After World War I, a conservative government ruled Hungary and made some progress toward economic modernization. The Great Depression, however, brought economic collapse, and the country's mood shifted to the far right. An alliance with Nazi Germany resulted, and Hungary fought on the Axis side in World War II. Again Hungary experienced defeat, and the country was occupied by the Soviet Red Army.
Postwar Political and Economic Conditions
In 1920 and 1921, internal chaos racked Hungary. The white terror continued to plague Jews and leftists, unemployment and inflation soared, and penniless Hungarian refugees poured across the border from neighboring countries and burdened the floundering economy. The government offered the population little succor. In January 1920, Hungarian men and women cast the first secret ballots in the country's political history and elected a large counterrevolutionary and agrarian majority to a unicameral parliament. Two main political parties emerged: the socially conservative Christian National Union and the Independent Smallholders' Party, which advocated land reform. In March the parliament annulled both the Pragmatic Sanction of 1723 and the Compromise of 1867, and it restored the Hungarian monarchy but postponed electing a king until civil disorder had subsided. Instead, Miklos Horthy (1920-44)--a former commander in chief of the Austro-Hungarian navy--was elected regent and was empowered, among other things, to appoint Hungary's prime minister, veto legislation, convene or dissolve the parliament, and command the armed forces.
Hungary's signing of the Treaty of Trianon on June 4, 1920, ratified the country's dismemberment, limited the size of its armed forces, and required reparations payments. The territorial provisions of the treaty, which ensured continued discord between Hungary and its neighbors, required the Hungarians to surrender more than two-thirds of their prewar lands. Romania acquired Transylvania; Yugoslavia gained Croatia, Slavonia, and Vojvodina; Slovakia became a part of Czechoslovakia; and Austria also acquired a small price of prewar Hungarian territory. Hungary also lost about 60 percent of its prewar population, and about one-third of the 10 million ethnic Hungarians found themselves outside the diminished homeland. The country's ethnic composition was left almost homogeneous. Hungarians constituted about 90 percent of the population, Germans made up about 6 to 8 percent, and Slovaks, Croats, Romanians, Jews, and other minorities accounted for the remainder.
New international borders separated Hungary's industrial base from its sources of raw materials and its former markets for agricultural and industrial products. Its new circumstances forced Hungary to become a trading nation. Hungary lost 84 percent of its timber resources, 43 percent of its arable land, and 83 percent of its iron ore. Because most of the country's prewar industry was concentrated near Budapest, Hungary retained about 51 percent of its industrial population, 56 percent of its industry, 82 percent of its heavy industry, and 70 percent of its banks.
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