ABSTRACT
The capitalist world market was in very good shape—almost trouble free, despite Club of Rome prophecies and minor shocks and uncertainties in foreign exchange—and Hungarian firms were able to increase their agricultural and manufactured exports to the West. For the moment, trade among the Comecon countries continued to provide the smaller countries of Eastern Europe with most of the energy and raw materials they needed for growth. Investment is a lengthy process, with decisions sometimes made years ahead of their implementation. The way Hungary regulated capital allocation, wages, and the labor market in the 1970s of course affected other aspects of the firms' behavior, working against market forces, reinforcing government interference, and recentralizing economic activity. The economic system established in the 1970s could best be termed indirect, but it was by no means decentralized. Hungary, with its existing economic and management system, was unable to adapt.
