DEVELOPMENT OF HUNGARIAN MILITARY ECONOMY FROM THE 2 nd WORLD WAR TO THE EU ACCESSION

Transcription

1 DEVELOPMENT OF HUNGARIAN MILITARY ECONOMY FROM THE 2 nd WORLD WAR TO THE EU ACCESSION Béla Jászay and Zoltán Lakner Abstract: This is the first part of a comprehensive study which analyses the history of Hungarian military economy from the end of Second World War up to the current time. The first part of the study analyses practically the last half century of the Hungarian military economy. During this period considerable changes have taken place in the political, social, and economic environment of Hungary, and all of these have exercised a profound effect on military economy. Analysis of dialectic relationships among the socio-economic, political, and military environment of military economy offers numerous lessons to analyse, based on which some consequences can be formulated for the basic principles for the future development of this extremely complex part of the national economy. Keywords: development, Hungarian Military Economy, 1. Preparation of Communist assumption of power The wildest inflation in the world history of money raged in Hungary from the spring of 1945 until the summer of The last Pengö banknote issued bore the denomination of 100 quadrillion. One unit of the new currency, the Forint, was equal to 400,000 quadrillion Pengő. A significant part of the city garbage at the time consisted of paper money that had been thrown away. The creation of the Forint in August 1946 was a financial masterstroke; it occurred without foreign loans and essentially through the provision of goods. One of its flaws, however, was the fact that fiscal reform also meant price reform: it displaced price ratios, it depreciated agricultural prices and increased industrial prices. And although it did not, for example, make rents and services cheap without reason, later this abridgement of the law of value was to strike back extensively. Hungary's political system altered radically between 1945 and The dozen or so political parties reviving or coming into existence in 1945, which in the fall of 1945 already pitted their strength against each other in extensive democratic elections, though the power relations appearing at this time were extremely fragile -were quickly reduced to four. Of the two peasant parties and the two workers' parties remaining, the latter, the Social Democratic Party and the Communist Party, merged in 1948, taking the name "Hungarian Working People's Party", and continued working in this form. The radical and dogmatic social utopianism of Rákosi and his associates for absolute power took on a Stalinist character, but had typically local traits as well [5]. In the beginning their political base was not negligible among workers, intellectuals, and the agricultural proletariat. In a couple of years, however, this was destroyed by the forced transformation, on the Soviet model, of the agricultural co-operatives, which had already been organized spontaneously; by the one-sided and forced development of heavy industry 35

2 (actually, this was a revival of the wartime "Györ Program", and paralleling it, the dilution that weakened the working class by including in it the peasants fleeing the land); by the deterioration of the workers' situation at all levels; by compulsory nationalization; by centralized, centrally-planned economic policies, by the fetishization of the paternalistic state, by the intimidation of the smallscale producer and the middle levels of society, and the growing appropriation of their property, however meagre; by the collection of material for secret personal dossiers; by discrimination against children according to their origin in education; by much increased production norms and reduced consumption levels which recalled the wartime emergency situation (directed labour, rationing); by unlawful acts not solely restricted to major political show trials - the list could go on and on. During the cold War period Hungary was on a constrained path in the Soviet sphere of interest and influence [8]. In this period the military development can be characterised by an extensive development model. The base of military and military finance thinking was in Moscow. At the beginning of the 50 s the possibility of the Third Word War became a real danger. Considerable economic resources were mobilised to achieve the ambitious goals of military development. In 1953, as a result of change in the leadership of the superpowers, new ways of thinking came into the foreground. The main goal of Soviet leadership was to force to adapt the already developed system and practice without any criticism from the Hungarian side, not taking into consideration the different historical traditions and the economic conditions. Practically each military professional decision was taken on a political level. As a consequence of Soviet decisions, the Hungarian Army was supplied with 36 Soviet military equipment, stockpiled during the Second World War, but at the same time there was a pressure from the side of the Soviet Union to purchase more modern weapon systems. The structure of the Hungarian defence industry was formed to fulfil Soviet demands [7]. There were 82 Soviet advisers at that time in the Hungarian army. The increasing imbalances in the national economy influenced negatively not only the circle of production, but also - as a consequence of decreasing of standards of living - the mood of the population too. The political leadership responded to the critical voices of the society by increasing the propaganda and the repression. As a consequence of the extremely extensive development there was an increasing in number of solders. The number of solders in 1948 was 53 thousand, in 1952 nearly 230 thousand. The military infrastructure did not follow these tendencies. E.g. the majority of garrisons were built before the First World War, and their capacity did not meet the increased demands. A considerable number of garrisons were occupied by the Soviet army. As a consequence of this, a considerable number of army personnel lived in camps, simulating the conditions of a presumed war. In numerous cases family members lived in these camps too. Under these conditions discipline and morals decreased considerably. The military organisations were not able to satisfy even the basic - e.g. food - demands of the solders. It is very hard to determine the real value of military budget, because as it is written in a secret document of Politburo of Communist Party: it is essential to organise the conspiration of one part of the military budget, by indicating some part of the military expenses at another ministries. The accounting standards could be abolished

3 with purpose of balancing of the military budget [6]. According to some estimations the armed forces in Hungary utilised 13.9% of National Income in 1950, 15.2% in 1951, 25,5% in 1952, 24,3% in 1953 [2]. The Hungarian party leadership tried to shift the responsibility for overburden of the economy by extremely high military expenditures to the Soviet leadership. The following extract is from a meeting between M. Rákosi at that time first secretary of Hungarian Communist Party and Berija, at that time the head of KGB. Rakosi: We tried to fulfil the directives. My heart aches for that we had such a huge army. Berija: You have consulted this with comrade Stalin, and he had given you a wrong advice [10]. After the Hungarian revolution in 1956 the Hungarian government tried to minimise military expenditures to increase the standard of living of the population, but this direction could not be maintained for a long time, as a consequence of the increasing conflicts between the two superpowers. After the erection of the Berlin Wall, Hungary could no longer avoid involvement in the army development and modernization campaign ordered by the leaders of Warsaw Pact in 1961 [1]. The army headcount was increased from the 78,000 approved in March 1961 to 85,000, and then a further increase was decided in September The key directions of army development were also identified: the anti-aircraft defence and the armoured forces were to be developed primarily. The Hungarian strategy was based on the concept that the current Soviet standpoint should always be supported, or at least one should not openly take steps against it. Therefore, they primarily tried to enforce. The Hungarian leadership often made independent initiatives, but only if they knew that they were not contrary to Soviet intentions at least, or if they could best assume that their proposals did not contradict the currently valid Soviet political line. 2. Characteristics of Hungarian defence industry In the period of socialism the Hungarian defence industry can be described by some characteristic features. The most important of these are as follows [3]: - Intensive export-orientation. One of the most important principal aims of economic policy was to utilise the comparative advantages of Hungarian defence industry in framework of the era, characterised by a total conflict of two opposite military block and superpowers (Fig.1) The share of export in the eighties achieved 80% of production. - According to the military strategy of the Warsaw pact during a possible war in the territory of Hungary considerable repairing capacities had had to be established. In this way, the development of the arms-production industry served the preparation of a possible military conflict by establishment of a material and human infrastructure, necessary for the setting up of repair plants. - The development of Hungarian military industry coincided with a technological revolution in military technology: the Hungarian strategic planners of military industrial development determined that the most important direction of development is the wide range application of electronic appliances. - Based on this strategy a considerable increase could be detected in value added content of export. The specific foreign conditions offered a favourable 37

4 possibility for the development of export in hard currency (USD) relation. The share of this export achieved more than 10% in the eighties. The Hungarian system of technological development mirrored the Soviet system. This fact had numerous negative and positive consequences. The most important negative consequence was the high level of bureaucracy and the overregulation. As a consequence of these processes in some cases the life cycle of development was extremely long. This system did not accept the dead ways of development, the unsuccessful development. As a consequence of this some programs have returned from time to time, without any practical application. The most important positive consequence of this system was the rather high of concentration of physical and human resources. The level of centralisation in Hungary was higher than in the Soviet Union, which is why the share of parallel development activities could be reduced to a minimum. 3. Conclusion The application of Soviet standards e.g. in resistance-tests, has established a possibility for the application of unified demands. These Soviet standards in most cases were based on American ones, which is why their severity has contributed to the increase of technical and technological development and upgrading of competitiveness of Hungarian military production % Others Vehicles Electronics Arms and ammunition Figure 1: The structural changes of Hungarian defence industrial export Source: Takács,

5 References [1] Békés Cs Hungary and the Warsaw Pact, : Documents on the Impact of a Small State within the Eastern Bloc; Parallel History Project on NATO and the Warsaw Pact (PHP), by permission of the Center for Security Studies at ETH Zurich and the National Security Archive at the George Washington University on behalf of the PHP network. [2] Bencze L Farkas Mihaly hadserege The amry of Mihály Farkas. Budapest: Magyar Nemzet 1990, febr 12. p.8. [3] Krejči, O Geopolitics of the Central European Region: the view from Prague and Bratislava. Budapest: Magyar Nemzet, 240 p. [4] Lázár I Hungary-a brief history, Corvinus Library-Hungarian history. < [5] MOL mdp kv titkarsag.54 5 o.e. Budapest, 11 p. [6] Nagy T Fordulattol forradalomig, From turn to revolution - military politics of Hungarian Workers Party 1948/1956 Ph.d. Thesis. Budapest: ZMNE, [7] Romsics I Magyarország története a XX. században History of Hungary in 20 th century. Budapest: Akadémiai Kiadó, pp [8] Rothenberg G.E Toward a National Hungarian Army: The Military Compromise of 1868 and its Consequences. In Slavic Review. Budapest: 1992, no. 31 (4) p [9] T. Varga Gy Rákosi Mályás és Nagy Imre a Kremlben Rákosi and Imre Nagy in the Kremlin, 1953 juni 13. In Historia. Budapest: 1992, 3. p.17. [10] Takács B A magyar hadiipar évtizedei a Varsói Szerződés időszakában; Decades of Hungarian military industry in era of Warshaw Pact. In.: A honi hadiipar és külkapcsolatai századunkban The domestic military industry and its foreign relations in our century ed. Budapest: Kovács V. Hadtörténeti Intézet és Múzeum, pp