ABSTRACT
This chapter focuses on Hungary in a search for lessons to be drawn from twenty years of attempting to promote a private sector in a challenging and ever-changing political environment. In Hungary as in the other countries of Eastern and Central Europe which fell under the Soviet sphere of influence after Second World War, the Soviet model of the centrally planned economy was introduced. Through a process of nationalization of industry, capitalist property was virtually eliminated in Hungary. By the end of 1949, virtually the entire economy, with the exception of agriculture and retail trade, fell under state ownership. The managers of the new state enterprises were chosen and dismissed by officials of the dominant Communist Party. The New Economic Mechanism introduced in 1968, sought to introduce certain market-economy benefits, most notably efficiency, into the Hungarian centrally planned economy.
