Except for the fact that its only shareholder is the state, you might not at first glance distinguish the Budalakk Chemical company from any Western enterprise. Its director, Gyoezoe Benyi, runs this Budapest paint plant to make profits. Its workers want higher wages. Benyi decides what to produce, where to sell it, what price to charge and what to pay his workers.
Budalakk represents the new face of Hungarian industry, as the communist country this year moves another step closer to capitalist economics. A law that went into effect in January is doing away with direct state control of most industry and ordering managers to run their companies to make profits.
By changing its system of company management, Hungary seeks to end the stifling control of government ministries and the Socialist Workers
(Communist) Party over enterprises and to put them in the hands of managers who will make autonomous decisions according to the market.
It is a further step in the economic reform Hungary started in 1968 when it abandoned the centrally planned economy, which is a feature of the Soviet Union and other communist societies and which has proved economically disastrous.
It is significant both as a possibility for the establishment of centers of power relatively independent of the party and the state and for the possibility that economic pluralism could lead some day to political pluralism.
Under the new system, company managers will not be chosen by government ministries but elected by workers` councils or workers` assemblies, depending on the size of the enterprise. Such workers` councils exist in different forms in Yugoslavia and in West Germany and other West European countries.
The new procedures have been implemented in about 100 state companies. Elections are going on now, and by the end of this year a third of Hungarian industry will experience the change, affecting about 350,000 workers in a labor force of 5 million. By the end of 1986, the system will operate in most competitive companies, excluding monopolies in public services, energy and raw materials.
The new system was adopted after long debates over how to solve the country`s economic crisis. The Hungarian economy was highly inefficient, productivity wasn`t going up, prices were soaring, and the government lacked the money for new investments.
The answer was to make companies more like firms in capitalist countries. Instead of getting instructions from central ministries or local party organizations, which often had priorities that conflicted with the need to make profits, the managers will decide on production and investments, purchases and sales, wages and prices according to the market. They will pay taxes to the government and use profits for investment or wages as they see fit.
Companies will be able to make contracts with national and foreign companies and to start joint ventures. The government has already discovered some capitalist-style problems. ”We have introduced new antitrust
legislation,” said Ferenc Madl, a professor of the Elte University Law School. ”As soon as you give freedom to the companies, they immediately abuse their position.”
The change was also prompted by a need to do something about the Hungarian worker, who commonly sits down on the job or goes out on company time to do private jobs elsewhere, often with company materials. The belief was that if workers had more rights, they would increase their efficiency and productivity.
Peter Renyi, 64, a member of the party central committee and managing editor of the party newspaper since 1956 and not known as a liberal, said a revolution necessarily centralized power at the top and that reforms were necessary ”to draw people in, give rights, give more autonomy, make the great masses more interested.”
Economic reforms begun in 1968 were slowed down in the early 1970s as a reaction to the 1968 Soviet invasion of Czechoslovakia, whose leaders had also sought to introduce liberal innovations.
However, the worsening economic situation of the early 1980s required drastic measures. Renyi, among the communist leaders who had stopped new reforms, said the process had to be speeded up now to make people more ambitious and involved in the society so they would have more initiative. Moving more power to the bottom, he said, ”works better for the common interests than if you have a bureaucratic system in which all wisdom is at the top and at the base people only look for orders.”
Now, the East Bloc climate is also more favorable. Joszef Bognar, 68, director of the government Institute for World Economics, said the reforms undertaken by Soviet leader Mikhail Gorbachev would be ”very useful for the socialist world and for Hungary.”
However, Marton Tardos, 57, an economist who sat on an advisory committee for the reforms, said the changes in Hungary were a positive step but did not go far enough. Tardos, who is chief of the research department on economic management of the government Institute of Economics, said he preferred establishment of competing capital-holding companies or conglomerates instead of workers` councils.
Tardos said the council system would make it difficult for company managers to deal with the problem of capital allocation. Tardos asked how the managers could make profitable investments or try to hold wages down, both necessary for profits, when the workers had elected them.
This conflict of interests between management and workers creates an ideological dilemma for a Communist government.
”On the one hand, the party leaders would like to have more efficient production, which means low costs, including low wages,” Tardos said. ”On the other hand, the party would like to have a political situation where there is no tension between management and workers, and workers are happy.”
It is still uncertain how much real power the managers will have.
”Centralized power structures in politics want centralized power in capital allocation,” Tardos said. ”The market solution means a
decentralization or pluralism of power. They are not very happy about giving these decision-making powers to bodies that don`t coordinate their activities with the party but have their own goals and aims.”
It is clear that the party has no intention of giving up all its power over industry. Party organizations have already dominated council elections;
they also have a legal veto power to eliminate candidates they don`t want.
The continued power of the party creates problems. ”The manager doesn`t know how far he can go to economize on wage costs and other things and how much he may do for profitability and how he should consider the other aims set by the party organization: to deliver more goods to the market, have more export production and give more wage increases to the workers,” Tardos said. In the end, the real constraint on economic reforms is the political system. The government, which has never forgotten the 1956 uprising, wants to promote efficiency so it can increase living standards and avoid political tensions, but it does not want to change the political framework.
There is disagreement on the political impact of the new management changes. According to Madl, they ”create an incentive to go ahead with political democracy, and that`s what people think should come.”
Others say that although some political changes will follow the economic ones, the Communist Party is not ready to end its monopoly on political power. ”Economic reform influences everything,” Bognar said. ”If the state doesn`t need to interfere in economic problems, why interfere in cultural problems? We will introduce further political reforms, but I don`t believe they are ready to give up the one-party system.”
Author Gyorgy Konrad, 52, a critic of the system whose books are published abroad, observed: ”The reform of state socialism leads to a kind of pluralism in every dimension of the society. It is not possible to make a feasible, efficient economic reform with people who are afraid of the central power.” However, he said, that will not necessarily produce political democratization.
Janos Kis, 41, editor of the dissident magazine Beszelo, who has lost his passport since the publication began, said more hopefully that although workers` council elections had already been manipulated by the Communist Party, ”in principle the idea of workers` self-management could have real long-time effects on ideology and influence the future.”
