| Abstract: | The particular historical trajectories of economic reform in East European socialist systems were important causal factors in their transformation, and often account for the different paths now open to each. Taking the case of Hungary, this article argues that socialist reforms, even when justifiably assessed as ineffective attempts at improved efficiency, interacted with an expanding second economy to alter in a gradual but profound manner the state-imposed relationship between the political and economic realms. This process of incremental social and ideological change “politicized” the economy and partially “privatized” the public sector, albeit often in informal ways. The turning-point was a 1982 reform of property-rights which legalized much of the second economy and opened up newly-legitimate channels for its cooperation with the state sector. By formalizing the previously informal relationship of mutual dependence between the state and the second economy, these statutes engendered new economic and political contradictions and possibilities in the system, as the enfranchisement of previously-excluded groups led to further concessions on the part of the state. The legalization of the second economy, the public campaign to legitimize the private sector, and the creation of new private partnership forms constituted a significant difference between the legacy of Hungarian socialism and other East European varieties. |
