Created: 3/29/1955

OCR scan of the original document, errors are possible

ti'9 Morcr-




Submithe DfRECTOH OF CENTRAL INTELLIGENCE The follmotng InteWgence organlzitlons participated in the preparation ot this esttviate. The Central Intelligence Agincy end the intelligence organization! of theof State, thehe Navy. Ihe Air Force, and The lord Staff.

Concurred In bp the


Oiarch IMS. Concurring uere ihr Special A'tHtant. Intelligence. Department al State; Ihe Assistant Chiel ol. Department of the Amp; the Director of Natalthe Director of IntelUginct. USAF; and lhe Deputy Director for Inteltigence. The Joint Stuff. The Atomic Energy Commission Representative to the IAC. and thc AssKtant lo the Director, federal Bureau of Investigation, abstained, the svbiett being outside of their jurisdiction.



estimate was disseminated by the Central IntelUgence Agency. Thisfor the Information and use of the recipient Indicated on the front cover and ofunder his jurisdictioneed to know basis. Additional essentialbe authorized by tbe following officials within their respective departments:

Assistant to the Secretary for IntelUgence, for the Department

Chief of Staff, IntelUgence, for the Department of the Army

of Naval Intelligence, for the Department ot the Navy

of InteUigence, USAF, for tbe Department of the Air Force

Director for IntelUgence, Jointor the Joint Staff

of InteUigence, ABC, for the Atomic Energy Commission

Director, FBI, for the Federal Bureau of Investigation

Director for Central Reference, CIA, for any other Department


National Security Council Department of Slate Department of Defense OporaUons Coordinating Board Atomic Energy commission Federal Bureau of investigation

This copy may be retained, or destroyed by burning ln accordance withsecurity regulations, or returned to the Central IntelUgence Agency bywith thc Office of Central Reference, CIA.

When an estimate Is disseminated overseas, the overseas recipients may retain lteriod not Ln excess of one year. At the end of this period, the estimate should either be destroyed, returned to the forwarding agency, or permission should be requested of the forwarding agency to retain it ln accordance with2




To assess the strengths and weaknesses of thc Hungarian Communist regime, to evaluate the regime's policies and probable courses of action, and to estimate the ability of the Communists to continue in control through


has in recent years shown consistent evidence of politicaland economic dislocation,by popular unrest, and willcontinue to be the most troublesome of the East European Satellites. Much of the popular dissension arises from thc Hungarians' deep-seated hostility toward Communism and toward the Slavs who have imposed Communism upon them They do not have the antagonism toward the Germans displayed by the Czechs and the Poles. However, the security farces at the disposal of the government, plus the presence of Soviet forces, arc sufficient to cope with any activeIn any event, we believe that the Kremlin will take all measures necessary to keep Hungary in the Bloc.

Although the Comraunist regimethe economy and, in somenotably heavy industry, expanded it, Hungary's economic difficulties Thc introduction of the "New

Course"3 failed to resolve thein industry and agriculture. Inthe failure is attributable to an inadequate raw materials baso,management, and inability tosufficient worker incentives. Inmismanagement coupled with general peasant resistance to agrarian policies accounted for most of thcLiving conditions did4 and, in the urban areas, were clearly below prewar levels.)

Improvement in the Hungarianis unlikely to take placeubstantial increase in agriculturalcan be achieved. Prospects for this are poor under existing Communist policies. )

The Hungarian Army and Air Force are capable of participatingloc campaign against neighboring countries although sustained operations wouldextensive Soviet logistic support. The reliability of the Army and Air Force

Is considered to be sufficiently high for them to serve in occupation duties, to guard rear areas, or to serve as integrated elementsoviet field force. The combat effectiveness of the Hungarian

Army high as that of any other European Satellite, except Bulgaria; its primary limitation being thereliability of some of the troops.)


all the European Satellites,In recent years shown the mostof political disharmony,and popular unrest. Thesehave not extended to open revolt,occurred in East Gennany in Junethey have been sufficient to arousetime to time, as to the ability ofto maintain power. We dothat the regime is, In fact,Nevertheless, Hungary isthe most troubled of all thestates subject to the USSR. ItsIs overwhelmingly hostile to thegovernment, and is apathetic andtoward thc economiceconomy has been dislocated byplans and byersistent failures ledNewftermonths of operation, the new policiesto bring about the hoped-forInertain"New Course" policies were Initiated.of efforts by the Communists, thchas not been resolved.




Worldhe Hungarianlike that of other war-torntate of paralysis.of recovery was Institutedoalition governmentCommunists which then ruled theThis plan was overfulfilled, and bygeneral level of production Inslightly exceeded the levelean-

while, the Communist minority in thewith the support of Soviet occupation forces, gradually but ruthlessly eliminated overt and organized opposition and took over the government

0 the Communist regimeive-Year Plan for rapid uidustriallxation; this plan in its general aims was similar to those of the other Satellites and of thc USSR Itself. Encouraged by the striking progress made during the first year of this program, and spurred on by the heightenedtensions accompanying the Korean War, the Communists1 greatly expanded the goals which they had set ln the previous year. Duringairly good progressto be made. Laterowever, serious difficulties began to appear, especially shortages of raw materials for tlieery severe droughtontinuing deficiency inproduction.

In spite of difficulties which gradually multiplied, the Hungarian economy in some respects had made remarkable gains.9ross naUonal product (GNP) rose at an average annual rate of more than seven percent; from an3 billion83 billion31 USotal industrial productiondoubled0hile producUon In heavy Industry more thanIndustrial construction IncreasedEven though these increases were achieved at Uie expense of the consumption sectors of Uie economy, they wereimpressive.

Along witb the considerable success in heavy Industrial development went afailure in agriculture. The agricultural planas not fulfilled, and sub-

sequent plans fared no better. In absolute terms, agricultural production approximated the prewar level only once,nd since that year it has declined. The causes for this failure besides the groat droughtay in: (a) the drawing off of farm manpower for industry; tb) thc failure to mechanizein accordance with plan; (c) theof the peasants to the regimes actual or prospective measures for theof farming; (d) arbitrary cropping pat-teri^i; andlhe governments. and price policies. This general situation, which was common throughout the Bloc, was particularly acute in Hungary.

consequences of the agriculturalwere very serious. Per capitaof food fell below prewar levels. Inconsumption of meat, fats, andthe foods required for thc betterof the rapidly expanding urbanpopulationfell off markedly.traditional exports declinedhad lo be Imported Theof foreign exchange was ofAs Hungary's Industriesthe development programs, theirimported raw materials grew also,lagging agricultural output rendereddifficult to pay for suchthe same time, exports ofmet price, quality, ond deliveryOveremphasis upon heavy industry,of agriculture, thus led to aimbalance; and byof living had reached on all-time low.

The "New Course"

by this deterioratingHungarian governmentulythe "New Course" which hadpurpose of redressing theand placating the hostileThe "New Course" announcementfollowed shortly afterimilar policy In East Oermanythat of similar programs in theThe economic part of thesharply altered post policies anda new program designed toIndustry and to Increase producUon In

agriculture and light Industry. Agricultural producUon was to be encouraged throughIncenUves rather than coercion.working their own land were promised greater government assistance, more equitable treatment in Uie use of agriculturalsome concessions with regard to delivery obligations, and higher prices. Even more important, the collective farm peasants were given permission to withdraw Industrial workers and urban residents were promised increased food and other consumer goods,wages, and better housing. Thepromised better quality, widerand lower prices of consumer goods. The announcement of Uie "New Course"remendous propaganda campaign aimed at generating greatersupport for Uie regime.

The Immediate popular reacUon to this announcement foreshadowed Uie difficulties which would plague Uie regime in its efforts to accomplish the two objectives of UieThe announcement was widelyto mean that Uie government was weakening; large numbers of peasants left Uie collective farms, thus seriously interfering with harvesting and sowing; in the factories, efficiency and discipline deteriorated to even lower levels. Party functionaries becameat Uie prospect that their posiUon and influence would be curtailed as thepromises of the "New Course" wereWithin one week after thcFirst Secretary Itakosl appearedand reaffirmed Uiat Uie regime's ultimate goal was the socialization of agriculture and reminded industrial workers Uiat the aboli-Uon of fines did not mean that breaches of discipline would go unpunished. Thesedissipated much of Uie hope that had been aroused by Uie promises of the "New Course" and created uncertainty andamong thc people

These misgivings were confirmed by Uie regime's erratic ImplementaUon of thepart of the "New Course"3nitial concessions In agriculture included cutbacks in delivery quotas, cancella-Uon of quota arrears, and reduction of income

taxes.ustained press attack was launched against those leaving collectives, various obstacles were placed in the way of those who insisted upon withdrawing, and concessions favored collective farms overpeasants. The regime's policy toward urban workers was more consistent, butbenefits either did not materialize or fell far short of inflated expectations.were made in the form of Increased wages, improved labor protection, and social security; prices were reduced, food stocks were released from reserves and foodstuffs wereto supplement low supplies in theareas. However, instead of reducingantagonism toward the regime, theseappeared only to generate moreand to promote the feeling that thecould be ignored with Impunity.

ot only did the "New Course" fall tothe widespread hostility toward thebut it also failed to achieve its purely economic aims. Industry's modified4 increase in outputhad to be even further reduced. Total Industrial production increased bythree percent, while heavy industrial output fell by an equal percentage andincome declined. Production continued to be Impeded by rising costs, waste. lowpoor labor discipline. Ineffectual management, and poort was in agriculture, however, where the greatest gains were planned and needed, that the "New Course" most conspicuously failed. Theof Industrial crops Increased considerably, but bread grain production was below thatespite an increase ln acreage, and beef cattle stock remained at3 level.the general collection waseven for those crops for whichwas good. Among thc causes for Uie shortfall in bread grains were: (a) theweather; (b) confusion Ln the<c) the regime's failure to deliver sufficient quantiUes of agriculturaland (d) Uie still depressant collection and priceore fundamental, and probably equally important, factor was the failure of the regime to win the support of the peasants. Even lhc additional concessions

madencluding furtherof tax arrears, failed to generateamong the peasants. The moderate goals of4 plan were still well below Uie minimum requirements of Uie Hungarian nation.

Uie Hungarian economy remainsstate of serious dislocation/ Theliving of Uie people Is generally lowthc urban areas, except for thesubstantially below prewarery considerable number of blackwho obtain much of theira result of widespread pilfering bymachinery has thus far hadbecause of poor maintenance. Tackparts, and the fact that its use haslimited to theercent of Uiestate and collective farms.are badly planned, and some ofleft unfinished. Those In operaUongenerally inferior goodsighmakes it difficult to compete withproducers in foreign markets.increases ln GNP representcapital equipment which, thuscontributed very litUe toward Uieof Uie welfare of the people.

Probable Economic Developments

According to recent policy5 plan, some of Uie formerupon industrial producUon is to beIndustrial producUon Is scheduled to increase4 by nearly six percent and agriculture by slightly more than sevenNaUonal income is to rise by nearly eight and one-half percent. The plannedin industry is made dependent largely upon raising productivity and Uiat inis to be achieved through larger acreage and modernization. Hungary's prospects for achieving5 increases are, at best, poor.

Hungary will almost certainly be unable to achieve any substantial economic growth during the next few years under Uie present course, and unless thereignificantin it. no improvement In Uvingis likely. Some temporary Improvement may be obtained through extended credits or

import loans from either the USSR or the West. The two basic Difficulties impeding economic developmentan inadequate raw materials base and the stagnation Inhave not been resolved, and the regime has been unable to reduce the widespread apathy and passive resistance of the people. Continued general emphasis uponproduction, and particularly uponthe amount of agriculturaland chemical aids available to bothfarmers and individual peasants, might lead to some increase in production, providing the weather is favorable. The latestion of economic policy, which may have been dictated by the USSR, suggests that there is little likelihood during thc next few years of any appreciable increase in the proportion of national product assigned to meet current consumer needs. Thc outlook5 will be influenced by the role assigned to Hungary by the USSR in the coordinated Bloc-wide plarming period due to commenceut it will be even more dependent upon basic Hungarian capabiliUes.

Uie long term, Hungary's basicproblem ls that of maintaining Itsplant andargeUie raw materials essential to Uieof Uiat plant. These imports can beby proceeds from thc export of ansurplus or, alternatively, but lessmanufactured products. Hungarya predominantly agriculturalthis basic pattern changed as athe rapid industrialization and Uiet present,will have difficulty competingmarkets. Thus, of the twoIs probably the moreof paying for thc needed imports,are poor for achieving aunder Communist agrarian policy.


Nature and Impact of ihe "New Course"

developments ln Hungarystrongly Influenced by Uieand traditions of the Theyeep-seated hostility to-

ward Communism and toward the Slavs who have imposed Communism upon them. The Hungarians feel Uiat their ancientcustoms, Roman Catholic and Protestant heritage, and their cultural tradition bind them to Western Europe. These factors, coupled with Uie peoples' recollections of Hungary's) Communistincrease Uie regime's difficulties in its efforts to bolster its limited popular

Although the "New Course" laid-primary emphasis upon economic policy. It alsoumber of concessionsolitical nature. Specifically, it promised: (a) broader religious freedom;adical change ln policeto increase individual security;f deportation and liquidation ofcamps; andeneral amnesty. The implementation of these promises has been both limited and belated with resultantdisillusion.

The promises and concessions of Uie "New Course" produced dissension within theParty. Some Party elementsthe new program to be contrary to the principles of Communism. Manyfeared that their own positions ormight be reduced, and Uiat, in any case, control of the Party over Uie Hungarian people would be substantially Impaired. On thc other hand, the adherents of Uie "New Course" considered that implementation of its liberal policies had become essential, If the Hungarian economy was to be preserved Irom disaster and Uie goals of UieParty achieved. Party leaders attempted to restore unityeries of publicShortlylenum meeting of the Central Committee of the Partyembers of thc Committee declared Uiat leaders who were unable or unwilling to carry out the "New Course" would be replaced.

4 andatyas Ra-kosi. Secretary of the Hungarian Communist Party, became identified with Uie members of the Party faction resisting what theyto be Uie extremes of the "Newhile Premier Nagy remained its chief defender. Sincea-


influence appears to have increased steadily, and the recent shifts in Sovietpriorities and leadership Indicate that bis views are again dominant. Nagy'strom public view in5 and the subsequent public attack by theCommittee on his "rightist incorrectduring the "New Course" furnishevidence of this trend. Althoughand vacillation over the "New Course" have diminished the stature and prestige of the Party, we believe that the Party willto maintain effective leadership and

The initial reaction of the Hungarian people ln general to the political promises of the "New Course"ombination ofand unrealistic expectations.reaction was sharp when It developed that many of the regime's concessions fell far short of meeting these high expectations. Even though the "New Course" didew of the political causes of popularthe hostility of the Hungarian people toward Communism and the Communistcontinues.

The vast majority of Hungarians feel that their country was stolen from them by aminority, wliich gained power andlt only through the backing of Soviet armed forces. Even among the Industrial proletariat and youthgroups from which Communism has generally drawn most of its adherentsthc prevailing attitude ranges from hostility through resentment to apathy.

Prospects for Continued Communist Conlrol

and organized resistance isimpossible because of elaborate andpolice controls, but popularexpressed in open criticism of thein widespread passive resistance-manifests itselfack ofdeliberate misunderstanding oflow quality production, highand reject rates, and other kinds ofThis pervasive passivebeen one of the Important reasons forof the original Five-Year Plan and

for the spotty performance under the "New Course"

While It Is unlikely that thc regime can soon eliminate the basic and general hostility of the people, il has nevertheless at Itsa formidable security apparatus: to wit, the Security Police0rontier Guardhe Security Policeighly mobile, well-organized, politicallyand Intensively trained force. Although the Frontier Guard is probably not asas the Security Police, its reliability is improvingesult of incessant political indoctrination and selective recruiting. In addition, the regime regularly uses theParty, its informer network, Its corps of "poliUcalnd numerous MVD members dispersed throughout Uie country to suppress subversion and to maintainThe Civil Police force of morehough not as reliable as the security forces, can perform limited assignments.

In case of widespread public disturbances, the regime has at its disposal an Army ofsizemall Air Force. If Uie situation got beyond the conlrol of Hungarian forces, the Soviet forces stationed ln theincluding two Soviet mechanized divisions and elements ofh Tactical Air Army, would almost certainly act with or without an invitation. Additional Soviet troops could be quickly brought Into the country if needed.

With these forces available, there ls litUc likelihood that Communist control overwill be Jeopardized during the period of this estimate, but Uie difficultiesthe regime will continue to be accentuated by the hostility of the people. Dissension In the Party will continue to Impair ItsIn Uie absence of any lastingto Hungary's basic problems, there will almost certainly be reorganizations, new promises, and shifts in leadership.


Hungarian Army consists oforganized Intoineechanized,rmored)combat support units. Underof compulsory universal service, some

en are Inducted into the Army each year and pass into the reserve after two. or In some cases, three years- The number of well-trained reserves isen. Upon mobilization, the size oi the Army could be quickly expanded,trengthenays, IT adequatesupport ls provided by the Soviets. The Hungarian Array is capable of participatingloc campaign against its neighborssustained operations would requireSoviet logistic support. Army units also could be employed for occupation duties and to guard rear areas and lines ofor they could be integrated withfield forces. The combat effectiveness of the Hungarian Army is as high as that of any other European Satellite, except Bulgaria; Its primary limitation being the questionableof some of the troops. The reliability of the Armyhole, however, Is considered to be sufficiently high for It to fightin the Bloc cause until It became apparent that the tide of war was turning irrevocably against the Soviets.

Hungarian Air Force has0 men and an estimatedstrengthircraft,etplanes,ight bombers,uring the past year, emphasisand advanced flying and on theof young pilots has alreadyand effectiveness, and the Airconsidered to be loyal to the regime.Force will probably be further Improvedadvances in organization, by aof the Jet re-equipmentby more extensive operational training.


thc other Satellites, Hungary Isthe firm control of Moscow. Basicalmost certainly dictated by theln considerable detail. Theindustrialization and the subsequentof the "New Course" wereall the Satellites, although morein Hungary. The recentlyon heavy Industry probably reflects,

at least lnonviction In Moscow that relaxation of pressures for industrial growth had gone loo far throughout the European


There Is no evidence that Moscow treats Hungarypecial case among thenor do we believe that the USSR would permit the adoption of policies In Hungary which would conflict with programs laid down for the Satellites generally. However,exist in the Hungarian political and psychological make-up which constitute sources of Intra-Satelllte dissension One is popular hostility toward neighboringof the country's postwar territorial and population losses: and, another Is that the Hungarians, having no territorial Issue to settle with Germany, appear largelyby Communist propaganda against West German rearmament.

During the next several years, Hungary's obvious economic difficulties and theof Its population will presentproblems to the Soviet rulers as well as to the Hungarian regime. Improvement in Hungary's managerial skillhe people's attitude toward the regime will develop very slowly. If al all. Hungary will continue toeak member of the Bloc, and might even,ime, cost more on balance In Bloc resources than it will con tribute.

Despite Hungary's limited contribution to the Bloc's power potential, the Kremlinconsiders Hungary of value because lt comprises an important strategic area, andontribution to Bloc military strength. Economically, while Hungary mayaw material drain. It docs supply certain specialized Industrial and selectedproducts. Over the long term. Hungary may be able to Increase Itsto the general viability of the Orbitand to the Orbit Integrated military front. Probably more Important than any of these factors, from the Kremlin's point of view. Is the prestige Involved in mamtalning the Communist monolith intact We believe, therefore, that the Kremlin will take allnecessary to keep Hungary within the Bloc,

Original document.

Comment about this article or add new information about this topic: