Opportunities and Limitations for Enterprise in the Socialist Economy
Opportunities and Limitations for Enterprise in the Socialist Economy

The Case of the Budapest Agricultural Cooperatives

Summary/Abstract: To this day, there is widespread consensus in the secondary literature on agriculture in the socialist countries of the Soviet sphere according to which the “Termelőszövetkezet” (agricultural cooperative) in Hungary represented a unique path of development that diverged significantly from the Stalin kolkhoz model. In this article, I examine this process, focusing on the example of Budapest, the Hungarian capital. The natural features of the city (poor soil quality, land divided into small plots) did not really favor agricultural production. Furthermore, in the 1950s, the factories of the city offered higher wages, thus luring workers away from agriculture. The market pressures of the labor force set in motion a process of adaptation in agriculture. In comparison with the rest of Hungary, in Budapest the expansion of the sphere of non-agricultural activity of the agricultural cooperatives began earlier, and cooperative members were paid in cash instead of according to a Soviet-style model of remuneration based on work units. In response to the consumer demands of the population of Budapest, several innovative forms of vertical and horizontal integration emerged. I emphasize in my article that, in the case of the agricultural cooperatives, the important elements of entrepreneurial management took form before the introduction of the so-called New Economic Mechanism, for the most part as consequences of initiatives coming from below. Since these innovations were implemented before the relevant changes to the law had been made, a great deal depended on how the superior organs of government handled the lacuna between law and practice. In the 1960s, the agrarian lobby managed to exert sufficient influence on the government to prompt lawmakers to adjust the laws to conform, retroactively, to practice. In the 1970s, when the brakes were being put on the economic reforms, this phase displacement became a vulnerable point. Economic and administrative measures and even steps involving criminal prosecution were taken to limit the entrepreneurial independence of the agricultural cooperatives.

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