Chapter 12

JENŐ VARGA:

THE YEARS OF HUNGARIAN SOCIALIST RECONSTRUCTION

(1945-1956)

ANDRÉ MOMMEN

1

Introduction

Stalin had no blueprint for the takeover of the various states of Central Europe and the Balkans. During the first post-war years Stalin preferred keeping on good terms with the Anglo-Americans,1 but on the other hand he was also interested in the foundation of a centralized economy in these countries belonging to his shpere of interest in order to satisfy the Soviet Union’s heavy reparation demands. As the Yugoslav case clearly would demonstrate in 1948, nationalist aspirations and contradictions existed. Though Varga stayed in Moscow, he would remain in close contact with his friend Mátyás Rákosi in Budapest. In addition, Varga was also considered as the theoretician of post-war regime changes in Central Europe. During the post-war period, Hungary’s relation with the Soviet Union was determined by its alliance with Nazi-Germany. Since 1938, the Horthy regime had become a German ally and when actively supporting Hitler’s war effort against the Soviet Union, the regime had signed its own death sentence. The Hungarian army had suffered on the eastern front heavy losses.2 Then, a faction of the Hungarian ruling class made an ill-fated attempt to contact the Allies in the hope that Hungary could leave the war before the Red Army would march into the country. In March 1944, the Wehrmacht occupied Hungary. The Hungarian Jewry became then subject to deportations to Auschwitz. Hungary had a Jewish population of 825,0073, including about 100,000 Christians of Jewish origin who were considered Jews by the racial legislation of 1941.4 Of the 825,000 Jews living in Hungary in 1941, 63,000 fell victims to the persecutions that took place prior to the German occupation of March 1944. At the time of the occupation, the Germans found approximately 757,000 Jews living in Hungary. Of those, 618,007 were deported during the various deportation waves which ended only in late 1944. Together with the 139,000 Jews left in the country (124,000 were in Budapest), they constituted the 255,500 survivors of the Holocaust.

On October 15, 1944, Horthy made a proclamation on the radio announcing that his government would ask for an armistice. He was immediately arrested by the Germans and compelled to appoint a Nazi-government led by Szálasi, the head of the Arrow Cross Party. The two houses of parliament approved this appointment. When in October 1944, the Red Army occupied Debrecen, a provisional government and a National Assembly could be installed. Meanwhile, the liberated towns were run by National Committees on which all parties had a voice. The broadest possible coalition government was formed with the help of defected anti-German officers, Social democrats, the Civil Democratic Party, the National Peasants’ Party and the Small Holders Party with the Moscovite Hungarian Communists. But a rapid liberalization of the whole country did not occur notwithstanding Soviet military superiority. Budapest was finally liberated in the middle of February 1945 after more than 100 days of siege. But Soviet troops were fighting on Hungarian territory until April 1945.

1 Eric Roman, Hungary and the Victor Powers. 1945-1950, New York: St. Martin’s Press, 1996, p. 197.2 The 200,000 men strong Second Hungarian Army had been destroyed on the Don in January 1943. Later on, rumours spread in Budapest that a regime change like in Italy occurred after the fall of Mussolini could be possible in Hungary.3 This included the 480,000 Jews left in Trianon Hungary and the Jews living in the territories incorporated by Hungary during 1938-1941. 4 The Third Jewish Law, Act XV of 1941, passed on August 8, 1941, introduced provisions to defend the Hungarian race. It prohibited marriage and sexual relations between Jews and non-Jews under penalty of imprisonment. The concept “Jewish” was defined in “racial” terms, as in the case of the German Nuremberg Laws of 1935. The Fourth Jewish Law, Act XY of 1942, adopted on September 6, 1942, banned Jews from owning land.

2

At the end of the Second World War the population of Hungary was on the verge of starvation. War losses were considerable. About 75 per cent of Budapest was destroyed. War damages paralysed the transportation system. Retreating German troops had blown up all major Danube and Tisza bridges. Nearly all river vessels were removed. About 70 per cent of rolling stock had been destroyed or had disappeared. Out of 3,000 locomotives only 500 remained intact.5 In the course of the Second World War about 350,000 Hungarian soldiers were killed and 600,000 became POW’s.6 Heavy industry was reduced to 35 percent of pre-war levels. Practically all industrial plants had suffered some damages. Coalmining had collapsed, while 50 per cent of spinning frames had been destroyed. Consequently, industrial production had dropped to 20 per cent of the previous year. Reparation payments became a hot issue: they amounted to 15-22 percent of the national income.7 In addition, the Soviet Union claimed 400 industrial enterprises on Hungarian territory belonging to German financial groups. The Soviet Union proposed the creation of mixed joint stock companies which would enable the Russians to control shipping on the Danube, the Hungarian airline, the bauxite and oil companies, etc. The armistice agreement obliged Hungary to pay US$300 million, while citizens of other states could claim reparations for the suffered war-damages. Deliveries in kind to the Soviet Union placed such a heavy burden that the factories could hardly produce for the domestic market. About 8 per cent of the reparation had to be paid by delivering machine tools from certain electric power stations and industrial plants. The first year’s instalment absorbed as much as 17 per cent of GDP. Most pre-war economic ties were cut off as Hungary’s main pre-war trading partners (Germany, Austria, Italy) had collapsed. Cut off from raw materials and machinery supplies from Western Europe, Hungary became depending on Soviet trade. In August 1945 the Hungarian government signed a US$30 million trade agreement with the Soviet Union regulating the purchase of iron, coke and other raw materials imports.8 Priority was the reconstruction of the devastated country and the feeding of its population. Meanwhile, in the wake of Hungary’s military defeat at the side of Germany, the old ruling classes and their political personnel had disappeared from public life. Finally, the last hour of the ruling class and the system of great feudal estates had arrived. With the radical land reform of March 1945 the social structure of the villages changed fundamentally. The landowning aristocracy and the gentry disappeared from the villages.9 Another stronghold of reaction fell when heavy industry and the mines were nationalised.10

The only force of the Left exercising a serious impact on the urban population was the old Social Democratic Party. The Social Democrats had a significant petty-bourgeois following in Budapest. In addition to the Social Democrats, the ‘Populist’ movement was influential in political-intellectual circles. The March Front set up in 1937 and representing the left-leaning elements of the Populists was in touch with some Communists in Debrecen. These Communists were less sectarian and more oriented to rural problems than the orthodox Stalinists in Moscow.11 5 Ivan T. Berend and György Ránki, The Hungarian Economy in the Twentieth Century, New York: St. Martin’s Press, 1985, p. 179.6 Hugh Thomas, Armed Truce. The Beginning of the Cold War 1945-46, London: Hamish Hamilton, 1986, pp. 274-276.7 Peter Kenez, Hungary from the Nazis to the Soviets. The Establishment of the Communist Regime in Hungary, 1944-1948, New York: Cambridge University Press, 2006, p. 77.8 Berend and Ránki, o.c., 1985, p. 181.9 Kenez, o.c., 2006, pp.107-118.10 Antal Ban, ‘Hungary’, in Denis Healey (ed.), forwarded by Rt. Hon. Aneurin Bevan, M.P., The Curtain Falls. The Story of the Socialists in Eastern Europe, London: Lincolns-Prager Publishers Limited, 1951, p. 67.11 Roger Gough, A Good Comrade. János Kádár, Communism and Hungary, London and New York: I. B. Tauris, 2006, pp. 16-17.

3

The Moscow Connection

A Provisional Central Committee was set up as early as November 5, 1944, in Szeged. In December 1944, the Central Committee moved to Debrecen and would remain there until March 1945. On 19 January 1945 a Budapest Central Committee was formed.12 After the liberation of Budapest, the Communists were able to readjust its party structure and working to the new political reality. Therefore, the two Central Committees merged on February 23, 1945. As expected, Rákosi became its secretary. With Rákosi’s return to Budapest in February 1945 the party’s conventional structures were re-established and the Party reorganized. Mátyás Rákosi was ‘a man of unpreposing appearance, short, corpulent, bald, and an indifferent speaker but obviously an intelligent man’.13 In addition, Rákosi was quick-witted, multilingual and could maintain at least an appearance of affability, all qualities his fellows arriving from Moscow were missing. Notwithstanding all these qualities, Stalin distrusted him. But he was also Stalin’s ‘best Hungarian disciple’.14

The party aimed at controlling the police and the security organs with the help of the Soviet occupation services. Therefore, Gábor Péter built up a political police, the ÁVO (Államvédelmi Osztály, State Security Department). At any rate, on the Anglo-American diplomats he made a forceful impression. His knowledge of English and his acquaintance with western habitudes made of him an enlightened individual.15 In Budapest, Rákosi found himself surrounded by Gerő, Farkas, and Révai. The composition of this leading quartet would remain unchanged until 1953. Though these four men shared many things - they were all Jews having a middle-class background and they had spent many years in Moscow as cadres of the Comintern – they were by no means close friends. Gerő was an old hand of the Comintern with good connections at the highest Soviet levels and a former NKVD agent turned economic expert. Jószef Révai was cultivated but dogmatic. He served as a party ideologue and, therefore, he became responsible for cultural and ideological issues. Mihály Farkas, a former Red Army officer and Czechoslovak Communist, specialized in military affairs and took control of the security organs. Imre Nagy, who was selected for his expertise in agricultural affairs, was not Jewish and during the whole post-war period he would remain a relative outsider who never could move to the centre of power. László Rajk became the highest-profile domestic Communist. Apparently, Dimitrov, who had selected the first Central Committee, had not exercised any pressure on Varga in favour of joining the leading quartet in Budapest. Instead, Varga preferred staying at his institute in Moscow while communicating with the Budapest party leadership. From time to time he would travel to Budapest to see Rákosi who, by the way, was his only friend and confident among the Hungarian leadership. After his release from Horthy’s jails in 1940 and his arrival in Moscow shortly afterwards, Rákósi had become Varga’s close friend in Moscow. Rákosi admired Varga for his economic expertise in financial and economic planning now that he had to plan Hungary’s post-war economic reconstruction. That was the reason why Rákosi wanted to see Varga arriving in Budapest as soon as possible. Meanwhile, Rákosi had to meet many difficulties of political and economic character. First of all, there was the weakness of the Hungarian Communist Party. From the so-called faction of pre-war 3,000 Communists and party veterans little economic or political expertise could be expected. Prison suffering and illegality had

12 Antal Apró, Bertalan Barta, Márton Horváth, János Kádár, Gyula Kállai, Károly Kiss, István Kossa, István Kovács, Gábor Péter, and Zoltán Vas. With the exception of Vas, they all were coming out of the underground.13 Kenez, o.c., 2006, p. 20.14 Gough, o.c., 2006, pp. 28-29.15 American diplomat Arthur Schoenfeld in his report to Washington, 17 August 1945. Foreign Relations of the United States (FRUS), Vol. 4, U.S Government Publication House, Washington, DC, 1947, pp. 849-850.

4

transformed them into fanatics lacking the discipline and schooling in Marxism-Leninism that was the hallmark of the small faction of returning Muscovite Communists. Recruiting “reliable” people for positions in the police and state apparatuses proved to be extremely difficult in a country suffering from widespread patronage practices. In addition, Rákosi must have been aware of the little support the Communist had among the population and the relative strong position of the Social Democrats.

From the very beginning on, Varga would become Rákosi’s consultant and confident. On 7 February 1945 Varga wrote a letter to Rákosi in Hungary in which he dealt with the organization of a medical insurance system. At that moment, he Hungarian Communists had not dealt openly with this problem.16 .The Moscow faction knew that the mistakes committed during the failed revolution of 1919 had to be avoided. For the first time since 1919, their party could live a legal life in Hungary. Instructed by Moscow urging for coalition politics they even helped reconstructing the other democratic parties.17 The model was the formation of a Hungarian National Front (Magyar Függetlenségi Front) possessing sufficient support within the Hungarian population as a whole.18 A special relationship was established between the MKP and the leftwingers of the Szociáldemokrata Párt (Social Democratic Party) that constituted a real force among the skilled workers. Árpád Szakasits, who had become de facto their leader,19 represented a younger generation influenced by the immediate experience of collaboration with the MKP. In March 1945 Szakasits foresaw a merger between the two parties. In that year, both parties organized a joint May Day parade in Budapest, but the workers marched behind separate banners.20

In May 1945, the Social Democrats held a series of conferences where cooperation with the Communists was reaffirmed. However, Communist control of the police deepened the conflict

16 Kedves Rákosi elvtárs!A magyar problémákról folytatott beszélget tésünkben egy dologról meg feled keztünk [közöttünk? AM]. Váloszinű, hogy otthon a kérdés közben felmerült, de mégis célszerűnek tartam figyelmeztetni rá. Ez a betegsegélyz pénztár kérdése.Biztosra veszem, hogy bizonyos idő múlva valamilyen formában a betegsegélyző intézményeket újra fel kell épiteni, illetve demokratikus formában visszaállitani. Amint emlékszit, az első világ háboru elötti időben tisztviselök a betegsegélyzö pénztárbeli állások a Szociáldemokrata Párt fiszetett káderjeinek a kiszélesitésére szolgálnak.Ezenkivül a szociáldemokrata betegsegélyző tiszztviselök a betegsegélyző pénztárak részéről a munkásoknak nyújtott segélyeket úgy tüntették fél, minta Szociáldemokrata Párt érdemét.Természetes, hogy arra kell törekednük, hogy ez az állapot ne ismétlödjék meg. A betegsegélyzö pénztárakat a pártnak kell kihasználnia káderjeinek elhelyezésére és kiszélesitésére & nem szabad megengedni, hogy ezek a pénztárak a Szociáldemokrata Párt várjanak, mint ez az első világháboru előtt volt.Itt semmi magukat különösen érdeklő újság tudtommal nincsen. Üdvözlöm az összes elvtársakat. Írja meg, megtudottvalamit a rokonságom sorsáról.Meleg üdvözlettel1945, február 7.Varga Varga Files. Party Archives, Budapest, 274.fond. 122.ő.e.document 5 (typoscript).17 Kenez, o.c., 2006, p. 24.18 Julianna Horváth, Éva Szabó, László Szűcs, and Katalin Zalai (eds) (2001) A Magyar Kommunista Párt iratainak repertóriuma 1944-1948, A dokumentumokat válogatta, szerkesztette, a jegyzetekkel ellátta, Budapest: Politikatörténeti és Szakszervezeti Levéltár Napvilág Kiadó, 2001, pp. 3-7.19 Károly Peyer, leader of the right wing, was held in a German concentration camp. He would return to Budapest in the summer of 1945.20 James Felak, ‘Relations between the communist and social democratis parties in Hungary in 1945’, in East European Quarterly, 2000, Vol. 34, No. 1, pp. 95-131.

5

with the Social Democratic right-wing, the Független Kisgazda- és Polgári Párt (Smallholders and Citizens Party) and the Demokratikus Polgári Párt (Democratic Citizens Party). In early July 1945 a political crisis broke out when Smallholder Béla Varga insinuated at a local meeting that Hungary did not have a “true democracy”. The crisis resulted in the expulsion of a few rightwing Smallholders and Social Democrats from their parties. The Government which had a non-Leftist majority, underwent several cabinet changes in July 1947 which resulted in a ’concomitant strengthening of the Left’s position’.21 The first free elections were held in Hungary in autumn 1945, which results indicated that support for the MKP had remained relatively small. Current realities fashioned public opinion concerning Hungarian Communists and Soviet troops. As expected, Soviet soldiers behaved badly.22 In addition, the Hungarian bourgeois population preferred the “well-educated” Germans to the “filthy” Russians,23 because the latter raped and looted without being halted or punished by their superiors. By October 1945, the MKP had become with a half a million members a mass party lacking any experience in party politics because membership was opened to anyone who wanted to join Communism.In spite of the Soviet soldiers behaviour, the Communist Party could grow. Rákosi was confident in an electoral success. But a lack of cadres and organizational weakness contributed to the Party’s poor electoral results. The municipal elections of October 7, 1945, in Budapest gave to a Communist-Social Democratic list only 42.8 percent of the votes, with 50.5 percent going to the Smallholders Party, 2 percent to the Nemzeti Parasztpárt (National Peasants Party), and 3.8 and 0.9 percent, respectively, to two bourgeois liberal parties styled the Citizen Democrats and the Radicals.24 Thereupon, the Social Democrats ran independently in the national parliamentary elections of November 4, 1945 – the first ever held in Hungary. This time, the Smallholders – transcending their rural origins to emerge as a catch-all party - won 57.03 percent of the votes; the Social Democrats, 17.41 percent; the Communists, 16.95 percent; the National Peasants, 6.87 percent; the Citizens’ Democrats, 1.62 percent; and the Radicals 0.12 percent.25 Mátyás Rákosi was summoned to Moscow to discuss his bad electoral performances.A pre-election agreement of the parties composing the National Independent Front to maintain their coalition government intact no matter what the electoral outcome neutralized were neutralized the results of this election. This clause prevented the Smallholders from forming a government of their own. Because the MKP represented the real power in Hungary, the victorious USSR, a government without the Communists was undebatable. Moreover, the Soviet take-over had a major incidence on the composition and structure of the civil services. Though the Nazi’s had annihilated the majority of the Hungarian Jewry, many Jews had could

21 Felak, o.c., 2000.22 Alexandra Orme, Comes the Comrade!, New York: William Morrow & Company.1950; Sándor Márai, Memoir of Hungary. 1944-1948, Budapest: Corvina in association with Central European University Press, 1996.23 Alexandra Orme gives a particularly colourful description tainted by racism: ‘To us they all looked alike, as all Mongols and negroes do to the average European. The Russian countenance may be described thus: it is like a keg; the lips broad and thick, but quite flat; the nose like a potato, the eyes small. Of course, not every face is like that, but more often than not that description fits them very nicely. The average Russian is of short or of medium height, thick-set, with legs like gate-posts; he radiates health and has the slightly waddling gait of the bear; he is incredibly filthy and untidy, so much so that the normal person cannot even picture it unless he has seen it with his own eyes.’ Orme, o.c., 1950, p. 46.24 Later, Antal Bán attested that the Communists could not have obtained even 17 per cent of the total votes except in the presence of the Rad Army occupation forces – without this they could not have gained more than 4 and 5 per cent. Ban, o.c., 1951, p. 69.25 Bennett Kovrig, Communism in Hungary. From Kun to Kádár, Stanford: Hoover Institution Press, 1979, p. 218.

6

survive the holocaust. Young and qualified Jewish members of the intelligentsia flooded into the ministries, the central committee and the security police.26 Urged by Rákosi in May 194527 to come to Budapest during the “good season” in order to help solving some urgent economic problems,28 he nonetheless would wait until the end of July 1945. The Hungarian press would keep silent on Varga’s short stay in Budapest for he was expected to be in Potsdam discussing German and Hungarian reparation payments to the Soviet Union.29

We are informed about Varga’s short stay in Budapest at the end of July 1945 because of a financial and monetary memorandum he wrote at the request of Rákosi for Révai, Farkas, Rajk, Kádár and Aladár Mód (see appendix 1)30

Varga returned to Budapest in September 1945 for a longer stay in order to help the Communist drafting an economic recovery plan.31 The destruction during the war had been estimated at five times the country’s annual GDP. Varga’s stay in Budapest remained relatively unnoticed. Though he was a former People’s Commissar of the Councils Republic, his fame had disappeared from the population’s collective memory. Therefore the party press32 had to re-introduce him to a general public struggling at that moment for daily survival and being not at all interested in Varga’s past as a People’s Commissar. Even in communist party ranks Varga’s reputation of specialist in economic affairs had to be remade after such a long absence from Budapest. Varga would, however, immediately acquire a prominent position in higher party circles during the ongoing election campaign in September and October 1945. On pre-election day, 6 October 1945, he lectured in the building of the Ferenc Liszt Academy33 on the impact of the war on a capitalist economy.34 On 11 October 1945 he

26 According to Richard V. Burks: ‘Often these police officials were survivors of the nazi extermination camps, and they did not let mercy or other humanitarian considerations stand in their way when it came to dealing with the class enemy.’ Richard V. Burks, The Dynamics of Communism in Eastern Europe, Princeton, N. J.: Princeton University Press, 1961, p. 166.27 Rákosi wrote to Varga on 5 May 1945 in German: ‘An Genossen Varga. Lieber Genosse! Ich bekam Ihren Brief. Ich teile Ihnen mit, dass ich offiziell vorgeschlagen habe, Sie auf zwei Wochen nach Budapest einzuladen, damit Sie uns bei der Lösung unserer komplizierten ökoomischen Fragen helfen und auch das Ansehen der Partei heben. Es versteht sich von selbst, dass auch Ihre Frau dann mitkäme. Wohnung, Kost usw. Ist schon besorgt. Ich hoffe, Sie werden nichts dagegen haben, Ende Mai oder Anfang Juni, das heisst in der besten Saison, hierher zu fahren. Ich lege Ihnen gleichzeitig einge Zeilen für Genossen Beria in der Angelegenheit des Sohnes Lukacs bei. Mit gleicher Post sende ich einen ausführlichen Bericht an G. M. Ich möchte, dass Sie im Bilde sind, in welcher Lage sich das Land und unsere Partei befinden. Sie haben sicherlich davon gehört, dass am 1. Mai in Budapest eine halbe Million Menschen demonstrierten. Wir arbeiten täglich 16, 17 Stunden und alle sind etwas kaput. Doch die Arbeit geht. Ich hoffe, Sie werden sich davon bald persönlich davon überzeugen. Ich grüsse herzlich Ihre Frau und Maria und bin mit warmen kommunistischen Gruss Ihr Räkosi.’ Party Archives, Budapest. MDP, Rákosi Papers. 274 fond, 9 (typoscript).28 In a reply to Rákosi’s letter on 18 May 1945, Varga argued that he had to be in Moscow on 15 June. ‘Az idö nem valami alkalmas, mert junius 15-e elött, feltétlenüll vissza kell lennem Moszkvában’. Varga’s letter is completed by a short note on solving transportation problems, inflation, reconstruction, agricultural and labour discipline. Varga thought that Hungary was in need of 500 new locomotives and many wagons. Party Archives, Budapest. MDP. Rákosi Papers, 274 fond, lap 9 and 10-14.29 Officially, Varga would appear for the first time in Budapest as late as September 1945.30 The Gerő files of the Communist Party Archives in Budapest contain this long memorandum concerning the inflation problem. This document is signed by Varga and dated on 28 July 1945. The letter is typed on paper with a letter-head of the Magyar Kommunista Pärt, Központi Vezetősége, Budapest, VIII, Tisza Kálmán tér 27, and addressed to Révai, Farkas, Rajk, Kádár and Aladár Mód. The letter arrived on 30 juni at Gerő’s office. Gerő files, Party Archives, Budapest, 274.f.12/73.ő.e, 153 pages.31 The MDP presented this Plan in Szabad Nép on 23 September 1945, well after Varga’s arrival in Hungary.32 Just before the start of the Potsdam Conference, Antal Éber wrote an introductory note on Varga’s life. ‘Hujuk mag Varga Jenőt!’, in Magyar Nemzet, 22 July 1945, p. 3.

7

lectured on such themes as Soviet foreign policy.35 Meanwhile he defended carried out agrarian reforms in combination with a democratisation of public life.36

After the 1945 parliamentary elections, it was clear that the MKP would not take over power through electoral competition. The Smallholders Party which had won the elections, should have to be defeated through police pressure and by expelling the right-wing peasant leaders from their own party. Attacks on reactionaries hiding within the Smallholders party or opposing the politics of national unity were accompanied by pressure from the streets and on 5 March 1946 by the formation of a Left-Wing Bloc of MKP, the Social Democrats and the NPP. The Bloc repeated the demand for expelling the right-wing Smallholders, but accepted collaboration with the “democratic elements”.37 This decision to break up the Smallholders Party was taken in March 1946, when Rákosi was having a secret meeting with Stalin in Moscow where both discussed the setting up of a new Communist International. After his return to Budapest he informed his Central Committee that ‘…whenever a country achieves the conditions for the liberation of the proletariat or for socialism, it will be carried out, with no regard for whether the respective country is in a capitalist environment or not. This is also a new perspective, because in a country where these conditions are present, it [sovietization] has to be realized. This is fresh encouragement for all communist parties, whether or not the conditions for the liberation of the proletariat are created in their own country.’38

Meanwhile, the MKP preferred defending the vague and defensive slogan of National Unity, but the ultimate goal of its policy was transition to socialism. The gradual route to power had been the MKP’s strategy since 1944. In Germany, the KPD had adopted in December 1945 the “German road” to Socialism, and Dimitrov had acclaimed a peaceful “Bulgarian road”, while Władysław Gomułka eulogized the issue of national independence in order to facilitate the building of socialism by domestic effort.39 In the summer of 1946, Stalin admitted in a conversation with a delegation of the British Labour Party that there was the possibility of two routes to Socialism, a Russian and a British one. In the beginning, Rákosi embraced the concept of the national road to Socialism as well, which meant defending the national interest against foreign interference and in a certain degree also against the Soviet interests. After his defection to the West, Minister of Finance Miklós Nyárády would observe that during the negotiations with the Soviet Government in Moscow, ‘the communists such as Rákosi, Gerő, and Vas asked me to show resistance to Soviet demands and supported me on some of these questions. Of course, they were never leading any resistance, but they were glad for me to show some.’40

For the time being, the particular phrase used to describe the transition process was that of People’s Democracy. This period would be closed at the end of 1947 when the offices of the Cominform were established at Belgrade. 33 This building in Hungarian Secession style had not been destroyed during the siege of Budapest earlier that year.34 Varga, A háboru hatása a tökés gazdaságra (Elöadás), Budapest: Magyar-Szovjet Művelődési Társaság, (16 pages). Reissued in 1947 by Új Magyar Könyvkiadó.35 This text remained unpublished. Varga, ‘A Szovjetunió külpolitikája’, Varga Jenő elvtars előadassa 1945. október 11.-én. (typoscript). Party Archives Budapest. 274. Fond, Lap 27-26; 27-38.36 Varga, A földbirtoreform és a közélet demokratizálása, Budapest: Magyar-Szovjet Müvelódési Társaság, 1945 (16 pages). This article was also translated and published in the several languages editions of New Times, 1945, Vol. 3, No. 8, in Rinascita, 1945, pp. 283-284; Neue Welt, 1946, No. 1, pp. 77-84.37 Martin Mevius, Agents of Moscow. The Hungarian Communist Party and the Origins of Socialist Patriotism 1941-1953, Oxford: Clarendon Press, 2005, p. 167.38 Quoted in Laszlo G. Borhi, ‘The Merchants of the Kremlin: The economic roots of Soviet expansion in Hungary’, Working Paper No. 28, Woodrow Wilson International Centre for Scholars, Cold War International History Project, Washington, D.C., 2000, p. 3.39 Dziemanowski, 1979, p. 252.40 Foreign Office, FO 371/78543, ‘Record of result of interrogation in Switzerland in December, 1948 of Mr. Nyárádi, former Hungarian Minister of Finance’, p. 68.

8

Combating inflation

The inflation process started in Hungary as early as in 1938. By 1944, war inflation had gained serious proportions as the paper currency in circulation had increased twelve times. At the end of 1944 there were 24 billion pengős in circulation. However, from the very beginning on the Hungarian Communists were aware of the danger of hyperinflation and its economic and social consequences. Hungary had the greatest inflation ever seen. It started immediately after the end of the war damaging the economy.41 In May 1945 Varga already mentioned in a letter to Rákosi that post-war inflation would become a major problem.42 Indeed, in the summer of 1945 inflation started soaring as the budget was practically entirely financed by the money press. State incomes could only cover 8 per cent of state expenditures in the summer of 1945. As a result of monetary financing, 765 billion pengős were in circulation by the end of December 1945. At that time, about 95 percent of the budget was financed by the printing press. In 1946, the quantity of paper money in circulation increased giving birth to hyperinflation. The standard of living of the working population declined dramatically.

41 Kenez, o.c., 2006, p. 77.42 Varga to Rákosi, Moscow, 18 May 1945. Party Archives, Budapest, 274. fond – 10/122. ő.e. 110.

9

Table 1: Money supply and inflation

Year

Money supply(in million pengős)1940-1945: gross currency1946-1948: total money supply

Whole-sale prices

1939 - 1001940 1,387 1161941 1,984 1421942 2,958 1731943 4,392 2361944 10,672 3171945 765,000 5321946 1,351,000 6161947 3,045,000 6561

1948 3,625,0002

1 October 19472 August 1948Source: International Monetary Fund, International Financial Statistics, December 1948, Vol. 1, No. 12, Washington.

10

Table 2: Exchange rates (1 USD = X pengő)

Date US$01-01-1927 5.0031-12-1937 5.4031-03-1941 5.0630-06-1944 33.5131-08-1945 1 32031-10-1945 8 20030-11-1945 108 00031-12-1945 128 00031-01-1946 795 00031-03-1946 1 750 000

31-04-194659 000 000 000(5.9×1010)

31-05-194642 000 000 000 000 000(4.2×1016)

31-07-1946460 000 000 000 000 000 000 000 000 000(4.6×1029)

To avoid mass famine, the government introduced the so-called “calorie-salary system”: salaries were based on an average 17,500 calories per employed person per week and an additional 6,000 calories per spouse. Meanwhile economic recovery emerged as railway transportation was restored and the other key branches of the economy recovered. However, after a year of hyperinflation currency stabilization became an urgent necessity. Already on 2 Februari 1946 Varga sent Rákosi a ‘strictly confidential’ letter on necessary money reforms to be implemented in post-war Hungary (see Appendix 2).43

The preliminary condition for monetary stability was a balanced budget, a problem Rákosi had to solve as soon as possible in order to prevent a total collapse. Rákosi reported on this fear in a letter to Varga written on 13 April 1946 (see appendix 3).44

On 13 April 1946, Varga addressed a general outline for monetary stabilisation to Rákosi.45

Strict measures in order to diminish state expenditures and to increase incomes had to be envisaged. As usual, Varga kept in touch with Rákosi on this problem.46 The Hungarian economy could only be stabilized by the introduction of a new currency, and so the forint was introduced at a rate of 400 000 000 000 000 000 000 000 000 000 pengő29. The exchange rate of the pengő with the US dollar had to be stabilized, a problem which should be solved by concluding an overall agreement with the US government. As long as wages were too low to be taxed heavily, state incomes had to be increased by means of indirect taxation. Therefore, a turnover tax was introduced. A stabilization plan was

43 Letter of Varga to Rákosi, 7 February 1945 (typoscript), Party Archives Budapest, 274 fond, 10.122, pages 39-40.44 Varga files. Party Archives, Budapest. 274. fond 10/122, page 41.45 Memorandum signed by E. Varga. ‘A végleges valutastabilizálás fő irányelvei’, no date [13 April 1946], 4 pages, Party Archives, Budapest, 274, fond 10/122, 45-48. Published with a slightly different title: ‘A végleges stabilizáció fő irányelvei’ (Basic principles of a definitive stabilization), in Párttörténeti Közlemények, 1967, Vol. 13, No. 11, pp. 126-128.46 Letter from Varga to Rákosi, Moscow, 13 April 1946. Party Archives, Budapest, 274, fond 10/122, 43-44.

11

carried out on 1 August 1946 when a new currency, the forint,47 was issued at an exchange rate of one forint for four trillion paper pengős.48 A forint equalled 0.29 gold pengős. Previously, the US had declared that the booty taken from Hungary by German and Hungarian Nazis, including the gold reserves of the Hungarian National Bank with a value of US$32 million was going to be returned.49 Fixed prices were combined with a strict deflationary monetary policy.50 At the time of stabilization the currency in circulation was only about 10 per cent that of January 1938 and by the end of the year it had reached 50 per cent. In August 1946, Varga stayed as an adviser to Rákosi in Budapest. Already in July 1946 the theoretical journal of the Hungarian Communist Party Társaldalmi Szemle (Social Review)51

published Varga’s defence of the necessity of combating post-war inflation by taking strict stabilisation measures. Meanwhile he could observe and comment on in the party press 52 the introduction of a new currency, the forint and, the application of a monetary stabilization programme.53 In a speech to a party audience given at a stadium in Budapest he told that the bourgeoisie had opposed a high devaluation rate. Obviously, Varga’s mission was to help Rákosi and the Communist Party to avoid the problems the Councils Republic had met in 1919, and maybe to counterbalance Gerő’s influence on monetary and financial affairs.54 In this period, Varga did not maintain intensive contacts with Gerő about the introduction of the new currency. Gerő who had recruited István Kóssa55, István Friss, László Háy56 and Zoltán Vas (Weinberger) as advisers57, was the man primarily responsible for the economic policies of the Communist Party. In the months preceding the decision to stabilise the currency, Gerő paid much attention to actual budget and exchange problems. In May 1946, on a budget of 790 million gold pengő, a deficit of 120 gold pengő should be covered,58 while the combined gold and hard currency reserves of the Nemzeti Bank (Hungarian Central Bank) did not exceed the total sum of 210 million gold pengő equivalents: American gold deposit: 140

47 L’szló Háy, ‘Adalékok az 1946. évi stabilizáció történetéhez’, in Szabadság, te szülj nekem rendet!, Budapest: Kossuth Könyvkiadó, 1970, pp.119-132.48 The introduction of adópengő was an attempt to keep inflation amongst limits, however, it could only slow down somewhat but did not stop the depreciation of the currency. Bonds were issued by the Ministry of Finance in denominations between 10 000 and 100 000 000 adópengő. These simple design bills on low quality paper became legal currency in the last months of the Hyperinflation almost completely replacing pengő. The adópengő was replaced at a rate of two hundred million to the forint. The exchange rate for the US dollar was set at 11.74 forints.49 Berend and Ránki, o.c., 1985, p. 191.50 Se memorandum ‘Politikai és gazdaság információ allampolitikai osztályon 1946 augusztus 13.-án’, Gerő files. Party Archives, Budapest. 274.f.12.69.ő.e, 4 pages; ‘A belpolitikai helyzet és a pénzügyi szanálás’, idem, 3 pages.51 Jenő Varga, ‘Infláció – stabilizáció’, in Társadalmi Szemle. A Magyar Kommunista Párt Tudományos Folyóirata, July 1946, Vol. 1, No. 7, pp. 481-488.52 ‘A parasztság és az agrárolló’ (The peasantry and the agrarian scissors), in Szabad Nép, 3 August 1946; ‘Szabad és kötött gazdálkodás’ (Free and tied economy), in Szabad Nép, 8 August 1946; ‘Le kell szállitani az iparcikkek árát’ (Prices of industrial products should be lowered), in Szabad Nép, 11 August 1946; ‘Jó a forint, de kevés van belőle’ (The forint is good, but this is insufficient), in Szabad Nép, 15 August 1946. 53 Háy, o.c., 1970, p. 124.54 ‘Varga Jenő elvtárs előadasa 1946. aug. 22.én a Sportcsarnokban’. Typoscript, 7 pages, Party Archives, Budapest, 274.fond – 10/122, 50-56.55 I. Kossa headed the Nemzeti Bank.56 Later, Háy would give an extensive account of this monetary operation. Háy, 1970, pp. 119-132.57 See memorandum ‘A stabilizáció eddigi mérlege és a legközelebbi tennivolók’. Party Archives, Budapest, 274.f.12/71.ő.e, 2 pages.58 See memorandum dated on 10 May 1946. ‘Feljegyzés a valuta stabilizáció targyában’. Gerő files, Party Archives, Budapest, 274.f.12/76.ő, 5 pages

12

million gold pengő; Swiss currency and gold deposit: 20 million; Soviet loan: 50 million gold pengő59

Though Varga had regularly access to Molotov and the Ministry of Foreign Affairs, his activities in Hungary created both confusion and anger in the Kremlin bureaucracy. Apparently, without Zhdanov’s consent Varga was acting as a consultant to Rákosi in Hungary. Therefore, Zhdanov could identify him as a Hungarian agent on behalf of Rákosi and other Hungarian officials beyond his control. When returning from Budapest to Moscow at the end of the summer of 1946, a visibly irritated Zhdanov summoned up Varga to submit a report on his recent activities. Without having consulted Zhdanov or other power brokers in the Kremlin, Varga had declared at the TASS news agency that in Hungary the population was refusing ‘capitalism as well as the dictatorship of the proletariat’.60 Apparently, such a highly controversial statement with far-reaching political implications must have awoken Zhdanov’s ire in a period he was trying to establish tighter control over his Agtiprop Department and the Communist parties of the “new democracies”. Finally, Varga would immediately report to Zhdanov and Aleksandrov of the Central Committee on his activities in Hungary. He was so clever to send a copy of his text to Rákosi as well.

In the mean time, Varga was serving as an intermediary between Stalin and Rákosi by writing in the latter’s name a report on the recent monetary reforms and the introduction of the forint (see Appendix 4). Varga’s role as an “independent” consultant to Rákosi was shortly interrupted after Zhdanov’s intervention (see Appendix 5). Varga, however, would keep in touch with Rákosi.61 In the beginning of the winter of 1946-47 Varga was in hospital due to tuberculosis that necessitated a surgery (see Appendix 6).62

Economic recovery

A centrally organized command economy was established - at least partially - in order to meet heavy reparation demands.63 The Soviet Union demanded US$320 million, while Yugoslavia and Czechoslovakia would receive US$80. Under British and American pressure that sum was finally reduced to US$300 and US$100 respectively. Obviously, American diplomacy feared that this heavy burden would harm their interests in Hungary. In the mean time, Hungary had to supply the Soviet occupying forces with food and lodging, a measure that was not included in the armistice agreement, but provoked widespread discontent among the population.

59 In another memorandum, different figures are given: American gold deposits: 180 million; hard currency deposits: 20 million. See memorandum 13 May 1946. Untitled memorandum. Ibidem, 9 pages.60 In August 1946 Varga had advised Rákosi how to stabilize the pengö. He published on this topic five articles in Szabad Nép. A copy of Varga’s report to Zhdanov, with a copy to Aleksandrov, is kept in the Rákosi files kept at the Party Archives in Budapest, 274 fond, 10/122, lap 61-64. 61 In a letter to Rákosi dated on 28 October [1946?], Varga dealt with the problem of the new currency. Varga files. Party Archives, Budapest, fond –274, 10/122, document 67.62 This is revealed by a handwritten letter by Sári Varga to Rákosi: ‘Vargának régi tuberkulozisa ujjult ki. Operalni fogjak. Utó kuriara a tavasz szal talán a Svabhegy re mennénk, üdvözlőni fedját’. In this letter, Sári Varga asked for receiving books in ‘any language’ for her husband. She was hoping for a cure at the Svábhegy Szanatórium in the hills of Buda. Varga files, Party Archives, Budapest, fond 274, 10/122, document 66, dated 12 December 194663 Between 1945 and 1948, a third of the national income was used to satisfy the reparation demands of the Soviet Union.

13

Historian Bohri identified in Soviet economic behaviour a purposeful penetration of the Hungarian economy and an undermining of free enterprising.64 During the first post-war years free enterprises were included in the reconstruction programmes of all political parties. Hence, Hungarian historian László Borhi65 could argue that heavy Soviet reparation demands and looting meant a ‘conscious first step’ toward reducing Hungary to a satellite. However, no such Soviet master plan existed at the end of the war. Before the Red Army could occupy the industrial areas, Germans and their Hungarian aids had carried away whole factories, railroad rolling stock and gold and silver reserves66 in order to prevent these from falling into Soviet hands.Only the Communist could be happy with the dominating position of Marshall Kliment E. Voroshilov who the chairman of the Allied Control Commission and who had become with his enormous staff of some 800 people Hungary’s ruler. Therefore, it was in the interest of the non-Communist parties of the Hungarian coalition government to have the Soviet Army removed as fast as possible from its territory. Because Hungary was cut off from the West and Germany, economic recovery was heavily depending on Russian raw materials. Already in August 1945, Hungarian newspapers reported on a Hungarian delegation headed by Antal Bán (Minister of Industry, Socialist) and Ernő Gerő (Minister of Trade) flying to Moscow in order to conclude a trade agreement. Though the term People’s Democracy had been used before the Second World War in the Communist world movement, it was presented at the Third Congress of the MKP, held from 29 September to 1 October 1946, as the main goal of the Party. When opening the Party Congress, Rákosi praised the USSR, but also his party’s national self-image. In its closing declaration, the MKP described People’s Democracy as the ‘road to the flowering of our Fatherland, to the happiness of our nation’.67 In reality, the Third Congress was also marked by the struggle against the reaction, i.e. the troublesome elements of the other parties in the coalition government, including the Socialist Right.68

Rákosi visited Molotov at the end of April 1947.69 During this meeting Rákosi expressed his concern with the post-peace treaty possibility of the Soviet army leaving Hungary. Rákosi’s mind, however, was put at ease that it would not happen. This gave the Hungarian communists the opportunity for the complete destruction of the Smallholders. In Moscow, Molotov also berated the Hungarian communists for not forming a multi-party voting bloc in 1945, which could have prevented the Smallholders from dominating government politics. Rákosi was forced to admit his mistakes. Upon his return from Moscow, Rajk unearthed in January 1947 a fabricated plot by a conservative group.70 The outcome of that reassessment was, however, still quite modest in comparison with the political orientation then prevailing in Poland, Romania, Bulgaria, and Albania. At that moment the Hungarian Communists still did not decide to seize political power. Rather, like their Czechoslovak comrades, they retained their authentic coalition strategy but henceforth prosecuted it less waywardly and with more sustained, albeit still only incremental, pressure on their partners. By attacking continually the right-wing politicians of the Small Holders, they insured themselves against the haunting spectre of a possible special sub-alliance within 64 László G. Borhi, Hungary in the Cold War 1945-1956. Between the United States and the Soviet Union, Budapest and New York: Central European University Press, 2004.65 Borhi, o.c., 2004.66 Ronald W. Zweig, The Gold Train. The Destruction of the Jews and the Looting of Hungary, New York: William Morrow, 2002.67 Mevius, o.c., 2005, pp. 170-171.68 Miklós Molnár, ‘The Communistg Party of Hungary’, in Stephen Fischer-Galati (ed.), The Communist Parties of Eastern Europe, New York: Columbia University Press, 1979, pp. 202-203.69 The minutes of the Molotov-Rákosi meeting.70 This was used to implicate the Smallholder secretary-general, Béla Kovács – who was kidnapped by the Soviets – and a few months later the Prime Minister Ferenc Nagy in a trumped-up conspiracy.

14

the National Independence Front of the Smallholders and the Social Democrats, two parties that had drawn close during the war and were also willing to open up the country to Western influence. When Zoltán Tildy, the Smallholder leader, was elevated to the presidency of the newly proclaimed republic on February 1, 1946, the Communists manoeuvred to ensure that he would be succeeded as the leader of that party and as prime minister of the government by the more malleable Ferenc Nagy rather than by his tougher competitor, Dezső Sulyok. The next month, they successfully pressured Nagy and Tildy into purging Sulyok (together with twenty-one other Smallholder parliamentary deputies from his party, ostensibly because he was spoiling Hungary’s relations with supposedly fraternal Czechoslovakia by his protests over the latter’s hard treatment of this remaining Magyar minority, but in fact because he was deemed recalcitrant to Communist leverage, and hence “reactionary”. Furthermore, in Nagy’s new government, the Ministry of the Interior, with its critically important control of the police, surveillance, and security apparatus, was for the first time assigned to the Communists. Interestingly, the Hungarian Communists had initially reconciled themselves to this portfolio going to the Smallholders, but that arrangement was overruled by the Soviets. Conversely, the still relative Communist moderation of this period was partly predicated on reluctance to provoke the British and Americans in advance of that peace conference. Indeed, Rákosi even joined Nagy on a ministerial delegation that visited Washington and London in May 1946 to solicit support for Hungary’s case. Stalin permitted no other country that had been liberated by his army to make such an open political overture to the West.

The Hungarian government adopted a republican constitution and hoped to retain the boundaries re-established with the help of Hitler. However, the peace treaty signed in Paris on 10 February 1947 restored the Trianon boundaries of 1920. Once the peace treaty with the Allies had come into force on September 15, 1947, the Allied Control Commission was disbanded, and the occupation ceased. But domestic political confrontation between the Right and the left in the coalition government sharpened while Soviet pressure on Hungary increased. The aim of the Communists was to break the Smallholders’ power. The first attempt to weaken the Smallholders came in January 1946, when the Left demanded nationalization of mines. The Smallholders were unable to block the passage of this bill because its own leftwing had threatened to bolt the party. The climax came in February 1947 with the arrest of Béla Kovács.71 The Smallholders rejected a Communist demand that they repudiate their executive secretary, Béla Kovács,72 whereupon the Soviet authorities (not the Hungarian police) simply arrested him in violation of formal Hungarian sovereignty. They charged that he had organized espionage on behalf of a foreign power, against the Soviet army. In May 1947, the Soviets announced that Kovács interrogation had incriminated Prime Minister Ferenc Nagy73 as participating in a conspiracy against the republic. Nagy, then on vacation in Switzerland and fearing arrest were he to return home, resigned in exchange for the release of

71 Ivan Volgyes, Hungary. A Nation of Contradictions, Boulder: Westview Press, 1977, p. 6.72 Later, American diplomat James McCargar would qualify Kovács as ‘a tougher man than most of them, he was very much tough than Zoltán Tildy and (…) than Ferenc Nagy. Nahy had the responsibility as Prime Minister. But Kovács, as the General Secretary of the Smalholders had a different responsibility. He was a party man (…)’. Pellérdi with Földesi, Pellérdi, Mária with Margit Földesi, ‘Their man in Budapest. James McCargar and the 1947 road to freedom’, in The Hungarian Quarterly, 2001, Vol. 42, No. 161, p. 59.73 Ferenc Nagy was a Calvinist peasant’s son. See ‘Ferenc Nagy Smallholder or Statesman?’, in Nagy Ferenc Miniszterelnök, Budapest: Occidental Press, pp. 148-156. After his migration to the US, Nagy would become a CIA agent involved in the Miami Cuban colony. See Paris Flammonde's book The Kennedy Conspiracy. An Uncommissioned Report on the Jim Garrison Investigation, New York: Merideth Press, 1969. http://www.maebrussell.com/Articles%20and%20Notes/Kennedy%20Conspiracy.html

15

his four-year-old son and remained in exile.74 In the mean time the Smallholders effectively disintegrated. Hungary embarked on a state-planned economy. In December 1946, the Central Committee of the MDP had announced an overall plan for the development of the national economy and had put out the directives of the Three-Year Plan for national reconstruction. The plan was endorsed by the left-wing coalition of the National Front and the progressive wing of the Smallholders Party. The National Bank gradually assumed control of industry, foreign trade, and savings and loan institutions. In July 1947, the Hungarian government rejected the Marshall Plan and a month later the first Three-Year Plan was launched. Meanwhile, a new general election was held on 31 August 1947, in which the position of the Communists was reinforced. A new election law was passed by which voters absent from home on election day could cast their votes wherever they happened to be, by using a special ballot paper. The Communists distributed these voting papers to their members all over the country. A revision of the electoral register excluded voters from the right to vote. As a consequence 6 percent of the electorate lost their right to vote. With 22.5 per cent of the total vote, the MKP was the majority party within the majority bloc. The Smallholders received only 15,4 percent of the vote, primarily because after the July 1947 split. This rump party had joined the left-wing coalition. As a result, the left parties received 61 percent of the votes against 39 percent for the other parties.75

At the conference at Szklarska Poręba between 22 and 27 September 1947 where the Cominform was established, Révai and Farkas were present. There, Zhdanov proclaimed in his opening address that the world was split up into two antagonistic camps. The East European countries had seceded from the capitalist world and had created a ‘new type of state, the people’s republic, in which power belongs to the people, major industries, banks, and transportation belong to the state, and the leading force is the bloc of the working classes, with the industrial proletariat in the vanguard. When all is said and done, the peoples of these countries not only freed themselves from imperialism, but also laid the foundations of the transition to socialist development.’76

On 24 September, Révai had to admit in his speech that the recent elections had marked a step forward, but that the result was not ‘as successful as (…) expected.’77 He even conceded that Communist influence within the working class was not yet overwhelming. ‘In certain plants and mines the socialists are stronger than us.’78 However, the Communists had become the stronger party controlling the majority of the Trade Union Council’s central committee and the higher ranks of the Hungarian army. According to Révai, Hungary should become one of the people’s democracies. Révai: ‘Hungarian democracy is a blend of popular democracy and bourgeois democracy’.79 Meanwhile the MKP had to overcome economic difficulties, to strengthen the left wing of the other coalition parties, and to consolidate its position in the armed forces.

Planning

Radical economic reforms had been introduced immediately after the liberation of the country. In the sphere of total collapse deserted large estates and factories were occupied and

74 Ferenc Nagy set up in 1951 the Central and East Europe Committee in the United States and with the help of the Ford Foundation he organized the Assembly of European Captive Nations in 1954. János Berecz, 1956 Counter-Revolution in Hungary – Words and Weapons -, Budapest: Akadémiai Kiadó, 1986, pp. 27-28.75 Volgyes, o.c., 1977, p. 7.76 Quoted in Kovrig, o.c., 1979, p. 219.77 Quoted in Kovrig, o.c., 1979, p. 220.78 Ibidem.79 Ibidem.

16

taken over by the workers. Workers’ committees sprang up everywhere. Large estates were spontaneously parcelled out and expropriated by governmental decree on 17 March 1945. A class of smallholders comprising 1,3 million families had been created during this stormy period. However, about half of the total area in private hands belonged to middle-peasants and well-to-do peasants. This parcelling out was carried out by peasant committees and or by county land reform councils with the help of a land agency. The remaining part of the confiscated land was reserved for the creation of state farms.80

Economic reconstruction in other areas of the economy was conducted by the government and combined with ‘a deliberate anti-capitalist drive pushed by the communists.’81 State intervention adopted and continued methods of war-economy through awarding of contracts and allocating of raw materials. Ernő Gerő who was the Party’s chief economist and second in command in the party hierarchy, pleaded in 1946 for ‘a controlled economy’ (...) ‘in the interests of the Hungarian democracy’.82 In December 1945, a Supreme Economic Council (Gazdasági Főtanács) was created.83 The Council was responsible for the allocation of raw materials and bank credit.84 In the mean time state interference had increased dramatically. In the summer of 1946 special bureaus for the administration of textiles, timber and wood, iron, etc. were created in order to organize the production, purchasing and allocation of raw materials, finished and semi-finished products and turnover of the various enterprises. 85 A strategic sector as the coalmining industry was supervised by a commissar. In coalmining all free market operations were forbidden. The big firms were operating as trusts fulfilling production targets set by the government. About two-thirds of their output was sold to the state, while the share sold on the free market dropped continuously.86 Economic historians Ivan T. Berend and György Ránki concluded with some good reasons that ‘free market, thus, hardly existed.’87

The reconstruction and reparation activities created meanwhile ‘an insatiable need for state finance’ as long as the private banks could mobilize enough savings.88 From the summer of 1945, the state furnished 1.5 billion pengős to restart industrial production and reconstruct the transportation and communication networks. Capital formation remained depressed. Hence, foreign loans were more than welcome.89 After the introduction of the forint, the Supreme Economic Council kept on channelling limited credits into preferred branches, especially, coal-mining, basic industries and engineering. ‘Most private firms, concluded Berend and Ránki, were trapped in the impasse of shortage of money and credits, fixed prices, increasing taxation and accumulating deficits. To stop production, however, was forbidden. More and more firms accumulated huge debts to the state’.90 As a result of their indebtedness to the state, the country’s most important industrial firms could be expropriated without any legal problem. In November 1946, the four largest firms in heavy industry were brought under state supervision. Meanwhile, all mines had already been

80 Berend and Ránki, o.c., 1985, pp. 182-184.81 Berend and Ránki, o.c., 1985, p. 185.82 Berend and Ránki, o.c., 1985, p. 186.83 This Council was presided over by Prime Minister Zoltán Tildy of the Smallholders Party, but the secretariat was headed by Zoltán Vas of the Communist Party.84 This coordinating body resembled to the National Economic Council created by the Councils Republic in 1919. 85 Berend and Ránki, o.c., 1985, p. 187.86 At this time, about two-thirds of the production of the Hungarian manufacturing industry as a whole was purchased by the state. 87 Berend and Ránki, o.c., 1985, p. 187.88 Berend and Ránki, o.c., 1985, p. 187.89 There were many talks on an American loan worth US$420,000. Se memorandum ‘A stabilizáció eddigi mérlege és a legközelebbi tennivolók’, Gerő Files, Party Archives, Budapest, 274.f.12/71.ő.e, 2 pages.90 Berend and Ránki, o.c., 1985, p. 193.

17

nationalized. The major banks would follow the next year. It was only after the founding of the Cominform in September 1947 that this gradualist strategy was abandoned by the Hungarian government. Instead of state capitalistic control and partial nationalizations, radical expropriation was decided. In Hungary, the Communist Party accepted on 15 October 1946 a three-year reconstruction plan drafted by a commission in which Jenő Varga had participated.91 Within six weeks, a team of 30 Social Democrats assisted by Nicholas (Miklós) Káldor had drafted their own recovery plan92 ‘using planning technique of material balances (which impressed the communists)’.93 Both development plans were ambitious, but quite similar. During the last three months of 1946 the Communists tried to refine their planning proposals per sector of economic activity.94 Later, Gerő95 would call a commission into existence in which specialists of the different coalition parties were represented. The commission’s task was to work out a definitive draft.96 Soon dissensions between the representatives of the left and the right would appear, a problem Gerő had to deal with.97

Table 3: The three-year reconstruction plans

1938 1946/47 1947/48 1948/49 1949/50Million forint

Social Democratic plan 23,376 14,806 17,755 21,383 24,823Communist plan 12.000 15.200 18.000 21.200

IndexSocial Democratic plan 100 119.9 144.4 167.7Communist plan 100 126.7 150.0 177.5

Source: Judik, 1947, p. 7.

Together with the founding of a new central planning body, the three-year plan was launched on 1 August 1947.98 The Hungarian government wanted to achieve an increase of the national income of 17 percent above the level of 1938. In 1948, however, the plan was changed into a more ambitious one. Even that was overfulfilled and finished at the end of 1949.

91 3 éves terv. A Magyar Kommunista Párt javaslata, Budapest: Szikra Kiadas, 1947, 92 George Kemény, Economic Planning in Hungary 1947-49, London: Royal Institute of International Affairs, 1952, p. 23.93 Anthony P. Thirlwall, Nicholas Kaldor, New York: New York University Press, 1987, p. 104.94 Commissions were installed for industry, agriculture, foreign trade, finance, transport and communication, cooperative associations, social policy, culture. See memorandum signed by Friss, 15 October 1946. Gerő Files. Party Archives, Budapest. 274.f.12/100.ő.e. 1 page.95 Andor Berei, having stayed in Brussels during the war, returned to Budapest in the beginning of 1946. He would become in charge of planning tasks. Memorandum signed by Berei, 9 May 1947. Gerő Files, Party Archives, Budapest, 271,f.12/107.ő.e. 2 pages.96 Dr. István Varga, who belonged to the Smallholders Party, presided over this commission comprising Sándor Gyönczey, Arthur Kárász, Jenő Rátz (for the Smallholders); György Kemény, László Faragó, Arthur Székely (for the SDP); Zoltán Vas, István Antes; György Markos (for the MKP); Imre Kovács, Lóránd Dabasi-Schweng. Gerő Files (for the Nemzeti Parasztpárt). Gerő Files, Party Archives, Budapest, 274.f.12./79.ő.e. 85 pages.97 In a speech given by Gerő at the Central Committee on 11 January 1947, he called Jenő Rácz (Smallholders) ‘a Horthy rendszer polgári közgazdászának tulajdonképen ennek az egy alapvető döntő, ugynevezett “’ervnek” az alátámasztávát szolgálták’. ‘Gerő Ernő referátuma a Központi Vezető ülésen a 3 éves tervről’. Gerő Files, Party Archives, Budapest, 274.f.12/102.ő.e. 5 pages.98 Behrend and Ránki, o.c., 1985, p. 195.

18

Salami politics

In the mean time, the Communists increased pressure on the other parties in order to accelerate nationalizations. By March 1948, nationalizations embraced all companies with more than 100 employees, as well as the utilities and banks. Im May 1948 twenty industrial directorates of the various branch ministries were set up to administer the nationalized industries. The Communists demanded the Social Democrats to merge in a campaign that reached its climax in early 1948. A unification congress was held on 12-13 June 1948 and on 1 February 1949 a Hungarian Independence-Popular Front was created to absorb the old parties.99 Meanwhile the right-of-centre parties disappeared as their leaders fled to the West. Control of the police and Soviet backing combined with hidden allies within the other parties contributed to Rákosi’s success. Rákosi put it in 1952: ‘Salami, an expensive food, is not eaten all at once, but is cut one slice at a time as it is used. (…) [Our] step-by-step approach was known as the ‘Salami tactic’, and tanks to it we were able, day after day, to slice off, to cut up the reactionary forces skulking in the Smallholders’ Party.’100

Hungarian economists had convened that without external financial assistance, economic recovery would take up several decades. The Social Democrats welcomed the Marshall Plan (European Recovery Plan, ERP) as a positive step forward. After Molotov had made public, the Hungarian communists announced their intention to take part at the condition that national independence would not be questioned. In July 1947, after Molotov’s unsuccessful return from the Paris Conference, Hungary was obliged by the Soviet Union to join its neighbours in declining to participate in the American-sponsored Marshall Plan. Instead, on August 1, a three-year plan providing for a state-directed economy (but not yet for steep Stalin-type capital investments, which awaited the five-year plan of 1950) went into effect. By this time, also, the civil bureaucracy had been purged and politicised to the point where the staffs of governmental agencies and offices that were headed by non-Communist ministers were no longer responsive to their nominal chiefs without Communist assent.

In 1949-1950, the politics of industrialization began. Hungary exceeded all the other Communist countries in the extraordinarily high investment of it devoted to heavy industry.

During the process of Communist take-over Moscow was confronted with different national situations. The problem was the definition of the concept “New Democracy” which had emerged in Central Europe. On 5 April 1947 Varga defended the view that in the “New Democracy” there existed neither capitalism nor socialism. 101 This “twilight situation” created political confusion vis-à-vis the real aims of the Communists and their allies in government. Especially the position of the Social Democrats was of crucial influence on the further political evolution. At that moment, de centre-right tendency formed still a majority within the Hungarian Social-Democratic Party MSZDP. This tendency had no interest in sharpening differences between them and the Communists. The Right-wing could even consider Varga as an objective ally as long as the concept of the “dictatorship of the proletariat” was omitted in his texts and the Communists affirmed that their only objective was a free, democratic, and independent Hungary, in other words, a “new democracy”102 or a “people’s democracy” headed by a government of all the united democratic forces.103 Varga’s study on the changes

99 It won 96 percent of the popular vote in the elections on 15 May 1949.100 Quoted in Gough, o.c., 2006, p. 30.101 Varga in Új Magyarorság, which was at that momement a social-democratic weekly defending rightest views,102 Varga defended on 5 April 1947? the view that in the “New Democracy” there existed neither capitalism nor socialism. In addition, he became involved in a discussion with the Hungarian Social Democrats on the subject of British imperialism and the Marshall Plan. 103 Molnár, o.c., 1979, p. 234.

19

having occurred in the capitalist economies as a result of the Second World War104 had been immediately translated into Hungarian105 and widely discussed as a major contribution to a better understanding of actual economic problems.106

As long as the concept of “democratic popular republic” was not yet defined, confusion reigned. At the end of 1947, a Belgian Communist like Pierre Joye visiting107 Hungary still talked about ‘popular and democratic regimes of a new type’ being ‘not really socialist like the Soviet Union or capitalist in the ordinary sense of the word.’108 Not in the ordinary sense of the word? Already in 1948, Rákosi and Révai expressed about the concept of the “people’s democracy” an explicit self-criticism. They declared having made a mistake by considering the new democracy as something durable and as a form of state and society fundamentally different from that of the Soviet Union. In fact, people’s democracy was nothing other than a “relatively peaceful passage” to socialism and people’s democracy descended from the people’s democratic revolution as a special form of the dictatorship of the proletariat.109

In reality, for a while, the Hungarian Communists had to take into consideration that their country had lost the war at the side of Germany and that the exceptional strength of the Small Peasants Party was the electoral expression of a generalized anti-Soviet sentiment among the population, especially in Budapest where the Peasant Party had gained the majority of the popular vote. The working class had to be mobilized continually in order to support the MKP’s action. Mass demonstrations on the 1st of May had to show the Party’s mass support and to change the realtions of forces. In the transition years 1945-48, the politics of the fronts had made of the MKP a loyal partner. Meanwhile the MDF stressed the importance of a “new democracy” and the existence of an “independent Hungary”. In 1947, Varga had contributed to having these concepts accepted after oublication of his article on the topic “democracy of a new type”.110 Varga understood by

104 Y. Varga, Izmeneniya, (1946) Izmeneniia v ekonomike kapitalizma v itoge vtoroi voiny (Changes in the economy of capitalism as a result of the Second World War), Moscow: Gospolitizdat, 1946.105 Varga, 1947, A tökés.106 Varga’s book was reviewed by Gyula Domány in the January-April 1947 issue of Közgazdasagi Szemle.107 Pierre Joye had interviews with Budapest Mayor Bognár (Small Peasants Party), Lajos Dinnyes (id.), Árpád Szakasits (Social Democrats) and Gerő.108 Pierre Joye was talking about ‘…de régimes populaires et démocratiques d’un type nouveau. (...) Ce ne sont pas des États socialistes (comme l’Union soviétique) mais ce ne sont pourtant plus des États capitalistes dans le sens ordinaire du terme. S’appuyant sur les masses populaires, le nouveau pouvoir a pu réaliser dans ces pays, en un temps très bref, des transformations démocratiques progressistes dont la bourgeoisie n’était plus capable, notamment la réforme agraire (...) et la nationalisation de la grande industrie et des banques, qui sape la puissance du capital monopoliste. Ces regimes démocratiques d’un type nouveau se caractérisent par le développement de plus en plus accentué dún secteur socialiste aux côt’s d’un secteur capitaliste qui subsiste tout en ayant perda sa position dominante. (…) L’ancien appareil d’État n‘y a pas été détruit de fond en comble comme en Union Soviétique. Il a été reorganise progressivement par l’élimination des anciens hauts fonctionnaires discrédités du fait de leur collaboration avec le fascisme et par l’introduction de représentants des nouvelles forces populaires.’ (…) ‘Le regime de chacun de ces pays est determiné par son passé historique… des républiques parlementaires à suffrage universel égal et secret gouvernées par la coalition de tous les parties; ailleurs (c’est le cas de la Hongrie) un gouvernement de coalition y trouve devant lui plusieurs parties d’opposition. (...) un pays comme la Hongrie, par contre, le rapport des forces à obligé les elements progressistes à différer jusqu’à ces tout dernières semaines une mesure relativement aussi modérée que la nationalisation des grandes banques.’ Pierre Joye, ‘Naissance d’une Démocratie Populaire: la République Hongroise’, in Rénovation, 1947, December No. 12, pp. 243-244.109 Molnár, o.c., 1979, p. 238.110 This chapter was published in most communist journals all over the world. ‘Demokratie neuer Art’, in Neue Welt (Berlin), 1947, No. 11, pp. 33-46 (seperately published as booklet by Verlag Tägliche Rundschau, Berlin, 1947); ‘Démocratie d’un type nouveau’, in Démocratie nouvelle (Paris), No. 9, pp. 463-467; ‘Democracy of a new type’, in Labour Monthly (Paris) 1947, No. 8, pp. 235-242 and No. 9, pp. 276-279; ‘Demokratiya novogo tipa’, in Mirovoye khozyaystvo i mirovaya politika (Moscow), 1947, No. 3, pp. 141-146; Rinascita (Rome), 1947, No. 11, pp. 141-146; ‘Democracy of a new type’, in Communist (Bombay), 1948, Nos 3 and 4; ‘Les democracies de type nouveau”, in Rénovation. Revue de doctrine et d’action du

20

a “democracy of a new type” a state f affairs ‘in a country where feudal remnants – large-scale landownership- have been eliminated, where the system of private ownership of the means of production still exists but large enterprises in the spheres of industry, transport and credit are in state hands, while the State itself and its apparatus of coercion serve not the interests of a monopolistic bourgeoisie but the interests of the working people in town and countryside.’111 Varga stressed the difference between countries where the “bourgeois-democratic” state (Great Britain) was controlled by the monopolies, and countries where the “democratic states of a new type”. ‘Nationalisation in the new democratic States signifies a spcial sort of economic revolution. The property of traitors to the country, of fascist capitalists, was confiscated without compensation. Other big capitalists received compensation, but their ncome after compensation was only a small part of the surplus value which they previously appropriated.’112 But he also conceded that there still existed a private appropriation of surplus value, but this was restricted to ‘a relatively narrow sphere.’113

In order to influence the development of their economies in a planned way, economic plans over several years were drafted. ‘It is obvious that there can be no planned economy, as understood in the U.S.S.R. in these countries.’114

In this article, Varga, however, remarked that these democratic states of a new type (Poland, Yugoslavia, Czechoslovakia, and Bulgaria) maintained the closest friendly relations among themselves and rendered each other economic and political aid. ‘Although at the present time’, Hungary and Rumania did not belong to this category of states, they were ‘clearly developing in this direction’.115

More important in this context was that, according to Varga, that the Soviet Union was interested ín the maintenance by these countries of the existing regime and their further development in a progressve direction’. In addition, he warned for any aggressive adventure against the Soviet Union. ‘This situation signifies that the States of democracy of the new type are the junction of the post-war struggle of two systems. It was not for nothing that during the war Churchill frequently called for the opening of a Second Front in the Balkans instead of a genuine Second Front in the West, in order that, by the end of the war, British armed forces would be on the spot to safeguard the old order. But these proposals were rejected by Roosevelt and Stalin as being incorrect from the military viewpoint.’116

The parliamentary elections of 31 August 1947 marked, however, a watershed in Hungarian politics. They happened at a moment Zhdanov was preparing his “theory of the two camps”.117 On 2 October 1947, American ambassador Selden Chapin sent a long telegram to Washington reporting on the political situation in the country he qualified as ‘the last peripheral nation to be forced within the Soviet orbit’. He noticed that ‘the national elections, it is true, demonstrated once again that most Hungarians are “non-Communists” in outlook and feeling.’ But he also pointed to the fact that during the election campaign the Communist Party successfully had demoralised, confused and fragmentised the opposition and that the Smallholder Party had bore the brunt of the election loss. In order to destabilize the Social Democratic party the Communists began to proclaim the fusion of the two parties, ‘with the

Parti Communiste de Belgique (Brussels), 1948, No. 9, pp. 145-156.111 Varga, ‘Democracy of a new type (i)’, in Labour Monthly, Vol. 29, 1947, No. 8, p. 235.112 Ibidem, p. 236.113 Ibidem, p. 236.114 Ibidem, p. 241.115 Varga, ‘Democracy of a new type (ii)’, in Labour Monthly, Vol. 29, 1947, No. 9, p. 278.116 Ibidem, pp. 278-279.117 Gone was the hope of using England as a counterweight to the USA. Aleksey Filitov, ‘Soviet security concepts in historical retrospective’, in Kurt R. Spillmann and Andreas Wegner (eds) with the assistance of Derek Müller and Jeronim Perovic, Russia’s Place in Europe: A Security Debate, Bern: Peter Lang, 1999.

21

result that despite vigorous denials by Social Democratic leaders, the anti-Communists in that party were definitely alienated.’ Selden Chapin optimistally concluded that ‘the elections were only an incident in the continuing political struggle for power. Nominally the Communists and their agrarian wing party the national Peasants have five plus two, or seven portfolios as compared to eight for the Smallholders and Social Democrats.’ But on the other hand he remarked that the Communist plans for the next three years followed ‘closely the measures already taken or planned in Bulgaria and Rumania. Control of finances and production is involved in the demand for the nationalization of the National Bank and of the large private banks in conformity with the law setting up state controllers.’ He concluded that the Communist Party had emerged from the national elections of August 31, 1947, ‘as the only coherent Party in an otherwise completely disorganized and demoralized political picture. Barring miracles, the process of incorporation of Hungary within the general Soviet system described in my despatch under reference will now continue at a steady and inexorable pace.’118 The political turn decided at the conference constituting the Cominform at the end of September 1947 marked a shift toward an openly Stalinist policy and the construction of a people’s democracy.119 Nationalization of industrial enterprises, banks and financial institutions only occurred at the end of November 1947. Big factories were merged. The political turn went hand in hand with an ideological redefinition of the new society and the new state formerly announced. Pressure exercised on the Social Democratic Party led to a purge of the Right-wingers and to talks with the Communists. A unification congress completed this process was held on 12 and 13 June 1948.120 The number of party workers amounted to some 125,000, which corresponded roughly with its paid officials plus the number of activists working in the army and other state organs Magyar Dolgózok Pártja (MDP, Hungarian Workers’ Party). In 1948, before unifaction with the Social Democrats, 30 percent of the merbers were women.121 A Hungarian Independence-Popular Front was created on 1 February 1949 to absorb the other parties. This Front won 96 per cent of the vote in fresh elections held on 15 May 1949. Meanwhile, Rákosi started purging the freshly constituted unified Magyar Dolgózok Pártja (MDP Hungarian Workers Party). The former leftist Socialists having joined the unified party and those Communists who were judged dangerous or cumbersome were eliminated. The Rajk trial of October 1949 would open a period of liquidations and repression. Without knowing the agenda, delegations of the socialist countries arrived in Moscow in the beginning of January 1949. Not Voznesensky, but CC Secretary Mikhail Suslov presided over the preliminary debates announcing the establishment of the Comecon. This happened with the participation of Gerő, President of the Supreme Economic Council, and Imre Vajda of the Hungarian Planning Office. No official agenda was distributed and no exact date of the meetings were reported. After that meeting Hungarian planning officials meetings were organized at the Matrahaza in Hungary in order to deal with economic problems.In the mean time, important changes were shaking the CPSU(b): almost all of Zhdanov’s entourage were arrested and executed during the year 1949. Among them were A. A. Kuznetsov, Secretary of the Central Committee and Zhdanov’s right hand man; Rodionov,

118 Selden Chapin, in US Foreign Relations, 1947. Chapin was ambassador to Hungary, April 1947-49 (declared persona non grata by the Communist government of Hungary, recalled for consultation by Department of State, 1949).119 Later, Miklós Molnár defined this turn: ‘The issue no longer was, as before, to construct a “new democracy,” but rather to construct a “people’s democracy,” erecting socialism with the help of the dictatorship of the proletariat and its vanguard, the Communist party.’ Molnár, o.c., 1979, pp. 204-205.120 Habuda, Rákosi, Székely, T. Varga (eds), Miklós Habuda, Sándor Rákosi, Gábor Székely and György T. Varga, A Magyar Dolgozók Pártja határozatai 1948-1956, Budapest: Napvilág Kiadó, 1998, pp. 15-32.121 Molnár, o.c., 1979, p. 210.

22

Prime Minister of the Russian Republic; and Voznesensky, President of the Plan. According to Khrushchev their elimination was due to Beria’s intrigues against his enemies,122 thus helping Stalin to get easily rid of a powerful intra-party network of officials having based their power in Leningrad and in the administration of the Russian Federation. Varga should have been aware of these important shifts in the power structure of the CPSU(b). He formulated in these days is long-attended self-criticism.

The Cold War starts

During that stormy year of 1947 Varga reviewed several books on international affairs published in the West. 123 He had certainly remarked how the international situation and the position of the communist parties had changed. Communists in the different western countries did not react that differently when being confronted with the same phenomena.In Italy, in May 1947 the De Gasperi government collapsed and thereafter Italy was governed by an unstable parliamentary coalition that included De Gasperi and excluded the left. In 1948 the Italian election was determined by the events in Czechoslovakia where the Communist party had seized power. The Italian election was bought by the Americans with the quite open promise of future Marshall aid and the support of the Vatican. The Christian Democrats won handsomely, gaining a majority of both deputies and senators, and Luigi Einaudi became president of the Italian Republic.124 Economic power shifted decisively to the entrepreneurs. The Marshall Plan started just after the frantic 1948 elections and the protest that followed after the attempt on party leader Palmiro Togliatti’s life.125 In France, after the ousting of the PCF ministers from the government in May 1947, the Communist leadership avoided conflicts with the Government, even as salaries plummeted, while the CGT only hesitantly participated in a nationwide strike wave in the fall of 1947. Jules Moch, by then the Socialist minister of Interior, easily broke a December 1947 strike by bringing in a few naval engineers to Paris-region facilities. The fall of 1947 marked the beginning of massive, unrelenting social agitation in France and a decisive break between Socialists and Communists. The U.S. State Department and the American Federation of Labor (AFL) supported Socialist efforts against the Communists. In 1945, the AFL had sent Irving Brown to Paris to undermine Communist influence within the CGT. Formalizing the split in the CGT, Force Ouvrière held its founding congress in December 1947.126 The State Department also encouraged the French government to act against the Communists.127 In the USA, Dennis called for a programme that would help to impede the outbreak of a crisis and above all to safeguard the interests of the people from the ravages of the crisis. In asking for a more extensive programme for curbing the monopolies he projected a more developed 122 N. Khrushchev, Khrushchev Remembers, London: André Deutsch, 1971, pp. 245-258; N. Khrushev, Khrushchev remembers, The Glasnost Tapes, Boston, Toronto and London: Little, Brown and Company, 1990, p. 25-26.123 They included titles like E. Mantoux, The Carthaginian Peace – or the Economic Consequences of Mr. Keynes, London, New York, Toronto, (translated from the French original La paix calomniée – ou les consequences économiques de M. Keynes, préf. Raymond Aron, Paris: Gallimard, 1946); Henri de Kirillis, I accuse de Gaulle, New York: Harcourt, Brace, and Company, 1946 (translated from the French original De Gaulle dictateur, Paris: La Défense, 1945); Trevor Evans, Bevin, London: Allen and Unwin, 1946.124 Robin W. Winks, Cloak & Gown. Scholars in the Secret War, 1939-1961, New Haven and London: Yale University Press (Second Edition), 1987, pp. 379-394.125 David W. Ellwood, (2003) ‘The propaganda of the Marshall Plan in Italy in a Cold War context’, in Giles Scott-Smith and Hans Krabbendam (eds), The Cultural Cold War in Western Europe. 1945-1960, London and Portland, Oregon: Frank Cass, 2003, pp. 229-231.126 Robert L. Frost, Alternating Currents. Nationalized Power in France 1946-1970, Ithaca and London: Cornell University Press, 1991, pp. 88-91.127 French president Vincent Auriol ordered Robert Lacoste to oust Communists from the nationalized firms’ boards. Frost, o.c., 1991, p. 91.

23

programme of nationalization under democratic controls. The slogan of nationalization was combined with the idea of struggle for a new democratic alignment and for the election of a progressive presidential ticket and congress in 1948. The second theme was the coming of a cyclical economic crisis in the United States accentuating the danger of fascism.128 Harry Pollitt argued at the Conference of the Communist Parties of the British Empire countries that ”the United States, while boasting and glorifying her free enterprise, is heading for an economic crisis which will break out either at the end of this year or the beginning of 1948.” It is possible between Dennis prediction and Varga’s opinion was due to Bittelman, one of the few American leaders reading the Pravda regularly.”129 The Communist Party remained the small, cantankerous splinter group it had been ever since its foundation in 1920. Two Communist MPs had been returned in 1945, Willie Gallacher in West Fife, and Phil Piratin, a newcomer, in Mile End. There were two Communist councillors elected in the LCC in the East End, in March 1946. At the start, the Communist strategy was to declare its warm support for Labour. Gallacher and Piratin voted in favour of the US loan to Britain in December 1945. But by the end of 1946, the opposition to Labour’s policies, especially to Bevin’s anti-Soviet foreign policy, was total. The Communist Party now drifted into a phase of ultra-leftism in 1948, especially after the expulsion from membership of the Labour Party of Platt-Mills and other left fringe. The 1950 general election showed that the Communist Party, apart from local pockets of strength, was feeble in the extreme. All its 100 candidates were defeated, including Gallacher and Piratin. They could muster a mere 91,765 votes between them, 0.3 per cent of the total poll. From 45,435 officially claimed members in 1945, the total fell to 38,853 by May 1950. In the 1951 general election, they put up only ten candidates. Communist presence in the unions was of some significance, but largely because of specific circumstances in particular industries, local traditions in areas such as South Wales, or the organizational talents of some union leaders. The Communist Party itself did not benefit thereby.130

Meanwhile, Varga was playing more than ever Rákosi’s informal diplomat and go-between in Moscow. There, he not only met Rákosi when visiting Stalin, but also other Hungarian officials arriving in Moscow. Among them was Minister of Finance Miklós Nyárádi when visiting Moscow. Nyárádi would later attest: ‘At supper in the Hungarian Embassy in Moscow in June, 1947, I challenged Communist predictions that the U.S. economy must soon collapse. “The Americans have postponed the crash by two measures,” Varga said. ‘They maintained war controls over the economy and they did not shift from war to peace production. Thus they prevented large-scale unemployment, the first symptom of the collapse of capitalism. (...) In Varga’s comfortable Moscow home in December 1947, I again pointed out that the U.S. economy showed no signs of crumbling. Varga was then on the verge of declaring publicly, in contrast with the Kremlin view, that the U.S. economy might not collapse early – a statement that cost him his fat job early in 1948. To me, however, he spoke in more orthodox fashion: ”Postponement or not, no capitalist economy will be able to stand the heavy drain of growing armament costs. The constant worsening of the world situation will finally result in an economic crash in the United States.” In 1949 Varga recanted his postponement theory altogether.”’131

128 Joseph R. Starobin, American Communism in Crisis, 1943-1957, Berkeley, Los Angeles and London: University of California Press, 1972, p. 129.129 Starobin, o.c., 1972, p. 282.130 Kenneth O. Morgan, Labour in Power 1945-1951, Oxford and New York: Oxford University Press, 1985, pp. 294-296.131 N.Nyaradi, ‘Notes on the Soviet economy’, Fortune, September: 98-100.1950, p. 100. Nyárádi wrote these lines after his emigration to the United States were he would become an active agent of the Cold War. On other occasions he did not omit to depict Varga as one of the worst enemies of capitalism. Nicholas Nyárádi, ‘The man

24

After having received a delegation of Hungarian academicians participating in the Jubilee of the Academy of Sciences in Moscow (probably) in 1950, Varga wrote a undated note to Stalin with copy to Malenkov proposing to remedy to the inadequacy of Soviet propaganda among foreign scientists. Varga was especially concerned by the role outspoken petty-bourgeois values private property still played in the mind of Hungarian scientists.

An Genossen StalinKopie an Genossen MalenkovÜber die Mangel unserer AuslandspropagandaMeine Gespräche mit ausländischen Gelehrten, die zum Jubileum der Akademie nach Moskau kamen, - vor allem mit Hungaren – zeigten, dass sie über die Sowjetunion die elementarsten Tatsachen nicht wussten. Insbesondere wussten sie nichts über jene Tatsachen, die geeignet wären, die in den Kreisen der Bauern, Intellektuellen, Angestellten weit verbreiteten Vorurteilen über unser Land zu zerstören.Konkret: sie wussten zum Beispiel nicht,dass die Bauern bei uns Produkten auf dem Markt frei verkaufen dürfen;dass die Bauern und die Sowjetbürger überhaupt ihr Wohnhaus als Privateigentum besitzen können;dass es bei uns Sparkassen gibt, wo man Geld einlegen kann und dafür Zinsen erhält;dass die Kinder das Vermögen der Eltern erben.Da diese Gelehrten ein-zwei Monate vorher wussten, dass sie herkommen werden und sich daher offenbar im Vorhinein über die Sowjetunion zu informieren trachteten, zeigt sich, dass breite Kreise der Bevölkerung in den lange unter faschistische Herrschaft stehenden Ländern bis heute von unserer Propaganda ganz ungenügend erfasst wurden.Der Hauptmangel unserer Auslandspropaganda in diesen Ländern scheint nur zu sein, dass sie davon ausgeht, dass was uns lange bekannt ist, dort ebenfalls nicht mehr propagiert zu werden braucht, anderseits dass was uns heute interessiert, auch die Bevölkerung dieser Länder interessieren muss! Beide Voraussetzungen sind unrichtig.132

Ich schlage vor:a) Eine Serie von kleinen, 20-30 Seiten umfassenden, einfachen, sorgfältig geschriebenen Broschüre für diese Länder herauszugeben, die nicht propagandistisch hochfliegende Phrase, sondern vor allem gut gruppiert.Tatsachen über die Sowjetunion enthalten sollen.Die Themen wären z. B.:Das Eigentum in der Sowjetunion.Die Bauern in die Sowjetunion.Die Intelligenz in der Sowjetunion.Die Studenten in der Sowjetunion.Die medizinische Versorgung der Bevölkerung u. ä.

who made Russia tough’, in U. N. World, September, 1951, pp. 13-16. However, the impact of Nyárádi’s words on public opinion in the western world remained low. Ernest Bevin even called him ‘untrustworthy’ and a ‘self-satisfied opportunist’. Interrogation in Switzerland in Dec. 1948 of Miklós Nyárádi, former Hungarian Minister of Finance - Defected Hungarian Minister of Finance, Miklós Nyárádi, agrees to talk to Anglo American authorities who interrogate him at length. Ernest Bevin commented that he regarded Nyárádi as ´untrustworthy´ and a ´self-satisfied opportunist´. The interrogation notes reveal the extent of Soviet penetration in all areas of Hungarian society – social, political and commercial. There is also concern about passing this information to the BBC. Archives Foreign Office, 371/78543. 132 Varga writes: ‘Der bei uns mit Recht schon populäre Film: “Lenin im Jahre 1918” hat z. B. in Budapest fast gar kein Interesse gefunden.’

25

b) Entsprechende Radio-Sendungen und Vortragzyklen in diesen Ländern zu organisieren.Ich glaube, dass dies eine Frage von grosser politischer Wichtigkeit ist.

During his period of disgrace between 1947 and 1953, Varga’s room of manoeuvring narrowed sensibly. In 1948 he still had two articles published in the Hungarian Communist party paper Szabad Nép133, which may indicate that his visits to Rákosi in Budapest had become less frequent and fashionable. On 20 March 1949 Varga nonetheless received a high Hungarian cross. Varga’s influence in intellectual party circles reamined unshaken in this period of socialist construction. In 1948 a new Economic University had been founded applying Marxist economic thought and recruting working-class students in order to train them for future taks in the state apparatus. Until 1948, the training of economists on the university level was cofined to the Faculty of Economics at the József Nádor Technical University. In the summer of 1948 the Budapest Karl Marx University of Economics was founded to turn out economists mastering the fundamentals their discipline and able to put their expert knowledge to practical application.134 László Rudas, Béla Fogarasi and Erik Molnár took on great roles as theoreticians of the Marxian social sciences. István Antos, Lajos Brebits and Imre Vajda took a role in training the new generation of economists. The economic classics of Marx and Lenin were translated and published in Hungarian. The writings of Eugen Varga and Soviet authors were the most important sources for economic cadre training. The Magyar-Szovjet Közgazdasági Szemle (Hungarian-Soviet Economic Review) became the only scientific economic journal primarily mainly using the works of Soviet authors.135 In the late spring of 1950 Varga visited the new university without any sign of great enthusiasm. In a letter of 7 June 1950 to Rákosi he noted that the students at the Karl Marx University ‘were insufficiently prepared for their study’ and that ‘the professors were for the greater part afraid to give bad marks at the examinations’.136 Rákosi’s semi-disgrace in 1953 and Imre Nagy’s subsequent ascendancy137 necessitated some academic reforms. The Magyar-Szovjet Közgazdasági Szemle was changed into the Közgazdasági Szemle (Economic Review) relying on new Hungarian authors. After a long period of stagnation broad-scale debates started in the Társadalmi Szemle (Social Review) on the importance of the NEP in the Soviet Union in the 1920s, the on the role of economic and financial incentives. Finally, in late 1954, a long-standing problem was solved by the establishment of the Institute of Economics of the Hungarian Academy of Sciences, as an independent organizational basis for economic research.138 György Göncöl, who was related to Varga,139 was appointed director of

133 ‘”A tőke”- Marx halhatatlan műve – Magyar forditásban’ (Capital – that unperishable work of Marx – in Hungarian translation), in Szabad Nép, 6 June 1948; ‘Nyugatnémet pénzreform – a tőkések érdekében’ (West Germany’s monetary reform – in the interest of capiltalist), in Szabad Nép, 23 June 1948; ‘A Marshall-terv: a nyomor és véradó terve’ (Marshall Plan: Plan of misery in the capitalist countries), in Szabad Nép, 8 June 1950; ‘Anglia gazdaság élete az amerikai “barátság” harapófogójában’ (England under pression of American “friendship”), in Szabad Nép, 3 December 1952 (the latter article was an translation of Varga’s article in Pravda, 25 November 1952).134 A. Mátyás, ‘The Karl Marx University of Economics’, in Acta Oeconomica Academiae Scientiarum Hungaricae, 1966, Vol. 1, No. 3-4, p. 387.135 K. Szabó, ‘Twenty-five years of economic science in Hungary’, in Acta Oeconomica Academiae Scientiarum Hungaricae, 1970, Vol. 5, No. 4, pp. 255-259.136 Letter quoted in Andor Ladányi, Felsőoktatási politika. 1949-1958, Budapest: Könyvkiádó, 1986, p. 63.137 About Rákosi’s semi-disgrace, see the transcript of the conversations between the Soviet leadership and the Hungarian delegation in Moscow on 13 June 1953, see Cold War International History Project, Woodrow Wilson International Center for Scholars, Transcript 33. http://www.wilsoncenter.org/index.cfm?topic_id=1409&fuseaction=va2.document&identifier=5034FC40-96B6-175C-9924E6BD5B22ACD1&sort=Collection&item=East%20German%20Uprising 138 Szabó, o.c., 1970, p. 259.139 György Göncöl (born 1907) had married a niece of Varga’s wife.

26

the Institute of Economics. Later, he would become, together with German Jörg Goldberg, editor of Varga’s collected quarterly economic reports published in the 1920s and 1930s.140

These academic reforms did, however, not announce any profound ideological restructurings at the political level or a vibrant philosophical renewal. For all practical purposes, Marxism-Leninism would remain the guiding theory in all fields of science.141

Though Varga remained back-stage, he was still an influential opinion maker in matters of pricing and economic planning. In June 1950 he published a paper in Szabad Nép in which he accused the workers of ‘consumption fever’ and ‘wage fraude’. Workers wanted to consume more and acquire new furnuture, better housing and food, but, instead, they should compare their fate with the miserable living conditions of the working classes in Great Britain and West Germany.142 In reality, Varga announced a comprehensive price reform to be carried out in his native Hungary after the implementation of the first Five Year Plan.

The institutions of control being established in 1949 necessitated a strong and comprehensive centrally planned economy. When the three year plan was midified in 1948, when the so-called five month plan was worked out, and especially when the first five year plan was being devised, the whole workings of the economy, production as well as distribution, were controlled by binding directives precisely spelled out in facts and figures. The production plans were used by the departments of material control in the ministries, and, after 1951, by branches of the Országos Tervhivatal (National Planning Office) to order the yearly and quarterly distribution of materials. The enterprises were, for the most part, left with but a formal independence. The aim was to carry through the central decision to minimise risks and to exclude market disorders. To this end, trade, money, and the market were, as far aspossible, forced out of the economic arena. This aim was reflected in the 1951 price reform, which did away with the direct connections of the price level and movement of so-called consumer prices and of the producers’ prices. The basic principle of the price reform was that the cost price of the goods produced by the state sector had to be covered from the sale price of the consumer products. The means of of production, however, were to be sold at cost price. A great many of the primary industrial materials were sold below cost, with substantial state subsidies. The situation was further aggravated by the great difference between the market price of agricultural goods, and the price which the producer got when he delivered to the state.143 With regard to the price reforms of 1951 Varga was called in for advice. Though he remained all the time backstage, foreign observers reported on this event. Der Spiegel wrote that he had drafted a “Varga Plan” for a thoroughgoing price and wage reform. For that purpose, leading civil servants had been commissioned for consultation to the Hollóháza castle144 25 km outside Budapest near the Czech border.145

140 E. Varga, Wirtschaft und Wirtschaftspolitik. Vierteljahresberichte 1922-1939, Herausgegeben von Jörg Goldberg, Berlin: Verlag das europäische Buch, 1977, 5 volumes.141 In November 1955, two young philosophers like Ágnes Heller and György Tamás expressed these ideas without any reserves: ‘Die Tätigkeit der ungarischen Philosophen ist im ganzen wie in einzelnen farauf gerichtet, mit ihren Mitteln, mit der Erschließund der objektiven philosophischen Wahrheit, der Partei bei der Festigung der sozialistischen Ordnung, der internationalen Arbeiterbewegung und der internationalen Friedensbewegung in ihrem Kampf gegen die Kräfte der Reaktion Hilfe zu leisten.’ Agnes Heller and Georg Tamás, ‘Das philosophische Leben in der Volksrepublik Ungarn’, in Zeitschrift für Philosophie, 1956, Vol. 4, No. 2, p. 234.142 ‘”Fogyasztási láz” és bércsalás’ (Consumption fever and wage fraud), in Szabad Nép, 18 June 1950. 143 Berend and Ránki, o.c., 1985, pp. 209-211.144 This was at the former residency of Mihály Királyi. 145 `Eugen Varga greift ein’, in Der Spiegel, 30 January 1952. Open Society Archives, Budapest, Verga Jenő file, 202 HUN BIO.

27

Meanwhile, other observers saw him as a disgraced propagandist. In a report contained in the archives of Radio Free Europe, Varga was categorized as somebody having nonetheless retained ‘something of his dignity which is more than can be said about the other Soviet propagandists’. The same biographer believed that ‘today he is financial adviser to Hungary, relegated to the fringe of Soviet power, much as a disgraced pro-consul might have been in the Nero Empire.’146 Ferenc Fejtö in Paris thought that Varga had been delegated by Stalin to Budapest in order to organise tight control on the Hungarian satellite.147 Franz Braunthal argued that he had definitely emigrate to his home country after having been disgraced by Stalin.148 Nothing of that all was true. Against his wife’s desire, Varga would stay in Moscow until the end of his life. The reason why is still unclear. Did he resist the temptation of returning to a country he once had left in the bandwagon of Béla Kun? Maybe that the Irish novellist James Joyce holds the key of this enigma: It is dangerous to leave one’s country, but still more dangerous to go back to it, for then your fellow-countrymen, if they can, will drive a knife into your heart.149

Last tango in Budapest

It is difficult to determine the exact character of the 1956 uprising in Budapest. The event demonstrated the extent of the hostility of the population, if not toward socialism and some of its economic and social accomplishments, then toward the communist regime. The revolt manifested itself with extreme violence against the Soviet Union and the Hungarian Communist leadership, without, however, necessarily implying the rejection of the new economic and social structures. On the other hand, the attachment to liberal and democratic values had remained vivid among the urban masses and the members of the former democratic parties which all reappeared together with the civil movement and the workers’ councils.150 Of course, representatives of the old order reappeared in the person of Cardinal Mindszenty, but they were by not representative at all for the real movement in the country that aspired at democracy and a higher standard of living. All these facts should have reached Varga who had followed the events in Hungary day by day.Very little is known about Varga’s opinion on the Hungarian uprising of 1956. In his many writings he would only give one single reference to these tragic events. Indeed, a year after the uprising he wrote that ‘...in postwar Hungary, where the active elements of the deposed ruling classes remained within the country, resorting to all manner of camouflage, and twelve years later, with imperialist assistance, organized a counter-revolutionary putsch.’151 Of course, Varga accepted the official explanation of the events. Thus he voluntarily wrote about a counter-revolutionary putsch with imperialist assistance having overthrown the communist regime. However, apart from these remarks, Varga never would try to give a thoroughgoing analysis of all aspects of the uprising or the mistakes committed by Rákosi’s leadership. To a certain extent he had been himself responsible for these mistakes, especially the planning of a forced industrialization process and a fast collectivisation of agriculture while keeping the living standard of the population extremely low.A workers’ uprising of this amplitude could have been predicted. After having scrutinized the June 1953 revolte of the workers in East Berlin, the Hungarian leaders had been summoned to

146 Open Society Archives, Budapest, Varga Jenő file, 202 HUN BIO.147 François Fejtő, Histoire des démocraties populaires, Paris: Éditions du Seuil, 1952, p. 308.148 ‘Erst als Schdanow längst im Grabe lag und Wosnesenskij verschwunden war, schickte man ihn still in seine ungarische Heimat’. Franz Borkenau, Der europäische Kommunismus. Seine geschichte von 1917 bis zur Gegenwart, Bern: Francke Verlag, 1952, p. 509.149 Quoted in Richard Ellmann, James Joyce, Oxford: Oxford University Press, 1983, p. 291.150 Molnár, o.c., 1979, pp. 226-231.151 Varga, ‘Forty years of socialist progress and capitalist decline’, in New Times, 1957, No. 45, p. 4.

28

Moscow to be received by the complete Soviet leadership (Beria, Khurshchev, Malenkov, Mikoyan, Molotov) in order to correct their Stalinist mistakes. Imre Nagy was designed as the executioner of the new course, but Rákosi kept his post as secretary general of the party. In the summer of 1953, Varga must have supported Rákosi during his relentless fight against the small faction of Nagy reformers wanting to draw back the rigid central planning system only favouring investment in heavy industry. In his possession was Rákosi’s speech and Nagy’s reply to the Conference of the Budapest Party Activists of the MDP on 11 July 1953.152 Varga153 underlined with crayon some passages in Rákosi’s lengthy speech about priority given to heavy industry 154 at the expense of consumption and social expenses.155

Varga paid some attention to Rákosi’s proposals concerning agriculture156 and the suppression of the list registering the kulaks.157 It is noteworthy that Varga omitted marking passages of Nagy’s speech published in the same pamphlet.158

Though the Soviet leaders had curtailed his power by forcing him to relinquish the prime ministership, Nagy’s New Course (increased production of consumer goods and concessions to the peasantry). As long as Rákosi could keep his post of first secretary Nagy’s reforms had little chance to become reality. In April 1955, Nagy was relieved of his duties for “rightist deviation’’ and expelled from the Party in November, sweeping away with his fall the reformist technocratic faction. After the Twentieth Congress of the CPSU, the reformist wing regained momentum. Already on 29 March 1956 Rákosi reluctantly admitted that Rajk had been innocently executed. But in July 1956, he was forced to retire in favour of Ernő Gerő, an appointment that would not solve the legitimacy problem the MDP had.159

The October 1956 events in Poland bringing Gomułka in power were a cataclysm. On October 23, 1956, a great mass demonstration initiated an upheaval of an unprecedented violence and amplitude the leading communist group had not foreseen. That evening, at 8.00 p. m. Ernő Gerő’s speech he had prepared in advance was broadcasted in which ha condemned that nationalist demonstration. In addition, Gerő stressed all key ideas the leading Stalinist group shared: refusal of any form of bourgeosie democracy and alliance with the Soviet Union.160

152 Mátyás Rákosi, ’Rede von Mátyás Rákosi’, in Rede von Mátyás Rákosi und Diskussionsrede von Imre Nagy auf der Konferenz des Budapester Parteiaktivs der Partei der Ungarischen Werktätigen am 11. Juli 1953, Budapest: Ungarisches Bulletin, 1953, pp. 1-21.153 A copy of the German edition of Rákosi’s speech is kept in Varga’s archive at the Party Archives, Budapest, 783.f.11.ő.e.154 ‘Ich möchte mich auf diesem Parteiaktiv in erster Reihe…’ and also ‘In erster Reihe haben wir einen Fehler begangen, indem wir in der Entwicklung unserer Schwerindustrie und der die Produkionsmittel herstellenden Industrien ein allzu schnelles Tempo einschlugen und bei der Planungsarbeit die wirtschaftlichen Kraftquellen, die reellen Möglichkeiten unseres Landes oft ausser acht liessen.’ Rákosi, o.c., 1953, p. 2. 155 Rákosi, o.c., 1953, pp. 3-4.156 ‘Wir müssen die Einzelbauern besonders beruhigen, sie auf jedem Gebiete beruhigen.’ (…) ‘Der Beruhigung der Einzelbauern dienen einerseits der Vorschlag, der das ziffermässige Wachstum der Produktionsgenossenschaften verlangsamt, und anderderseits der Vorschlag, der es den Genossenschatsmitgliedern ermöglicht, Ende des Wirtschaftsjahres aus den Genossenschaften aus zu treten (...)’. (..) ‘Und wenn wir den Einzelbauern helfen, so ändert dies nichts an unserer Politik, dass wir den Produktionsgenossenschaften um so eher helfen’. Rákosi, o.c., 1953, pp. 11-12.157 Rákosi, o.c., 1953, p. 15.158 Rákosi, o.c., 1953, pp. 22-32.159 Granville, o.c., 2002, p. 674.160 Dear Comrades, Beloved Friends, Working People of Hungary! Of course we want a socialist democracy and not a bourgeois democracy. In accord with our Party and our convictions, our working class and people are jealously guarding the achievements of our people's democracy, and they will not permit anyone to touch them. We shall defend these achievements under all circumstances from whichever quarter they may be threatened. Today the chief aim of the enemies of our people is to shake the power of the working class, to loosen the peasant-worker alliance, to undermine the leadership of the working class in our country and to upset their faith in its party, in the Hungarian Workers' Party. They are endeavouring

29

Imre Nagy was again appointed Prime Minister. He re-established a coalition government with the former democratic parties and negotiated the retreat of the Soviet troops. But after a few days of disorders, the Soviet army again moved out to attack Budapest. This intervention of November 4, 1956, marked the end of the Nagy Government. According to Miklós Molnár, ‘the alleged “reaction” during the revolution of 1956 would not have had a social basis worthy of the name’,161 because the purge of the administration, the land reform and the nationalization of the companies had uprooted its layers. However, privately, he was convinced of the fact that an immediate and above all a forceful intervention of some determined troops could have prevented all these excesses.162

Meanwhile, the once so powerful and omnipresent MDP had been swept away. According to János Berecz, the Party had a membership of close to 900,000, but ‘a considerable proportion

to loosen the close friendly relations between our nation, the Hungarian People's Republic, and other countries building socialism, especially between our country and the socialist Soviet Union. They are trying to loosen the ties between our party and the glorious Communist Party of the Soviet Union, the party of Lenin, the party of the 20th Congress. They slander the Soviet Union. They assert that we trade with the Soviet Union on an unequal footing, that our relations with the Soviet Union are not based on equality, and allege that our independence has to be defended, not against the imperialists, but against the Soviet Union. All this is a barefaced lie-hostile slanders which do not contain a grain of truth. The truth is that the Soviet Union has not only liberated our people from the yoke of Horthy fascism and German imperialism, but that even at the end of the war, when our country lay prostrate, she stood by us and concluded pacts with us on the basis of full equality; ever since, she has been pursuing this policy. There are people who want to create a conflict between proletarian internationalism and Hungarian patriotism. We Communists are Hungarian patriots. We were patriots in the prisons of Horthy fascism and in the difficult years of underground work and illegality . . . We declare that we do everything in our power to build up socialism in our country . . . on a Marxist-Leninist basis -which we have in common with other socialist countries- at the same time taking into account the peculiarities of our country, its economic and social situation, and Hungarian traditions. Yet, while we proclaim that we are patriots, we also energetically state that we are not nationalists. We are waging a constant fight against chauvinism, anti-Semitism and all other [51/52] reactionary, anti-social and inhuman trends and views. Therefore, we condemn those who try to spread the poison of chauvinism among our youth, and who use the democratic freedom which our state has assured the working people for nationalistic demonstrations. However, not even this demonstration shakes the resolution of our party to proceed on the road of developing socialist democracy. We are patriots but at the same time we are also proletarian internationalists. Our relations with the Soviet Union and all other countries building socialism are based on the fact that our parties-leading parties in our respective countries are inspired by the teachings of Marxism-Leninism, that we love our people and respect all other peoples, and that we follow the principle of complete equality and non-interference in each other's affairs, while at the same time, we give friendly mutual aid to each other. We help each other in order to further the progress of socialism in our countries and the victory of the lofty ideals of socialism in the whole world. The unity of the Party is always a great necessity. Without unity our Party would have been unable to defy the murderous terror of Horthy fascism for a quarter of a century. Without the unity of our Party and the working class, the people's democracy could not have triumphed in our country and the working class allied to the labouring peasantry could not have gained power. This unity, the unity of the Party, working class and working people, must be guarded as the apple of our eye. Let our Party organisations oppose with discipline and complete unity any attempt to create disorder, nationalistic well-poisoning, and provocation. Worker-Comrades, Workers! We must put it frankly: the question now is whether we want a socialist democracy or a bourgeois democracy. The question is: do we want to build socialism in our country or to make a hole in the building of socialism and then open the door for capitalism? The question is: do you allow the power of the working class and the worker-peasant alliance to be undermined, or will you stand up resolutely, disciplined, and in complete unity with our entire working population, to defend the worker's power and the achievements of socialism? Source: Radio Kossuth, quoted in Melvin J. Lasky (ed.), The Hungarian Revolution. The Story of the October Uprising as Recorded in Documents, Dispatches, Eye-Witness Accounts, and World-wide Reactions. A White Book, Published for the Congress for Cultural Freedom, London: Martin Secker & Warburg, 1957, pp. 51-52.161 Molnár, o.c., 1979, p. 227.162 Varga in his unpublished memoirs. Archive of Mária Varga, Moscow.

30

of the members were not Communists and did not have a firm ideological basis. Many of the party members were no more than sympathizers and easily influenced by various elements and shifting currents in the atmosphere.’163 Other factors played a much more important role. The number of industrial workers had risen from 387,096 to 729,000 from 1949 to 1956, but meanwhile ‘tens of thousands of the best workers had been appointed to responsible posts in industry, the economy, social organizations and public life.’164 A new party, the Magyar Szocialista Munkáspart (MSZMP), the Hungarian Socialist Workers’ Part was formed under János Kádár’s leadership.Even for Khrushchev, Rákosi’s presence in Moscow became less and less desirable165 as the new leadership surrounding János Kádár in Budapest had to get a foothold against the old guard having joined the new party. Meanwhile the Rákosi’s remained in Moscow where they met the Varga’s.166 Obviously, for many a party official Varga was a man of the past remembering them an unprestigious period of party life. However, in Kádár’s environment several repented party officials having been loyal to Rákosi reappeared. Among them was Varga’s nephew József Köböl.167 At an Executive Committee meeting on 26 February 1957 had to answer questions about his dissolution of the former party in November.168

Meanwhile, a process of “normalization’ had begun. Repression started. A new party was formed recruiting among the remnants of the old MDP. On 1-3 January 1957 leaders from the Soviet, Czechoslovak, Romanian and Bulgarian communist parties met with the Hungarian leaders in Budapest (the Poles and Yugoslavs were excluded). Meanwhile, Imre Nagy was treated as a ‘traitor’. In late March 1957 Kádár visited Moscow where he was told that the exiled Hungarian leaders (Rákosi, Gerő and Révai) never could return to power.169 Again, the “Nagy problem” was discussed at length. Kádár reported to his Executive Committee that ‘we must say to the Hungarian people (…) that it is not possible to organize counter-revolution in a socialist system with impunity’.170 On 1 May 1957, a mass rally brought a 100,000 people to Heroes’ Square, a success beyond any expectations for the new leadership. Kádár, who was open to change, had to prepare for social and economic change. Among his new advisers were Jenő Rácz, a former Minister of Finance and István Rácz, both former members of the Smallholders Party. By June 1957, the Varga Committee, came with an reform plan stressing the introduction of new policy tools such as prices, taxes and interest rates. Probably, from the very beginning the old guard wanted to prevent any attempt to dissolve the centrally planned economy. Already on 12 February 1957,171 Károly Kiss172 wrote a letter in the name of the Central Committee of the newly formed Magyar Szocialista Munkáspárt

163 János Berecz, 1956 Counter-Revolution in Hungary – Words and Weapons -, Budapest: Akadémiai Kiadó, 1986, p. 84.164 Berecz, o.c., 1986, p. 85.165 After a few months, Rákosi had to leave Moscow for the Black Sea. He was later on exiled to Central Asia. He died in Gorky in 1971.166 Gerő, now retired, was allowed to return to Budapest and readmitted to the Party. Rákosi was never permitted to return to Hungary. He was exiled to Krasnodar, Tokmak (Kirghizia), Arzamas, and finally to Gorky, where he died on 5 February 1971. Johanna Granville, ’1956 reconsidered: why Hungary and not Poland?’, in The Slavonic and East European Review, 2002, Vol. 80, No. 4, p. 665. 167 Huszár, o.c., 2006, p. 43.168 Gough, o.c., 2006, p. 109; Huszár, o.c., 2006, p. 42.169 Rákosi was exiled to the Black Sea.170 Gough, o.c., 2006, p. 110.171 On that day, the Provisional Executive Committee had met as well. Tibor Huszár, Kádár. A hatalom évei 1956-1989, Budapest: Corvina, 2006, p. 42.172 Károly Kiss (1903-1983), former minister of Foreign Affairs (1951-52) belonged to the so-called Rákosi faction rallied to Kádár. He writes: ‘Szivesen vermé, ha ellátogatna Magyarországra és pihenés mellett az ország jelenlegi helyzetét is közelebbről megismerhetné. PIL, Budapest, Varga files, 783.f.2.ő.2, page 23.

31

(MSZMP) to Jenő Varga in Moscow and on 21 March 1957173 and 7174 and 8 April175 1957 Dezső Szilágyi176 repeated the MSZMP Central Committee’s invitation to visit Budapest in April or May 1957. It is unclear whether Varga ever replied to these letters. However, on 16 August 1957, a letter signed by János Kádár was sent to Varga177 in Moscow (see Appendix 7).

Conclusion

The events of 1956 must have provoked a profound shock in Varga’s life and environment. Therefore, until his last days Varga remained ostentatively blind for the excesses committed by the Rákosi leadership he had supported with his advice and interviews in the party press. Rákosi’s fall meant also the end of an era. With Kádár a historical compromise with all layers of Hungary’s civil society would be sought and established without introducing political pluralism. His policy aimed at maintaining working-class support, but showed in economic matters a growing sense of national interest as well. The development of economics as an academic discipline or an institution as the Statistical Office under its reformist head, György Péter, was against Varga’s preference for a centrally planned economy. When Varga died on 7 October 1964 in Moscow telegrams were sent from Budapest to his widow. Most of them were addressed by close friends.178 Only two telegrams having an official character were received, one signed by Kádár on behalve of the Hungarian Party and another one signed by the economist István Friss (and his wife Csaladja) of the Academy.179

For sure, Varga was not completely forgotten in his native Hongary. The Karl Marx University in Budapest named a dormitorium after him, a technical school received his name and a square in the XXIIe district of Budapest180 was named after him. A bibliography and selections of his works were edited and published, but nobody was interested in studying works anymore. The leading economic journal Acta Oeconomica published by the Hungarian Academy of Sciences would never pay any attention to Varga’s works. At the Academy, the institute of economic sciences rapidly became a bulwark of reformers working on the introduction working on the introduction of so-called “new-economic mechanisms”.

173 On 21 March 1958, Desző Szilágyi writes: ‘Kiss elvtárs megbizásából értesitem, hogyaz MSZMP vezetősége örömmel vette tudomésul, hogej ön és felesége pártúnk meghivását elfogadta. Szeretettel várjuk az Ön által választott időben április végén, vagy május elején. Ilyen értelembem mégkérjük a SZKP vezetőségét hogy az on magyarországi látogatás engedélyezze.’ PIL, Budapest, Varga files, 783.f.2.ő.e, page 24. 174 Kedves Varga elvtárs! A mellékelt levelett elküldtük a Szovjetunió Kommunista Pártja Elnökségének, az Ön hazatérését illetőn. PIL, Budapest, Varga files, 783.f.2.ő.e, page 25.175 PIL, Budapest, Varga files, 783.f.2.ő.e, page 26176 Desző Szilágyi (1897-1967) belonged to the Moscow faction for having lived in the Soviet Union and having joined the CPSU. OSA, Budapest, Szilágyi file.177 The letter was addressed to the Bolshaya Kalushchaya Ulitsa 11, apartment 171, and not to the Leninskii Prospekt 11, apartment 171.178 Irén Komjat; György Lukács and son Jánossy; Pogányé; Viola and Sándor Gergely; Jorsi, Ila, Ilonka Bozsiek; Láci and Egesz Csaland; Lica; Fodor Csalad; Bélané Kun; Joli and Ica Szilágyi; Gyuri, etc.179 PIL, Budapest, Varga files, 783.f.20.ő.e.180 This square was later, after the fall of Communism, renamed Városház tér.

32

APPENDIX 1

Magyar Kommunista PártKözponti Vezetősége Budapest, VIII, Tisza Kálmán tér 27

Tisztelt Elvtársak!Rákosi elvtárs felhivása folytán az infláció ellemi törvényhozás tekintetében az alábbiakban terjesztem elő, amikor a termelés megbénult és a kapitalista a piacza kevés árut dob.

I

Infláció akkor áll elő, amikor a terelén megbénult és a kapitalista a piacra kevés arút dob. A verseny ellanyherlása nem elégszik meg aszal a profittol amellyel a versenu du lása idején és a marx-I P-Á-P képlet második P-je jóval nagyobb, mint az első. A kapitalista fokozatosan és erősen drágitja az árut és iparkodik a piacra minél keve sebbet deobni. Inflációról beszételtünk az első világháboru után is és inflació dul ma is. A két inflació között azonban nagy különbség van. Az első világháboru után a munkásság meg felelő politikai és gazdasági erők hiján, ugyszólván tétlenül állt az inflációval szemben, ma azonban, amikoraz államaparátusban bizonyos pozicióhoz jutott, felveheti ellene a harcot.A horc módja tekintetében tudatositanunk kell eggrésst azt, hogy financtőke mesterkedésével állunk szemben, másrészt pedig azt, hogy a kapitalisták a versenyt egymás között teljesen kizárni nem tudják.Azt hiszem, hiba volna, ha az államgépezetben szerzett posición katorra használnól fel, hogy a kapitalistávol szemben mechanikus kémpzerreduszabályokhoz fordulnánk. A letünt fasiszta kor mutattameg, hogy pl. az árszabályozás áruel rejtést von maga után. Azt hiszem, hogy helyesebb, ha kihasználjuk a kapitalistának azt a gyergéjét, hogy a versenyt egymás között huzárni nem tudjak. Igy adva van a megohdás is: erős versenytársat kell nekik állitanunk. Mivel pedig ezt a versenytársat a financtőhével szemben kell állitanunk, az nem is lehet más, mint egy széles alapokon nyugvó bank.A mai politikai helyzetet tekintve tehát egy hatalmas Munkás- es Parasztbankat kell felállianunk szövetkesti alapon. Igy teremtjük meg az ujjáépitésnek gazdasági alapjait is. Ez a Munkás-es-Parasztbank a “Milliók Bank”- jo az államtól megfelelő támogatást kopna. Ez a támogatást egyrészt adó – és illetékmentyességben nyuilvánulna, másrészt pedig az államnak a bank egyes kötelezettségeiért kellene kezességet vállalnia.Ha a politikai vonalon sikerül e harcot eredményesen folytatnunk, ugy durva becslés szerint kb. Két millió tag legalább fél milliárd pengő részjegyet jegyezhetne.A részjegg ára alacsony, a mai helyzetet tekintve, 200-P-nél több nem lehetne. A bank első lépesé az infláció ellen az lennelenne, hogy állami garancia mellett felelősséget vállalna azért, hogy a tagok részjegyeik árát, a betevők pedig betétjüket valorizálva kapnák meg. Ez gyokorlatilag abban állna, hogy a részjegyre illetőly a betétkönyvbe a bank bejegyzené a részjeggynek illetóleg a betétnek, a részjegg áránek befizetéze illetóleg a betét idejében fennáló, aranuhoz vagy buzához vagy esetleg mindkettőhöz viszonyitott órát. Ës azokat ennek megfelelően is fizetné vissza.Az esetleg befizetett fél milliárd P-vel ilyen magas garancia azonban nem vállalható. Ehhez megfelelő aranyhitel is kellene. Mivel az ország aranykészlete kicsi, azt külföldről kellene megkapn…. Mint külföld azonban osak a Szovjetunió jöhetne tekintetbe.Az aranykölcsön lebonyolitását a következőképen gondolom:

33

A “Milliók Bank”-ja kölcsön kötvények bocsátána ki, amely kölcsönkötvények beváltásáért az állam vállalna felelősséget. A kölcsönkötvényeket a hitelező Szovjet hapná (??) meg. Az aranyat nem kellene a Szovjetbol ide szállitami, elég volna, ha az ott, a magyar kormány rendelkezésére állma, hogy azt szükség esetén bármikor igénybe vehesse.Egy ilyen lépéssel az infláció elleni hare jelentősen jutna előre.A “Milliók Bank”-ja édrekeltségekörébe vonná elsősorban az elhagyett javakként kezelt üzemeket és ingatlanokat, de igyekez ne más üzemeket is érdekeltsége körébe vonni.A “Miliók Bak”-ja foglalkozna jelzáloghitellel is és pedig ugy, hogy államilag garantált jelzaloghitelleveleket bocsájtana ki és a jelzáloggkölcönöket, a hitellevelek árának erejéig nyújtaná. Mivel kevés a remény arra, hogy a németek és a nyilasok által elrabolt aranyakot megkapjuk, az aranykölcsön törlesztésére két mód kinálkozik:

1. A Torgsin-ek mintájára a késöbb említett szövetkezeti központok eyes taggjai kapnák meg a kizár’rlages árusitási jogot afényüzési cikkekre. E cikkeket csak aranyért vagy augynevezett “nemes valutáért” lehetne vásárolni.

2. Fontolóra kellene venni egy erősen progressziv, 60-70-%-os háborus vagyonszaporulati adó bevezetézét.

Mivel a tőke nagyrészt Svajeba és Svédországba mene kült a további menekülés megakadályozásának egyik módja a finánctőkénak, a bankoknak kontrollja lenne.

II

Mivel célunk az, hogy a tőkének megfelelő kezdeményezést hagyjunk, nem volna kivánatos ellene erősebb rendszabályyokat foganatositani. Er azonban semmiesetre sem zárhatja ki azt, hogy a tőkét megfelelő ellenőrzés alá vonjuk. A finánctőkének a maihoz hasonló korban pl. egyik kedvene spekulációs módja az. Hogy ipartelepeket alapit egy részvénytársaság köpenye alatt.Rendszerint a részvények többségét, 51 %-át a ban kmegtartja magának, a többi 49 %-ot pedig aladja. Nem kell kiemelnem, hogy a részvények 49 %-anák ára jóval megholadje az ipartelepét. Rendszerint kispolgárokat sikerül igy a banktőkének beugratnia. Természetes, hogy a banknak nem is célja az ipartelep fenntartása és az abban való termelés. Az ilyen és az ebhez hasonló spekulációk ellen be kell vezetni azt, hogy a nyilvános számadásra kötelezett vállalatok alapitását engedélyhez kőssük.Igy alkolom nyilnék annak megállapitására is, hogy kihuzédik meg a kezdeményező tőke mögött. Ugyancsak kivánates lenne a már meglevő. Mindenesetre meg kellene hagyni a tőkének a profit lehetőségét is. Ennek a mai korban az az előnye van, hogy a tőkét versenyre.

III

Valutavédelmi intéz kedéseket kellene bevezetni. A bankjegyek lebélyegzése nem nagyon közkedvelt, de nem is nagyon közkedvelt, de nem is feltétlenül szükséges. Elegendő volna a magyar kibocsátásu pengő-bankjegyeket má sokkal becserélni, mégpedig rövid határidón belül. A pénz becseréles történnek meg, ami fontos kontrollt nyujtana a háborus vagyonnövekedés mégállapitásánál. Ezzel szemben a Magyarországon tartózkodók birtokában levő részvényeket, szövetkezeti részjegyeket és egyéb értékpapirokat le kellene bélyegezni, már csak az előbb emlitett ellenőczés miatt is, de meg azért is, mert meg kellene tiltani a lebélyegzés után a külföldröl behozott értépapirok magyarrországi forgalmát. Szigoru pengő ki-sé leviteli tilalmat kellene felállitani. A pengő órát az aranyhoz kell viszonyittami és

34

szigornan meg kell állapitani azt a bankjegymennyiséget, amelyet a Nemzeti Bank kibocsájthat, illetőleg azt az aranyfedezetet, amelyet a Nemzeti Bank tartania kell.A külkereskedelmet monopolizálni kell. Ez csak a “Milliók Bank”-ja utján volna bebonyolitható. Az ujáépitésben részt véve kapitalistáknak meg kellene azt a kedvezményt adni, hogy a “Milliók Bank”-ja árubehozatal esetében részükre nyereség nélküll közvetitene.

IV

Élénkké kell tenni a falu és a város közötti árucserét. Ennek a termelés intenzitásán és a közlekedési eszközökön kivül, az az előfeltélek is van, hogy megfelelő kereskedelmi szervezetek legyenek kiépitve. Már meg is idult a sz”vetkezetek népszerüsitése. Mindenesetre kivánatos, hogy a szövetkezeti szervezekedés és az egyes sz”vetkezeti központokhoz voló tartozás önkénte legyen. A tagszövetkezeteket anyagi érdekük és ne a kényszer kösse az egyes központokhoz. Fel kell állitani a Szövetkezeti Tanácsot, mint csucsszervezetet. Az üzérkedések és parasztfogások megakedályozása végett a Szövetkezeti Tanács engedélyéhez kell ugyan kötni egyes szövetkezetek megalakitésát, de az engedélynek függetlennek kell lennie attól a körülmenytől, vagjon alapitandó szövetkezet tagja kiván-e lenni volamelyik szövetkezeti központnak vagy sem.Demokráciának kell érvényesülnie az egyes szövetkezeteken belül is. Minden tagnak csak egy szavazata lehet, tekintet nélküll arra, hogy nennyi részjegye van.Az éllam szerepe a szövetkezetekkel kapcsolotban csak támogatá/adómentesség stb./ lehet, de a szövetkezetek ügyeibe egyébként bele nem avatkozhatik. Különösen kerülendő az a faciszta módszer, hogy a szövetkezeteket az államtól gazdaságilag függővé tegyük. Legyen a szövetkezet szabad emberek szabad tömörülése.Külösön favorizálni kell a fogyasztási, értékesitő árubeszerrzés tipusokat. Azt hirzem ajánlatos volna a szövetkezetek e harom tipusát egyesiteni. Igy a folusi és városi szövetkezetek együtt – müködése biztositia lenne.A szővetkezetteknek egymásközöti csereforgalma clearing utján történnék. E clearing lebonyolitására és a szövetkezetek finanszirorására “Szövetkezeti Bank”-nak és rajta keresztül a szövetkezeteknek kölcsönt nyújtson.Az adó kérdése. Meg kell teremtenünk az adómorált, a tömegek között egyrészt azért, mert a tömegekken tudatositanunk kell azt a tényt, hogy már nem régi fasiszta államak kell adót fizetniök, hanem a demokratikus népi Magyarország bevételét, saját eletleketőségük alapját kell biztositaniok. Je meg kele teremteni az adómorált az adóbeszedés és kivetés terén is. Az adóhivatalnokok ne a régi könyörtelen, mechanikus bákok legyenek, hanem demokratikusan érző és gondokodó emberek, a kik ugyan könyörtelenül lecsapnak az adóeltitkolókra, de megértik és megérzika kisememberek baját.Kivánatosnak látszik a George-féle egyadórendszer bevezetése, amely nem a jövedelmet, hanem a jövedelmi lehetőséget teszi adó tárgyává. Helyes behajtási politika mellett, ez az adó erős fegyvez lehet a szabotálo tőke ellen.Meg kell szüntetni a jövedelmi és kereseti adó kettő ségét, mert ez főleg a kisembert sujtja. Növekvő kulcs szerint új jövedelmi adó hozandó be.Be kell hozni a forgalmi adót is, noha ez jó részt a fogyasztót sujtja, de az államnak tetemes bevételt biztosit. Igy ez ma elkerülhetetlen. Mindenesetre meg kellene szüntetni a mai beszedési formát, mert ez adósikkasztásoknak és az adócsalásoknak ad bő lehetőséget, azt mindjárt a termelőnél kellene beszedni és pedig as árunak a telepről való elszállitósa idejében azonnal. Ez alkalmat nyujtana a termelés ellenőrzésére is.

VI

35

Végül be kellene hozni, hogy az állam által ezutám nyultandó ipari kölcsönöket a kapitalisták valorizálva legyenek kötelesek viszafizetni.Noha a rendszabályok jórészével megkéstünk, azt hiszem, hogy ezek megvalósitásával meg lehetne a további inflációt akadályozni, ha ennek megakdályozása bizonyos időt isvenne igénybe. Azt hiszem, hogy e rendszalályok biztositanák az ujjáépitésben való résgvételét.Amennyiben az Elvtársak a foganatositandó rendszabályokat tudomásomra hozzák, a Jogügyi Bizottság a megfelelő jogszabályok tervezetét azonnal munkába veszi.

Elvtársi üdvözlettel.Szabadság!

Varga

36

APPENDIX 2

Szigoruan Bizalmas

Budapest, 1946, február 2.

Kedves Varga Elvtáras!

Köszönettel megkantam most küldöttet is. A mai postavál küldöktegg el ég terjedelmes jelentést. Szeretném, ha ellolvasná és mejtenné rá a megjegyzéseit.A Vörös Hadsereg kivonulásával kapcsolatos véleménye helytálló. A Vörös Hadsereg jelentéte nélküll már régen polgárháborn volna Magyarországon. A fegyveres erőre ezért mi nagy sulyt helyezünk. Sajnos távolról sem azzal az eredménnyel, mint amit szerertnénk. A hadseregre is nagy sulyt fektetünk, de mert demokratikus vafy éppen kommunista tisztünk kevés, inkább azt az utat választjuk, hogy a hadsereg létszámát a minimálisza esökkentjük. Ezt elsősorban gazdasági indokolássai tesszük. Pillanatnyilag az a helyzük, hogy Budapesten mincs is garmzon. Ellenben van vagy 10.000 tiszt, akiknek egy része fel van fegyverezve. Mi pillanatnyilag emiatt inkább a rendőrségre fektetjüla Budapesten a fősulyt. Épp a napokban egyeztünk meg a Kissgazdapärttal, hogy kommunista lesz a budapesti rendőrfőkapitány, még pedig a hadsereg politikai osztályának eddigi vezetője Tervbevettük hogy a tavasszal a renderzőgárdát az eddiginél ozolidabban és katonai szervezettell fogjuk kiépiteni.A svábokra vonatkozó megjegyzése is helytálló. Az állatállomány egyrészét a háboru elpusztitotta, a másikrészét a svábok áttelepitésük előtt dollárért és aranyért itthagyják, csak kisebb részét vagják le. A kitelepitésnek az a baja, hogy a magyar burzsoázia és a rövidlátó demokrácia jelentékeny része is szabotálja Lényegében csak a kommunistak reszük komolyan. Szabotálják és akik ezt az átvételt minden erővel igyekeznek elhuzin. A kitelepitést juliusig kell végrehajtani. Eddig csak az első öt vonat ment elkb. 6.000 svábbal.. De máris akadozik a dolog. Mert az amerikaiak nem küldik vissza a vornatokat és nekünk nincs annyi vagonunk, hogy 4-500 csak ezzel legyen elfoglakra.A béketárgyalások előlkészitéséve’l, valamint a reparációs szállitások akadozásával kapcsolatban itt felmerült a gondolat, hogy a legközelebbi időben utazzom Moszkvába, kölcsönös informálódás céljából. Szeretném erre vonatkozólag a Maga véleményét hallami. Ha szükségesnek tartja az ilyen utazást, ugy legyen szives közölje ezt Szántó elvtárssal, aki nekem meg fogja táviratozni.Az elvtársak mindnyájan üdvözletüket küldik. Közülük egyre többen kerülnek állami szolgálatba. Ën pillanatnyilag miniszterelnök is vagiok, de remélem, hogy holnapután már megalakul az uj kormnány. Bár attól sem lesz kevesebb a munkám.Adja át üdvözletemet feleséggének, Mariának és nagyon kérem, hogy május végén. Amikor Budapest ujra emberszabásu képet ölt, látogasson el hozzánk. Azt kiszem ez a gondolat nem rossz és remélem, hogy helyesli. Jó egëszségét és jó munkát kivánok.A regi barátsággals és kommunista üdvözlettel.

37

APPENDIX 3

Budapest, 1946, április 13.

Kedves Varga Elvtárs!

Josiph Visszarionovitzsal való beszélgetésem után tööt órával már repülőgépen ültem és mert nem akastam éjjel háborgatni. Bárányossal üzentem meg, hogy a beszélgetés során felmerült a maga hazajövetelének a kérdése is. A Gazda, mikor arrál volt szó, hogy pártunk erőit most a gazdasági fronta vesse át, megkérdezte, hogy mi a véleményünk a Maga hazajöveteléről. Mindjárt kítszer is hozajöveteléről. Mindjárt kítszer is hosátette “on tolkoviije parin”. Én megmondottam, hogy mi rendkívül örülnénk neki, ha legalább is a szanábás nehéz hónapjainak idejére hozajönne, csak attól féünk, hogy ghyenge egészsége nehezem fogjor állami a mi kissé nyers uiszonyainkat. Most nagyonkérem, hogy döntsön Maga, amermyiben ugy érzi, hogy néhámy heti pihenés után, mondjuk május első felében hazajohetne, ugy mi kérni fogjuk, hogy engedjék egyelőre hat hónapra haza. Mondanom sem kell, hogy itt már teljes atavasz és hogy rajta leszünk, hogy az egészségére vigyázsunk. Válaszát vagy Gerő elvtárson keresztüll, vagy Szántó elvtárson keresztül juttassa minél sürgősebben hozsám, hogy a javaslatot megtehessük.Nagyon örülnék, ha valamit közölne velem arról a benyomásról, amit a magyar kormánydelegació Moskvában léte tett és általában hogyan vélekednek ott a magyar helyzetről és pártunkról.Válaszát előre is köszönöm. Jó munkát, jó egészséget kivánok, Kém adja át üdvözletemet feleségének és Máriánok is.

Meleg kommunista üdvözlettel

Szabadság!

38

APPENDIX 4

В Секретарият ЦКВКП(б)

Товарищу Жданову А. А.

Уважаемий Товарищ

По указаний Товарищ Александрова.

Посылаю Вам оь-яснение по поводу моего выступления в будапеште.

Почему я решил виступить

Я выступил по совместной просьбе руководства коммунистнуеской и социал-демократическойпартии Венгрии. Они считали, что я, почьзуясь авторитетом одиноаково как среди комунистических, так и социал-демократических робочих, лучше других смогу справиться с трудной и весьма непопулярной задачей раз и яснить работникам профсоюзов грозяшую им опосность – превратиться в орудие реакции, стремящейся сорвать стабилизацию валюты. Я считал себя не в праве отказаться от зтой задачи и согласился выступить на собрании. (между прочим, собрание было закрытым, на него допускались только лица с именными пригласительными билетами).

Политическое положение Венгри является очень сложным. Денежная реформа была проведена вопреки воли буржуазии и вобще реакции, которая боится, что успешное проведение денежной реформы укрепит нынешний демократический режим.

Та йная программа венгерской реакции сводится к следующему : сорвать стабильность денеги тем самым дискредитировать перед масами демократический режим и коалиционное правительство , создать новчю инфляцию и доказать этии , что стана не может платить нам репараци , вытеснить левые партии из правительства , а затем с помощью американского займаснова провести стабилизацию валюты , но при диктатуре буржази и антисоветской политике .

Реакция не может выступить открыто с програмой новой инфляци – это вызвало бы всеобщее возмущенле народа, поэтому она старается использовать для этого профсоюзы.

Дело обстоит таким образом: уровень производства в Венгрии составляет около 60% довоенного; из этого надо еще выделять средства для уплаты репараций и для восстановительных работ. Ясно, что реальная заработная плата равочих и служащих не может превышать 50-60% довоеной.

Жахование государственных служащих было снижено правительством до 35-50 % довоенного уровна. Работникам профсоюсоя было дано указание, что при заключени новых коддоговоров на основе твердых денег, зарплата должна быть установлена на уровне 50-60 % довоеннй – выдо дано указание – переходить на сдельщину, чтобы

39

поднять выработку, многих отраслах ниже 40 % довоенной, и этим создать возможность увеличить зарплату без ущерба стабильности денег.

Тактика капиталистов следующая

Они не толко без боя приняли все требования профсоюзов, которые часто предусматривали зарплату не в 50-60, а больше 100 % довоенной заплаты, но и уговаривали их требовать больше, переводить рабочих в более высокие разряды и т. Д.;

Капиталисты не поддерживали перехода к системе сдедьщы.

Агенты реакции, бывшие фашисты, ведут на заводах агитаци за дальнейше увеличение зарплаты, вызывают забастовки. Капиталисты хотят, чтобы под предлогом улушения положения рабочих при теперешнем низком уровне производства было пущено в обрашение больше бумажних денег, чем нужно для товрообого, и этим вызвать новую инфляцию. Профсоюзные работники не разгадали замылов капиталистов и чтезмерю повысили номинальную зарплату. Задачей моего доклада было: убедигь профсоюзных работников – не дать превратить себя в орудие реакции в ее попытках со рвать стабилизацию.

О содержанли выступления

В кратком изложении тасса имеется рад неточностей и искажений. Например, зятая изолированно фроза высокую заработную платую – странна и непонятна. Я гопорил отом, что ряд профсоюзов, вопреки указаниям партии, заключили или подготовили колдоговоролы на основе заплаты, превышающей 100 % уровния довоенной зарплати. Например, колдоговор с. – х. Рабочих прелусматривает для годовых рабочих зарплату, на много превышашую их довоенную зарплату, а также превышаюшую доход крестьянина с 10-15 га земли; колдогоговор журналистов предусматривает для средних журналистов большую зарплату, чем полочают министры и т. д. такая высокая номинальная зарплата создает угрозу новой инфляции.

Неравилью передана фраза: “Я должен здесь подчеркнуть, что никакой политический строй – ни капитализм, ни диктатура пролетариата, ни какой – либо средний между ними строй – не может дать больше того, что производится в стране”. Я старанея об яснить рабочии тот простой экономически факт, что при любом уровне номинальной зарплаты население страны никак но может потреблять больше, чем производится в стране. В связи с этим я сказал, что это является обшим экономическии фактом, независимо от политической системы данной страны. Очень неправильно сформулирована в отчете тасса фраза о национализации: “Можно ли проводить национализацию. Напрасно мы будем национализировать заводы, если не будет повышения производительности труда. От зтого рабочий ничего не выграет.”

Я говорил о национализации в контексте. В венгерской компартии есть “левые” товарищи – так наз. “Коммунисты 1919 года”, - которые атитируют за непосредственную и полную национализацию средств производства, и прибавил, что и при национализации увеличение реальной зарплаты есть следствие увеличения производительности труда.

40

Если у Вас еще останутся какие – либо сомнения в правильности содержания моего докада. Вы можете дать указание мин.

Иностранных дел или пуру, чтобы они сделали перевод моего доклада по газете компартии Венгрии, которая уже в Москве.

С коммунистическии приветом –

41

APPENDIX 5

Toваришу И. В. СталинуМосква

Дорогой Товариш Сталин!

Венгерская денеҗная реформа, начавшаяся 1-го августа с.г. до сил пор в обшем и целом идет успешно, хотя соль шинство в уршуазии и реакционеров против нее. Их план состоит в следуюшем подорвать экомически и политически венгерскюо демократию и после этот о с номошью американских займов провести новую денежную реформу против демократии.

Эта онасная для стаблизации тенденция полуает излучает изветное подкреплние в том методе, которыи применяежя при быплате репарационных пла тежей Советскому Союзу, Югославии и Чехословакии.

На основе договора о перемирии, Βенгрия должна платить репараци по мировым ценам 1938г. (с 15 % набавкой на промымленные товары и 10 % надбавкой на сельскохозяйственны продукты). В течение тода, итёкщём после заключения доровога о перемирии, цены на мировом рынке сново значительно моднялись, что увеличивает тяжесть репарационых платежей последнее об ясняется тем, что мы вынуждены большую чсть сырья для репарационных поставок в возить из-за границы; кроме того, многие цены уже с самого начала были установлены ниж 1938г. В ряде слґчаев от нас требуют очень много занасных частей [что является донолнутельной тяжестью. В отдельных случаях] устававливают новие технические требования, предписывают [применять другую] упаковну, прибав пяются расходы по транспорту. Все эти факторы вместе взятые фактически повыают репарацоные платежи на 70-80 % мировьеи цены 1938г. – это обстоятельство представляет собой серьезную угрозу для славой, можно сказать визяшей на волске стабилизации венгерской валюты.

Угрозой стабѕлизаци являются также значительные заранее нам неизвестные поставки (в деньгах и продуктах) для удовлетвореной коммиси. Эти сумы, вследствие ежедевных новых требований нельзя еще точно определить, но они (составляют) не меньше10 %, вероято дохохят до 15 % государственых расходов.

В виду того, что рапарации сосгавляют 40 % государственых доходов (в нынешней твердой валюте), мы стараемся огтянуть опубликованко гос. […] бюджета, чтобы этим не повредить стабилзации денег и не дать новод для новых американских выпадов.

Например, только для оплаты содержания на текущии месяц местных частей Крoсной Армии требуестся 9 милиардов (новая денежая единица – е. В.), исходя из расчета: 1 рб. = 2,1 форинта (по курсу 1 долл. = 5,30 руб., а 11,7 форинта = 1 долл. – Е. В.):

Таким образом, например мл. Командир должен был бы получить в месяц в венгерских деньгах 315 руб. На эту сумму он может купить: либо 780 кг. ншеницы, либо 3100 kг картоля, либо 70 кг домашней птицы, либо 32 пары женски чулок, либо 30 метров х. б. ткани.

42

В виду того, что засуха причинила большой ущерб и уменьшила урожай осеннх продуктов (кукурузы, карго еля, подсолнуха – Е. В.) больше чем на 50 %, причем […] наши товарные фонды, которые крестьянство может кумить на новые бумажные денги, столь [..] незначительны – моявление такой большой покупательной с пособности (состороны Красной Арми) угрожает сделаться причиной новой инфлации.

Поэтему я прошу Вас товариш Сталин дать указния местным организациям точно выполнять соглошене, заключенное 15-го июня 1945 г. и зимать репарации [таким образом, чтобы] по ценам не ниже мировых цен 1938 г . (с 15 % надбавкой на промышленные товари и 10 % надбавкой на селскохозя-йственные продукты). Я прошу вое также, чтобы требо вания Кросной Армии – во всяком џмучае на ближайшие два месяца – были бы уменьшены на половину.

Тов. Е. Варга, который играл ведущую роль в нодготовке и проведении стабилизации вентерской валютй и который теперь возврощается в Москву может Вам дать более исчерпывающую информацию.

Повторяю свою просьбу.

С горячим коммунистически приветом.

Ракоши

43

APPENDIX 6

Kedves Rákosi elvtárs!A magyar problémákról folytatott beszélget tésünkben egy dologról meg feled keztünk [közöttünk? AM]. Váloszinű, hogy otthon a kérdés közben felmerült, de mégis célszerűnek tartam figyelmeztetni rá. Ez a betegsegélyz pénztár kérdése.Biztosra veszem, hogy bizonyos idő múlva valamilyen formában a betegsegélyző intézményeket újra fel kell épiteni, illetve demokratikus formában visszaállitani. Amint emlékszit, az első világ háboru elötti időben tisztviselök a betegsegélyzö pénztárbeli állások a Szociáldemokrata Párt fiszetett káderjeinek a kiszélesitésére szolgálnak.Ezenkivül a szociáldemokrata betegsegélyző tiszztviselök a betegsegélyző pénztárak részéről a munkásoknak nyújtott segélyeket úgy tüntették fél, minta Szociáldemokrata Párt érdemét.Természetes, hogy arra kell törekednük, hogy ez az állapot ne ismétlödjék meg. A betegsegélyzö pénztárakat a pártnak kell kihasználnia káderjeinek elhelyezésére és kiszélesitésére & nem szabad megengedni, hogy ezek a pénztárak a Szociáldemokrata Párt várjanak, mint ez az első világháboru előtt volt.Itt semmi magukat különösen érdeklő újság tudtommal nincsen. Üdvözlöm az összes elvtársakat. Írja meg, megtudottvalamit a rokonságom sorsáról.Meleg üdvözlettel1945, február 7.Varga

44

APPENDIX 7

Kedves Varga elvtárs!Augusztus elején Budapestről telefonálták nekem Moszkvába, hogy az Ön személyes ismerőse, Polacsek László181 elvtárs, hivatkozva találkrásukra, szóvátette, hogy Őn szivesen látogatna Budapestre.Azt gondoltam emak szervezési ekadálya van – amit. Őszintén szólva nem értettem.Kerestem Őnt, de megtudtam, hogy nincsenek a városban, hanem valahol a közeli környéken pihen; gyengélkedik.Megkértem Szuszlov elvtársat, aki megigérte, hogy személyesen foglalkozik az üggyel. Már Budapesten voltam, amikor üzentek, hogy egészsége nincs teljesen rendben és ezért nem tud utazni.Most kaptam meg Varga elvtárs augusztus 6-án kelt levelét, onnelyböl ismét értesülók arról, hogy sajnos, égeszségi állapota nem kielégitő.Kivánom, hogy mielőbb gyógyuljon mes.Őn tudja, hogy az év elején hivatalosan kértük, hogy ideutazhasson hozzánk hátogatóba és az Sz.K.P. illetéhos szerve ehhez készséggel hossájárult. Meghivásunk érvényes bármely időpontra, amikor ez az Őn számára lehetséges. Mindenkor sziven látjuk önt-fewleségével együtt – mint idősebb és tisztelt elvtársunkat, kedven vendégünket.Azt jiszen ezt Őnök is tudják és csupán azért emlitem, hogynem “kizsákmányolo” lélzattol hivjuk, nem dolgortatni akarjuk. Jöjjón hozzánk egyszerüen látogatóba és pikenni.Mégegyszer gyógyulást kivánok és tiszteltetem kedves feleségét.Elvtársi üdvőzlettel.

Kádár János

181 Dr. László Polacsek was working as a children’s doctor at the Kremlin Hospital in Moscow. He published in 1969 a commemorative article on Varga: ’Ismeretlen epizódok Varga Jenő életébő’, in Ország-Világ, 1959, Vol. 50, No. 10.

45