*** Hungary Hungarian economy








Hungarian Economy

Hugarian economy
Figure 1.--Here Budapest workers in 1955 struggle to get onna city trolley on the way back to dreary, cramped apartment blocks built by the Communist regime. The caption read, "Knock off time: Nearly off their trolley in their anxiety to get home,these Budapest wirkers feel lucky to get such a good breakin rush hour trafficin the heart of the city's industrial section. Even more reckless riders cling to thectrolley behind them. It seemns that even behind the Iron Curtain when the quiting whistke blows that's all Comrade!" The photograph was dated December 16, 1955. Notice that there are no cars. At the same time in Western Europe, well-paid workers were purchasing cars and comfotable single-family home. Less than a year later, Budapest workers would use these same trolleys in a desperate attempt to stop Red Army tanks.

Modern Hungary was within the brders of the Roman Empire. It was the province of Pannonia and the remains of Roman roads and building exist. The Carpathenian Basin subsequently became a center for both the Huns and Avars. The conquest by the Magayars meant that this early history had almost no impact on modern Hungary. Ecoonomics is even more affected by geograpohy than history. In Roman times, Pannonia ws primarily an agricultural land. Rich pasture land attracted the Avars, Huns, and eventually after the fallpf Rome the Magyars. Mounted Magyar raiders would terroirize central Europe until subdued by Otto I. Hungary after being defeated by the Ottomn Turks was absorbed into the Austrian Empire (16th century). Hungary remained a largely agricultural area. Much of the economy ws based on lrge landed estates owned by nobels. Hungary emerged from the Feudal era later than the countries of Western Europe. The Austrians, un like the Germans, did not strongly promote industrial development. Much of the industry of the Austro-Hungarian Empire was in the Czech lands,primarily because several notable Czech businessmen promoted indusyry. Although industry was not absent from Hungary, the same level of indidtril development did not occur. After World War II, the Communists under the aegis of the Red Army seized control of Hungary (1945). The Communists launched on a massive program of industrialization. To the shock of the Communists, the economy did not grow like the economies of Western Europe. Not ony were the state-owned industries not profitable and able to pay good wages, but because of state policie, shortages developed for agricultural products. The economomic problens were only partly due to Communist inefficencies. The Soviet Union exploited allof its Eastern European subject peoples. This would prove to be a factor in the Hungarian Revolution which was brutally supressed by the Soviets (1956). After the repression that followed, more liberal outlook took hold in Hungary and an economy which came to be called Goulash Communism. There were notable improvements, but Hungarian industry was not competive outside the COMECON barter system. This was the situation when Communism fell (1989).

Celts

The first people of historicl importance to inhabit midern Hungary were the Celts. It was a fertile land that would be coveted by other peoles including the Germans who moved west pressured by barbarian steppe people.

Illyrians



Rome

Modern Hungary meaning the was Carpathenian Basin was for a time within the brders of the Roman Empire. It was the province of Pannonia and the remains of Roman roads and building exist.

Huns

The subsequently became a center for the Huns. The Caropethian Basin offered rich grzing for the Hun horses, the critical spect of the Hun military.

Avars (600-800 AD)

The Avars were another fierse steppe people who coveted rich grazing lands. They held tge Carpathian Basin for two centuries.

Charlemagne (9th century)

Charlemagne finally defeated the Avars.

Magayars (10th century)

The Magyars were one of the many war-like tribes to emerge out of Euro-Asian Steppe. Like the other Steppe people they were nomadic hearders. The origins of the Magayars are not known. The only available clues are linguistic. There origins seem to have been east of the Urals. The conquest by the Magayars meant that this early history had almost no impact on modern Hungary. They move into the Carpathian Basin, the plains of Hungary and Transylvania (about 900 AD). There wre seven tribes led by �rp�d. It was not an outright invasion. The Holy Roman emperor Arnulf negotiated an allianbce tobhelp defeatr the Moravians. The arrival of the Magayars meant that this early history had almost no impact on modern Hungary. Ecoonomics is even more affected by geograpohy than history. In Roman times, Pannonia ws primarily an agricultural land. The same rich pasture land after the fallof Rome attracted the Avars, Huns, and eventually the Magyars. Mounted Magyar raiders would terroirize central Europe for decades. The resulting booty became a major part of the Magayar economy. They were finally conquered by Otto I.

Medevil Hungarian Kingdom (11-16th centuries)

The defeated Magyars were converted (late-10th century). Unlike the Avars, they dud not disappear but becamre the basis for a ne Christian kingdom. The Magyats had done emense damage throughout central Europe, devestating some areas. The conversion of the Mgyars changed this equation. Therecnow existed a new Christian kingsom in central Europe with considerable martial skills that erected a barrier against depredations from other Asian invaders. steppe people. The Mongols would later get bogged diown in Hungaey, but not penetrate further west (13th century). Later the Ottomans would threaten Western Euripe. They would defeat the Hungarins, but like the Mongols did not advance further west.

Ottoman Empire

The Ottoman invasion of the Hungarian plain destroyed the Hungarian monarchy. Hungary was divided between the Ottomans and the Hapsburghs. For a time the Ittomans threatened Vienna. Hungary ws on the outer fringe of Ottoman power and by the time they eized Hungary, the Renaissance, sea routes to the East, and the Reformation was remaking Europe and the power ballance between the Ottomons and Christian Europe was shifting. The noving forces were seconomics and science. Neiter figured grearly in Hungaey, but both meant that the Otoomans could not hold Hungary and eventually the Balkans as well.

Hapsburg Austrian Empire (16th century-1866)

Hungary after the Ottomons were driven out was fully absorbed into the Austrian Empire (17th century). The Austrian Emperor became the king of Hungary. Hungary remained a largely agricultural area. Much of the economy ws based on lrge landed estates owned by nobels. Hungary emerged from the Feudal era later than the countries of Western Europe. The Austrians, un like the Germans, did not strongly promote industrial development. Much of the industry of the Austro-Hungarian Empire was in the Czech lands, primarily because several notable Czech businessmen promoted indusyry. Although industry was not absent from Hungary, the same level of indudtril development did not occur, especially heavy industry. The nobels who dominated tge economy and held vast estates had little interetvin industrialization.

Austro-Hungarian Empire (1866-1918)


World War I (1914-18)


Independent Hungary (1918-45)

As a result of Wirld War I, Hungary became independent (1918). Agricultural reform became a major issue. Hungary had been part of a great empire for centuries. The Hapsburg Austria-Hungary Empire had had been Germany's principal ally as one of the Central Powers. After defeat in World War I, Hungary became a small republic on its own with a very small domestic market. As part of the Treaty of Trianon ending the War (1920) suffered the greatest loss of all the belligerents. It lost nearly 70 percent of its territory, although most of the territory lost in Romania and Slovakia had majority non-Hungarian populations. This had dramatic economic consequences. Before the War Hungary depended upon the Austrian and Czech areas the Empire for the import of nearly 80 percent of its raw materials and a market for about same proportion of its exports. As a result of the War. Hungary was with limited raw materials, the loss of its primary markets, and no outlet to the seas. All requiring major adjustments. The country experienced a range of problems, especially high inflation. The Hungarian Government was forced to adopt a range of controls including foreign exchange regulations. By the mid-1920s, the economy had begin to stabilize, thanks in part to a League of Nations Financial Reconstruction Plan (1924). As the economy stabilized, heavy regulation was being replaced with more open policies. The Government introduced a new currency, the pengő, which equaled 12,500 of the inflated paper crowns. Hungary despite its small size, due to its rich agricultural productivity managed to export more wheat than any other country in Europe. This included the Soviet Union whose agricultural sector was greatly impaired by Communist policies, especially Stalin's brutal collectivization program.

The Depression (1930s)

Improving economic conditions came to a sudden stop with the onset of the Great Depression (1929). There was a collapse of world commodity prices, in Hungary's case--wheat, Hungary's primary export. Suddenly Hungary faced massive foreign trade deficits. The Government implemented the boletta system. This provided price support and tax relief for Hungrian farmers to help them whether the precipitous decline in wheat prices. The Government also established a National Council for Industry to aid the industrial sector. With its major export sales drying up, Hungary had unceasing trouble financing imports pr ping interest on foreign loans. The country had to suspend loan repayment (1931). The Government adopted deflationary policies designed to help balance the budget. A major step was achieving lower inflation rates. Here a bilateral bilateral trade agreement the Gyula Gömbös Government signed with NAZI Government now dominating Germany was very important (1934). This provided Hungary a secure market for its important wheat exports along with attractive pricing. This was a major factor in tying the Hungarian economy to the German market. A balanced budget was finally achieved 1936/37. Hungary reached an agreement to resume paying interest on long-term non-governmental debts, which had been suspended since 1931. More than 65 loans were affected. This was made possible with the beginning of a recovering economy. The German trade agreement helped Hungary recover from the Depression, but there were serious restrictions. The funds from the German purchases were designated for an account in Germany. The funds could only be used to purchase German industrial goods. This mean that as NAZI Germany moved toward war, the Hungarian economy was essentially linked with Germany. There were also developing trade ties with Fascist Italy. Tragically political ties followed and Hungary joined the Axis (1940). This lead Hungary into World War II.

World War II (1939-45)

Hungary with its economic ties to Germany joined the Axis alliance because it did not have the military power to stay out (1940). In addition neigboring states, epecilly Romania, had territorial demands. The Red Army moved into Hungary (late 1944). Hitlter committed the few remaining SS armored unts to defend Budapest. which did not fall until the end of the War.

Communist Hungary (1945-90)

After World War II, the Communists under the aegis of the Red Army seized control of Hungary (1945). Stalin oversaw the same provess in Hungary as the rest of the Soviert Empire he was constructing in Eastern Europe. There was a brief transitiinal period which was useful both to molify the Western press and to identify independent thinking figures to be be purged later (1945-47). The Commiunists were in control from the beginning, but ruked through coalition governments giving the illusion of democracy. The Communist Party seized full control (1948-49). With the breakdown of Soviet-Allied cooperation in occupied Germany andcthe formaloutbreak of the Cold War, cosmetic coaltions were no longer needed. A new constitution gave the Hungarian Workers' Party an exclusive monopoly on political power and thius the ability to completely overhaul the Hungarian economy. The Communists proceeded to enact a throughly Stalinist political and economic system (1949-53). The Communists launched on a massive program of industrialization. To the shock of the Communists, the economy did not grow like the economies of Western Europe. Not ony were the state-owned industries not profitable and able to pay good wages, but because of state policie, shortages developed for agricultural products. The economomic problens were only partly due to Communist inefficencies. The Soviet Union exploited all of its Eastern European subject peoples. Stalin's death seemed to create the the posibility of more flexibility (1953). Imre Nagy became prime minister. He announcedcnew policies called the New Course. The Soviers engineered his ouster (1955). The economic failure of the Stalinist economic system gavecrise to growing dissension and protest. The workers pradise the Communists had promised not only did not occur, but shortages andc shoiddybproductions meant that Hungarian living standards noyt only did not rise like those in the West, but fell below pre-War standards. The rumors reached Hungay of the Soviet 20th Party Congress and De-Stalinization. Workers and students rose up against the orthodox Communist regime that had replaced (October 1956). Imre Nagy assumed leadership, but the Soviets sent in their tanks to suppress the rebellion. Thgey installed János Kádár, as prime minister.The Soviets and their Hungarian acolytes like Kádár launch a Stalinist crackdown amd widespread arrests. Nagy was promised safe passage, but arrested and executed. The Hungarian Workers' Party because of its hated reputation was renamed the Hungarian Socialist Workers' Party. After the repression that followed, more liberal outlook took hold in Hungary and an economy which came to be called Goulash Communism. There were notable improvements, but Hungarian industry was not competive outside the COMECON barter system. This was the situation when Communism fell (1989). While the economic failings of Communist Hungary were well known, before the fallof Communism, what was not know was the envirimental desvestation wrought by stateowned industrial concerns.

Modern Hungary

The Communist Party after the fall of the Berlin Wall voluntarily gave up its autocracy. A multi-party parliamentary democracy came into being in the country. The Soviet army left Hungary.








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Created: 5:48 AM 6/19/2012
Last updated: 6:24 PM 4/18/2019