Hungary’s Challenge for the West

Anyone keenly attuned to history and its ironies, and inspired by faith and hope in the irrepressible human spirit, could not help but be moved this spring as Hungarian soldiers began the symbolic dismantling of the Iron Curtain that has painfully divided Europe for nearly four decades. The removal of the barbed-wire fence was a symbolic opening to freedom within Hungary and a signal of its reaffiliation with Europe.

Equally remarkable is the rehabilitation of Imre Nagy, the leader of the 1956 democratic revolution that was crushed by Soviet invasion. Nagy was secretly executed by Soviet troops and buried in an unmarked grave. Today, with government consent, Nagy will be reburied. His reinternment will be a major occasion, with participation of Hungary’s prime minister, the speaker of its parliament and other top officials.

The promise held by the dramatic political and economic changes in Hungary (and in Poland as well) poses a profound challenge and a historic opportunity for the United States to encourage and support the potential for freedom and democracy in Eastern Europe.

I do not mean to exaggerate Hungary’s march toward liberty nor to minimize the internal and external obstacles in its path. They are many and grave. Nevertheless, those of us committed to freedom can only welcome the palpable progress and the even more promising trends in Hungary, which go well beyond the rest of Eastern Europe and the Soviet Union itself. Hungary is embarking on sweeping reforms that will dismantle one-party rule and the state-run economy and emulate the economic and political models of such neutrals as Sweden, Finland and Austria.

A quiet revolution for economic freedom is occurring, slowly but steadily. New laws to let the private sector blossom and to free capital movement are steps toward a free market and a mixed economy. Individual enterprises and private share-holding companies, aided by eased taxation, will make new ventures more profitable and less risky. A new law on foreign investment permits foreign firms to buy into domestic companies or set up wholly owned subsidiaries. By the early 1990s, if the trend persists, half of Hungary’s economy could well be in private hands.

Yet without political freedom there is no economic freedom, and political reform is moving at an almost dizzying pace, spurred on by Communist Party reformers and the democratic opposition. Freedom of association and expression, a free press and free publishing and a multiparty system are already legalized. These reforms, along with citizens’ rights, the rule of law, impartial justice and free trade unions are all to be enshrined and institutionalized in a new constitution, now being drafted, which will be voted upon next January.

There are grave risks. All of these incremental reforms could result in a crisis of systemic transition. Already the economic reforms have sparked an inflationary spiral, exacerbated discord between the poor and the newly rich, and increased unemployment and impatient pressures for higher living standards. And another ominous note: On a per-capita basis, Hungary is the most heavily indebted country in Eastern Europe.

This is all the more reason for the United States and its Western allies to help ease that transition. Hungary presents an important opportunity but also a challenge.

There is much that Washington can do. Our policies and actions can make an enormous difference by aiding a reform-minded regime to overcome its difficulties during the transition to a market-oriented economy.

We should recognize that Hungary has satisfied the requirements of the Jackson-Vanik Amendment for free emigration, and grant it long-term most-favored-nation status. At present, such trading status must be renewed annually by the President. By granting it for a longer term, we would encourage reduction of tariff barriers and reinforce the long-range stability and growth of Hungarian-American trade.

We also can extend to Hungary the benefits of the Overseas Private Investment Corp., which helps to insure U.S. business investment against political risks, and thus encourages investment by American firms. And we can encourage joint ventures, boost cultural and educational exchange programs, increase high-level contacts and encourage small loans directed to specific private-sector projects and placed with small commercial banks.

As for Hungary’s debt, we should encourage the International Monetary Fund and the World Bank to work up financial packages that will not cancel, but will ease the debt burden. Hungary can and must deal with its own financial problems, but our help and support can make a difference.

With this measured policy, we can at once aid the Hungarian people to advance to greater economic and political freedom, influence the course of democratic evolution in Eastern Europe as a whole and open up freer trade. All of this will serve the American national interest.