2015_4_Body

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.

Bibliography

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