Stabilization Without Recession: The Success Of A Long-Awaited Financial Adjustment In Hungary

Abstract

Two hundred years after the French Revolution another great systemic change hook the European continent: the fall of communism. The destruction of the Berlin Wall is as important of a symbol of this clearly not less remarkable social tremor as the siege of the Bastille was at that time. The decline of state-party dictatorships had been accelerated by the disintegration of the underlying command economies which obviously failed to satisfy the growing needs of consumers in Central and Eastern Europe. Some countries tried to hold back the clock of history by reimposing a neoStalinist version of harsh grip on society and curbing international trade and human contacts, limiting domestic consumption, reducing or even eliminating foreign debt, etc. Czechoslovakia and Romania offer good examples for the application of this desperate strategy. Others, like Poland and Hungary were more fortunate: their party elite had learnt the lessons of bloody uprisings in the past and pursued a policy of gradual, albeit cautious liberalization of both economic and cultural life. Trade with Western countries was constantly growing, travel restrictions were eased step-by-step, and education was increasingly free-wheeling. Even capitalism was tolerated to a growing extent by having allowed the establishment of small family ventures. (People were given the incentive to undertake extra work in second and third jobs in order to provide a better living for themselves and at the same time not to be left with any spare time and inclination to be involved in any political activity.)