Economy Of Hungary Essay Research Paper During

Economy Of Hungary Essay, Research Paper

During the two decades following World War II, Hungary was transformed from a predominantly agricultural land into an industrial-agricultural state. This transformation was carried out under a system of central planning patterned on that of the Soviet Union. Consumer desires were ignored, tight labor discipline was enforced, and living standards were depressed, so that the largest possible share of Hungary.s resources could be used to develop an industrial base. Investment in industry was encouraged by a tax and subsidy structure that overpriced consumer goods and underpriced the components of heavy industrial goods. The highly centralize panning process often led to inefficiencies, while strict discipline and low living standards led to poor labor performance and popular discontent.

After 1960 the rigid planning policies of the regime were somewhat liberalized. To increase efficiency, modern techniques were adopted to establish production targets, to determine prices, and to allocate resources; and the regime began changes brought about a rise in the standard of living but slowed the country.s economic growth rate. Nevertheless, by the middle of the 1960.s Hungary was one of the most industrialized states of Eastern Europe.

Moving onto production and investment, Hungary is quite detailed. Annual national income in Hungary, as in other centrally planned economies, is measured in terms of net material product (NMP), which assigns values to material goods and “productive” services. In Hungary the NMP includes the values of the goods and services provided by forestry, mining, manufacturing, construction, transport, communications, and trade, and it also includes turnover (sales) taxes. No values are attached to such “unproductive” economic activities as public administration defense, and moist private and professional services.

Hungary.s NMP in 1975 stood at 395.9 billion forints. The GNP as calculated by the World Bank was about 26$ billion, or 2,470$ per person. If the NMP were converted into dollars at the World Bank rate for the forint that year, it would equal $19.8 billion, or about $1,880 per person. This compares with an NMP per person of about $2,390 in Poland, $2,730 in Czechoslovakia, and $4,340 in East Germany in 1975.

Between 1950 and 1960 Hungary.s NMP increased at an average annual rate of 4.9 percent; during this period industrial production grew about 6.8 percent annually and agricultural production only about 1.6 percent. From 1960 to 1974 the NMP grew at an average yearly rate of 5.8 percent: the respective figures for industry and agriculture were 6.9 percent and 1.2 percent.

The share of Hungary.s NMP increased at an average annual rate of 4.9 percent; during this period industrial production grew about 6.8 percent annually and agricultural production only about 1.6 percent. From 1960 to 1974 the NMP grew at an average yearly rate of 5.8 percent; the respective figures for industry and agriculture were 6.9 percent and 1.2 percent.

The share of Hungary.s NMP contributed by industry and agriculture has changed markedly since World War II. In 1938, for example, agriculture contributed 54 percent of the national income, while industry contributed only 37 percent. By 1955 agriculture contributed 31 percent and industry 53 percent. By 1976 the respective percentages for agriculture and industry were 13 percent and 46 percent. About 97 percent of Hungary.s NMP is generated by the public sector of the economy, which includes both state-run and cooperative enterprises.

Communist Hungary has consistently allotted the largest share of investment to industry; in 1975, for example, industry (including construction) received 37.7 percent of the total investment in the socialist sector, while agriculture received only 17.7 percent. Investment in the maintenance and expansion of fixed assets like industrial plants and machinery amounted to 21.9 percent of total investments.

Budapest is the hub of Hungary.s transportation system, which in the mid-1970.s included about 1,050 miles (1,690 km) of navigable waterways, more than 18,000 miles (30,000 km) of roads, and about 8,500 miles (13,700 km) of railroads, about 10 percent of which are electrified. Budapest is also the seat of the Danube Commission, an eight-nation body that controls traffic on the Danube River, Budapest.s Ferihegy Airport handles both domestic and international flights. Malev is the national airline.

Transportation plays an important part in Hungary.s economic system. Hungary.s pattern of traffic has undergone a significant shift from an almost total reliance on rail transport to a mixed system of rail and road traffic, with trucks accounting for the bulk of short-haul freight movement. In the 1950.s railroads carried close to 80 percent of the total freight tonnage, and trucks moved only 13 percent. By 1976 only about 37 percent of all freight was moved by rail, and 56.5 percent was carried by truck. The railroads, however, continued to carry most long-distance freight. Water transport is particularly important for moving heavy materials, such as iron ore and coal. Except for the coldest part of winter, the Danube is navigable throughout Hungary and the Tisza as far as Tokaj.

A key item in Hungary.s economy, would have to be trade. Wholesale and international trade are state mo