Slyly but surely, Hungary is preparing for the next major hurdle in its steady evolution away from a Soviet-style state-run economy toward a mixed socialist-capitalist market economy.
"Convertibility" is the hurdle, a drysounding word meaning the unrestricted exchange of one currency for another: American dollars or Japanese yen for Hungarian forints.No other Soviet Bloc country has attained convertibility because their centrally run economies bear little relationship to the global financial system outside the bloc.
For Hungarians, convertibility has acquired remarkable importance as a measure of this small, landlocked and resource-poor country's will to rationalize its economy along Western lines despite Moscow's ideological conservatism and traditional heavyhandedness.
The crisis in Poland, carrying an ever-present threat of Soviet military intervention, has immeasurably rasied the stakes for the Hungarians in pursuing their own economic goals. And Poland's desperate economies throughout East Europe as well as the giant Soviet Union itself have given additional significance to the Hungarian moves.
For these reasons, Communist Party and government officials in their offices on quiet back streets of this lovely Danube River city are reluctant to speak of it. "We don't like too much talk of this until it's actually done," said one man with a deprecatory smile.
In the Communist Bloc, as inside the Kremlin Politburo, it can be dangerous to go first. "This is not because we think we are the most advanced," asserted East-West trade expert Tibor Antalpeter, "but because we need it to strengthen our economy. It is a question of the best methods for our own objectives."
The Hungarians have been successfully pursuing those objectives remarkable in the Communist East, ever since 1968 when the Janos Kadar leadership embarked on the dangerous journey to market economics, using the so-called New Economic Mechanism.
While diligently adhering to orthodox Soviet foreign policies, Kadar has brought his countrymen economic rewards unrivalled in the bloc outside of East Germany. Hungary earns half its export income with the West and has entered into joint-stock companies in places as far away as the United States (a light-bulb factory) and Cyprus (hybrid root stocks for carnations and other flowers).
Although buffeted by a counterattack from conservatives in the early 1970s that probably was inspired by Kremlin hard-liners, and now hit hard by the energy price stagflation like all other industralizing countries, the Kadar leadership is pressing ahead with further reforms.
Domestic prices are being steadily brought into line with world prices, and the reins cast off small-scale private enterprise, with government actively encouraging private concessionaries and shops.
Although the state foresees an annual growth in the gross national product of barely more than 1 percent through the next five years because of inflation and recession abroad, it has boubled to 70 billion forints the special investment capital fund available to Hungarian firms able to find better export markets if they modernize.
In the context of these efforts, even the limited convertibility being talked about here would have enormous positive psychological impact on a nation whose 10.6 million citizens are Western-oriented despite their position as a Soviet satellite.
Akos Balassa, head of the State Planning Office's economics department, said in a recent interview that convertibility might be achieved by 1985. "Some political considerations play a role," he said in a classic bit of Budapest understatement. "There must be an appropriate world climate. We hope we can do it, but it's not like we have to do it by 1985.At present, we are working hard to establish the preconditions."
There are two official exchange rates now for the forint, reflecting substantial government subsidies that cushion consumers from inflation in the domestic sector and support inefficient factories and outmoded enterprises in the commercial-industrial sector. In mid-January, the tourist exchange rate was about 24 forints to the dollar, and the commercial, or trade, rate was about 32 to the dollar.
Five years ago, these rates stood at 20 and 40. The gap has been narrowed as domestic prices have been forced upward, and Hungarian industry forced increasingly to survive without massive state intervention. Meanwhile, Hungary has curbed foreign borrowing to reduce its Western debt, which stands at a slightly unnerving $8 billion, or slightlly less than 10 percent of the entire East Bloc's hard-currency debt.
In the next five years, senior officials say, the two exchange rates will be unified. At that moment, they believe, the forint could be made convertible on world money markets for approved commercial transactions, but not for ordinary citizens. "Limited convertibility, similar to what various Third World countries already have," said one knowledgeable source, making a comparison the cosmopolitan and nationalistic Hungarians might find distasteful.
The result would be to allow the forint to circulate far more freely in the world, easing business transactions, loan arrangements and deposits and payments in ways that should further enhance Hungary's search for world markets.
The country's steady progress toward this monetary milestone is being watched with interest by the rest of the bloc, especially Romania, which pursues orthodox internal policies and an adventuresome foreign policy that annoys the Kremlin.
Despite their caution in talking about their careful experiment, officials here also betray pride at what they have achieved so far.
"It seems we will do this because there is a strong will to do it," one party economist said. "There is a very general consensus among the politicians and the economists that this must be done. It's already been 12 years in the minds of the bureaucrats in the National Planning Office, achieving our mixed economy by long-range and short-range plans. We can't live any other way."