In the late 1940s, Hungary's Marxist-Leninist leaders imposed a Soviet-style command economy that included rigid central planning, agricultural collectivization, and rapid industrialization (see Postwar Hungary , ch. 1). Faced with the need to improve efficiency in the late 1960s, however, the government undertook an economic reforms and in 1968 introduced the New Economic Mechanism (NEM), which eliminated compulsory plan directives, introduced market mechanisms, allowed many enterprises a measure of autonomy, and legalized a narrow range of private economic activity. The reform stalled between 1972 and 1978, but trade imbalances and other problems prompted the government in 1979 to begin implementing a second wave of reforms that included ministerial and industrial restructuring. These reforms to a great degree differentiated the Hungarian economy from a traditional command economy. The Hungarian Socialist Workers' Party (HSWP), however, has retained its monopoly of political power, and a central plan containing broad goals still existed in 1989. After Kadar's resignation as general secretary in May 1988, Hungary entered a new era that may see more energetic implementation of reforms already on the books and the enactment of even more radical reform measures.

Data as of September 1989