Hungary, once leader in reform, now lagging. Critics say central party unwilling to act to get economy moving

Western observers long have praised Janos Kadar's ``goulash communism,'' a mixture of market-based economic reforms and tolerant human rights attitude. But now Hungary faces daunting problems. Its heavily indebted economy is stagnating, and perhaps even worse in the Grobachev era of rising expectations, so is its political system.

``People here see a direct comparison between [Soviet leader Mikhail] Gorbachev and his readiness to face uncomfortable decisions,'' says Janos Kis, a leader of the democratic opposition, ``and our party's lack of dynamism, passivity, and incoherence.''

How ironic.

Hungarian communists point out that they have gone much further than the Soviet leader in practicing glasnost (openness) and perestroika (economic restructuring).

Just last week, Prime Minister Karoly Grosz produced a new plan of further economic reform, including the imposition of the communist world's first income tax.

After presenting his program, Mr. Grosz allowed unprecedented debate in parliament and held a rare press conference for foreign reporters.

The problem is applying glasnost and perostroika to the Hungarian context.

In Hungary, economic restructuring could involve serious economic sacrifices.

Over the next two to three years, Rezso Nyers, the father of Hungary's economic reform, told the Monitor that living standards must be cut by some 8 to 10 percent, hundreds of lossmaking factories be closed, and thousands of Hungarians ``retrained'' for new jobs - a euphemism for unemployment.

``There might be some labor unrest,'' admitted Mr. Nyers, a Communist Party Central Committee member. ``But these moves are needed to restore economic balance.''

To Hungarians, glasnost does not simply mean more open discussion, either.

It translates into calls for parliamentary control of the government, freedom of the press, and a guarantee of human rights.

Some 100 leading Hungarians - opposition members as well as other intellectuals, art ists, and economists - called for these freedoms in a bold letter last week to Prime Minister Grosz.

``This is the first time that such a coalition gets together to promote change,'' says Miklos Haraszti, one of the signers of the letter.

``When the Soviet Union talks reform, we cannot miss the moment.''

In order to diffuse the mounting pressure, radical solutions are being heard within the party ranks.

Imre Pozsgay, a Central Committee member and a leading reformer, says that government must be given more independence from the party and independent associations allowed to represent the country's diverse interest groups.

Mr. Pozsgay even might tolerate the emergence of a Hungarian version of Solidarity, the now-banned independent Polish trade union.

``We need new institutions to regulate conflicts,'' Pozsgay says.

``If it applied self-restraint, I could accept such as union as Solidarity.''

Such proposals, of course, are not acceptable to all Hungarian communists.

At his press conference, Grosz sharply rejected the opinions of ``hostile people'' who signed the opposition letter.

Officials admit there is deep, constant debate among party leaders, a debate that Mr. Kadar seems unable to control.

``Within the party, there's lots of questioning and quite a healthy opposition,'' says Emil Nyul, a party official in Budapest.

``The big problem is how to deal with the economy's stagnation.''

The economic problems stem from the party's grip on power, according to Mr. Nyul and others party members.

Although Hungary introduced market forces into its economy in 1968, the party has continued to interfere in the affairs of the supposedly independent managers.

Lossmaking firms received large state subsidies, while profitable firms paid all their profits back to the state.

The result now is visible. Growth is stagnating around 1 percent annually, the trade deficit is rising above $1 billion, and the debt to foreign banks has soared over $10 billion, by far the highest per capital total in the communist world.

In theory, a solution is simple: Let the market work. End the subsidies and close down the bad firms.

Under the recent bankrupcy and tax reforms, the necessary legislation is in place. But is the necessary political will?

``Kadar is 75,'' says Jozsef Bognar, director-general of the Institute for World Economics, ``and at that age it's hard to begin again.''