Energetic New Regime : Hungary Resumes Role as East Bloc Reform Leader

Janos Kadar’s last stand was the spectacle of an old Communist holding out to the end.

The aging Hungarian leader’s hands fluttered through the mussed pages of his last speech, his place lost. He rambled on, falling back on murky parables and childhood memories of village sweet shops. The speech that was designed as a last defense turned out to be the final unraveling of his rule.

In the hours that followed this appearance Sunday before his Communist party comrades, Kadar, who will be 76 on Thursday and had ruled Hungary for 32 years, was swept aside by party reformers. Kadar was replaced by an energetic modernist who had dared to campaign for his post, and the veteran leader was relegated to his rose garden and the specially created ceremonial job of party president.

In the aftermath of the extraordinary three-day party meeting, characterized by a frankness unheard of in Eastern Europe, Hungary once again assumes the Communist Bloc’s undisputed leadership in the drive toward reforming the region’s creaking economic and political systems.

Kadar’s replacement as general secretary of the Hungarian Socialist Workers’ Party, the formal name of the Communist Party, is his own premier, Karoly Grosz, 57. Seven members of the 13-man Politburo, all Kadar lieutenants, were sacked and replaced with younger, reform-minded party officials. In addition, two party secretaries were fired and the 1,110-member Central Committee was transformed by an infusion of new blood.

Bold Image-Building Campaign

Grosz has never been regarded as a member of the “radical” reform wing of the Hungarian party. But his bold image-building campaign, which included a visit to British Prime Minister Margaret Thatcher two weeks ago, and his direct appeal to top party reformers for support in the last year, amount to an open expression of ambition unprecedented in the political systems of Eastern Europe.

“A government committed to the Communist Party but answerable to the Parliament,” was the formula announced by Grosz, whose new team, now dominating the Politburo, aims to strengthen the nation’s heretofore rubber-stamp legislative body and to place new limits on the all-powerful role of the party.

It also signifies a nod of approval from the Soviet Union, where leader Mikhail S. Gorbachev’s own reforms continue to reverberate with warnings to Eastern Europe’s most elderly and cautious leaders--in East Germany, Romania and Bulgaria--to adapt to a new era or to give way to reformers from a younger generation.

Significantly, the first official word of the change came from Gorbachev, in a message of congratulations that arrived even before the news was announced in Budapest.

The response of the Soviet leaders--and their apparent reluctance to intercede and rescue the party chieftain they installed after the Hungarian uprising of 1956--amounts to another signal from the Gorbachev regime that Eastern Europe’s Communist governments are freer than ever to try their own versions of perestroika , or economic and structural reform.

Go Further than Gorbachev

Under the plan envisioned by Grosz and his allies, reform would go much further than anything Gorbachev has yet discussed for the Soviet Union. Grosz, however, has made it clear that he is not a part of the radically reformist intellectual wing of the party, asserting that there is no need to change “realistic objectives” in Hungary and that only “a few corrections” are necessary.

But Grosz is a staunch supporter of private enterprise and the notion--heresy not many years ago in a Communist world--of financial reward based on merit and accomplishment. He has said he opposes the cherished idea of socialist egalitarianism as a relic of a bygone era. And the idea now being put forward by Grosz--an elected Parliament empowered to veto the decisions of the ruling Politburo--could turn out to be a shift of lasting significance.

Hungary is already far ahead of the Communist Bloc in economic innovation. It has an actively functioning bankruptcy law, established well ahead of its Communist neighbors. A banking system has been established to compete with what was once a state banking monopoly. A small bond market is flourishing.

Moreover, Hungarians have been encouraged to help develop what, in effect, is a second, free-enterprise economy, in which workers taking second jobs fuel a growing desire for private ownership and business innovation. Hungary has the highest standard of living in the Soviet Bloc, and Budapest’s unusual wealth of consumer goods--scarce in neighboring countries--provides at least a surface sign of prosperity.

Sympathy for Kadar

Janos Kadar can claim the largest share of the credit for this, and it is for this reason that some Hungarians watched his melancholy performance Sunday with a measure of sympathy.

But his career as Hungarian party leader did not begin with sympathy. A former head of the Budapest Police Department, he was installed by Moscow as a pliant caretaker after the aborted 1956 revolution was put down by Soviet tanks.

In the years that followed, thousands of Hungarians were purged, including Imre Nagy, the premier at the time of the 1956 uprising, who was hanged after a trial that some regard as the grimmest point in modern Hungarian history. This darker side of Kadar’s career has been difficult for many Hungarians to forget, particularly the country’s opposition figures.

In the 1960s, however, Kadar’s repression eased. In 1968, as the Soviets and the rest of Europe fixed their attention on the “Prague Spring” in Czechoslovakia--another bid for change that was put down by Soviet tanks--Kadar quietly pushed through a series of economic changes that helped lift Hungary to unique prosperity in the Communist Bloc. Through much of the 1970s it was regarded as the one economic success story in the Soviet sphere.

But in recent years the economy has stagnated. The plentiful flow of consumer goods that helped to pacify Hungary’s 10.6 million people has also run up a debt of $18 billion, the highest per-capita in the Communist Bloc. Unemployment is rising and inflation is increasing, eroding the benefits brought by prosperity. Dissatisfaction with the deepening economic problems and the sense of political stagnation had in the past year become more vociferous, and more pointedly directed at Kadar.

Drained of Stamina

Clearly, according to diplomats and other observers, Kadar no longer had the physical stamina and mental alertness to cope with the problem. Increasingly in the last 12 to 18 months, sources say, he avoided or delayed decisions.

“I think everyone in the country knew his days were numbered,” a Western diplomat said. “Kadar was the last one to understand it.”

While Kadar fumbled, Grosz was making moves that he hopes will begin to revitalize the economy.

Last September, his design for a three-year stabilization program was approved by the National Assembly, introducing austerity measures that may well become fundamental tenets of Hungary’s economic future. Under the plan, subsidies to state-run enterprises are to be reduced or eliminated, inefficient companies closed and wages and prices gradually raised to reflect world market levels.

The economic plan was quickly followed by a government reorganization scheme aimed at streamlining and cutting the bureaucracy. In December, income taxes, ranging up to 60%, were introduced, along with the Communist Bloc’s first value-added tax.

Negotiated $350-Million Loan

It was Grosz who negotiated with the International Monetary Fund for a $350-million loan, announced last week, a key endorsement for Hungary’s reform efforts.

Thus in less than a year as prime minister--a position with little authority before Grosz--he not only put his imprint on the government and the economy, he effectively gathered enough power to topple Kadar. Grosz called for the special party meeting, the first since 1957, with that goal in mind.

Grosz, a printer by profession, is described by associates as a pragmatist. A member of the party since 1945, he has spoken of his disillusionment with communism after the Hungarian uprising, when he was one of the few party officials who did not go into hiding. He was persuaded by his father to remain active in the party, and he rose slowly through its ranks until 1980, when he was elected to the Central Committee.

He became Budapest party chief in 1984 and was elected to the Politburo a year later. It was Kadar who appointed Grosz premier, apparently in the belief that the post would smother the obviously ambitious younger man in a morass of detail. But after six months in the job, it became clear that Kadar had miscalculated, that Grosz had set his sights on the old man’s job.

Now that he has it, along with an apparent license from the Soviets to continue to serve as the guinea pig of the socialist world, pressures for political change may mount as well. A number of recently formed political groups have been pressing for official recognition and arguing for limits on the power of the party. Grosz has rejected their demands so far but seems to have established links to many of their supporters. His well-advertised pragmatism will probably mean that such groups will be tolerated but not overly encouraged.

Intense Speculation

The long run, politically and economically, is uncertain, because both the Soviet Union and its satellite countries are embarking on new ground, and the question of how far Marxist systems can change is a subject of intense speculation.

Many Hungarian economists say the real blame for the economic stagnation of recent years lies in the impossible nature of socialist central planning and free-enterprise flexibility, a hybrid that, the theorists say, was doomed to fail. The answer, most of them say, is to leave behind the socialist half of the economy and move further toward the West, a path virtually guaranteed to assure Hungary’s continuing importance as a pioneer in the East Bloc.