Hungary tries adding a few more capitalist touches

Hungary -- for more than a decade East Europe's "quiet" reformer -- is about to adopt the boldest program yet devised within the communist bloc to grapple with the economic stagnation troubling the whole area.

Twelve years ago it launched its "new economic mechanism," taking some steps away from Soviet-style planning and toward a market-orientated economy. But world recession and the energy crisis of the mid-1970s slowed NEM's gains.

Now Hungary, which has fewer raw materials than its allies and a greater dependence on foreign trade, faces a balance-of-payments deficit of almost $400 million with Western countries. It has a similar deficit, in rubles, with its East-bloc partners.

After a year of agonizing political debate, it has come up with a new strategy for handling its difficulties that will mean still greater shifts away from the general bloc approach to "socialism" and "socialist planing." This new program will be confirmed by the party congress opening in Budapest today.

It signals some remarkable changes: Old standbys of communist system and theory like cheap food (through costly subsidies) and wage egalitarianism are to make way for such "capitalist" tests as efficiency and profitability and pay packets tied to incentives based on work performance.

A start was made last year on two fronts. First, one of the country's biggest industrial units introduced redundancy -- which is normally excluded by the communists as an exclusively capitalist "remedy" -- as a means of weeding out nonviable, superfluous labor.

Then, food prices were raised by an average 20 percent (with an 11 percent boost for the farmer-producers), which enabled food subsidies to be slashed by half.

Each move became a sensitive political issue, and more may be heard of them in this week's congress. But the realists seem to have won the day.

Retraining and other job opportunities in a generally labor-short economy and pay raises (consistent with enterprise profits) softened the redundancy idea.

Austerity generally is offset with continued cheap basic foodstuffs, continued imports of good-quality consumer durables, and more leeway for small-scale private enterprise to boost inadequate consumer services.

Nonetheless, the government is nailing its colors to the efficiency-profit mast and seems determined to come to grips with the nagging problem of labor indiscipline.

One new regulation provides for a 20 percent forfeit in wages for persistently bad work. The fine may be ordered by a manager. It seems a tough measure, but the offender may appeal to an arbitration board whose members will be independently elected by the workers themselves from the floor.

Hungary's problem is common throughout the bloc. It needs to produce goods that can compete in Western markets, where it wants to buy the technology it needs to develop its own economy. A byproduct of the economic impasse has been a nervousness among ordinary Hungarians that the regime might feel obliged to draw a firmer political line, thus countering the "soft" approach that has made the country the most relaxed, domestically, within the bloc.

But preparations for the congress have included frequent official assurances that no political crackdown was in the offing. Party leader Janos Kadar's slogan of "a party for all the people" has a new prominence, and a bigger effort than ever before has been made to involve the great nonparty majority in public discussions of policies.