Council, February 21, 1958. Report on the final accounts for 1957 of the Budapest agricultural cooperatives and the circumstances of the agricultural cooperative movement.

49 MNL OL M-KS-288. f. 28/1960/2. ő.e. Report on the forms of income distribution used in the Budapest agricultural cooperatives.

50 MNL OL M-KS-288. f. 28/1960/4. ő.e. Report on the continued operation of the distillery of the Budapest agricultural cooperatives.

51 The Champignon Agricultural Cooperative continued to use this system of incentives in 1962, when it was merged with the Pákozdi Antal cooperative in Zugló and the Vaszil Kolarov cooperative in Csepel. “Két szomszéd vár,” Magyar Nemzet, August 23, 1962.

52 “Mezőgazdaság Budapesten,” Népszabadság, April 26, 1957.

53 MNL OL M-KS-288. f. 28/1960/2. ő.e. The introduction of the system of income distribution in the agricultural cooperatives of Budapest that expressed the direct material incentives for the cooperative members.

54 Sipos, Reform és megtorpanás, 188–97.

55 MNL OL M-KS-288. f. 28/1960/4.ő.e The report of the Budapest Committee of the Hungarian Socialist Workers’ Party on the agricultural cooperatives of Budapest. April 8, 1960.

56 For more information on the switch of ministers, see Tibor Huszár, Kádár János politikai életrajza, vol. 2 (Budapest, Szabad Tér Kiadó–Kossuth Kiadó, 2003), 128–40.

57 For more on its detailed operations see Varga, Politika, 82–92.

58 “Budapest mezőgazdasága,” Figyelő, October 4, 1961.

59 With this ruling, the 39/1954 (VII. 15) decree of the Council of Ministers became void.

60 Budapest Statisztikai Évkönyve (Budapest: KSH, 1962), 119.

61 András Schlett, “Success and Failure of the Hungarian Agrarian Model, ” Arhivele Totalitarismului / Totalitarianism Archives, 74–75 (2012): 96–97.

62 The agriculture lobby consisted of politicians, agricultural experts, and scientists who wanted to bring about a change in the subordinate position of agriculture and agricultural producers. They suggested changes (corrections) to the use in Hungary of the Stalinist kolkhoz model.

63 Zsuzsanna Varga, “The Impact of 1956 on the Relationship between the Kádár Regime and the peasantry, 1956–66,” Hungarian Studies Review 1–2 (2007): 155–76.

64 Varga, “The Impact of 1956.”

65 Mezőgazdasági termelőszövetkezeti törvény. Földjogi törvény (Budapest: Közgazdasági és Jogi Könyvkiadó, 1968).

66 For more on this in detail, see András Schlett, “Másolás – Adaptáció – Útfüggőség. Az agrártechnikai forradalom közgazdasági tanulságai Magyarországon,” in A mában élő tegnapok: tanulmányok a XIX. és XX. század történetéhez, ed. Sándor M. Kiss, Iván Bertényi, Jr., and Gergely Fejérdy (Piliscsaba: PPKE BTK, 2011), 172–73.

67 Zsuzsanna Varga, The “Modernizing” Role of Agriculture in the Hungarian Economic Reforms, in Zur Physiognomie sozialistischer Wirtschaftsreformen. Die Sowjetunion, Polen, die Tschechoslowakei, Ungarn, die DDR und Jugoslawien im Vergleich, ed. Christoph Boyer (Frankfurt am Main: Max-Planck-Institut für Europäische Rechtsgeschichte, 2007), 201–18.

68 BFL XV.20. 74. Vol. 458. Official reports of the sittings of the Executive Committee of the Budapest Council April 2, 1969. Report on the experiences of management of the agricultural cooperatives in 1968 (emphasis in the original).

69 On the gigantic cooperatives created through these unifications, see for instance Nándor Keresztényi, Csepeli agrárszövetkezők: a Duna Termelőszövetkezet 25 évének krónikája (Budapest: Duna Tsz, 1986); Tamás Kő, ed., 25 év a sasadi dombokon (Budapest: Sasad Kertészeti Mg. Tsz, 1975).

70 BFL XVII-130. 1 FNEB 35. box. Summary report on the supplementary activities of the agricultural cooperatives.

71 Ferenc Varga, “Szövetkezet a főváros peremén,” Gazdálkodás 26, no. 11 (1982): 49.

72 90 percent of the agricultural and food industry products were sold in Budapest.

73 BFL XV.20. 74. Vol. 458. Official reports of the sittings of the Executive Committee of the Budapest Council. April 2, 1969. Report on the experiences of management of the agricultural cooperatives in 1968.

74 A similar case was mentioned in András Schlett’s book on the Bábolna State Farm. András Schlett, Sziget a szárazföldön. A Bábolnai Állami Gazdaság története 1960 és 1990 között (Budapest: Szent István Társulat, 2007), 117–20.

75 “Félmillió forint jogtalan újítási díj. A termelőszövetkezetek ellenőrizzék rendszeresen közös vállalkozásaikat,” Népszabadság, February 3, 1971.

76 Zsuzsanna Varga, “Why is Success a Crime? Trials of Managers of Agricultural Cooperatives in the Hungary of the 1970’s,” Hungarian Studies Review 40, no. 2 (2013): 149–76.

77 The people’s oversight committees were formed on district and county levels, and they were all part of the Central People’s Oversight Committee, or KNEB (Központi Népi Ellenőrzési Bizottság). Formally, KNEB was answerable to the government, but in practice it was answerable to the party leadership. Ferenc Horváth M., “A ‘népi ellenőrzés’ Magyarországon 1957–1989,” Levéltári Szemle 40, no. 4 (1990): 29–40.

78 Hungarian–Bulgarian Friendship, Óbuda, Rákosvölgye, Béke, Összefogás, Blagojev, Aranykalász, Vörös Október, Sasad, Dimitrov, Rákosvölgye Béke, Szabadság, Rozmaring. MNL OL XVII–2–a KNEB 13. batch 753. d. Cooperative transport investigation (1972) 2. appendix.

79 MNL OL XVII-2-a 22. batch I. series 2.d. 1970–1977. Monthly notice on the thematical and targeted investigations launched by the bodies of people’s control.

80 Because of their location, these agricultural cooperatives were often used when the regime was welcoming high-ranking foreign delegations. This entailed numerous advantages, but at the same time, the high incomes that were paid to the leaders and members of these cooperatives in the 1970s irritated many of the politicians who visited them.

81 Nándor Keresztényi, Zugligettől a Pilisig: a Rozmaring Termelőszövetkezet első negyedszázada (Budapest: Rozmaring Mgtsz, 1982), 71–92.

82 “Elvirágzott vállalkozás,” Esti Hírlap, October 26, 1976 (emphasis in the original).

83 Árpád Pünkösti, Vasalt ruha mángorolva (Budapest: Múzsák, 1989), 22.

84 Ibid., 23–24.

85 Zsuzsanna Varga, “Hatalom, büntetőjog és termelőszövetkezetek Magyarországon az 1970-es években,” Jogtörténeti Szemle 5, no. 4. (2003): 10–21.

86 MNL OL XX-10-e 22.278/1977 (539.d.) Trial documents of J.G. and associates.

87 Keresztényi, Zugligettől, 109–10.

pdfVolume 4 Issue 4 CONTENTS

Zsombor Bódy

Enthralled by Size Business History or the History of Technocracy in the Study of a Hungarian Socialist Factory*


In this essay, I examine the extent to which the terms and concepts of business history are useful in furthering an understanding of the development of a socialist enterprise, the Hungarian Ikarus bus factory. I come to the conclusion that the factory, which manufactured buses for all of the member states of COMECON (Council for Mutual Economic Assistance, 1949–1991), was not really able to take advantage of and turn a profit off of the economies of scale that the enormous market offered. The reason for this was that the socialist enterprise was not able to bring technological advancement in line with the need to make profit. The large investment in the bus factory rested on a technocratic vision which mechanically linked technical development with the solution to economic problems. This technocratic vision, which was found both in the West and in the countries of the Eastern Bloc, fit particularly well into the system of state socialism.

Keywords: Ikarus, bus manufacture, technocracy, socialism, business history


Scholarship on the economic history of the socialist era for the most part consists of macro-level analysis of economic processes, which are often linked with a kind of sociology of the functioning of the so-called planned economy. These inquiries continue to this day to draw heavily on the classic work by János Kornai.1 There are also works of social and cultural history that deal first and foremost with the enormous investments of the Stalinist era, but they tend to draw their impetus not from any particular interest in economic history. Rather, they arrive at interpretations of the tremendous investments in industry and the construction of new cities somewhat metaphorically as narratives of the phenomenon of the socialist or Stalinist system as a whole.2 Microeconomic inquiries, which focus on the history of one or only a few enterprises, are almost absent from the secondary literature on the economic history of the socialist period.3

The visible hand was very noticeably present in the socialist corporate management, but the ways in which it functioned and the results of its presence have to this day only rarely been made the subject of study.4 The two factors that played key roles in the history of the evolution of large companies in the United States, namely the requirements of economies of scale (which stemmed in part from technological development) and reductions in transaction costs (through the incorporation of the various manufacturing processes and business activities into a single enterprise) are clearly problems that can be studied in the history of the socialist economies. For the specialization within the COMECON (Council for Mutual Economic Assistance, 1949–1991), the economic organization under Soviet leadership, was based on the idea that the investments in big enterprises would unquestionably be profitable due to economies of scale, since they would be producing for a far bigger market than the domestic one, and that would make possible the use of the most modern technologies. In this essay, I examine the extent to which the terms and concepts of business history are useful in furthering our grasp of the growth of socialist large companies by focusing on a single case study, the history of the Ikarus Bodywork and Vehicle Factory. I also consider how the socialist enterprise and the system of economic management functioned when they had to deal with the problems of the interrelationships between technological development and economies of scale, problems that had been dealt with very effectively by American large enterprises.5

As an alternative to the approach of business history, I will also make some contentions concerning the conclusions at which one may arrive if one attempts to interpret the socialist system of economic management and company management from the perspectives of the history of technocracy. The history of technocracy in the twentieth century is a promising subject of study because the emergence of technocracies itself was a significant phenomenon in determining the Western and Eastern poles of the Cold War era, though it did not take place in the same way on both sides of the Iron Curtain. The history of the technocratic approach and its supporters, the “experts,” is one of the themes that can enable us to go beyond the separation of the history of the “Eastern bloc” and the “West,” a borderline that to this day remains difficult to cross in the writing of history. In both the communist East and the West, technology was a determining factor in the transformation of social structures and everyday life, and the linking of considerations of technical rationality and efficiency with the call for oversight and management of social and economic problems, which was the central element of technocracy, was characteristic of both blocs.6

The object of my inquiry is the Ikarus bus factory, which was one of the success stories of Hungary’s industry in the 1960s, 1970s and 1980s. The company, which exported most of its output to COMECON markets, was one of Europe’s biggest bus factories for a long time. The regime presented the international successes of the Ikarus buses, which were in fact primarily successes achieved in the Eastern bloc and in developing countries, as a source of socialist national pride. The presentation of the Ikarus buses in a manner that associated them with domestic political concerns was an important and successfully used tool of the Kádár-regime’s portrayal of itself to Hungarian society. This strategy was so successful that Ikarus, as one of the country’s few globally successful companies, still evokes a sense of nostalgia in many.7

My study aims to examine the so-called “Road vehicle program 1965–1975,” which was launched in the wake of the COMECON agreement of 1963. This agreement assigned the manufacturing of large buses within the Eastern bloc to Hungary. The investment program concentrated primarily on the Ikarus plant, and it was designed to develop the company to a level at which it would be capable of meeting the needs of all the socialist countries for buses. In addition to a number of smaller companies, the Győr Rába Magyar Vagon- és Gépgyár (Rába Hungarian Wagon and Machine Factory in Győr) and the Csepel Autógyár (Csepel Automobile Factory) as suppliers were also recipients of the investments of the program. The program was based on the idea that the investment would unquestionably be profitable due to economies of scale, as Ikarus would be producing for a far bigger market than the domestic one. One of the key questions of my research was whether the picture “broadcast” at the time of the success of the Ikarus investment program was accurate. To put differently, I have tried to determine whether, when measured according to the standards of business history, integration into the COMECON actually created favorable circumstances for Hungary and whether the larger market of which Hungary became a part actually brought useful advantages from the perspective of economies of scale.8

In the course of my work, however, I encountered a problem that initially seemed to be an issue of source criticism. Namely, the company and the organizations overseeing it did not produce any statements or analyses revealing whether the investments of the 10-year Ikarus development project actually brought a matching return, to put it in today’s economic terms. In the economic management of socialist Hungary, they did not apply the concept of profitability in the sense generally used in economics and everyday business calculations. Although efforts were made to measure success and efficiency and to improve productivity in various ways, the concepts applied differed from those used today. The differences between the economic concepts applied at the time and those used today meant that, in order to answer my original question, I first had to clarify the meanings of the various categories applied in socialist economic management and the concepts that were used to measure the results. One might well ask what criteria drove the decision-makers in connection with the “Road vehicle program” and what concepts they intended to use to measure success. Thus, the question of how those in charge of managing the economy at the time were thinking, a question which could be regarded as part of the history of mentality, seemed as important as the one concerning the plausibility of the economic successes allegedly achieved by the Ikarus factory through its integration into the COMECON.

The Antecedents to and Preparatory Steps for the Road Vehicle Program

First, I would offer a brief sketch of the preliminary history of the Ikarus plant and the origins of the bus development program in the first half of the 1960s. Ikarus’ predecessor companies, the Uhri brothers’ vehicle body factory and the far smaller original Ikarus plant, which made coolers for combustion engines, were nationalized in 1947, before the general nationalization of industrial plants. After they had been nationalized, the two plants were merged.

It might seem self-evident that the collectivist socialist regime would favor community transport over private motoring and that a fundamentally ideological commitment lay behind its support for the development of the bus network and bus manufacturing. In reality, this was not the case. In fact, the regime did not have a specific transport policy concept based on ideological criteria.9 In the early period, those in charge of transport policy focused primarily on the railways and freight transport and did not concern themselves with the problems of road passenger transport.10 The fact that Ikarus was nevertheless able to develop and start manufacturing new types of vehicles in pre-1956 times was probably the result of the work of engineers and transport experts committed to bus manufacturing, people who were in mid-level positions at the company or served in various organizations of the planned economy.11 1956 (a year of unrest that culminated in the uprising against Soviet occupation in late October and early November) brought about a change in the development of Ikarus. There were substantial fluctuations of output at the time, and the types designed during this period did not prove successful. This was a consequence of the fact that the staff of engineers and the plant management, which had enjoyed successes before 1956, disintegrated or could not continue their work in part for political reasons.12 It must be noted, however, that the engineers and experts who left Ikarus at the time to emigrate or who were removed for political reasons after the revolution were replaced by equally well-prepared engineers, who often also had had to leave their former workplaces for political reasons. They came primarily from the army or from the defense industry, from which they had been removed because their loyalty to the Kádár-government had been thrown into question by the regime.

At the same time the political leadership also became seriously interested in Ikarus. One of the reasons for this was the attention paid by the Kádár-leadership to infrastructural developments that improved the quality of life. The other one was the Eastern Bloc’s policy of placing COMECON cooperation onto new foundations. The intention was to coordinate five-year plans rather than simply focusing on foreign trade agreements, as earlier had been the practice. Attempts to coordinate the plans proved unsuccessful (though the Soviet partner continued to propose this at later stages) because the planning procedures and particularly the interests of the individual member states were far too divergent. Nevertheless, while planning as a whole was not coordinated, the economies of the individual socialist countries, which until then had been rather autarky-oriented, began to cooperate. This cooperation went beyond barter trade and was introduced in various areas of production. The partnerships were based on the idea that the manufacturing of individual products must be conducted wherever would be most advantageous given the local traditions, geographical conditions and existing production capacities, and comparatively less favorable production capacities in the other socialist countries must be dismantled. Officials saw “parallel capacities” (as they referred to the existence of enterprises that performed the same functions within the COMECON) as a squandering of resources. In their assessment, competition made no sense in the economic space integrated into the COMECON. Consequently, industrial expert committees were established within the international organization of the COMECON, and they began working out the production specialization of the member states.13 In the course of these negotiations, bus manufacturing belonged to the authority of the forum that bore the title “COMECON Standing Committee for Economic and Scientific-Technical Cooperation in the Machine Industry, Section no. 7 for the Manufacturing of Automobiles, Tractors and Farm Machinery.” During the series of negotiations, which took about seven years and included various twists and turns, the Hungarian political leadership and vehicle industry expert circles consistently battled to ensure that the manufacturing of large long-distance and city buses would be allocated to Hungary.

There was an extensive road vehicle industry research base operating in the country at the time, Járműfejlesztési Intézet (JÁFI, Research Institute for Vehicle Development), and in addition to the staff of the three large companies concerned—győri Rába Magyar Vagon- és Gépgyár (Rába Hungarian Waggon and Machine Factory in Győr), Csepel Autógyár (Csepel Automobile Factory) and Ikarus—, certain sections of the staff of the ministries were also involved in the issues. In fact, even the Ministry of Postal Affairs had a Research Institute for Automobile Transport at one point. These professional circles worked with visible commitment and a kind of planning ethos on the development of Hungary’s bus manufacturing, and when expert-level talks with COMECON partners came to a standstill, they tried to mobilize the Hungarian political leadership in the interest of the cause.14 The mentality and professional ethos of these engineering circles and their visions of modernity were in harmony with the regime’s official economic doctrines in their enthusiasm for planning even in the absence of any deeper Marxist commitment. From the engineering perspective, the internal requirements of technical/technological design were a given priority, and the laws of a market economy, which, for example, demand that investment be used as efficiently (inexpensively) as possible, constituted impediments. Thus, the elimination of the “anarchy” of the markets through the institution of central planning would also have appealed to engineers who were not necessarily Marxists or leftists, and this constituted a basis on which these engineers could get involved in various projects of the “building of Socialism.”

While the Soviet Union had more influence at the COMECON talks on the specialization of bus manufacturing than the other countries, the Soviets did not simply dictate the terms. The other COMECON countries also had some room for manoeuvre in the early 1960s. In the end, the Hungarian endeavour proved largely successful, as the manufacturing of large buses was “allocated to Hungary” through a COMECON agreement in 1963, with Czechoslovakia alone retaining its manufacturing of large buses, although for domestic purposes only, not for export. In order to support the development plans of Ikarus, even while the talks were underway the experts tried to determine the projected bus requirements of the COMECON countries all the way up to 1980. This itself reveals one of the characteristics of socialist planning. The aim was not to survey the projected solvent demand for the buses. Given that they were attempting to look ahead 20 years, this would not have been possible anyway. They tried to calculate the natural demand for buses in the Eastern Bloc. In order to do this, they analysed the bus fleets of forty of the world’s developed countries in proportion to their populations, by bus categories, and calculated in passenger-kilometres, and they compared these results with the existing bus fleets of the socialist countries in order to estimate the projected development. This planning provided the basis for the Hungarian claims for bus manufacturing at the COMECON talks, and the argument made in favor of selecting Hungary seems to have been more convincing than the arguments made in favor of other countries, which were not as thoroughly supported with similar calculations. Thus, the manufacturing of larger-category buses was allocated to Hungary by the COMECON, even if the manufacturing of Hungarian Csepel trucks, for example, had to be sacrificed in exchange for the bus monopoly. After the COMECON agreement had been concluded, they launched the “Road vehicle program,” which primarily involved increasing the production capacities of the Ikarus factory. Ikarus’ two main suppliers, Csepel and Győr, were also affected (as were further suppliers, if indirectly).

The technocrat groups active in the vehicle industry were obviously attracted by the opportunity to use calculations involving resources and demands on a far larger scale than the calculations suited for Hungary in connection with bus manufacturing.15 This criterion also influenced the politicians who made the investment decision. The documents drawn up by the planning office in preparation for the decision were all based on the single argument that it is not worth developing the bus manufacturing capacity or developing modern bus types to meet the Hungarian requirements alone because that would not be efficient. The index number used to prove this was the daily per capita production value calculated for the company. According to the calculation, if the capacities of Ikarus were increased to suit the demands of the entire Eastern Bloc, per capita daily production value would grow to 148 percent of its level in 1960 by the end of the investment program. What is implied by the per capita daily production value index number that the decision-makers had in mind in the early 1960s? It is obvious at first glance what is not implied. There are no calculations concerning the return of the investment amount. It seems that such calculations simply were not prepared. From the perspective of the planners and economic policy decision-makers, the proportion of the invested amount and the projected profit was not a question in the early 1960s. Later on, after the economic reform of 1968 in Hungary, such calculations were required before investments, but their reliability remained questionable. In the early 1960s, however, development was measured in natural indicators, specifically in terms of the number of buses, and per capita daily production value was used as a measure of efficiency. This indicator, of course, contained a number of arbitrary elements, as the estimates regarding the future price of the buses were rather uncertain. Further background calculations were even more uncertain, however.

Due to the country’s negative foreign trade balance at the time, particular attention was paid to the proportions of exports and imports. Developing bus manufacturing capacities were expected to improve the particularly negative export-import balance of the vehicle industry substantially, even with the projected increase in passenger car imports. From the point of view of the foreign trade balance, however, whether the countries involved were socialist or capitalist countries made a difference. In the case of investments, the level of import demand from capitalist countries was generally a priority indicator, since the country was constantly struggling with a foreign currency shortage in connection with the financing of imports from Western countries. Here they calculated with the indicator of the foreign currency return per one USD worth of imports, and in the case of Ikarus they found that a far more favorable foreign currency revenue ratio could be achieved relative to import costs by manufacturing the buses in larger volumes and exporting them. Of course, when calculating the foreign currency revenue ratio, they took into account not only the buses sold for dollars, but also the socialist imports that were offset by Ikarus buses, which could replace imports from capitalist countries. This means that they did not just calculate with the actual foreign currency revenue, but also included estimated foreign currency savings that could be achieved through socialist imports.16 The series of investments of the “Road vehicle program” were launched on the basis of these calculations.17

The Launch of the Road Vehicle Program

The program was launched in 1965 and continued for ten years. The investments also affected the Rába plant in Győr and the Csepel Automobile Factory, since Ikarus only manufactured the bodies and assembled the buses. On the whole, the three companies employed about 40,000 people and constituted one of the biggest manufacturing industry complexes in the country. For Rába, which manufactured the engines for the buses, they purchased a license from the German MAN group, so imports of Western technology played a part at the start in this case as well, as it did in many other industrial projects in the Eastern Bloc.

The program managed to achieve its objective in terms of volume, as they manufactured 12,000 buses a year in the first half of the 1970s as targeted, while also switching over to new types, and progress was also made in modernizing production technology. The buses were sold in socialist countries and a number of developing countries. The buses exported to the Middle East and other Third World countries were perhaps the most unambiguous business successes for Ikarus, as well as an assembly plant established in Iraq. The company managed to establish a presence in these countries in the 1960s and 1970s with competitively-priced, hard-wearing buses. More than 30,000 buses were sold to the German Democratic Republic (GDR) alone, but Ikarus buses could also be seen in the public transport of Hamburg at one time. However, the relationship between these quantitative performances, the modernization of production technology and economic efficiency remains questionable.

At the end of the 1960s, the factory’s management effectively rejected in a report the idea of economic efficiency, a criterion required after the economic reform of 1968. They pointed out that they were not able to take rentability into consideration while they were focusing on meeting quantitative targets, developing new types and applying new technologies.18 According to the report prepared for the Ministry of the Metallurgy and Machine Industry, it was almost impossible to determine whether Ikarus was profitable, as state funding was present at so many levels and in so many forms in the production and sales process, not to mention the maze of various foreign exchange rates, which made the economic rentability of production opaque.19 Another reason why it was difficult to calculate the profitability of Ikarus was that part of the profit appeared at the large suppliers, which had better chances of passing on their actual costs to Ikarus through their prices after the economic reform of 1968 than Ikarus could do through the export prices of the buses. Reports prepared by the management of MOGÜRT (Magyar Országos Gépkocsi Üzem Rt. [Hungarian National Road Vehicle Works Co.]), the foreign trade company exporting Ikarus buses, revealed that the price of the buses did not depend directly on production costs in any of the markets. It was in the domestic market that prices best reflected the changes in costs. In the various socialist markets, the price of the buses was influenced by political power relations. At one time, for example, the buses sold to the Soviet market were cheaper than those exported to the GDR.20 In the case of the buses made for “capitalist export,” although these exports were highly appreciated because they brought in convertible currency, costs were relatively high due to the relatively small sizes of the series and the various individual requirements (as these vehicles were never exactly the same as the vehicles made in large series for the socialist markets). Nevertheless, foreign currency revenue counted as an achievement regardless of the cost.21 For that matter, foreign trade within the COMECON was rather bureaucratic.

There were long-term master agreements, for example, designating Hungary for the manufacturing of large-category buses. These were broken down to the individual countries through annual bilateral trade agreements. And finally, based on the annual trade agreements, there were specific contracts regarding the deliveries, assigning prices, numbers of units and deadlines. These contracts, however, were not usually concluded by the manufacturing companies themselves, but by foreign trade companies enjoying a monopoly and overseen by the Ministry of Foreign Trade. The contradiction built into the system meant that the management of Ikarus prepared its plans based on long-term master agreements and annual trade agreements, and these agreements never coincided with the actual stock of orders. In the course of the reform, a number of large companies were granted independent foreign trade rights in Hungary, but this almost never happened in the other socialist partner countries.

Ikarus and, in general, the other enterprises involved in the road vehicle program were in an extremely tense relationship with MOGÜRT, which had a monopoly in foreign trade. In 1961, Ikarus and the Csepel Automobile Factory negotiated and prepared a statement of their common standpoint in which they presented their grievances with regards to MOGÜRT. They contended that MOGÜRT was unable to organize the provision of necessary replacement parts. There were more than enough in stock, but in some countries there was nonetheless a dearth of parts. MOGÜRT itself had replacement parts made that could be sold for profit, while the parts that could only be produced at a cost it ordered from the Ikarus plant and Csepel Automobile. In the contracts with foreign partners, MOGÜRT agreed to provide an unjustifiable quantity of replacement parts the price of which, however, could not be covered on the basis of the price of the vehicles that had been fixed in advance. MOGÜRT also expected the factories to cover the costs of the production of the brochures and instruction manuals for the vehicles, which was a significant burden because they had to be both detailed and precise with regards to the given product. However, since there was a wide variety of types, changes to the texts (editing, typesetting, translation) represented a tremendous cost. Furthermore, they were often not completed by the time orders had been placed. MOGÜRT, however, charged a penalty for missing or incomplete printed materials.22 On many individual points, the enterprise in charge of exports and the businesses responsible for production had conflicting interests. With the revenue made through the sale of buses, they were only able to earn a profit at each other’s expense.

The modernization of the technology was also not free of conflict. The management of Ikarus and the offices of the Ministry were well aware of a number of problems surrounding bus manufacturing. They tried to follow innovations of the global vehicle industry continuously (a special technical press monitoring department was established for this purpose), and they believed that, in contrast with the design of the buses, manufacturing technology in the early 1960s was less up-to-date by international comparison. Production also fluctuated radically, with rather substantial differences from one month to the next. The higher echelons of management had to struggle to replace the industrial culture with which people were familiar with the industrial culture deemed up-to-date by the technocratic approach, which placed emphasis on the importance of large-scale production. The annual factory inspections that were done by the organs of upper management represented regular assessments on the basis of the criteria of modernization and efficiency, as well as the struggle with the work force’s attachment to the work culture with which they were familiar, but which was seen as obsolete by the technocrats.23

A long explanatory report that was written by the chief engineer of Ikarus sheds light on the details of all this. The report concerned the critical contentions made in the course of one of the factory inspections. Essentially, according to the technocratic reproaches, the factory was not using adequately detailed plans or adequate technological documentation. In his reply, chief engineer Hirmann did not dispute the validity of the claim and the expectation, but he noted the difficulties that were presented by the production and use of the technological documentation and adherence to the proper production guidelines. As he observes, the design division did not have the capacity to prepare detailed plans for every type and every series, as the series themselves were too diverse, and the technological division was also unable to draw up complete documentation of the production technology because it was simply too understaffed. In addition, any efforts that were made to provide complete documentation were met with decisive opposition in the workshops:


[The leadership of the enterprise] attempted at the launch of type 55 to do everything according to the prescriptions, but this striving was thwarted by opposition in the workshops, which were not willing to acknowledge that the manner ordered by the upper-level management was correct when, until then, a different approach had been fine, and they deviated from the documentation, and the design and technological divisions were unable, because of their small size, to keep this within bounds or record the deviations. […] The workers see the documentation as completely unnecessary and they will only be sufficiently convinced to take an interest in this question after long educational efforts have been made, because for the moment they only see the unpleasant side. […] This causes a particularly difficult problem in the case of the few old skilled laborers who really can do good work and, because they have seen many solutions, tend to feel what is this young engineer or technician doing explaining things to me, someone who was doing far better things back when he was still a little child.24

They were unable to document the many variations in the different types or the practical solutions that were devised in the course of manufacture, and indeed the skilled laborers did not see the need for this. The Technical Oversight Department of the Automobile and Tractor Industry Trust, which was charged with the task of ensuring that methods of production met technological standards, complained a great deal about this, though they often had occasion to observe that in the workshops their efforts to enforce standards were regarded as a hindrance to production. A former Ikarus designer recalled the experienced car-body ironworkers (they were nicknamed “sheet-metal emperors”), who were able to accomplish any task by hand before the installation of the stamping machines that were well-suited to the production of large series.25 This old work culture, however, did not harmonize with the technocratic approach, which was oriented around large-scale production.

The Road Vehicle Program betwixt Economic Integration into the Empire and the Scale of Business in Hungary

By 1966, the fundamental transformation of production technology had expanded as a consequence of new and significant investments. However, from a certain perspective the efforts to use the most modern technologies overshot the mark. There was no doubt concerning the modernity of the technology, but there might be questions regarding the profitability of the application of modern solutions. Economists at the time determined that technological modernization in the Csepel Automobile Factory, for instance, would hardly yield a profit. In order to manufacture the shells of the Ikarus vehicles, automated up-to-date welding equipment was purchased from Switzerland that could only be used economically in the case of the manufacture of very large series. Although in the perception of the ministerial apparatus the purchase of the automated Swiss machinery would ensure that the techniques used in production were modern, and the factory leadership regarded it as a solution to the problem of understaffing, though Ikarus always needed different versions of the shells because it produced vehicles for buyers from the Third World and the West in comparatively small numbers. Thus the machinery, which was suitable for the economical production of large-scale series, continuously had to be stopped and adjusted to weld together new, differing shells. The Csepel Automobile Factory and Ikarus were exclusive partners in the 1970s. In other words the former essentially only supplied these frames for the latter and the latter ordered all of the necessary shells from the former. 26

Many times Ikarus also faced the problem of modern technologies that were only economically practical when used on a large scale. As early as the late 1950s, in the course of the inspections that were done by the upper level authorities for economic management, the observation was made that some of the expensive machines that had been purchased from western European countries were not in use.27 These machines included the up-to-date stamping equipment, which according to the original plans was supposed to fill the needs not only of Ikarus but also the entire vehicle industry in Hungary, and later a modern varnishing workshop where for a time a varnishing material was used that was regarded as out-of-date. Even as late as 1964, one still found complaints in the factory inspection reports according to which the individual production phases that represented different technological levels could only be coordinated with “crafty tricks” (in the report one finds the word “kunststiklikkel,” a somewhat slangy Hungarian word), and management had the creativity of the experienced workforce to thank for these tricks.

After 1966, thanks to the new investments, Ikarus began to use assembly-line production techniques when a new line moving system was created. There was, in principle, one production line suitable for manufacturing the buses of various size and purpose belonging to Type 200, which, however, were assembled largely from identical components for the Soviet and other socialists “markets.”28 At the same time, even in this case the use of modern technologies was not always profitable or economical. They not only produced large series of buses for the socialist countries, but also regularly manufactured buses in smaller numbers for Third World and Western countries, for which they had to take into consideration the particular wishes of the customer. In the second half of the 1960s and in the 1970s, these vehicles were therefore put together using separate workshops, alongside the equipment designed for the production of large-scale series. Naturally this dramatically increased the costs. Additional problems arose because Ikarus was, first and foremost, an assembly plant, in accordance with the vision at the time of the up-to-date enterprise. In other words, Ikarus itself only produced the bodywork of the vehicles, and it assembled the buses out of the main units and component parts delivered by the suppliers.

Ikarus had continuous problems with the suppliers (problems that in the end remained unsolved), or, to use the language of socialist economic management, the “cooperation partners.” Socialist economic management saw the manufacture of series on a large-scale as the essential criterion of economical production and parallel production capacities as a waste of resources. For this reason, Ikarus had only a single supplier for most of the main units and components, and usually the supplier could only deliver the product in a single kind of transport. This left Ikarus at the mercy of the suppliers, since it could not turn to other potential partners in the event of a problem with quality and it faced difficulties when filling smaller orders from clients in the West or the Third World, since when it came to the parts for “deviating types” (to borrow the terminology used at the time), there was not an adequate array from which to choose on the market.

The differing technical quality of the parts that were provided by the various suppliers also caused problems. The economic management strove to ensure that the parts met high technical standards, though this was not always possible. Some of the high quality parts made the buses more expensive for the socialist and the Third World markets, which already constituted a loss for Ikarus, since the additional costs stemming from the higher technical standards of the components were not reflected in the prices. In other cases, parts that did not meet high technical standards were a source of problems, because they could not be used in the production of the buses intended for the “non-socialist market,” where good quality was a basic expectation. The shock absorbers (which were obtained through an English license), the breaking system (obtained through the license with Knorr), the starting engine (obtained through the license with Bosch), and the engine produced by Rába (obtained through the MAN license, and too small for use in the largest buses29) increased the production costs of the buses, while the anterior bridge supplied by the Soviet Union (which was designed for trucks), the Czechoslovak gear shift, and the Polish distributor pump brought down the quality of the final product in comparison with the expectations of the Western markets.30 The suppliers, furthermore, were often incapable of providing the parts at the pace necessary for Ikarus. This problem was often solved by using parts in the buses that were produced for urgent orders that had been manufactured on the spur of the moment or, when this was not an option, simply by taking the parts from vehicles made for other, less pressing orders.31

Ikarus expected the superior authorities to arrive at solutions to these difficulties. When no other options were available, the authorities had to address the problems by issuing instructions to the suppliers regarding concerns of quality or adherence to deadlines. Given its role, it is worth examining this mode of operation not only on the level of the enterprises but also on the level of the management that dealt with this entire branch of industry. From many perspectives, the superior authorities, which to be more specific meant at first the Automobile and Tractor Directorate of the Ministry of Metallurgy and Machine Industry, then later the ministry’s Automobile and Tractor Trust (1963–1967) and then, following the cessation of this trust, the ministry’s head division in charge of the Road Vehicle Program (1967–1975) handled Ikarus, the Csepel Automobile Factory, the Rába factory and the other enterprises with which they worked as parts of one large enterprise group. Thus one might well ask whether or not this gave rise to the same kinds of advantages that were created by the development of large enterprise in America.

In Northern America, large businesses came into being because some technologies could be put to use more economically only in the case of large-scale production. Large-scale production meant both the use of assembly-line production techniques and the entirety of the process of turning the finished product to account, which included the well-organized marketing of a product that was identified by its brand name. From the perspectives of labor productivity and reduced transaction costs it proved more effective to bring all of the various production and marketing functions under the umbrella of a single enterprise than to address these needs simply on the basis of market contracts. One of the conditions of the existence of big business was the emergence of a managerial apparatus that performed the tasks involving the organization of the various functions within a single enterprise, in other words the development of modern entrepreneurial management, which was becoming increasingly technical and effective.32

From many perspectives, the main ministerial department responsible for the Automobile and Tractor Industry Trust and, later (as of 1967), the Road Vehicle Program treated Ikarus and its most prominent partners as if they were the various units of a single large enterprise. However, according to the indicators, this did not bring about the kinds of advantages which served as the foundations for the business successes and potentials for continuous technological innovation of the American enterprises.33 A comparison of the development plans of the Automobile and Tractor Industry Trust and the analyses that were done by Ikarus of the activities of the Trust is revealing. According to the ideas that were formulated at the time of its establishment, the Trust was going to be the economic unit responsible for management issues, such as concluding contracts in order to bring the products of the enterprises that belonged to it to the market, coordinate production development, centralize administration of raw materials acquisition and the labor force, integrate the production of machine tools into the branch of industry, and professionalize (and specialize) the production of parts.34 Instead of performing these functions, however, the Trust functioned essentially as an entity that played supervisory roles and set the prices that were used in the industry (including the prices of components that cost only a few hundred forint). According to Ikarus’ own analyses, the Trust was not able to perform many of the tasks for which it would have been responsible according to the plans.35 It did not actually function as unit responsible for economically effective management, but rather served merely as a forum for strategic decisions regarding the branch of industry in question and an arbitrator in the conflicts that arose between the various individual enterprises. Furthermore, the structure of its own was functioning parallel to the organs of the enterprises, since it had numerous organs of its own, such as control and allocation of materials, development of production techniques, and a personnel department. Thus it is hardly coincidental that the overall structure as such did not lead to the advantages usually associated with centralization, nor could the benefits, brought about by the creation of a system in which management was close to production, be earned by the enterprises.

Yet the economic organization for the management of the ever-shifting vehicle industry was nonetheless not the main source of problems. The structural problem of this branch of the economy actually was that while the finished products (in this case the Ikarus buses) could be produced at profit in large quantities in a small country (the COMECON marketplace made this possible), the network that provided the parts necessary for the manufacture of the finished products could not function on a similarly large scale. Hungary was not capable of producing economically the parts and main units. Indeed as a consequence of the principle of specialization, even in the best case scenario in the COMECON marketplace only one provider could be found, and that provider enjoyed a monopolistic position. This hampered attempts to deal with problems concerning quality from the outset, since the entity that placed an order was unable, instead of using the existing provider, to turn to a competitor. The efforts of the ministry in question to provide Ikarus with technologically up-to-date parts lead to a situation rife with contradictions, and not simply because for some of the buyers this made the buses unnecessarily expensive, but also because the production practices of the suppliers were not always cost effective. As of the end of the 1960s, the size of the series of buses produced by Ikarus corresponded to the technological equipment that had been built, though the economically profitable series did not mean the same thing for the suppliers of the main unit or individual replacement parts as it did for the bus factory. The investments and the technologies purchased from the West thus did not bring in returns adequate to cover their cost, neither in the case of the engines produced by the Rába factory on the basis of the MAN license nor in the case of the small parts. In North America and Western Europe, behind the large enterprises that bore the brand names of their finished products, there was an array of producers and suppliers of larger and smaller parts and main units in the vehicle industry, and these enterprises were usually extremely specialized. Thus outside of the national boundaries one was always able to find an appropriate range of products to choose from and, seen from the other side of the exchange, producers of parts could always find more potential clients on the market. The rigid COMECON cooperation, which strove to eliminate parallel capacities and therefore competition as well, made this impossible, and within the framework of the scale of enterprise in Hungary the vertical development of the entire vehicle industry would have been impossible from the outset.

Ikarus’ impressive results in the area of production, results which it achieved first and foremost with the production of the 200 series of buses for the Soviet Union and other “friendly markets,” ultimately constituted a pitfall.36 The series, which was unusually large in its scale, was a consequence of a very particular circumstance, namely that the orders were being placed by a large, centralized empire. In other parts of the world the management and operation of local and long-distance bus transport was always broken into smaller units. Thus there was no other entity that would have purchased buses in such large numbers for a prolonged period of time. (The situation in the automobile market was different.) Ikarus continued to manufacture the Type 200 bus line for the Eastern bloc for a long time even when it was already regarded as obsolete and the new design meant to replace Type 200 buses was ready. Socialist countries continued to accept these in the 1980s, as they did not really have a choice due to Ikarus’ quasi monopoly position within the COMECON. Thus, Ikarus did not have to switch over to serial production of the new types until around the time of the change of systems, when its earlier recipient markets suddenly turned into real, ever-shrinking markets. Under the conditions of real competition, the company, which lacked capital and could no longer reckon with government investments, became increasingly indebted. In the mid-1990s, the government tried to tackle this problem by privatizing the company, but it was unsuccessful.


* * *


Returning to one of our question on the efficiency of the COMECON integration, we can establish that although this kind of integration offered some benefits through economies of scale and the production capacities created for the Eastern bloc allowed companies such as Ikarus to enter the market in other countries as well (primarily in developing countries), nevertheless, the balance on the whole was negative. Although the Ikarus buses and, through related maintenance work, supply of spare parts or the training of local workforce, Hungarian experts found their way to many countries worldwide, the semi-globalization based on the planned economy and the elimination of competition never created a globally competitive company and was not able to contribute to the development of the applied technology.

The other lesson to be learned on the basis of my inquiry is that the conceptual tools of business history are less applicable to the study of the history of socialist enterprises. To be more precise, when one applies them it becomes clear that the “visible hand” of socialist economic direction was not able to obtain the same results from the perspective of increased labor productivity and reduction of costs as large enterprise management in capitalist markets. The reason for this was not simply the absence of the market from the dynamics or, in the event of a setback, the absence of appropriate feedback. In the nationalized economy of the socialist state, the borders of an enterprise were blurry. From many perspectives, a branch that functioned under central management could be considered an enterprise, but at the same time it was unable to operate like an enterprise, for the branch never became a well-integrated unit, even in the period of oversight in which it was in the form of a trust. Individual enterprises had conflicts of interest because they had to divide the revenues of the branch among themselves in a zero sum game.

On the level of this branch of industry, the distinctive socialist technocratic approach (the complexities of which I mentioned in the introduction) was decisive. There are virtually no studies on this question in the Hungarian secondary literature, though on an international level we are dealing with an increasingly prominent trend in the scholarship on the socialist era.37 The technocracy that emerged in the wake of World War II assumed it would find solutions to economic and social problems through the spread in the active application of scientific knowledge, and it held this vision of cybernetic efficiency—a vision that today seems even antiquated—as valid, regardless of political standpoint. This technocracy, and in particular its engineering version, harmonized well with the needs of the political systems which put planning in the center of their focus. In most of the socialist countries, the technocratic vision of modernization began to replace Marxist ideology, particularly in the 1960s, and it was able to create some measure of loyalty toward the regime among the people who played the roles of technical experts, even among members of the younger generation.38 (The fact that in the 1980s half of the well-trained engineers of the world worked in the Soviet Union was one of the consequences of this faith in a kind of technical rationalism.39) However, in the prevailing conditions of the socialist state, the implementation or adoption of technical rationalism was not ensured by considerations of self-interest or internally motivated, independent participation of the actors, which would have compelled every player to accept a more efficient solution. Rather it was dictated by the regime, by a system that was both one of bureaucracy and one of power. Thus the tension between the aim of maintaining the system of rule, the solidarity of the bloc, and technical efficiency remained, since technical efficiency would have required more wide-ranging cooperation with external partners, which would have increased the scope for action of the individual players, and this would have represented an attack on the system of power.40

The socialist regime and ideology essentially made it impossible for the system of differentiated operations that is required by modern technological standards to emerge in the economic sphere, as such a system would have been founded on the autonomous movement of the various players in the economy. Instead, socialism attempted to transform a technocratic vision that appeared to be free of politics or rather prior to politics into a reality. This vision was based on the notion that technological modernization and economic profitability always went hand in hand. Yet as a consequence of this assumption the most important ability of modern organizations, the ability to learn and remain adaptable, was lost, for either the real challenges never even reached them or the organizations were only able to deal with these challenges in a distorted form.41

Archival Sources

Magyar Nemzeti Levéltár Országos Levéltára [National Archives of the Hungarian State Archives] (=MNL OL)

XIX-F-6-h Kohó- és Gépipari Minisztérium, Beruházási Főosztály [Ministry of the Metallurgy and Machine Industry, Main Investment Division], 1953–1975.

XXIX-F-1-a Autó- és Traktoripari Tröszt [Automobile and Tractor Industry Trust], TÜK Iratok, 1960–1967.

XXIX-F-187-r Ikarus Karosszéria és Járműgyár, Rendszerező iratok [Ikarus Bodyworks and Road Vehicle Factory, Organizational documents], 1947–1974.


Bódy, Zsombor. “Der Ikarus-Bus als ungarische und sozialistische Ikone. Die symbolische Aufladung alltäglicher Objekte mit politischen Bedeutung.” Österreichische Zeitschrift für Geschichtswissenschaften 21, no. 2 (2010): 152–72.

Boyer, Christoph. “Einleitung.” In Zur Physiognomie sozialistischer Wirtschaftsreformen. Die Sowjetunion, Polen, die Tschechoslowakei, Ungarn, die DDR und Jugoslawien im Vergleich, edited by Christoph Boyer, IX–XLII. Frankfurt am M.: Klostermann, 2007.

Chandler, Alfred. The Visible Hand. The Managerial Revolution in American Business. Cambridge, MA–London: The Belknap Press of Harvard University Press, 1977.

Chandler, Alfred. Scale and Scope. The Dynamics of Industrial Capitalism. Cambridge, MA–London: The Belknap Press of Harvard University Press, 1990.

Ciesla, Burghard. “Die Vision von der planbaren Mobilität. Entwürfe des öffentlichen Nahverkehrs in der DDR (1949–1990).” In Geschichte der Zukunft des Verkehrs. Verkehrskonzepte von der frühen Neuzeit bis zum 21. Jahrhundert, edited by Hans-Liudger Dienel and Helmuth Trischler, 223–44. Frankfurt–New York: Campus, 1997.

Dokumentumok a magyar közlekedés történetéből 1945–1949 [Documents on the History of Transportation in Hungary], edited by Béla Pálmány. Budapest: Új Magyar Központi Levéltár–Közlekedési és Postaügyi Minisztérium, 1981.

Finta, László. Földön – vízen – levegőben. Uhri testvérek története 1941-től 1942-ig. Finta László tanulmánya 2008–2012 [On Land – on Water – in the Air. The History of the Uhri Siblings. An Essay by László Finta, 2008–2012]. Budapest: published by the author, n.y. [2012].

Germuska, Pál, and János Honvári. “A közúti járműgyártás története Győrött 1945-től 1990-ig” [The History of the Production of Road Vehicles in Győr from 1945 to 1990]. In Győr fejlődésének mozgatórugói [The Driving Forces of Development in Győr], edited by János Honvári, 21–111. Győr: Universitas–Győr Nonprofit KFT, 2014.

Germuska, Pál. “A magyar fogyasztói szocializmus zászlóshajói: Hadiipari vállalatok civil termelése 1953–1963” [The Flagships of Hungarian Consumer Socialism: The Products of Defense Industry Enterprises for Civilian life, 1953–1963]. Korall 33 (2008): 62–80.

Gestwa, Klaus. Die “Stalinistische Großbauten des Kommunismus” Sowjetische Technik- und Umweltgeschichte 1948–1964. Munich: Oldenbourg, 2010.

Graham, L. R. The Ghost of the Executed Engineer: Technology and the Fall of the Soviet Union. Cambridge, MA: John Hopkins University Press, 1993.

Halmos, Károly. “A nagyvállalkozás történeti elmélete. A.D. Chandler Jr. három munkája” [The Historical Theory of Large-scale Enterprises. Three Works by A.D. Chandler Jr.]. Korall 14 (2003): 117–34.

Heumos, Peter. “‘Der Himmel ist hoch, und Prag ist weit!’ Sekundäre Machtverhältnisse und organisatorische Entdifferenzierung in tschechoslowakischen Industrie­betrieben (1945–1968).” In Vernetzte Improvisationen. Gesellschaftliche Subsysteme in Ostmitteleuropa und in der DDR, edited by A. Schuhmann, 21–41. Cologne–Weimar–Vienna: Böhlau, 2008.

Horváth, Sándor. A kapu és a határ. Mindennapi Sztálinváros [The Gate and the Border. Everyday Sztálinváros]. Budapest: MTA TTI, 2004.

Jajesniak-Quast, Dagmara. Stahlgiganten in der sozialistischen Transformation. Nowa Huta in Krakau, EKO in Eisenhüttenstadt und Kuncice in Ostrava. Wiesbaden: Harrassowitz, 2010.

Jenei, Károly, and Szekeres, József. Az Ikarus Karosszéria és Járműgyár története 1895–1980 [The History of the Ikarus Bodyworks and Road Vehicle Factory]. Budapest: Ikarus Karosszéria és Járműgyár, 1981.

Josephson, Paul. R. Totalitarian Science and Technology. New York: Humanity Books, 1996.

Kotkin, Stephen. Magnetic Mountain: Stalinism as a Civilisation. Berkeley: University of California Press, 1995.

Kozma, Ferenc. “Külgazdaság-stratégiai kihívások a hatvanas évtizedben” [Foreign Trade Strategy Challenges in the 1960s]. Múltunk, no. 4 (2001): 78–106.

van Laak, Dirk. “Technokratie im Europa des 20. Jahrhunderts – eine einflussreiche ‘Hintergrundideologie.’” In Theorien und Experimente der Moderne. Europas Gesellschaften im 20. Jahrhundert, edited by Lutz Raphael, 101–28. Cologne: Böhlau, 2012.

Pető, Iván, and Szakács, Sándor. A hazai gazdaság négy évtizedének története 1945–1985 [Four Decades in the History of the Domestic Economy, 1945–1985]. Budapest: KJK, 1985.

Sattler, Friederike. “Unternehmerische und kompensatorische Netzwerke. Anregungen der Unternehmensgeschichte für die Analyse von wirtschaftlichen Netzwerkstrukturen in staatsozialistischen Gesellschaften.” In Vernetzte Improvisationen. Gesellschaftliche Subsysteme in Ostmitteleuropa und in der DDR, edited by A. Schuhmann, 139–55. Cologne–Weimar–Vienna: Böhlau, 2008.

Schivelbusch, Wolfgang. Entfernte Verwandtschaft. Faschismus, Nationalsozialismus, New Deal 1933–1939. Munich–Vienna: Fischer, 2005.

Schulze Wessel, Martin. “Zukunftsentwürfe und Planungspraktiken in der Sowjetunion und der sozialistischen Tschechoslowakei: Zur Einleitung.” In Zukunftsvorstellungen und staatliche Planung im Sozialismus. Die Tschechoslowakei im ostmitteleuropäischen Kontext 1945–1989, edited by Martin Schulze Wessel und Christiane Brenner, 1–18. Munich: Oldenbourg, 2010.

Schweitzer, Iván. A vállalatnagyság [Enterprise Size]. Budapest: KJK, 1982.

Soós, Károly Attila. “Műszaki színvonal és gazdaságosság. Beruházási döntés egy központi fejlesztési program keretében” [Technical Standards and Economic Efficiency. Investment Decision within the Framework of a Central Development Program]. In Vállalati magatartás – vállalati környezet [Corporate Conduct – Enterprise Environment], edited by Márton Tardos, 285–94. Budapest: KJK, 1980.


Translated by Thomas Cooper


1* Some of the research on which this article is based was made possible by the fellowship of the Imre Kertész Kolleg of the Friedrich Schiller University, Jena.

János Kornai, The Socialist System: The Political Economy of Communism (Princeton: Princeton University Press, 1992).

2 Stephen Kotkin, Magnetic Mountain: Stalinism as a Civilisation (Berkeley: University of California Press, 1995); Sándor Horváth, A kapu és a határ. Mindennapi Sztálinváros (Budapest: MTA TTI, 2004); Dagmara Jajesniak-Quast, Stahlgiganten in der sozialistischen Transformation. Nowa Huta in Krakau, EKO in Eisenhüttenstadt und Kuncice in Ostrava (Wiesbaden: Harrassowitz, 2010).

3 The works of Pál Germuska represent an exception: Pál Germuska, “A magyar fogyasztói szocializmus zászlóshajói: Hadiipari vállalatok civil termelése 1953–1963,” Korall 33 (2008): 62–80; Pál Germuska and János Honvári, “A közúti járműgyártás története Győrött 1945-től 1990-ig,” in Győr fejlődésének mozgatórugói, ed. János Honvári (Győr: Universitas–Győr Nonprofit KFT, 2014), 21–111.

4 The book by Alfred Chandler constitutes a fundamental work in the study of business history to this day: Alfred Chandler, The Visible Hand. The Managerial Revolution in American Business (Cambridge, MA–London: The Belknap Press of Harvard University Press, 1977). Károly Halmos raises the possibility of applying the study of the business history of enterprises to the socialist era: Károly Halmos, “A nagyvállalkozás történeti elmélete. A.D. Chandler Jr. három munkája,” Korall 14 (2003): 117–34. Ágnes Pogány offers a survey of the findings of business history scholarship in the case of Hungary: Ágnes Pogány, “Business History in Ungarn,” in Business History. Wissenschaftliche Entwicklungstrends und Studien aus Zentraleuropa, ed. Alice Teichova, Herbert Matis, and Andreas Resch (Vienna: Manz, 1999), 77–85.

5 Alfred Chandler, Scale and Scop. The Dynamics of Industrial Capitalism (Cambridge, MA–London: The Belknap Press of Harvard University Press, 1990). The subject was not unfamiliar in Hungary at the time. See Iván Schweitzer: A vállalatnagyság (Budapest: KJK, 1982).

6 Dirk van Laak, “Technokratie im Europa des 20. Jahrhunderts – eine einflussreiche ‘Hintergrund­ideologie,’” in Theorien und Experimente der Moderne. Europas Gesellschaften im 20. Jahrhundert, ed. Lutz Raphael (Cologne: Böhlau, 2012), 101–28. For a comparison of the early technocratic approach in three countries see Wolfgang Schivelbusch, Entfernte Verwandtschaft. Faschismus, Nationalsozialismus, New Deal 1933–1939 (Munich–Vienna: Fischer, 2005).

7 Zsombor Bódy, “Der Ikarus-Bus als ungarische und sozialistische Ikone. Die symbolische Aufladung alltaeglicher Objekte mit politischen Bedeutung,” Österreichische Zeitschrift für Geschichtswissenschaften 21, no. 2 (2010): 152–72.

8 I cannot touch on the questions pertaining to the financing of socialist enterprises within the framework of this inquiry, but limit myself strictly to the operation of the enterprise from the perspectives of technological development and the buyer’s markets. Thus as a study of business history, my examination is one-sided.

9 The situation was similar in the GDR, where road passenger transport was also addressed with the use of Ikarus buses following the first decade of communism and where a comprehensive transport concept was never developed. However, from the early sixties, private motoring came to the forefront in the GDR as well. Burghard Ciesla, “Die Vision von der planbaren Mobilität. Entwürfe des öffentlichen Nahverkehrs in der DDR (1949–1990),” in Geschichte der Zukunft des Verkehrs. Verkehrskonzepte von der frühen Neuzeit bis zum 21. Jahrhundert, ed. Hans-Liudger Dienel and Helmuth Trischler (Frankfurt–New York: Campus, 1997): 223–44.

10 Dokumentumok a magyar közlekedés történetéből 1945–1949, ed. Béla Pálmány (Budapest: Új Magyar Központi Levéltár–Közlekedési és Postaügyi Minisztérium, 1981), see: draft proposal prepared at the Ministry of Transport in January 1947, ibid., 468–70; memorandum of the Transport Department of the National Planning Office (OT) to the government in July 1949, ibid., 507; statement of the National Planning Office on the completion of transport investments, May 1949, ibid. 658; minutes of planning meeting held at the Ministry of Transport, ibid., 650–56.

11 The Transport Department of the OT indicated in July 1949 to Zoltán Vass that, in order to replace bus imports, they wanted to switch to meeting demand from domestic manufacturing. Documents 1981, 507. The decision seems to have originated from the medium-level management of the planned economy; it was at this level that the decision, taken at the political level, was initiated and prepared.

12 They wrote about chief engineer Béla Zerkovitz, son of the songwriter of the same name, who was acting CEO of the factory during the revolution, and the chief accountant and head of the department for construction as follows: “It can be regarded as political illiteracy, lack of experience and short-sightedness that the abovementioned persons continued to support the anti-Communist measures even after November 4 [if they cooperated with the workers’ council]. Through their actions, they not only offended against their own work, past and earlier friends, but, excluding themselves from the subsequent life of the company, they renounced that wonderful and incredible development which started almost out of nothing, and which until then they had initiated, managed, actively participated in and fought for.” Károly Jenei and József Szekeres, Az Ikarus Karosszéria és Járműgyár története 1895–1980 (Budapest: Ikarus Karosszéria és Járműgyár, 1981), 160–61. On the failed attempt to develop new types of buses, ibid. “We must point out the fact, however, that the attempts to further develop type I 55, manifested in prototype I 155, proved unsuccessful, similarly to prototype 303.” Ibid., 173.

13 Iván Pető and Sándor Szakács, A hazai gazdaság négy évtizedének története 1945–1985 (Budapest: KJK, 1985), 379.

14 The documentation of the negotiations is found in the National Archives of the Hungarian State Archives (=MNL OL). XXIX-F-1-a T. 1. XXIX-F-1-a T. 2.

15 During the protracted negotiations, in which the issues of bus manufacturing, truck manufacturing and passenger car manufacturing were combined, they tried to proceed in a highly methodical way on the one hand, so a great part of the negotiations consisted simply of the actual preparations. This is why documents such as the following were created: “Report and draft recommendation for the development of type series of passenger cars and the methodology and schedule for the development of the draft recommendation for the specialization of the manufacturing thereof.” MNL OL XXIX-F-1-a T. 4. On the other hand, every member state clearly tried fiercely to protect its own interests, even if they were not equally able to justify this methodically and convincingly from the point of view of planning. In the case of Ikarus, the Hungarian delegation seems to have done a thorough job by COMECON standards with its analyses of the future of bus transport and domestic manufacturing opportunities. The documents of the negotiations: MNL OL XXIX-F-1-a T. 1., XXIX-F-1-a T. 2.

16 Foreign trade calculation looking at 1961 from the perspective of MOGÜRT (the monopoly company that distributed the buses to foreign markets). MNL OL XXIX-F-1-a T. 3.

17 The documentation of the preparations that were made for the Road Vehicle Program can be found in three volumes: MNL OL XIX-F-6-h 102. According to the preliminary calculations, labor productivity would increase by 204 percent with the switch to assembly line production techniques. The predicted rise in labor productivity as a consequence of an increase in the number of workers was comparatively slight. One forint of investment was expected to lead to an increase in production value of 7.3 forints. The necessary capital would be reduced to 77.7 percent of what it was at the time. Material costs would drop by 10 percent. The acquisition of the large stamping machines, up-to-date painting technologies and assembly-line production techniques were expected to lead to a decrease in wage costs. However, however persuasive these calculations may seem, their plausibility was undermined by the following remark: “The economic indicators of the investment expressed in terms of international value suggest similarly favorable efficiency. However, we must note that MOGÜRT’s remarkably inadequate information regarding price makes its assessment of production for the global marketplace unreliable.” I. 103.

18 Letter from the CEO of Ikarus to the minister for the metallurgy and machine industry, December 4, 1968, MNL OL XXIX-F-187-r Box 205.

19 MNL OL XXIX-F-1-a T. 3.

20 Based on the analysis of Ikarus’ Main Division of Pricing and Tenders on the pricing of the buses and a similar and, from many perspectives, self-contradictory analysis by the Main Division of Pricing of the Ministry of the Metallurgy and Machine Industry in June 1969. MNL OL XXIX-F-187-r 205.

21 According to a retrospective analysis by one of the experts on foreign trade at the time, the export of Ikarus buses from Hungary to the West really meant little more than the export of the pressed sheet metal since these buses contained so many components obtained from abroad, differing to a large extent from the buses that were produced for the “socialist” markets. Ferenc Kozma, “Külgazdaság-stratégiai kihívások a hatvanas évtizedben,” Múltunk, no. 4 (2001): 78–106.

22 The notice of the head book-keepers of Ikarus and the Csepel Automobile Factory to the general managers of the two factories. 1962. 05. 28. MNL OL XXIX–F-187-r 178.

23 Reports of the factory inspections: MNL OL XXIX-F-187-r 178. doboz.

24 Report of Ferenc Hirmann, dated December 31, 1958. MNL OL XXIX-F-187-r 178. Type 55 was the so-called “rear” Ikarus. It was given this name because of the unusual placing of the rear engine, and it was one of the successful designs.

25 László Finta, Földön – vízen – levegőben. Uhri testvérek története 1941-től 1942-ig (Budapest: published by the author, n.y. [2012]).

26 Károly Attila Soós, “Műszaki színvonal és gazdaságosság. Beruházási döntés egy központi fejlesztési program keretében,” in Vállalati magatartás – vállalati környezet, ed. Márton Tardos (Budapest: KJK, 1980), 285–94. I would like to thank Aladár Madarász for having called my attention to this publication.

27 The reports of the so-called factory examinations and the explanatory statements that were written on them by the various leaders at Ikarus: MNL OL XXIX–F-187-r 178.

28 A type of Ikarus bus that had the form of a box and was planned in the 1960s and produced in large quantities in the 1970s and 1980s.

29 I cannot go into the question of the choice between engines that were produced in Hungary and those that were obtained from abroad through various licenses, a question that was only resolved after several years of debate, after the engine designed by the Research Institute for Vehicle Development did not meet expectations. The perception was that it would take years to redesign the engine in order to make it useful, and the Road Vehicle Program could not wait that long. For an analysis of the decision making process see: Germuska, Honvári, “A közúti járműgyártás története.”

30 Károly Attila Soós, “Műszaki színvonal és gazdaságosság.”

31 According to the instructions of general management, this solution was only to be adopted as a last means of recourse in cases in which it could be justified. February 3, 1966. MNL OL XXIX-F-187-r 179.

32 For a summary see Halmos: “A nagyvállalkozás történeti elmélete,” 124. Halmos draws on the work of David S. Landes.

33 According to a similar analysis, the hidden transaction costs were very high in the bureaucratic socialist economy. Friederike Sattler, “Unternehmerische und kompensatorische Netzwerke. Anregungen der Unternehmensgeschichte für die Analyse von wirtschaftlichen Netzwerkstrukturen in staatsozialistischen Gesellschaften,” in Vernetzte Improvisationen. Gesellschaftliche Subsysteme in Ostmitteleuropa und in der DDR, ed. A. Schuhmann (Cologne–Weimar–Vienna: Böhlau, 2008), 139–55.

34 Under the guidance of the Trust’s technical manager, plans that in the end amounted to a thick book’s worth of documentation were drawn up concerning this in 1964. MNL OL XXIX-F-187-r 178.

35 These analyses, it seems, were made for the general manager, presumably so that he would be adequately prepared for negotiations with the high-level organs, probably in the interests of dissolving the Trust. MNL OL XXIX-F-187-r 178.

36 The investment program managed to achieve its objective in terms of volume, as they manufactured 12,000 buses a year in the first half of the 1970s, which had been the target.

37 L. R. Graham, The Ghost of the Executed Engineer: Technology and the Fall of the Soviet Union (Cambridge, MA: John Hopkins University Press, 1993); Paul. R. Josephson, Totalitarian Science and Technology (New York: Humanity Books, 1996); K. Gestwa, Die “Stalinistische Großbauten des Kommunismus” Sowjetische Technik- und Umweltgeschichte 1948–1964 (Munich: Oldenbourg, 2010).

38 Martin Schulze Wessel, “Zukunftsentwürfe und Planungspraktiken in der Sowjetunion und der sozialistischen Tschechoslowakei: Zur Einleitung,” in Zukunftsvorstellungen und staatliche Planung im Sozialismus. Die Tschechoslowakei im ostmitteleuropäischen Kontext 1945–1989, ed. Martin Schulze Wessel and Christiane Brenner (Munich: Oldenbourg, 2010), 1–18.

39 Gestwa, Die “Stalinistischen Grossbauten.”

40 For an analysis of the dynamics of the socialist economic reforms, which would get off to a good start and then come to a standstill again and again, see Christoph Boyer, “Einleitung,” in Zur Physiognomie sozialistischer Wirtschaftsreformen. Die Sowjetunion, Polen, die Tschechoslowakei, Ungarn, die DDR und Jugoslawien im Vergleich, ed. Christoph Boyer (Frankfurt am M.: Klostermann, 2007), IX–XLII.

41 Peter Heumos, “Der Himmel ist hoch, und Prag ist weit!” Sekundäre Machtverhältnisse und organisatorische Entdifferenzierung in tschechoslowakischen Industriebetrieben (1945–1968),” in Vernetzte Improvisationen. Gesellschaftliche Subsysteme in Ostmitteleuropa und in der DDR, ed. A. Schuhmann (Cologne–Weimar–Vienna: Böhlau, 2008), 21–41.

András Cieger

National Identity and Constitutional Patriotism in the Context of Modern Hungarian History

An Overview*


Since the end of the eighteenth century, Hungarians have considered themselves a nation of the “millennial constitution” and a “nation of lawyers.” What meanings, identity-founding values, and interpretations of the past are associated with the concepts of constitution and constitutionalism in Hungarian public thinking and scientific discourse? Furthermore, to what extent is there any consensus concerning principles, and how coherent is the context of Hungarian constitutionalism as a product of national history? In this overview, I show how the political program of constitutionalism underwent a transformation from an elite-project to a common emotional foundation of constitutional patriotism in 1848. I also examine how, after the Austro-Hungarian Compromise of 1867 and in the interwar period, the emotional bonding of citizens to their political institutions weakened and several myths of the Hungarian exceptionalism gathered strength in scientific and political discourses. Four decades of socialism extinguished almost completely any sense of constitutional consciousness, already only flickering, among the people, as well as their trust in the world of politics. Finally, the many examples of embittered debates on symbolic questions after the regime change in 1989/90 and the much-criticized circumstances of the drafting of a new constitution in 2011 demonstrate convincingly that a constitutional patriotism based on broad societal consensus has not yet formed in Hungary. The successive political regimes used constitutional values and the memory of the struggles for constitutionalism only as symbols or slogans to reach their short-term political aims. The political elites in Hungary utilized the constitutional consciousness of the society instead of working to strengthen it.

Keywords: constitutional patriotism, national identity, Hungarian history, symbolic politics

Volume 5 Issue 1 CONTENTS

Ferenc Hörcher

Enlightened Reform or National Reform?

The Continuity Debate about the Hungarian Reform Era and the Example of the Two Széchenyis (1790–1848)1


This paper returns to the problem of how to interpret the Reform Era, a constant issue of Hungarian historiography since the 1840s. While most master narratives continue, even today, to repeat that it actually began in 1830, there are compelling arguments that in fact the reform programs of the 1830s were deeply rooted in the earlier movements of the 1790s, or even in Joseph II’s reforms of the 1780s.
The paper offers an overview of some of the latest trends in the research of the problem (in the writings of Károly Kecskeméti and Gábor Vermes, viewed from the perspective of Ambrus Miskolczy), as well as a reconstruction of the ways in which contemporaries saw the issue during the Reform Era. In the second part, it compares two important aristocratic protagonists of the age, father and son, Counts Ferenc Széchényi and István Széchenyi.2 It will show that there are indeed close links between these two people, including their plans for reform and their anglophile political attitudes. As both of them played major roles in their own time and were often regarded as heroes by members of their respective societies, if the link between them is strong enough, their example can presumably be used as an argument for the continuity thesis between the two reform generations of the period, and thereby for an interpretation of the Reform Era in the context of the late Enlightenment.

Keywords: continuity, Hungarian Reform Era, historiography, István Széchenyi, Ferenc Széchényi, Enlightenment, liberalism

Volume 5 Issue 1 CONTENTS

Áron Kovács

Continuity and Discontinuity in Transylvanian Romanian Thought An Analysis of Four Bishopric Pleas from the Period between 1791 and 1842


Based on the analysis of four Romanian bishopric pleas, the article examines the connection between the reform movements of the 1790s and 1830s. The subject of the analysis is the political and intellectual-historical background of the 1791 Supplex Libellus Valachorum and the pleas of 1834, 1838 and 1842, with particular focus on how the authors of the pleas formulated their concepts of the future and the relationship between the pleas and concepts of natural law.
If one examines the pleas side by side, the key concept in each of them, with the exception of the plea of 1838, was repositioning (reponere, repositione, repunere), but the meaning of this concept changed significantly over time. In the case of the Supplex Libellus Valachorum, the argumentation based on social contracts and the customary law definition of feudal rights was replaced with a positive legal argumentation built on actual acts of laws. On the other hand, in the plea of 1838 the concept of handling nations as living beings is unmistakably recognizable, together with the idea of their rise through civilization and culture. This change of paradigms caused a change in the aims of the pleas as well. Eventually, their main aim was not merely to secure rights, but to establish auspicious circumstances for the development of a nation conceived of as a living being. The goal became to prepare for cultural development and establish the conditions necessary for culture to flourish. Thus, although at first glance the argumentations of the documents seem to have a lot in common, in fact one can clearly discern how the community-related concepts of Transylvanian Romanian Romanticism started to gain ground, while at the same time the tropes appearing in the Supplex Libellus Valachorum started to undergo a transformation.

Keywords: Transylvania, Transylvanian Romanians, Supplex Libellus Valachorum, social contract, natural law, eighteenth century, nineteenth century, political thinking, Romanian Enlightenment, Romanian Romanticism

Volume 5 Issue 1 CONTENTS

Sara Lagi

Georg Jellinek, a Liberal Political Thinker against Despotic Rule (1885–1898)*


Georg Jellinek is commonly thought of as one of the most prominent representatives of German legal positivism. In this article I look at Georg Jellinek not only as a legal theorist, but also as a political thinker of liberal inspiration. In this sense, I seek to show some key continuities and connections between the fundamental aspects of his legal, positivistic theory and his political vision of liberal inspiration, and between his stay in Vienna and his move to Germany.

Keywords: legal positivism, liberalism, sovereignty, fundamental rights, limits of power.

Georg Jellinek as a Political Thinker: Introducing the Personage

Volume 5 Issue 1 CONTENTS

Martyn Rady

Nonnisi in sensu legum? Decree and Rendelet in Hungary (1790–1914)


The Hungarian “constitution” was never balanced, for its sovereigns possessed a supervisory jurisdiction that permitted them to legislate by decree, mainly by using patents and rescripts. Although the right to proceed by decree was seldom abused by Hungary’s Habsburg rulers, it permitted the monarch on occasion to impose reforms in defiance of the Diet. Attempts undertaken in the early 1790s to hem in the ruler’s power by making the written law both fixed and comprehensive were unsuccessful. After 1867, the right to legislate by decree was assumed by Hungary’s government, and ministerial decree or “rendelet” was used as a substitute for parliamentary legislation. Not only could rendelets be used to fill in gaps in parliamentary legislation, they could also be used to bypass parliament and even to countermand parliamentary acts, sometimes at the expense of individual rights. The tendency remains in Hungary for its governments to use discretionary administrative instruments as a substitute for parliamentary legislation.

Keywords: constitution, decree, patent, rendelet, legislation, Diet, Parliament