174. Telegram From the Embassy in Hungary to the Department of State1
4840. Subject: Poland and Eastern Europe: Analysis and Policy Implications. Ref: State 238732.2
1. (C-entire text)
2. We concur in the general thrust of the analysis presented in the referenced message on how events in Poland may affect the USSR and Eastern Europe. As it pertains specifically to Hungary, we agree with the estimate that Poland’s uniqueness, for the various reasons stated, makes it unlikely that there will be any dramatic spillover effect over the short term. While Hungarians follow events in Poland with keen attention, they invariably express the view that “Hungary is different”. This, of course, is merely another way of stating that “Poland is different”. Our interlocutors stress:
—The relative strength of the Hungarian economy and the attention Hungarian leaders have long given to supplying the consumer sector.
[Page 517]—The well managed and productive agricultural sector.
—The general, popular acceptance of the Hungarian Party’s leadership.
—The scant politicization of Hungarian labor.
—The absence of links between workers and the small group of intellectual dissidents.
—The cooperative (to the point of appearing co-opted) role of Hungarian religious leaders.
—The relatively successful national alliance policies of Kadar’s regime which have given even non-Communist Hungarians a sense of national pride and participation in the country’s life.
3. Many Hungarians with whom we have talked look at the Polish events through a local prism. The prism is small and reflects mostly economics. Hungarian officials are not confident that events in Poland have run their course, and that is naturally worrisome. Any argument picturing what has happened this summer in Poland as being solely about free trade unions is doubly worrisome because that, standing alone, could combine political danger and economic ruin. Here they would rather see Polish events in the context of economic reform, as a vindication of Kadar and the economic reform program as elaborated and pursued since 1968.
4. Although Poland in some ways provided the political backdrop against which Hungarian reform was first made possible, Poland has been regarded here as a foot-dragger. The importance of the Party and government keeping its word is often heard and the Polish record of broken promises to the workers held up in comparison to what is claimed a perfect Hungarian record of promises kept. Communication with the workers and keeping faith with them is seen as the foundation for the Hungarian economic reform model which has at least these six major components:
(A) A commitment to economic growth, not export led but with a vigorous East and West export component.
(B) A modernized planning system which is both precise and flexible and does not fully allocate all resources.
(C) Less centralized control and more authority for local enterprise management.
(D) An increased role for consumption, being critical not only for public support, but, of equal importance, for expanding capital formation.
(E) Allowing initiative to develop at all levels, through the profit motive and profit sharing.
(F) Allowing the market to play a significant role in resource allocation and pricing.
[Page 518]5. The Hungarians think this model is adaptable to most of their partners, at least for those to the north. In their optimistic moments they believe the Poles may now have opened the way and the Soviets will have to swallow reform in the EE countries, even if it contains heresies against Leninism, because the alternative options are just too costly. The Hungarians will probably try to push their model to their EE friends as they like to think the others live in envy of them and they want recognition that Hungary has indeed been the pace-setter.
6. However, we very much doubt the larger EE countries, to whom Hungary would like to appeal, will take that much notice of her. Hungary is a fine place for a holiday and it’s true the shops are comparatively full, but what strikes the economist is smallness of scale. Moving away from the command economy was less complex, could be undertaken with a leadership that truly enjoys much public support, and even so is incomplete after 12 years. The Hungarian accomplishment has taken place during years of economic growth at home and in the export sector has been supported by solid OECD growth. The years of the 80s will probably not be big growth years and reform, even with 12 years of foundation, may not save the Hungarian economy, much less make it a model for others.
7. The leadership still appears bent on going ahead with planned economic reforms, but the adverse economic environment could affect the speed and manner in which they are implemented. Hungary is attempting to cope with mounting economic difficulties by seeking to increase hard-currency exports, decrease consumer goods purchases from the West, and reduce consumption. A period of zero or negative economic growth with little improvement in the standard of living, could seriously impair the regime’s standing in a society that has derived political stability from the steady growth afforded the consumer sector. Hungary’s outlook is thus clouded by serious economic and political uncertainties.
8. Over the longer term, we agree that the events in Poland cannot but have some impact on Hungary and other countries in the region. This will be particularly true if the Polish liberalization succeeds (especially in the area of free trade union development); but it would also be true in the case of a major reversal. We have had reports that workers in some factories “discussed” the Polish situation, but this activity did not extend to work stoppages or demonstrations. Particularly if the Poles succeed, we believe it possible that Hungarian workers may similarly demand a more democratic trade union structure. We suspect, however, that the workers here will carefully weigh the potential economic and social costs before engaging in any agitation. The memory of 1956 remains strong in Hungary and will continue to act as a brake on worker-initiated activity or reforms not closely concerted with the party and governmental leadership.
[Page 519]9. Finally, while the government and party can be expected to prevent the formation of any coalition of dissidents and workers, we do not believe that the regime will feel compelled to increase internal vigilance or otherwise seek to insulate the populace from Western influence. Throughout the Polish events, the Hungarian media followed a deliberate policy of keeping the public informed of the main elements of the situation.
10. Policy implications: We believe that the policy recommendations outlined for both the region and Hungary specifically are valid. We see no need to alter our basic policy of differentiation (para 6–A). Indeed, the GOH seems to have gotten over its post-Afghanistan jitters and decided to go ahead with a full range of contacts with the West. While our policies may need to be tuned to meet the requirements of an evolving Polish situation, we see no need to make any major readjustment in our approach here.
11. We agree we should continue to maintain the useful political dialogue established in recent years with the Hungarians through increased high-level visits. There are also new areas, such as energy, that can be usefully exploited to maintain the momentum of an active, differentiated policy toward this country. We agree we could be more aggressive in expanding exchanges and cultural programs. We are less certain, however, that international institutions can be effectively utilized—at least for the present—to influence Hungarian behavior. Despite indications of renewed interest in IMF membership, Hungary is not yet a member. The ILO enjoys little influence on Hungarian internal policies. In sum, we agree that the Hungarian situation should be watched in the light of the Polish events to assure we take advantage of opportunities for US policy initiatives but our assessment for now is that we are on the right track.
- Source: National Archives, RG 59, Central Foreign Policy File, D800431–1060. Confidential. Immediate. Printed from a corrected copy.↩
- See footnote 2, Document 41.↩