In 1947 the postwar cooperation between the Soviet Union and the West collapsed, marking the beginning of the Cold War and the beginning of the end for Hungary's democratic coalition government. Having seen communist parties seize power in Poland, Romania, Bulgaria, and Yugoslavia and a communist insurgency threaten Greece, the Western powers dedicated themselves to containing Soviet influence. In May communists were expelled from the governments of Italy and France, and a month later the United States promulgated the Marshall Plan for the economic reconstruction of Europe, which was appealing to the to East European governments.
Stalin feared a weakening of the Soviet Union's grip on Eastern Europe. Anticommunist forces in the region remained potent, and most of the communist governments were unpopular. In addition, East European parties began taking positions independent of Moscow; for example, communists in the Polish and Czechoslovak governments favored participation in the Marshall Plan, and Yugoslavia and Bulgaria broached the idea of a Balkan confederation. By September Stalin had abandoned gradualism and reversed his earlier advocacy of independent, "national roads to socialism." He now pushed for tighter adherence to Moscow's line and rapid establishment of Soviet-dominated communist states in Hungary and elsewhere. The policy shift was indicated in September 1947 at the founding meeting of the Cominform, an organization linking the Soviet communist party with the communist parties of Eastern Europe, France, and Italy.
The HCP proceeded swiftly to assume full control of the government. First Secretary Rakosi became the country's most powerful official and dictated major political and economic changes. In October 1947, noncommunist political figures were told to cooperate with a new coalition government or leave the country. In June 1948, the Social Democratic Party merged with the HCP, forming the Hungarian Workers' Party (HWP). In 1949 the regime held a single-list election, and on August 20 of that year the government ratified a Soviet-style constitution. The official name of the country became the Hungarian People's Republic, and the HWP's control of the government was assured. In 1952 Rakosi also became prime minister.
In 1948 Yugoslavia was expelled from the Cominform, and the Soviet-Yugoslav rift broke into the open. Almost overnight it became treasonous for communists to display any approval of Yugoslav leader Josip Broz Tito or to advocate national roads to socialism. Beginning in 1949, the Soviet Union unleashed a four-year reign of terror against "Titoists" in Eastern Europe. Rakosi purged members of the party's wartime underground, potential rivals, and hundreds of others. Rajk, who continued to support a Hungarian road to socialism, "confessed" to being a Titoist and a fascist spy and was hanged in 1950. Another victim was future party chief Janos Kadar, who was jailed and tortured for three years.
Between 1948 and 1953, the Hungarian economy was reorganized according to the Soviet model. In a campaign reminiscent of the Soviet Union's forced collectivization of agriculture in the 1930s, the regime compelled most peasants to join collective farms and required them to make deliveries to the government at prices lower than the cost of production. The regime accelerated nationalization of banking, trade, and industry, and by December 1949 nearly 99 percent of the country's workers had become state employees. The trade unions lost their independence, and the government introduced Soviet-style central planning. Planners neglected the production of consumer goods to focus on investment in heavy industry, especially steel production, and economic self-sufficiency. In January 1949, Hungary joined the Council for Mutual Economic Assistance (Comecon), an organization designed to further economic cooperation between the Soviet Union's satellites. The authorities also agreed to form joint-stock companies with the Soviet Union. These companies allowed the Soviet Union to dominate Hungary's air and river transportation, as well as its bauxite, crude oil, and refining industries and other sectors.
With the opposition parties disbanded and the trade unions collared, the churches became the communists' main source of opposition. The government had expropriated the churches' property with the land reform, and in July 1948 it nationalized church schools. Protestant church leaders reached a compromise with the government, but the head of the Roman Catholic Church-- Cardinal Jozsef Mindszenty--resisted. The government arrested him in December 1948 and sentenced him to life imprisonment. Shortly thereafter, the regime disbanded most Catholic religious orders, and it secularized Catholic schools.
Stalin died in March 1953. The new Soviet leadership soon permitted a more flexible policy in Eastern Europe known as the New Course. In June, Rakosi and other party leaders--among them Imre Nagy--were summoned to Moscow, where Soviet leaders harshly criticized them for Hungary's dismal economic performance. Soviet communist party Presidium member Lavrenti Beria reportedly upbraided Rakosi for naming Jews to Hungary's top party positions and accused him of seeking to make himself the "Jewish King of Hungary." (Communists of Jewish origin had dominated the party leadership and the secret police for a decade after the war, and every party leader from Bela Kun to Erno Gero had Jewish roots.) Rakosi retained his position as party chief, but the Soviet leaders forced the appointment of Nagy as prime minister. He quickly won the support of the government ministries and the intelligentsia. Nagy also ended the purges and began freeing political prisoners. In his first address to the National Assembly as prime minister, Nagy attacked Rakosi for his use of terror, and the speech was printed in the party newspaper.
Nagy charted his New Course for Hungary's drifting economy in a speech before the Central Committee, which gave the plan unanimous approval. Hungary ceased collectivization of agriculture, allowed peasants to leave the collective farms, canceled the collective farms' compulsory production quotas, and raised government prices for deliveries. Government financial support and guarantees were extended to private producers, investment in the farm sector jumped 20 percent in the 1953-54 period, and peasants were able to increase the size of their private plots. The number of peasants on collective farms thus shrank by half between October and December 1953. Nagy also slashed investment in heavy industry by 41.1 percent in 1953-54 and shifted resources to light industry and the production of consumer goods. However, Nagy failed to fundamentally alter the planning system and neglected to introduce incentives to replace compulsory plan targets, resulting in a poorer record of plan fulfillment after 1953 than before. Rakosi used his influence to disrupt Nagy's reforms and erode his political position. In 1954 Soviet leaders who favored economic policies akin to Nagy's lost a Kremlin power struggle. Rakosi seized the opportunity to attack Nagy as a right-wing deviationist and to criticize shortcomings in the economy. Nagy was forced to resign from the government in April 1955 and was later expelled from the Politburo, Central Committee, and finally the party itself. Thus, the Central Committee that had lauded the New Course in June 1953 unanimously condemned its architect less than two years later.
After Nagy's fall, collectivization and development of heavy industry again became the prime focus of Hungary's economy. The purges did not resume, however, as Rakosi did not enjoy the same amount of power or Soviet support that he did while Stalin was alive. Moreover, he now had to contend with many outspoken opponents within the party, including numerous victims of the purges who had been readmitted to the HWP on Moscow's orders. A schism soon split the party leadership from the rank and file, and the party organization within the Writers' Association became a forum for intraparty opposition. In 1955 a rapprochement between the Soviet Union and Yugoslavia produced the Belgrade Declaration, in which Moscow confirmed that each nation had the right to follow its own road to socialism. One year later, Soviet leader Nikita S. Khrushchev denounced Stalin in his "secret speech" before the Twentieth Party Congress of the Soviet communist party. These external events shook Rakosi, who was a strong opponent of Titoism and the instigator of Hungary's purges.
HWP members opposed to Rakosi compelled him to admit that the purges involved abuse of power and that Rajk and others had been its innocent victims. Rakosi ordered an investigation, but it cleared him and blamed the state security police instead. This result not only inflamed the party opposition but also alienated Rakosi from the police. In June 1956, Rakosi's position became untenable. The party press printed open attacks. The Writers' Association, the newly created Petofi Circle, and student organizations clamored for Rakosi's ouster and arrest. On June 30, the Central Committee dissolved the Petofi Circle and expelled intellectuals from the party. By mid-July, however, Soviet leaders began to fear outright revolution and called for Rakosi to step down. He resigned after a meeting of the Central Committee on July 17. Gero, Rakosi's deputy, was appointed first secretary. Moscow hoped to introduce a slow liberalization, but Gero was too closely identified with Rakosi, and party discipline subsequently broke down completely.
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