Foreign Relations of the United States, 1955–1957, Eastern Europe, Volume XXV

13. Despatch From the Legation in Hungary to the Department of State¹

No. 338

Budapest, May 11, 1955.

SUBJECT

• Ouster of Prime Minister Nagy, Current Trends, Estimate of the New Leadership and Future Prospects²

Now that the air has cleared a little, it is possible to analyze with somewhat greater accuracy the underlying reasons for and the sequence of events culminating in the ouster of Prime Minister Nagy, and to chart with somewhat greater precision the course which the new leadership in Hungary appears to be laying out for itself.

A re-analysis of total output pertaining to internal developments in Hungary since the beginning of March strongly suggests to us that, contrary to what efforts have apparently been directed at making us believe, the crisis here goes much further and deeper than a conflict over economic policy, and that the fundamental causal factors are, if anything, more politically than economically based. While much emphasis has been placed on such factors as heavy versus light and consumer goods industries, socialized agriculture versus individual farming and free markets, etc., we have been impressed by the tone and implicit content of output relating to the Party and to the role it should properly fill in a communist society adhering to the precepts of Leninism-Stalinism and coming under the complete domination of the Kremlin.

Accusations Against Nagy and Their Validity

Going back to the Central Committee resolution of March 4, we find that Prime Minister Nagy and his right deviationist followers were accused of four primary crimes: (1) denying the importance of heavy industry; (2) underestimating the significance of constantly increasing productivity and reducing prime costs; (3) failing to carry on class warfare in the villages (eradication of kulaks), to stress resolutely enough that the leading partner in the worker-peasant alliance is the working class, and to encourage the development of collective farming; and (4) underestimating the achievements of the Party and under-emphasizing the Party’s leading role.

Assessing the justice of these particular accusations in turn, we find that although Mr. Nagy was charged with denying the importance of heavy industry and of attempting to push it into the background, the shift back to heavy industry has been conclusively evident thus far only in propaganda. Figures released in the Central Committee resolution itself do not give substance to the lip service being paid to heavy industry, and, if we examine the 1955 budget presented to Parliament on April 19, we find that investment funds scheduled for heavy industry for 1955 are 25 per cent below the amount originally scheduled for 1954, and probably less than what was actually spent last year. Moreover, total heavy industry expenditures for 1955 are scheduled at 3.15 billion forints, which is considerably less than the 4.2 billion allotted this sector in 1954, and far below the amounts spent in previous years. Finally, it is perhaps noteworthy that whenever the question of increasing heavy industry production has been mentioned in recent output, the phrases “within its proper proportions” or “keeping in mind the particular conditions of our country” have invariably been used.

The second charge, that Nagy and his followers ignored the problem of raising productivity, decreasing prime costs, etc., is blatantly false. These have been continuing major points of emphasis over the past nine months and were, in fact, primary points in the October Central Committee resolution and in Mr. Nagy’s confession of faith as published in Szabad Nep on October 20. In the latter, Mr. Nagy stated: “If the quality of the product is inadequate, and if it is too expensive, we must call ourselves to account. We must draw the final conclusion to produce more, better and cheaper goods.” Nagy went even further in his November 19 speech, saying: “Our industry, our leaders and workers alike must make further huge efforts in the constant raising of productivity. This must be attained by eliminating slackness in work discipline . . .³ every factory must work to regulations under which productivity should be raised, prime costs reduced, materials spared, and waste eliminated.”

Although there is probably more substance in the accusations regarding Mr. Nagy’s policies in the agricultural sector, they cannot be fully supported by the facts, and where supported, political, rather than economic, factors are more often than not drawn upon for support. Insofar as the charge that he failed to carry on class warfare in the villages is concerned, this is the sort of accusation which would be impossible to prove or disprove, if only for the reason that “kulak” has become a generic term for all opponents of the regime. It should be borne in mind, however, that the land reform in Hungary was carried out under Mr. Nagy while he was Minister of Agriculture, and there has been nothing to indicate that he has changed his views about this luckless section of the population who once owned more than 25 yokes of land. Mr. Nagy has, moreover, alluded many times to the question of the peasant-worker alliance, always paying tribute to the workers’ class by stating, as he did in his speech prior to the council elections, that they “were the leading force, the organizing and uniting power of the people’s gigantic efforts.” Finally, if Mr. Nagy failed to encourage the development of collective farming, it was due primarily to the unanimous decision of the Central Leadership, supported by Mr. Rakosi, to permit peasants to leave collective farms, which was one of the major reforms announced at the inception of the “June Course”, and not one evolving later as a result of any deviationism. The socialization of agriculture has continued to be pointed to as a major long-range objective even during the New Course period. The fault here might be said to rest in the fact that it was not pushed with sufficient zeal to overcome the strong antipathy of the Hungarian peasant. In short, coercion was abandoned, which again was a result of politically, rather than economically, based factors.

It is believed, therefore, that it can be said that the main charges against Mr. Nagy which have an economic base are largely without foundation and that they would not have been sufficiently strong in themselves to have supported, even on communist terms, the serious charge of “right deviationism” leveled against him. It would have been understandable had Mr. Nagy been accused of inefficiency, for there can be no doubt that everything said in the resolution about the present state of the Hungarian economy can be easily justified, including the charge that the New Course has been a complete failure economically. Had the charges gone no further than this, it is conceivable that Mr. Nagy might have been persuaded to withdraw gracefully in the manner of Mr. Malenkov, thereby tempering the shock on Western public opinion, and, more importantly, on Hungarian public morale.

Against this background, we are more and more inclined to believe that the dominant factors in the local situation are politically grounded and that they bear directly on basic communist dogma itself. As mentioned above, we have been greatly impressed by the tone and content of output bearing on the fourth and final charge against Mr. Nagy, namely, that he underestimated the achievements of the Party and under-emphasized the Party’s leading role. We see in this charge relating to communist dogma three separate facets: (1) the role of the Party in a communist society, (2) the rights and responsibilities of the individual within the framework of the Party’s role, and (3) the extent of an individual’s and a nation’s independence relative to the system (the latter including the growth of liberal and nationalist tendencies with undertones of Titoism).

Regarding point (1), we believe there has been a conflict within the Hungarian Workers’ Party between those forces led by Nagy, who considered that the Party should merely give general policy directives to the Government and allow the Government to work out the details, and those led by Rakosi, who maintained that the Party should be permitted to direct the day-to-day administration of the country in every sphere, from the Ministerial level down to the organization of production in factories. Attached hereto as Enclosure No. 1 is a series of excerpts from speeches and articles which relate to this issue of the role of the Party.⁴ They cover the gamut of relations between the Party and mass organizations such as the local councils, the trade unions, the Patriotic People’s Front, the press, etc., and, it is believed, point up and provide a considerable amount of evidence that this basic tenet of communist dogma has figured very heavily in the recent crisis.

Regarding point (2), the ideological conflict here appears to have been well summarized by Mr. Nagy himself when in his October speech he stated: “Socialism can be built only if the working people are granted more rights and freedoms, as well as increasing material welfare.” This element bears heavily on Party discipline and accounts, we believe, for Deputy Foreign Minister Sik’s recent remark that Nagy “went to excess—he exaggerated”. The growth of liberal tendencies, conspicuous in the increased freedom with which individuals and the press expressed criticism of Party policies and personalities, and in the greatly lessened police pressure, obviously ran counter to established dogma. This “opportunism” appears to have been looked upon as an insidious growth which could not be permitted to spread in Hungary because of its harmful effects throughout the bloc.

The third facet, the extent of an individual’s and nation’s independence relative to the system, constitutes, in our view, the most significant issue. At point here is whether it is permissible for a satellite country to develop along the road to socialism taking into account its own capacities and capabilities, and, more importantly, profit by mistakes previously made, or whether it must, perforce, tread the same path and go through the same contortions as the Glorious Leader. There is, it is believed, ample evidence in the attached extracts to indicate that Nagy took a firm stand in favor of the former proposition and that this issue constitutes the core of the “right deviationism” charge brought against him. Two more recent editorials in Szabad Nep have taken the veil off this key issue and exposed it more clearly than did either the resolutions or earlier output. On April 8, Szabad Nep in an article, the purpose of which was said to be to draw readers’ attention to the roots and dangers of “right deviation” stated: “. . . The rightist deviationists endeavor to underestimate the importance of the Soviet Union and of the People’s Democracies in the development of this country. Instead of realizing the importance of the fact that we are members of the peace camp, they used high falutin’ words in connection with nationalism. In other words, rightist views do not refer only to some minor details, but affect the whole policy of our Party. In their articles and speeches and in practical life, the supporters of rightist deviationism have revised the Leninist program of socialist construction and have substituted it by another one. If we analyze the rightist views, we clearly see that they were aimed, willy-nilly, at making the Party deviate from its road, the road followed by the Soviet Union—and at making Hungary follow another, a specifically Hungarian road that was supposed to lead to socialism. There is only one road leading to the building of socialism and that is the road followed by the Soviet Union . . . ”

Again, on May 4, Szabad Nep published an article commenting on the “Textbook of Political Economy” published last fall in Russia and recently translated into Hungarian, which was most revealing on this point. It stated: “The special chapter [on the People’s Democracies]⁵ has furthermore been written on account of the fact that in the countries of the People’s Democracies the period of the transitory phase has not yet ended, and therefore the legal precepts of this period can only be studied in its purest form by the example set in the Soviet Union . . . in the most essential points the rightist deviationists have rejected the methods of the building of socialism which have proved a success in the Soviet Union and have suggested a different road to follow instead . . . ”

Herein would appear to lie what might be termed “the seeds of Titoism”. One sentence of Rakosi’s speech delivered before Budapest Party activists on March 13 would appear finally to confirm that the orders to reverse the New Course came from without Hungary and strongly to suggest why they came and why Rakosi, the doctrinaire, was given the support necessary to overcome the preponderant forces rallied around Mr. Nagy, both in the Party and in the countryside, and to oust him from power—“Until the summer of 1953”, Rakosi said, “nobody thought of discovering a gap in the structure of the peace front of 900 million people. Since then, however, glances of growing hope have been cast in the direction of Hungary.” In other words, Hungary had exposed herself as a weak spot politically in Moscow’s otherwise firm and uniform control of the bloc Governments and drastic action was required to mend this breach and to reverse the trends which brought it about.

It is our conviction that the Rakosi faction encountered much greater difficulty in gaining acceptance of the March resolution than anticipated either by it or by Moscow, and that when the strength of the Nagy following became clearly apparent, there was not only considerable vacillation both here and in Moscow, but a decision was actually taken to modify tactics if Nagy could be persuaded to cooperate. This, we believe, accounts for the long interval between the first public condemnation of Nagy (March 9) and his final ouster (April 18). This time was taken advantage of by Rakosi to hold meetings all over the country in an effort to justify his action and gain acceptance of it by the Party’s rank and file and, concomitantly, to attempt to persuade Nagy to recant. That this latter effort was made is supported by reports from reliable sources that two separate delegations, the last of which included a high-ranking Russian, visited Nagy for this purpose, and by later press admissions that even after the March 9 denunciation Nagy “continued to display an anti-Party attitude”. Nagy’s stubborn refusal to follow Malenkov’s example accounts, we believe, for the comparatively severe action finally taken against him. It is perhaps noteworthy in this connection, however, that despite the severity of the language and charges contained in the April 18 indictment against Nagy, there is as yet no indication that he has been or will, in the near future, be brought to trial, which may, in itself, be indicative of the latent strength of the Nagy faction.

Current Trends

An evaluation of the new leadership can probably best be made against a stock-taking of policies it has pursued and actions that it has taken since assuming responsibility for Government in early March. The Legation has just completed a review covering the industrial, agricultural and private sectors of the economy in its Despatch #337 of May 11.⁶ The conclusion reached is that in these sectors actions which have been taken add up to a new policy, but it is clear, at the same time, that this new policy is not what regime propaganda attempts to make it appear, particularly in the industrial sector. Here it is not a return to heavy industry, which it is said to be; nor does it appear to be a logical plan for improving industrial efficiency prior to establishing new long-range output goals for the second Five-Year Plan. It seems rather to be an effort to stave off, for at least a short period of time, the ever-increasing chaos and growing economic and financial problems through the use of labor competitions, firing of “non-productive” workers, reduction of illegal wage payments, etc. while undertaking measures to close the breach on the political front.

In agriculture, the stated policy coincides more closely with action taken. The objective is to push socialization of agriculture, and the two primary methods being used are pressure of all kinds on the peasant to force him back into collectives and actions aimed at curtailing the tendency of both cooperative members and private peasants to engage in capitalistic or speculative activities.

New measures have also been instituted to force back the private enterprise sector, the growth of which during the past year and a half has been a striking example of the liberalism prevailing under the Nagy regime. (All of these measures are discussed in greater detail in the Legation’s despatch under reference.)

A close analysis of the actions which have been taken in the above three fields, however, has convinced us that the regime is currently pursuing a course here which, for the moment at least, is dictated primarily by political, rather than economic aims, and which might even be said to have been chosen despite the prospects of rather meager economic results. In short, the current trend in these three fields appears to have as its aim the restoration of a desired political atmosphere, whatever its effects on the economy of Hungary. This conclusion adds considerable force to the theory propounded above that the dominant factors in the local situation are politically grounded.

In the purely political sphere, the following are the more significant measures coming to our attention:

(1) A greatly stepped up secret police activity. The number of reports brought to the Legation of midnight house searches and arrests indicates that this practice, which was considered taboo under the Nagy regime, has now been resumed with considerable energy.

(2) The reintroduction of the practice of obliging house concierges to report all visitors and goings on to the AVH authorities, a practice which was likewise dropped under the New Course era.

(3) The bringing to trial of two separate and rather large groups of persons on charges of conspiracy, with publicity given to the trial and to the severe sentences handed down.

(4) The formation of a new supplementary Party organization in the countryside and the holding of new elections for leaders of all Party organizations throughout the country.

Thus, in the political as in the other sectors, the current trend is towards harshness, with the use of more coercive, restrictive and fear-instilling tactics an outstanding feature.

Estimate of the New Leadership

Against this background the temptation is to conclude that the current leaders of Hungary have unanimously chosen a one-way, four-lane highway leading back to pure Stalinism. However, we do not believe that this is the case. We are strongly of the opinion that it is not the intention of even the most diehard doctrinaires to attempt to turn the clock back two years or that there is even now unanimity in the leadership regarding the right course for Hungary in these critical times. Measures taken thus far have, we believe, been dictated by Rakosi, with the support of Moscow, with the aim of shearing off quickly and decisively some of the more potentially dangerous political outcroppings of the Nagy era—to restore a more desirable political climate from the standpoint of the doctrinaires, a climate in which Hungarians will be less susceptible to influences coming from outside the bloc and less willing to expose themselves in lending support to Nagy personally or to policies which he stood for and which have now been branded as being too Hungarian and tacitly acknowledged as running counter to established communist dogma.

The sequence of events and several incidents which came to light during the protracted interval between Nagy’s public denunciation and his dismissal revealed quite clearly the strength of the Nagy faction in Hungary not only in the countryside (where it is believed preponderant) but in the top echelons of the Party itself. We are inclined to believe that it was the appreciation of this fact on the part of the doctrinaires and the employment of it by the moderates which led to the selection of Andras Hegedus as the new Prime Minister. We look upon Hegedus as a compromise candidate, a man, who because of his peasant background and his position as Minister of Agriculture under Nagy, was more acceptable both to the Nagy faction within the Party and to the peasantry than someone more closely associated in the public mind with the doctrinaire element or with an overtly anti-peasant policy. He was, at the same time, probably considered acceptable to the doctrinaires because of the debt he doubtless owes Rakosi for his rather spectacular rise and as it is considered that he could be bent to Rakosi’s will when vital issues are at stake.

The fact that Hegedus seems to have been a compromise candidate does not of itself mean that future policy of the regime will similarly be a compromise policy. Policy will undoubtedly be governed during the coming months by the objective of restoring political stability and removing the budding liberalism of the Nagy era on the one hand and the virility of the opposition to whatever course is taken on the other. The immediate political objectives must be considered of real urgency by Rakosi and his followers if, as seems to be the case, they are willing to forego economic improvement for the time being. It might, therefore, be concluded that the doctrinaire element might be prepared to take rather extreme measures to attain its immediate ends in the political field. On the other hand, the reaction throughout the countryside to new tactics cannot be ignored either, and it seems quite probable that reaction and opposition will grow stronger as regime policy toughens.

It seems to us that what is now developing might be characterized as a “dash back to more secure ground”, which will continue until solid ground has been reached or at least until what might be called the political quagmire of Nagyism has been escaped. Once this objective has been attained—if indeed it can be—it may be that the doctrinaires under the figurehead of Hegedus will attempt to steer a middle-of-the-road course between the “excessive” liberalism of Nagy on the one hand and the pre-1953 harshness of the doctrinaires on the other. They would probably also at this time attempt to give more serious attention to the running sore of Hungary’s economic problems.

Needless to say, all of this will, in any event, be contingent upon the absence of great changes within the USSR’s domestic situation and upon the absence of significant modifications in the tension between East and West, either of which could have effects within Hungary which might well outweigh the internal factors discussed above.

The Department is requested to send processed copies to Embassy, Moscow, other Missions in the satellites, and to USIA, Washington.

For the Minister:

Donald P. Downs

First Secretary of Legation

1. Source: Department of State, Central Files, 764.00/5–1155. Secret.
2. On April 14, Nagy was stripped of his posts in government and in the Hungarian Workers’ Party by a Rákosi-promoted vote of the Central Committee. This completed Nagy’s political demise which had been anticipated since his denunciation on March 4 in the Central Committee as an “anti-Marxist right deviationist.” The premiership was transferred to Andras Hegedüs. (Soviet Affairs, May 1955, p. 20; ibid., INR Files)
3. All ellipses in this document are in the source text.
4. Enclosed with this despatch, but not printed, were eight translations of articles from newspapers, editorials, and speeches by party officials critical of Nagy and his policies from March 4 to March 21.
5. Brackets in the source text.
6. Not printed. (Department of State, Central Files, 864.00/5–1155)