For well over a decade, Hungary's Janos Kadar has been performing the balancing act that eluded both government and Solidarity in Poland. Alone among Soviet Bloc leaders, he has shown that it is possible to reconcile a deeply antagonized population to Communist rule while reassuring the Kremlin that its interests are being looked after.

When Kadar came to power in November 1956, after the Hungarian uprising had been suppressed by Soviet tanks, he was regarded by most of his fellow countrymen as a Soviet stooge. Yet today he is almost certainly the most genuinely popular politician in Eastern Europe and also enjoys the confidence of the new Soviet leader, Yuri Andropov.

The key to Kadar's success has been the careful preparation of reforms and a chess player's sense of how much the Russians will allow. Analyzed individually, his moves often seem insignificant, and occasionally he has sacrificed pieces to consolidate his position. But the cumulative effect has been the emergence of a more tolerant and relaxed society than any other in Eastern Europe.

An admiring Western diplomat in Budapest commented: "Kadar has created the feeling among Hungarians that, if they have to be part of the Soviet empire, they're best off here. The quality of life has to be the highest in Eastern Europe -- both in terms of living standards and political freedoms."

For the traveler from other Eastern Bloc countries, arriving in Hungary is almost like arriving in the West. The first shock comes at Budapest's airport, where passengers are provided special carts to push their luggage through a green customs channel marked "nothing to declare" -- a welcome contrast to other Communist border crossings where much time is wasted in elaborate form-filling and compulsory money-changing.

Budapest itself is full of privately owned shops and restaurants, evidence of a more flexible attitude to small-scale capitalism than anywhere else in the Soviet Bloc. The boutiques in the courtyards off Vaci Street keep up to date with Paris fashions. It is possible to buy Western newspapers from hotel kiosks the day after publication. Music stores sell a wide variety of imported records -- and walls have been sprayed with names of punk rock groups.

The stalls in the central market on Tolbuhin Street seem almost to groan under the weight of all kinds of fresh fruit and vegetables. At the Vorosmarty coffee house, elderly matrons nibble delicately prepared cakes beneath crystal chandeliers, as in the heyday of the Austro-Hungarian Empire.

After ruthlessly suppressing the uprising, Kadar coined the slogan "He who is not against us is with us" to promote national reconciliation. Put into practice, this meant extending a hand to people who might otherwise have been opposed to his regime and creating legal outlets for their energy and initiative.

Thus Istvan Feher, 40, whose father's 18-acre farm was expropriated in the '50s, now runs a thriving agricultural cooperative near Budapest. Erno Rubik, an engaging 38-year-old architect, retains the royalties on his world-famous cube and has become a millionaire. Tibor Liska, 57, an iconoclastic economist who sympathized with the rebels in 1956, is quietly encouraged to develop a theoretical model which combines elements of capitalism and socialism.

It is worth emphasizing, however, that the Hungarian success story is a relative one, set as it is against a background of general economic failure. Hungary shares many of the problems familiar to the East Bloc economies--low productivity, high indebtedness, inefficient use of energy--as well as some more Western problems like inflation. Last summer there were the first signs of shortages of such items as detergent.

Reszo Nyers, who was responsible for much of the detailed work on economic reform in the late '60s, said that one of the main aims of the Hungarian leaders was to get themselves accepted by the people and also by the world. Despite gathering economic clouds, including a high foreign debt and the prospect of a 2 percent drop in real incomes next year, he believes that Hungary can continue on its present course. But he makes certain provisos.

The first is that Western credit restrictions could lead to a protectionist backlash and moves away from free market mechanisms. He pleads for Hungary not to be lumped together in the minds of Western bankers with "high risk" borrowers like Poland and Romania.

The second is that there has to be the right international climate. Further crises in East-West relations and reversal of attempts at economic reform in Poland would encourage the presently dormant conservative faction in the Hungarian leadership.

Asked the ultimate question -- "How far will Moscow let you go?"--Nyers replied: "Hungary must continue to have a Communist leadership that is recognized as effective. It can be a liberal leadership, but it must be effective and it must be Communist."