Demeny, Pal, My Prison-Mate, Spinoza (In Hungarian) ( Budapest 1989).
Economic Policies in Communist Hungary. Immediately following World War II, the Hungarian Provisional Government (see Provisional Government of Hungary in 1944) ordered the nationalization of all large private enterprises. Hungary had a tradition of state ownership of public works, such as railroads and gas- and electric services. The new nationalization was, however, mostly a symbolic gesture, since most of the industrial firms had been thoroughly destroyed during the war. The Allied bombing campaign damaged 60 percent of the factory buildings. The retreating Germans took away a great deal of industrial equipment, and what was left was thoroughly looted by the Soviet occupying army.
The rebuilding of Hungarian industry began even while fighting was still going on in the western parts of the country. By the time the communists came into power in 1948, the factory buildings had been mostly restored, and some plant equipment had been returned to Hungary by the Western Allies.
In 1949, the nationalization of all firms employing more than nine workers was declared. By 1950, no private enterprises were in existence. By then, even newspaper vendors were state employees; they sold papers and magazines produced by printing shops owned by the state. Matyas Rakosi (see Rakosi, Matyas), the Communist party chief, declared in 1949 that Hungary was on its way to being turned into a country of iron and steel. This statement was in line with Stalinist policies of creating a new heavy industrial sector in Hungary, serving the interests of Soviet military plans.
The first five-year plan, introduced in 1949, set production targets for heavy industry 200 percent higher than they were in 1949. Two years later, the targets were increased to 380 percent! All sorts of unnecessary projects were built. For instance, the City of Stalin (Stalinvarus) was constructed under extraordinarily difficult circumstances in a small rural town in southern Hungary with the expectation that this industrial giant would be fueled by Yugoslav coal. When Josip Broz Tito was expelled from the socialist bloc, however, coal from the city of Komlo was substituted. This was a lower grade coal than that of Yugoslavia, necessitating the replacement of machinery already installed. To transport Komlo's coal to the City of Stalin, a new railroad line had to be built in great haste. The new steel works were to start production on Rakosi's birthday, and the hastily constructed railroad tracks sank into the muddy ground under the weight of the second train load of coal. The blueprints for the steel mill of the City of Stalin turned out to have been pilfered from steel mills, originating in the late 1920s, from Pittsburgh, Pennsylvania. The huge plant was, therefore, already outdated when it started production.
Similar practices were followed everywhere. Hungary lacked the essential raw materials for the development of heavy industry, and these had to be imported mostly from the Soviet Union or other Soviet Bloc countries, strengthening the economic hold of the Soviet Union over the country.