Hungary's 'goulash miracle', with a taste of profits, is losing its paprika

Hungary's economic performance in recent years has stunned foreign observers. The apparent success of the partly unshackled planned economy has taken even its perpetrators by surprise and at the same time quieted local critics of heretical practices, including seeking profits.

But the "gulyas miracle" (goulash miracle) is showing signs of running our of momentum. Inventories of unsold manufactured goods are piling up, and what's more, unemployment is beginning to raise its ugly head.

Virtually all branches of the economy are sputtering, instead of throbbing in a healthy fashion. Agriculture is the exception.

Hungarian proponents of the so-called flexible economic system are calling for still more concessions from the Communist-run government to give their pet theories the chance to work out.

Whether they will get their way will depend to some extent on party considerations of both economic and political matters here, in the rest of the Eastern bloc, and in the Soviet Union, in particular.

Hungarian planners have already concluded that there will be negative growth in the domestic economy at least in the next two to three years.

They are also bracing themselves for a continuing adverse balance of payments from falling exports, especially to the West. The burden of repaying Hungary's debts, now estimated at $8 billion, is also mounting.

Those responsible for the new experiments know that if their rosy contentions are not borne out by tangible results it will inevitably mean the loss of their jobs and a return to the centrally controlled economy of the past.

Yet, in their heart of hearts the free enterprisers, as the heretics are known here, as well as the staunch defenders of the socialist economic doctrines , know that only a continued opportunity at still greater liberalization of the economy can avert Polish-style problems here.

Such is the Hungarian paradox.

Some of the reform-minded people here suggest the new economic directions of the late '70s -- reaffirmed last year -- came too late, after more than three decades of grave mistakes, to have much effect on a rigid system of ill-chosen priorities and methods.

Others claim that the experiment is not faltering but that "too much is being expected, too soon" from that minute segment of the economy that has been allowed to approximate a modus operandi taken for granted in the West.

In fact, the success stories bandies about here to support the arguments in favor of corporate autonomy are impressive.

Hungarian-made autobus fleets now serve many major cities around the world. Soon the double-jointed Ikarus buses will be rolling on North American streets.

Medicor, one of the world's leading suppliers of hospital equipment and "turkey" health services is, in fact, setting international public health care standards.

With only a sliver of the 6 million hectares (14.8 million acres) of arable land in private hands, fruits and green vegetables are abundant and, at least in the summer, affordable by most people. The bulk of the produce comes from the private plots.

This year the almost fully mechanized Hungarian agriculture -- state owned -- is reaping a bumper crop. There are likely to be large volumes of cereals ready for export.

For the first time since the nationalization of all businesses in the late ' 40s less than 1 percent of the country's retail trade is being leased to private operations.

They are expected to pay stiff rentals. Some of them will prosper, others are expected to go broke, the same as in the West.

Not quite. The small shopkeeper, the same as the ostensibly autonomous manufacturer of the Hungarian Magic Cube (Rubik Cube), currently the hottest-selling toy on the world market, somehow has to fit into the overall five-year plan.

The state framework may be stretched, but it cannot be dispensed with.

That's the problem for profit-motivated, export-oriented enterprises having to reconcile business mandates with the realities of state-directed crystal gazing at home.