Poor Show Resentment : Money Talks Ever Louder in Hungary

Times Staff Writer

In the bowels of the city, polyester sticks to sweaty skin and buses belch exhaust.

But on a hillside patio high above the traffic's din, the afternoon breeze wafts the fragrance of apricots through the air. A servant glides silently, bearing mineral water in crystal pitchers and trays piled high with finger sandwiches.

"Socialism is a most corrupt system, " muses businessman and film director Istvan Bacskai Lauro, leaning back in his crisp white cottons to survey the hills below him like a ruler taking inventory of his kingdom. "The secret is knowing how to manipulate it and who to bribe. . . . One must use connections and money."

Burying the Sickle

Much blood has been shed in Hungary this century in the name of the proletariat. But most Hungarians today would much rather march within the ranks of the moneyed class, whose shiny sports cars, A-frame homes and satellite dishes dot the Rozsa Domb (Rose Hills), the Hungarian equivalent of Bel-Air.

Throughout these hills ring the sounds of construction as workers wield their hammers to build three-story, half-million-dollar homes for those who have buried the sickle of communism forever.

Hungary has always had an elite, of course. The Communist system even has a name for it--the nomenklatura , whose power and privilege were passports to an easy life. But Hungary's wealthy have long been forced by the reigning ideology to enjoy their fortunes discreetly, behind locked doors.

No longer. As Hungary moves steadily toward a market economy, those with money and Western-style business skills find themselves increasingly courted by the same government that threatened to jail them for "speculation" 20 years ago.

Scathing Reviews

The result is an emerging entrepreneurial class that pays little attention to socialism, except to dismiss it scathingly.

"Socialism? That's against human nature," one businessman says.

"Everyone hated communism. They were just acting," says another.

Some, like Lauro, speak candidly about bribing people. Others pepper their conversations with discussions about burgeoning art collections and his-and-her Mercedes.

The Western concept of conspicuous consumption has taken firm root.

Hungarian yuppies zip down the grand leafy boulevard of Nepkoztarsasag Utca (People's Republic Street) in new BMWs. They drop bundles of forints--Hungary's currency--at chic, privately owned bistros where everything from the lobster to the avocados is flown in from the West.

These are the most obvious signs that the gap between the rich and poor is widening in socialist Hungary. But in the side streets and alleys there are others: the growing numbers of homeless men and women rooting through the trash.

In a country where the average Hungarian lives with her or his family in a three-room, high-rise, cinder-block apartment and earns $130 a month, there is growing resentment and envy toward those whom the economic reforms have helped make rich.

"They hate my car," said Gabor Varszegi, staring gloomily at an ugly gash inflicted by vandals on his sleek, black Mercedes 560 SL. Varszegi, 43, founded a financial empire around one-hour photo-processing shops in a joint venture with Kodak.

"Twenty years ago, if you wore a pair of blue jeans and drove a Czech car, you were rich," recalled Varszegi, who got his first taste of wealth in the 1960s as the bass player for a successful Hungarian rock band called Gemini.

In 1986, Varszegi took a $200,000 investment and opened a Fotex-Kodak shop in Budapest's Scala department store. The first year, he made a 500% profit, he says. Last year, he made $6 million with six shops.

Today, he employs 105 people and has branched out into contact-lens manufacturing, picture-frame and animal-feed factories and a state-of-the-art eye clinic with 20 doctors. Launching a weekly newspaper and opening a Budapest diamond exchange are next.

"I am very familiar with the rules in Hungary. I have very good connections," said Varszegi, sinking into a green velvet chair at the Ballantine's Club, a posh, private watering hole for wealthy businessmen in the city. But he admitted that most Hungarians aren't so lucky. Many feel betrayed, he says, by 40 years of Communist rule that promised social equality but has delivered little social security.

"It's the system. The people feel they have no chance, no opportunity," he asserted.

Ottilia Solt, a Budapest sociologist who studies the poor, agreed that there is growing resentment and that it could lead to social unrest.

"People are angry with those who are at the top, who are given advantages and privileges as never before under the slogan of capitalism," Solt said.

20% Live in Poverty

She cited a study that found that one in five Hungarians lives below the poverty level. The state Department of Statistics said that in 1987, the last year for which figures are available, only 5% of Hungarians made more than 10,000 forints (about $170) per month.

Yet, officials in banking and the government tax and finance ministries estimate there are about 50,000 Hungarians, out of 10.6 million, who are millionaires in forint terms.

"It takes talent and luck, and working 16 hours a day," said Lauro, the film director. "Then sooner or later, you're going to make it to the top. The problem is that everyone is in a greedy rush to be rich overnight."

Lauro, 56, said he comes from middle-class family of clerks. He is known in artistic circles for helping to found the Bela Balazs Studio, Hungary's acclaimed experimental film center that nurtured directors such as Istvan Szabo.

Kitty Lauro owns a tony fashion boutique that bears her name in Budapest's chic shopping district near the banks of the Danube. She is a child of prewar wealth: Her father used to own Hungary's largest shirt-making factory.

Kitty started her career as a tour guide, then graduated to modeling. She married twice, once to an Austrian millionaire. Istvan went through two marriages of his own. They met in 1971 and have made money together ever since.

Today, Istvan helps manage the business, and Kitty designs all the fashions and supervises a small factory that makes the garments. They attribute their success to the marriage of business and artistic skills.

But life hasn't always been filled with caviar and champagne.

"In 1970, when Kitty opened her store, it was the first time the word boutique had ever been used in Hungary," her husband said. "Of course, it had to be taken down immediately because it wasn't a Hungarian word and it smacked of capitalism."

But the Lauros persisted, under the benediction of Hungarian leader Janos Kadar's "goulash communism," which permitted small businesses to flourish so long as owners didn't flaunt their wealth too openly. In this way did many Hungarians quietly accumulate fortunes.

Others plied the realm of the black market or sidestepped the Hungarian tax laws, which can gobble up to 90% of profits, by under-reporting sales.

"If I have a boutique, and I sell 600 pairs of jeans but only post 10 sales, I pay very little in taxes," one businessman explained.

But Hungarian entrepreneurs illustrate the perils of succeeding too well with the apocryphal "cherry pit" or "apricot seed" story.

It seems that about 15 years ago, a Hungarian pharmaceutical firm was looking for seeds, and a fruit preserves firm was discarding them. A businessman who saw an opportunity bought the waste seeds from one firm and sold them to the needy party. He was promptly jailed for profiteering.

Hungarians use this tale to warn outsiders that despite the economic and political reforms in modern-day Hungary, businessmen still look over their shoulders, fearful of a crackdown and the return of the Soviet tanks whose arrival in 1956 signaled the end of an earlier thaw.

"Tomorrow, if some crazy man shoots down Mr. (Mikhail S.) Gorbachev, I have to close the company and leave the county," said Varszegi. He was voicing a common fear about the Soviet president, whose reform program in his own country has set a liberal tone and stretched the boundaries of what is permissible in East Bloc countries.

Those who mistrust communism note an alarming trend: Party functionaries who formerly espoused puritanical values now lust after Armani suits and Gucci loafers. Their children are entering the moneyed elite, forging alliances of power with the capitalist entrepreneurs who were formerly ideological enemies.

"Party members now have a son involved in a joint business venture with a foreign firm, a daughter with a boutique, and Daddy can still be the Communist factory boss. This is the new leadership of the country," Lauro said.

Sociologist Solt, an editor of former samizdat, or underground publications, who was harassed by the police for many years, said the new wealth of party officials is an especially bitter pill to swallow.

"People don't mind when a boutique owner gets rich, but there is resentment against party functionaries who didn't lose their possessions, their cars, their houses or their positions and are now at the top of the economy," she said.

One positive aspect, however, is the decline of neighborhood watchdogs who once zealously monitored the living standards of others.

"Earlier, if you had a better car than your neighbor, someone would report it to the police or the local council," Lauro said. "You got used to the idea that you mustn't show you have money, and since you couldn't buy a factory or invest it, you didn't know what to do with it."

Many found a solution by building opulent palaces behind the nondescript and sheltering walls around their properties.

"You walk into these people's homes, and they are filled with marble columns and gold-leaf inlays and chrome fixtures," marveled a Budapest journalist who writes about fashion and design.

Since travel restrictions to the West have been eased this year, many take luxury vacations.

"Travel agencies advertise half-a-million forint ($8,000) vacations in their shop windows, and they sell out within a half-hour," one Hungarian business writer said.

The loser in this spending spree is the government, which is trying to stimulate its domestic economy but is suffering from the public's longstanding distrust against savings and investment.

It's little wonder. Hungarians have seen their currency formally devalued twice in the past year. Some who recall 1948, when the Communists nationalized all industry, are wary of giving the country's leaders a second opportunity.

Varszegi, who lived in the United States for almost a decade, does sink money into his business. But he also invests in art.

At Fotex headquarters, in the Buda Hills, Varszegi showed a visitor his Salvador Dalis, Marc Chagalls, a bronze sculpture by Wild West artist Frederick Remington and a winsome Art Deco statue by Erte that he picked up for $26,000.

"I collect everything," he said proudly.

Not all Hungarian millionaires cultivate such a high profile. Even Lauro, who is forthright about most things, admonished a visitor: "Please don't ask anything about finances."

But he was more than happy to give a quick tour of his well-appointed home.

On the walls of his study hangs a Russian icon overlaid with a heavy gold cross that might give a few museum directors acquisitive pangs. A sleek personal computer, on which the Lauros track their transactions, perches above a hand-carved wood desk. An antique tapestry of a Magyar astride a horse graces another wall.

The house, located on the aptly named Szobadsag Hegy (Freedom Hill), brings home the point that while Hungary retains vestiges of socialism, its wealthy enjoy the fruits of capitalism.

Said Lauro: "When we bought this house 15 years ago, we had to pay an extra fee for the view. It's got the best view in all Budapest."

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