The Economic Transformation of Eastern Europe: Views from Within

Katalin Szabo

In the 1980s, Hungary shed the limits of its large organizations in an explosion of small-scale activity. New ventures and new forms of proprietary rights were created. Most of them were not totally new constructions, but rather adaptations of the usual forms found in the more developed economies, or reincarnations of organizations existing in Hungary before nationalization (e.g., share companies). The structure of proprietary rights became almost unrecognizable with the proliferation of new organizations. The developments have corroborated the statement of a famous Hungarian writer known for his irony: "The nation came to its senses" ( Esterhazy 1979).

The small-venture ¹ sector has proved to be the most dynamic in this wave of transformation. In this short study, we will try to describe the characteristics of Hungarian small ventures and their place in the Hungarian economy.

In Hungary, as in the other Eastern European countries, small enterprises were simply erased from the map of the economy by socialism. In 1940, about 45 percent of the total employed in industry worked in this sector ( Berent and Ranki 1972). In 1950, small industry employed only 5.3 percent, and in 1980 not more than 0. 1 percent, as a result of a government policy of systematic repression of small enterprises. The elimination of small business is documented in Table 9. 1.

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