LIGHT INDUSTRY IN HUNGARY 1947-57

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A000800100002-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 51
• Document Creation Date: December 23, 2016
• Document Release Date: May 31, 2013
• Sequence Number: 2
• Publication Date: July 31, 1957
• Content Type: REPORT

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N? 62
LIGHT INDUSTRY IN HUNGARY
1947 - 57
CIA/RR 95
31 July 1957
CENTRAL INTELLIGENCE AGENCY
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Sees. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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LIGHT INDUSTRY IN HUNGARY
1947-57
CIA/RR 95
(ORR Project 38.910)
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This report analyzes the conditions and prospects of light industry
in Hungary before and after the rebellion of October 1956. Light indus-
try plays an important part in determining the level of living and the
allocation of resources and is to be emphasized increasingly in 1957
as an aftermath of the rebellion.
The industries included in light industry are textiles, clothing,
leather and footwear, woodworking, and paper and printing. Among the top-
ics discussed in this report are the change in ownership and control of
light industry, the building up of productive capacity since the end
of World War II, the efforts made toward solving the chronic shortage
of raw materials, and the effects of the October rebellion on the sta-
tus of light industry.
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Page
Summary and Conclusions . . . . . . . . . . . . . . . . 1
I. Introduction . . . . . . . . . . . . . . . . . . . 3
II. Effects of the October Rebellion . . . . . . . . . 3
III.. Developments from 1947 to 1956 . . . . . . . . . . 7
IV. Second Five Year Plan (1956-60) . ... ... . . . . 10
V. Organization . . . . . . . . . . . . . . . . . . 12
VI. Investment . . . . . . . . . . . . ... . . . . . . 13
1. Three Year Plan (1947-49) . . . . . . . . 13
2. First Five Year Plan (1950-54) . . . . . . . , 14
3. Transition Year (1955) . . . . . . . . 16
4. Second Five Year Plan (1956-60) . . . . . . . . 17
5. Plans for 1957 . . . . . . . . . . . . . . . . 17
VII. Labor Force . . . . . . . . . . . . . . . . . . . . 18
VIII. Important Branches . . . . . . . . . . . . . . . . 19
A. Textiles and Clothing . . . . . . . . . . . . 19
1. Cotton Textiles . . . . ... . . . . . . . . 20
2. Woolen Textiles . . . . . . . . . . . . . . 21
3. Flax and Hemp Textiles . . . . . . . . . . 22
4. Silk and Synthetic Textiles . . . . . . . . 23
5. Knitwear and Clothing . . . . . . . . . . . 23
B. Leather and Footwear . . . . . . . . . . . . . 24
C. Woodworking and Paper . . . . . . . . . . 25
IX. Consumer Durables 26
X. Foreign Trade . . . . . . . . . . . . . . . . . . . 27
XI. Capabilities, Limitations, and Intentions . . . . . 29
A. Capabilities . . . . . . . . . . . . . . . . . 29
B. Limitations . . . . . . . . . . . . . . . 29
C. Intentions . . . . . . . . . . . . . . . . . . 30
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Appendix A. Statistical Tables . . . . . . . . . . . .
Appendix B. Data on Cotton Mills and Woolen Mills. . .
Appendix C. Methodology . . . . . . . . . . . . . . .
Page
31
35
39
1. Gross Value of Production of Consumer Goods and
Producer Goods in Hungary, 1938, 1948-57, and 1960
(Plan) . . . . . . . . . . . . . . . . . . . . . 31
2. Consumer Goods and Producer Goods as a Percentage
of the Gross Value of Industrial Production in Hun-
gary, 1938, 1948-57, and 1960 (Plan) . . . . . . . 32
3. Production of Selected Goods by Light Industry in
Hungary, 1938, 1949-56, and 1960 (Plan). . . . . . 33
It. Production of Radiobroadcast Receivers, Bicycles,
and Household Sewing Machines in Hungary, 1938,
1948-56, and 1960 (Plan) . . . . . . . . . . . . . 34
5. Number of Spindles in Place and Added in Major
Cotton-Spinning Mills in Hungary, 1949, 1954, and
1960 (Plan) . . . . . . . . . . . . . . . . . . . 36
6. Major Wool-Spinning and Weaving Mills in Hungary,
1956 ............... ....... 37
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Figure 1. Hungary: Percentage of Consumer Goods
and Producer Goods in Total Industrial
Production, 1938, 1948-57, and 1960
(Plan) . . . . . . . . . . . . . . . .
Figure 2. Hungary: Gross Value of Production of
Consumer Goods and Producer Goods,
1938, 1948-57, and 1960 (Plan) . .
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CIA/RR 95 S-E-C-R-E-T
(ORR Project 38.910)
LIGHT INDUSTRY IN HUNGARY*
1947-57
In 1957 the absolute priority traditionally given heavy industry
in Communist Hungary is being modified, and raw materials, manpower,
and foreign exchange are being allocated to favor light industry,**
the food processing industry, and agriculture. Under present plans,
investment in 1957 will amount to about 9 percent of national income,
compared with an annual average of from 18 to 20 percent of national
income in 1945-55.*** For the time being the Hungarian government is
maintaining relatively high levels of consumption, not only by reducing
the tempo of its industrialization program but also by depleting stocks
and by borrowing. "We are living," said a Hungarian spokesman recently,
,,on reserves, on gifts, and on loans."
The change in the status of light industry and other sectors of
the economy concerned with the production of consumer goods is attrib-
utable to the rebellion of 23 October 1956. In part the rebellion was
caused by the longstanding resentment of the people over the failure
* The estimates and conclusions contained in this report represent
the best judgment of ORR as of 1 May 1957.
** The term light industry as used in this report includes the follow-
ing industries: textiles, clothing, leather and footwear, woodworking,
and paper and printing. Although the term does not include the food
processing industries or the industries producing appliances and other
consumer durables, these industries are brought into the discussion
when necessary, and there is a separate section'on consumer durables
(IX, p. 26, below).
*** Unless otherwise stated, figures for production, investment,
foreign trade, and other over-all economic activities are taken from
official Hungarian announcements. Figures for postwar production gen-
erally exclude production by private and cooperative industry, a pro-
cedure' followed in the official statistics of Hungary. Because offi-
cial figures for production by industry as a whole and by major sectors
of industry represent the gross value of sales of industrial ministries,
these figures involve some double counting of production -- for example,
where the production of one ministry is a raw material for another min-
istry.
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of the government to improve living conditions rapidly. The immediate
effects of the rebellion on light.industry were a drop in production,
reduction in commercial inventories of the products of light industry
and in imports of raw materials for light industry, and a deterioration
in factory discipline. In the first quarter of 1957, production in
light industry was restored to three-fourths of the pre-October level;
but many serious problems remain, notably the restoration of control
over costs of production in light industry and the elimination of the
large adverse balance of trade. One of the striking features of the
plan of the government to stimulate production of consumer goods in
1957 is the attention being given to reviving artisan production in
such fields as tailoring, custom shoemaking, and upholstering.
Even if the government supports light industry in 1957, production
probably will be no greater than in 1956, and the level of production
in 1956-57 is estimated to be 16 percent below that of 1955. Although
production has declined, wage rates in light industry are now 10 per-
cent above the rates of early 1956. Consequently, the government will
have to face the problem of tightening up factory discipline in order
to reduce costs of production. Moreover, the de-emphasis of'investment
in 1957 is temporary, and by the end of 1957 pressures probably will
have risen in the government and Party for the resumption of priorities
for heavy industry.
The background of the events in light industry in 1956-57 lies in
the revolutionary measures adopted by the Communist government of Hun-
gary since the end of World War II. The emphasis placed on the rate
of industrial growth as the basis of economic policy has resulted in
the steady long-run decline of the relative importance of light indus-
try, even though in absolute terms light industry has continued to grow.
In 1938, about 35 percent of the gross value of industrial production
in Hungary was accounted for by light industry; in 1948, about 29 per-
cent; and by 1957, only about 21 percent. Under the original Second
Five Year Plan (1956-60), the share of light industry was to represent
18.6 percent of the gross value of industrial production by 1960.
The private sector of light industry declined steadily between 1947
and 1953 and by 1953 accounted for only 2 percent of the value of pro-
duction. When the "new course" was announced in July 1953, plans were
made to increase the importance of the private sector, and by 1955 it
accounted for 5 percent of the value of production. The revival of
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artisan activity planned for 1957 suggests that the relative importance
of the private sector of light industry will be maintained or even expan-
ded in 1957.
I. Introduction.
The rebellion of 23 October 1956 in Hungary was partly the result
of the longstanding failure of the Communist government of Hungary to
insure better living conditions for its people. As a consequence of
the rebellion the regime has re-examined the status of light industry
and, at least in 1957, will modify the absolute priority traditionally
given heavy industry and will favor light industry in the allocation
of raw materials, manpower, and foreign exchange. Investment in heavy
industry is to be curtailed, especially in those branches of heavy in-
dustry for which Hungary lacks raw materials. A detailed account of
the immediate and long-term effects of the October rebellion on light
industry. follows in II, below.
This report traces developments during the period after World War II
in the important branches of light industry in Hungary in terms of pro-
duction, growth in capacity, quality of product, and availability of
raw materials. Changes in the labor force of light industry, in the
composition of foreign trade, and in the relative importance of the
Sino-Soviet Bloc and the West as markets and sources of supply for the
products of light industry are treated in separate sections.
Underlying the entire discussion is the concentration of the Com-
munist rulers on the building up of the heavy industrial strength of Hun-
gary at the expense of immediate improvement in living standards. It
was this dogmatic insistence on the priority of investment over con-
sumption that played an important role in setting the conditions for
the October rebellion. There is no question of an abandonment of the.
goal of forced industrialization; there is only the question of how
long the present emphasis on production by light industry will last.
The immediate effect on light industry of the October rebellion in
Hungary was a drop in production. Phrases used in the official press
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to describe conditions were "production at an insignificant fraction
of the same period last year" or even "production at a standstill."
Although the rebellion started late in October 1956, production even
in October dropped perceptibly below that in September, an indication
of the unsettled political and economic conditions that preceded the
actual rebellion. In the months of November and December, production
of light industry was less than one-third of what it would have been
if the rebellion had not taken place. The production of 3 important
products of light industry, with production in September 1956 equaling
100, was as follows j*:
Product
Cotton fabrics
Knitwear
Leather footwear
September
October -
.November
December
100.0
58.3
6.1
22.7
100.0
71.6
9.7
26.5
100.0
79.0
12.7
31.7
At the same time that production was declining so sharply, indus-
trial payrolls were being maintained under a conciliatory government
policy, with the result that consumption of the products of light
industry ran far ahead of production. The value. of commercial inven-
tories of four important products of light industry at the beginning
and at the end of the last quarter of 1956 declined as follows J :
Cotton fabrics
513.8
209.7
Woolen fabrics
420.6
137.3
Knitwear
238.1.
91.8
Leather footwear
613.6
243.3
*-* Current prices: See the second footnote in IV, p. 10, below, for a
discussion of forint values.
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Another effect of the rebellion was a decline in exports of the
products of light industry and in imports of raw materials used in
light industry. Thus, in October and November 1956, Hungary imported
only 4,100 tons* of raw cotton, an amount equal to 51 percent of the
imports of raw cotton in the same period in 1955.
The rebellion caused considerable physical damage to public build-
ings and apartment houses, especially in Budapest, but the facilities
of light industry for production were relatively unharmed. Workers
were not so shortsighted as to engage in wholesale destruction of facil-
ities necessary to any future amelioration of their low-standards of
'living.
As a result of the rebellion, lines of authority in light industry
were disrupted. Factory workers enjoyed a short-lived local autonomy
in the form of workers' councils, which were supposed to plan produc-
tion, to set work norms, and to settle grievances at the plant level.
In December the government planned the merger of the Ministry of Light
Industry and the Ministry of the Food Processing. Industry, but the mer-
ger was abandoned shortly thereafter.
In the first quarter of 1957 the situation in light industry was
successfully stabilized by the new Kadar government, and those lasting
effects of the rebellion which could be expected to continue through
1957 became apparent. First, the government conceded the necessity of
a 1-year moratorium on the absolute priority traditionally' given to
heavy industry. Investment in 1957 is to be about 9 percent of national
income,** compared with an annual average of from 18 to 20 percent of
national income in 1945-55. Consumption, including military expendi-
tures, is to account for 91 percent of national income. Available raw
materials and foreign credits are to be used to restore production in the
light and the food processing industries rather than to continue the
development of heavy industries little suited to the economic resources
of Hungary. Production of consumer goods, as shown in Tables 1 and
2,*** is expected to account for almost 57 percent of total indus-
trial production in 1957, compared with 53 percent in 1956.
Toimages are given in metric tons throughout this report.
* According to the original revision of the Plan for 1957, invest-
ment was to be only 5 percent of national income. The increase in
investment reflects a gradual reversal of the position held immediately
after the October rebellion, when substantial improvement in standards
of living was anticipated.
**** Appendix A, pp. 31 and 32, respectively, below.
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In January 1957, production in light industry had been restored
to 68 percent of the September 1956 level, and, in February, production
advanced to 77 percent of the September level. If this rate of increase
were to continue, production in light industry for 1957 as a whole could
equal production in 1956. The level of production in 1956-57, however,
is estimated to be 16 percent below the 1955 level. Exports of the
products of light industry. will be limited to 10 to 15 percent of pro-
duction compared with 30 to 40 percent before the rebellion. The
partial restoration of production in light industry in the first quarter
of 1957 and the easing of export requirements did not solve the prob-
lems of depleted stocks or of excessive wage payments. In the first
quarter of 1957, people still had to queue up for a number of manufac-
tured consumer goods.
Even though production in light industry is restored to prerebellion
levels, costs of production hardly can be brought back to prerebellion
figures. In January and February 1957 the industrial plants of 6 min-
istries, which earned a profit of 110 million forints In January and
February 1956, incurred deficits of 1,430 million forints. Part of
these deficits were caused by operation below capacity, but official
commentary makes it plain that 2 other contributory factors were the
10-percent wage increase of 1956 and the failure to "consolidate work
discipline." Because the grinding pace of work was one of the major
causes of the bitterness felt by workers in the period before the
rebellion, the regime will find it difficult to restore previous norms
of production-.
In 1957, as part of the program of the government to support con-
sumer goods industries, a revival of artisan activity is planned in
such traditional lines as tailoring, custom shoemaking, and upholstering.
The decline in artisan activity in Communist Hungary is illustrated by
a report that from 1 January 1949. to the end of 1953 the number of artisans
and their employees declined from 377,000 to 51,000 as a result of the
emphasis by the government on industrialization.
The situation in 1957 probably cannot continue indefinitely, because
the Hungarian economy is not paying its way. A government spokesman
admitted,"We are living on reserves, on gifts, and on loans."
Foreign aid from the Sino-Soviet Bloc during the last quarter of 1956
amounted to 2 billion forints and continued at approximately the same
rate in the first quarter of 1957. A large part of this aid has been
in the form of consumer goods necessary to maintain living standards
and to reduce upward pressure on prices of consumer goods. The contin-
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uation of an unfavorable balance of trade in 1957 is illustrated by
the report that imports in January and February were 42 percent above.
the same period of 1956, whereas exports were 14 percent below.
As soon as political control is more firmly established and indus-
trial production recovers to prerebellion levels, the Communist govern-
ment of Hungary may be expected to revitalize the long-run program of
industrialization. Beyond 1957, therefore, if the concessions made to
light industry and the consumer sector are to be continued, the govern-
ment will have had to achieve remarkable success in solving the grave
economic problems cited above.
III. Developments from 1947 to 1956.
Developments in light industry that took place in the decade prior
to the October rebellion help to explain the growing popular resentment
felt against the Communist regime. In common with Communist governments
in the other countries of the Sino-Soviet Bloc, the government of Hun-
gary in the prerebellion period had favored the expansion of production
of producer goods at the expense of production of consumer goods. Of
the gross value of industrial production in the prewar year of 1938,
light industry accounted for 35 percent and the food processing indus-
try for 30 percent, or a combined total of 65 percent,* as shown in
Table 2.** Under the Communists in 1948 the percentage of consumer
goods to total industrial production already had fallen to 58 percent,
and by 1953 to 50 percent (see Table 2). At this time, under the "new
course," consumer goods received more attention in government planning,
and the percentage of consumer goods to total production went up to about
53 percent for the next 3 years. The food processing industry rather
than light industry accounted for this advance. Changes in the abso-
lute level of production in light industry in the postwar period and
production figures for these years are shown in Table 1.xxx
The relative share of consumer goods and producer goods in total
industrial production in Hungary is shown in the accompanying chart,
Figure 1.**** Production of consumer goods decreased from more than
65 percent of total industrial production in 1938 to 50 percent in 1953.
* Prewar and postwar figures are comparable; the sector covered in
1938 approximates what is now state and local industry.
** P. 32, below.
*** P. 31, below.
XXXX Following p. 8.
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Although the relative position of consumer goods has increased since
1953, the original Plan for 1960 anticipated that consumer goods again
would account for only 50 percent of total industrial production.
The gross value of production of consumer goods and producer goods
is shown in the accompanying chart, Figure 2.* After 1952 the growth
in production of consumer goods is shown to have been concentrated in
the food processing industry, with production by light industry level-
ing off.
In August 1947 the economy began to operate under the Three Year
Plan (1947-49). Under this Plan, light industry reached 62 percent
of its prewar level of production by the end of 1947 and 86 percent
in 1948. j/ The goals of the Three Year Plan were to restore indus-
try to its prewar level and to achieve a greater degree of industriali-
zation as a basis for ultimately improving the standard of living. A
report was issued for the first year of the Plan (1947-48), and nothing
was reported again until 1949 when it was announced that the Plan was
to be finished ahead of schedule and that the First Five Year Plan would
begin in 1950. J Although production by light industry was behind
schedule in 1947-48, by 1949 light industry had exceeded the Plan,
reaching 116 percent of its prewar (1938) value of production and 29
percent of the gross value of industrial production.
The Three Year Plan was completed 6 months ahead of schedule, and
the First Five Year Plan, which followed, firmly established the trend
started in the first year of the Three Year Plan. Increased industrial-
ization, which was to be the basis for ultimately raising the standard
of living, was the foremost goal of the planners, and the standard of
living temporarily was subordinated to this increased industrialization.
During the First Five Year Plan the development of heavy industry was
stressed at the expense of light industry; and although production by
light industry increased considerably, this increase was well below that
of heavy industry.
In 1950 the value of production by light industry increased by 28
percent above that in 1949; and in 1951, by 29 percent above that in
1950. By the end of 1951, however, light industry accounted for only
26 percent of the gross value of production of industry compared with
35 percent in 1938. The entire consumer goods sector represented only
56 percent of the total value of production compared with 65 percent
in 1938.
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 SECRET
HUNGARY
PERCENTAGE OF CONSUMER GOODS
AND PRODUCER GOODS IN TOTAL INDUSTRIAL PRODUCTION
1938, 1948-57, and 1960 plan
CON
SUME
R GO
ODS
' --------
--
PRO
DUC
ER GO
ODS
1960
(plan)
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 SECRET
HUNGARY
GROSS VALUE OF PRODUCTION OF CONSUMER GOODS AND PRODUCER GOODS
1938, 1948-57, and 1960 plan
SECRET
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The First Five Year Plan was revised and accelerated in 1951, and
all goals were raised, including those for light industry. In 1952,
however, production by light industry was only 13 percent above that
in 1951. A reduced rate of growth at this time continued into the
first half of 1953, and the second major revision of the Plan was
announced in July as the "new course."
The "new course" reiterated the ultimate goal of a higher standard
of living. The principal goals of the "new course" were to make more
goods immediately available to the consumer, to increase agricultural
production, and to develop those branches of heavy industry producing
durable consumer goods. The general development of the engineering
and basic industries was to continue, but at a reduced rate, until
some degree of economic balance had been restored. The "new course"
contained no specific plans to increase production but provided only
for the attainment of goals which were either the same or lower than
those in the original Plan. Plans were made to increase production
as well as investment during the second half of 1953 in order to make
up for the serious underfulfillment in the first half of that year and
to make possible the fulfillment of the original plans for 1953. In
spite of the efforts made during the second half of the year, the goals
were not attained. Production by state and local enterprises of light
industry in 1953 increased 0.2 percent above that in 1952, and the food
processing industry showed a`n~ increase of 11 percent, which was below
that in the previous year. L
In the first part of 1954, heavy industry failed by a wide margin
to meet its goal for the production of durable consumer goods. The
food processing industry continued to feel the effects of a poorly equipped
agricultural labor force, and light industry continued to be faced with
shortages of raw materials. These conditions prevailed throughout 1954,
and by the end of the year the new program was seriously lagging behind
planned goals. Production by the state and local enterprises of light
industry increased only 6 percent. At the same time the value of pro-
duction by heavy industry decreased 4 percent.
In 1955, Hungarian industry was more successful in fulfilling pro-
duction plans than in 1953 and 1954. The Plan called for a 7.1-percent
increase in light inducs/try, compared with a 5.7-percent increase in
industry as a whole. J The Plan was fulfilled, and the value of pro-
duction by the state and local sector of light industry increased 8 per-
cent above that in 1954, compared with a similar 8-percent increase
for industry as a whole. In 1955 the state and local sector of light
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1
S-E-C-R-E-T
industry produced 22 percent of the value of production by industry
as a whole, and the consumer goods sector accounted for 54 percent.
IV. Second Five Year Plan (1956-60).
Under the original Second Five Year Plan (1956-60), which was can-
celed as a result of the rebellion, light industry was to reduce imports
of raw materials by developing the synthetic fiber industry and by
increasing domestic sources of raw materials. The Plan provided for
the extensive use of modern techniques of production that were designed
to increase both the quantity and the quality of goods. A directive
of September 1954 stated that the only priority for light industry
would be for articles produced for export and for articles that other-
wise would have had to-be imported. v In accordance with this direc-
tive the production plan for 1956, compared with that for 1955, called
for a decrease of 3u./8 percent to compensate for a reduction in imports
of raw materials. ? By 1960 the domestic supply of goods produced by
light industry was expected to have risen 40 percent above the supply
in 1955. A reduction in the export of the goods of light industry,
particularly of cotton fabric, was expected to contribute to the
achievement of this goal.
In 1949, Hungarian planners were misled by the rapid rates of growth
achieved in industry during the Three Year Plan. They underestimated
the extent to which these rates were the result of underemployed labor,
underutilized capacity, and a temporary surplus of raw materials -- con-
ditions which made possible a higher rate of return on investment. If
it is assumed that light industry in Hungary had reached approximately
45 percent of the prewar value of production* at the time the Three
Year Plan began in August 1947, then for each forint** of investment,
light industry produced 31 forints of additional goods by the end of
1949. During the following 5-year period the shift from the
* The values of production by light industry in 193d, 1946-47, and
1947-48 were used to estimate the value of production at the beginning
of the Three Year Plan.
** Forint values are given in terms of 1955 Plan prices unless other-
wise indicated. At the official rate of exchange the forint-dollar
ratio is 12 to 1. The extent of overvaluation in the official rate
of exchange, however, is shown in the forint-dollar ratio of 23 to 1,
recently established by the Hungarian government for tourists and for
international-exchange transactions not involving the movement of com-
modities.
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reconstruction and repair of damaged plants to the construction of new
plants resulted in only 23 forints of additional goods being produced
for each forint invested. During this period, however, there had been
an increase in the amount of investment allocated to light industry.
An accurate comparison of the relationship of production to investment
between these two periods cannot be made, because of the increase in
size of the capital stock, changes in maintenance and repair costs,
and changes in the lag between new investment and new output.
Under the Second Five Year Plan as originally adopted, light indus-
try was to produce about 5 forints of additional goods for each forint
of planned investment.* The 25-percent increase in production that was
planned for 1956-60 was largely contingent upon increased utilization
of present capacity and increased productivity of labor.** It is expected
that light industry will represent only about 20 percent of the gross
value of industrial production in Hungary by 1960.
Plans for light industry are being modified as a result of the
economic crisis. The Second Five Year Plan is being replaced by a
One Year Plan for 1957 and a Three Year Plan for 1958-60. The basic
objective of the One Year Plan is stated to be that of raising the
standard of living of the workers. In line with this objective the
1957 goals for the production of consumer goods will be greater than
production in 1956, investment will be cut, a larger share of national
income will be allocated to consumption, and exports of consumer goods
will be reduced where necessary in order to increase the quantity avail-
able for the domestic consumer. Hungary has obtained loans from non-
Soviet Bloc countries as well as from countries of the Soviet Bloc and
is increasing its imports of consumer goods. In addition, independent
craftsmen and artisans' cooperatives are being encouraged to broaden
their productive activities in order to increase the supply of con-
sumer goods. 2/
The long-term effect of the present situation on production by light
industry is not as yet clear. Industrial objectives probably will be
modified in accordance with the directives of the Council of Mutual
Economic Assistance (Sovet Ekonomicheskoy Vzaimopomoshchi -- CEMA),
* This relationship is subject to the same qualifications mentioned
in the preceding paragraph.
** For example, 90 percent of the increase planned in the production of
wool fabric and 40 percent of the increase planned in the production of
knitwear must be accomplished without additional investment.
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whereby Hungary will concentrate its resources chiefly on those indus-
tries which can produce at an advantage.in comparison with other Satel-
lite countries. Also prominent is the problem of modifying production,
trade, and financial policies in order to build up depleted reserves,
to raise the domestic level of consumption, and at the same time to
avoid inflation.
In Hungary, nearly all consumer goods except processed foods are
produced under the jurisdiction of the Ministry of Light Industry. The
exceptions are those durable consumer goods, such as household electrical
appliances, produced by heavy industry. The Ministry of Light Industry
was organized in 1949 to administer the textile, clothing, and footwear
industries. At that time a Ministry of Local Industries was responsible
for production of many durable consumer goods and for the production of
some textile goods as well as for such services as shoe repairing and
tailoring. In 1954 the government placed local industries, cooperatives,
and independent artisans under the supervision of the Ministry of Light
Industry. / In 1956 the following industries were under the juris-
diction of the Ministry of Light Industry: textiles, clothing, leather
and footwear, woodworking, and paper and printing.* ll
State and local industry comprise the most important part of pro-
duction by light industry, accounting for approximately 80 percent of
the total value of such production during 1949-56. This sector of pro-
duction was formed chiefly from enterprises which employ more than
10 persons and which had been taken over by the state in 1949. The
remainder of production by light industry is carried on by small pri-
vate enterprises and by cooperatives.** Until recently the policy
of the Hungarian government has been to drive private enterprises
out of business or into cooperatives, with the result that the value
of production by private industry has declined. Private enterprises
produced approximately 20 percent of the value of production of light
industry in 1949, 2 percent in 1953, and about 5 percent in 1955. During
* A few enterprises of the chemical and machine-building industries
are also under the jurisdiction of the Ministry of Light Industry. These
enterprises probably are concerned with products such as synthetic fibers
and machinery for the textile industry.
** In addition, there is some home handicraft production, especially
in rural areas. The importance of this production in the prewar period
is not known, but it is negligible at present.
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the same period the importance of cooperative industry has increased
from about 3 percent of the value of production of light industry in
1949 to about 15 percent in 1955. / The need for increased produc-
tion of consumer goods is leading to the encouragement of private indus-
try, particularly since January 1957. Incentives for private industry
are to include a reduction in the tax burden on the independent artisan
and the provision of an adequate supply of high-quality raw materials
at reasonable prices. i3i
VI. Investment.
The investment by Hungary in light industry may be divided into
three major categories: (1) investment for the reconstruction and
repair of plants and equipment damaged during World War II and for
the replacement of equipment taken as reparations by the USSR,
(2) investment for the construction of new plants and for the expan-
sion of existing facilities, and (3) investment for the development
of substitutes and new processes. The first of these categories and,
to a limited extent, the second were basic characteristics of the
goals of light industry under the Three Year Plan (1947-49); the second
also was a characteristic of the First Five Year Plan (1950-54); and
the third will dominate the 1956-60 period.
1. Three Year Plan (1947-49).
To regain prewar levels of production, Hungary invested 227
million forints, at current prices, in capital equipment for light in-
dustry during the Three Year Plan. 14/ This investment represented
only 7 percent of gross industrial investment whereas investment in
heavy industry represented about 89 percent and that in the food pro-
cessing industry, 4 percent of the total. The textile industry received
about 70 percent of the funds invested in light 'inc~ industry. Most of these
funds were spent to increase spinning capacity, y which had been either
destroyed during the war or reduced as a result of reparations.
In 1947, cotton-spinning capacity in Hungary was about 60 per-
cent of the 1938 level, 16 and the spinning mills were unable to pro-
duce.enough yarn to supply the weaving mills adequately. Because Hun-
garian production of textile machinery was negligible, most of this
machinery had to be imported. During the Three Year Plan, 100,000 spin-
dles were added to the capacity of the textile industry, and at least
90,000 of these spindles were imported.* Of the spindles imported,
* Excluding 30,000 spindles in the cotton-spinning mill at Szeged, which
was not completed until 1950.
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72,000 were, p'u~rchased from England, and a minimum of 18,000 from other
countries. I These additions helped Hungary regain prewar spinning
capacity by the end of the Three Year Plan. In 1949 there were 320,000
spindles for cotton in Hungary.* L8/
During the Three Year Plan, investment funds were used to com-
plete the viscose works in Nyergesujfalu** and to build a new spinning
mill in Szeged. The viscose works is the only known rayon and fiber
factory in Hungary. In 1948 the daily output of this factory was 5,000
kilograms (kg) of rayon and 2,000 kg of staple fiber'.n /New machinery,
presumably of Swiss manufacture, was added in '1949. / Further expan-
sion was planned during the First and Second Five Year Plans.
The cotton-spinning mill at Szeged, although not completed until
1950, was the most important construction in light industry during the
Three Year Plan. This mill was equipped with 30,000 spindles obtained
from the USSR. Weekly production was planned to be 50,000 to 60,000 kg
of cotton yarn. 20 -
There are no data available on losses of capacity in the foot-
wear, paper and printing, and woodworking industries during and after
World War II. The losses, however, were probably small compared with
the losses in the textile industry, and investments allocated to these
industries were therefore also small.
The achievements of the Three Year Plan served as the basis
for the industrial expansion called for by the First Five Year Plan.
The priority of heavy industry was demonstrated by the apportionment
of 90 percent of industrial investment funds to heavy industry. Under
the revised plan, investment in heavy industry was to total 37.5 billion
forints, in light industry 1.8 billion forints, and in the food process-
ing industry 1.7 billion forints. The division of investment funds
among the branches of light industry, in billions of forints, was to
be as follows L Y:
* The number of spindles in place and added in major cotton-spinning
mills in Hungary in 1949, 1954, and 1960 (Plan) is shown in Appendix B.
Table.5, p. 36, below.
** Construction was begun during World War II but had to be discontinued.
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Branch of Industry
Amount
(Billion Forints)
Textiles
1.050
Clothing
0.261
Leather and footwear
0.139
Woodworking
0.103
Paper and printing
0.287
Construction of 34 plants was planned originally for light in-
dustry as follows L 2j: 20 plants for the textile and clothing industries,
2 for the leather and footwear industries, 9 for the woodworking indus-
try, and 3 for the paper industry. The revised First Five Year Plan,
announced in 1951, reduced the number of new enterprises in light indus-
try to 29. This reduction may be attributed to governmental re-emphasis
on the development of heavy industry and to a shortage of raw materials,
which limited the growth of production by light industry.
Actual gross capital investment in induscry in Hungary during the
First Five Year Plan amounted to 29.7 billion forints in current prices.
Of the gross capital investment in industry, 27.4 billion forints were
used by heavy industry, 1.2 billion by light industry, and 1.1 billion
by the food processing industry. 23/
/
During the First Five Year Plan, not more than 10 of the 29 plants
scheduled for construction were completed and put into operation. L4/ in
addition to the 10 new plants, many existing plants were expanded. Al-
though the construction plan for light industry was not fulfilled, the
following important results were achieved by light industry during the
First Five Year Plan:
a. The addition of 100,000 spindles to the textile industry
made possible a 42-percent increase in the production of cotton yarn.
Of these spindles, 40,000 we'r~e/ located at the new 100-million-forint
spinning mill in Kaposvar. / This mill began operation in 1952, and
its additional spinning capacity was expected to increase by about 5,000
tons production of cotton yarn in Hungary. L6/ The spinning capacity
of mills in Lorinci and Kobanya Hegy was increased by the addition of
30,000 spindles in 1952.
b. Facilities for the manufacture of flax and hemp products
were expanded. A new flax factory in Mikosdpuszta and a hemp factory
in Sarkad were put into operation in 1954. The hemp factory w~nas~ expected
to effect a 10-percent increase in production of hemp fiber. =J
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c. A firm basis for a large-scale clothing industry was
developed. The most important factories built between 1950 and 1954
were those at Bekescsaba, Zalaegerszeg, and Budapest. c7/ The machinery
for these plants was supplied by the USSR, and production was scheduled
for domestic, civilian, and military consumption as well as for export.
d. The viscose works in Nyergesujfalu was expanded. This
increase of capacity made possible the plan for increased production of
rayon.
'~ ~e. A straw-cellulose factory was constructed in Szolnok
in 1954. ,2Q1 This factory enabled Hungary to reduce imports of wood
for the manufacture of cellulose by substituting domestically available
straw and rice hulls.
f. The leather factory in Pecs and the Tisza Shoe Factory
in Szolnok were expanded. 31/
Under the "new course" of July 1953, investment funds were re-
allocated in favor of light industry, bringing the percentage of total
investment for 1953 up to the level of investment set by the First Five
Year Plan as revised in 1951. Actual investment in light industry in
1953 was 323 million forints, or 2 percent of total investment. 32/
In 1954 the investment plan for light industry was not fulfilled, and
heavy industry again received priority development.
3. Transition Year (1955).
The investment plans for 1955 and 1956 were more realistic than
those for previous years. In 1955, fewer funds were allocated to total
investment. Proposed investment in light industry was increased, although
it was still low -- about 420 million forints / -- and proposed invest-
ment in heavy industry was decreased.
Investment in 1955 was used to complete projects begun during
the First Five Year Plan. The most important plant 34J built by light in-
dustry in 1955 was a new spinning mill in Miskolc. Operation at
total capacity was not expected to be reached until 1958, but partial
operation began in 1955. Machinery for this plant was imported from
East Germany, an important supplier of textile machinery to Hungary.
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4. Second Five Year Plan (1956-60).
The Second Five Year Plan (1956-60) called for a 20-percent in-
crease in total investment in Hungary over the level of 1950-54. / In-
vestment for light industry was to be 3 percent of total investment, com-
pared with 2 percent under the First Five Year Plan. Despite this in-
crease in investment for light industry, it is expected that light indus-
try by 1960 will represent only about 20 percent of the gross value of
industrial production. Total investment in light industry, however,
was to be 92 percent higher than under the First Five Year Plan. The
major goals for light industry under the Second Five Year Plan were
the expansion and improvement of present plant facilities rather than
the construction of new plants. These goals were to be achieved by
tae construction of additions to the existing plants, by installing
improved types of machinery, and by improving techniques of production.
The utilization of synthetics and substitutes was one of t'h~e~
chief goals of the Hungarian investment plan for light industry. 16
Success of this program would have enabled Hungary to decrease imports
of raw materials and thus to increase the supply of foreign exchange
available for importing higher priority goods.
A new synthetic fiber plant in Nyergesujfalu was to be construc-
ted, and facilities for spinning and weaving synthetic fiber were to
be expanded. For example, the construction of a spinning mill at Kis-
taresa to process wool yarn mixed with synthetic fiber was begun during
1956. The cost of con~s~tructing this mill was originally estimated at
20 million forints. 3.
5. Plans for 1957.
Total planned investment for 1956 was 11.6 billion forints,
but plans to increase the proportion of national income to be allocated
to consumption in 1957 have necessitated a 30-percent reduction in
planned investment. This most recent revision of the Plan allocates
8.2 billion forints to investment, in contrast with the 5 billion for-
ints allocated to investment by the Plan as originally revised.
According to the most recent revision of the Plan, approxi-
mately 500 million forints, or 17 percent of industrial investment,
is to be allocated to light industry and the food processing indus-
try. This figure for 1957 is only 66 percent of investment in the
same industries in 1955, but the percentage of industrial investment
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to be allocated to light industry and the food processing industry in
1957 is approximately the same as that in 1955. Investment in light
industry in 1957 will be concentrated on maintenance and repair of
equipment rather than on the construction of new plants.
VII. Labor Force.
The rise in the value of production by light industry since 1949
is the result of an increase in the number of workers engaged in pro-
duction of light industry and, to a lesser extent, a rise in the pro-
ductivity of labor. In 1954 there were 210,000 workers and employees
engaged in the state and local sector of light industry, or 60 per-
cent more than in 1949. The number of workers engaged in production
rose by 61 percent during the same period and-represented 79 percent
of all workers and employees in 1954. Textile workers and employees
constituted about 50 percent of the total number of workers and
employees in the state and local sectors of light industry in 1954
and 1955, and garment workers accounted for approximately 17 percent
more. 39/
State economic policy is reflected in shifts in the distribution
of the industrial labor force. The number of workers and employees
engaged in the state and local sector of light industry has declined
as a percentage of total industrial employment from about 30 percent
in 1938 to 25 percent in 1949 and 23 percent in 1955? Conversely,
heavy industry employed 58 percent of all industrial workers and employees
in 1938, but 62 percent in 1949 and 66 percent in 1955. 40
The labor force of light industry includes members of industrial
cooperatives and private artisans as well as workers and employees in
state and local enterprises. In 1955, probably 50,000 productive mem-
bers and employees of the industrial cooperatives were engaged in light
industry. As of 31 December 1955 there were also about 94,000 indepen-
dent artisans in Hungary, who employed more than 4,600 employees and
11,000 apprentices to supplement their own productive activities.
Approximately 29,000 of the 94,000 artisans were engaged in the cloth-
ing and footwear industries. There were almost 8,000 cabinet makers
and a small number of jewelers, decorators, and members of other trades
that are closely connected with the production, repair, or servicing of
nonfood consumer goods. 41
The Second Five Year Plan (1956-60), as originally adopted, did not pro-
vide for large additions to the labor force of light industry. Instead,
the Plan was to be fulfilled by the development of substitutes for scarce
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raw materials, the fuller utilization of existing plant facilities,
and a rise in the productivity of labor. According to the Plan, the
productivity of labor in light industry was to increase 20 percent by
1960. 42
The rise in production by light industry during 1949-54 was achieved
primarily by an expansion of the number of workers rather than by an
increase in output per worker. In 1954 the labor force in the state
and local sector of light industry was 60 percent larger than in 1949.
The value of output per worker in light industry, however, had risen
only 25 percent, whereas output per worker in heavy industry was 56 per-
cent above the level of 1949. Output per worker in light industry
declined in 1953 and 1954. This decline was partly a result of shortages
of coal and electric power and of difficulties in obtaining raw materials.
In 1955 the productivity of labor in light industry rose 6 percent com-
pared with that in 1954 and almost reached the 1952 peak.
The 20-percent increase in the productivity of labor in light indus-
try envisaged by the original Second Five Year Plan will not be attained,
because of the continuing need for repair and modernization of equip-
ment, the need for improvement in the supply of raw materials for light
industry, and the need to lessen popular dissatisfaction with the Kadar
regime. Although the number of workers employed in the textile indus-
try is to be increased by 11,400 in 1957, the problem of increasing
production through a rise in the productivity of labor remains to be
solved.
VIII. Important Branches.*
A. Textiles and Clothing.
The textile industry of Hungary began to develop on a large
scale after World War I. From 1920 to 1929 the number of spindles used
in cotton mills increased from 30,000 to 243,000 and the number of
spindles used in woolen mills from 6,000 to 69,000.** Y3!
* Production of selected goods by light industry in Hungary in 1938,
1949-56, and 1960 (Plan) is shown in Appendix A, Table 3, p. 33,
below.
** The major wool-spinning and weaving mills in Hungary are shown in
Appendix B, Table 6, p. 37, below.
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World War II delayed the development of the textile industry,
and war damage and reparations reduced the available capacity. As a
consequence the Three Year Plan (1947-49) of Hungary provided only for
the attainment of the prewar level of production in light industry.
The Plan, which was completed in 2 year's and 5 months, not only was
fulfilled ahead of schedule but also was successful in socializing the
greater part of industry. By 1948, 74.8 percent of the textile workers
were in the socialist sector, which contributed 78.8 percent of the
gross value of production. L4/
The textile and clothing industries accounted for 16.4 percent
of the gross value of industrial production in 1955, compared with 18.6
percent in 1949 and 15.8 percent in 1953?* j / These industries are
.the most important branches of light industry, representing 74 percent
of the value of production of light industry in 1955, compared with 66
percent in 1949. The clothing industry increased its production by
402 percent between 1949 and 1955, compared with a rise of only 80 per-
cent in the value of production of the textile industry during the same
period. 46 The rapid gains made by the clothing industry resulted
largely from a considerable amount of new construction and from the
substitution
~~.o,f~ large-scale factory production for artisan handicraft
production. JJ
On the basis of the number of workers and the volume of
output, cotton textiles are the most important branch of the textile
industry of Hungary. During 1938-55, cotton accounted for about 45 per-
cent of the value of production of textiles. 48
Before World War II the majority of cotton enterprises in
Hungary were concentrated in Budapest and its suburbs. A smaller num-
ber of enterprises were located in western Hungary, near the centers
of raw material imports at Gyor, Sopron, Szombathely, and Papa. Several
other enterprises were located east of the Danube River at Baja, Bekes-
csaba, and Mezotur. The most important new construction during
the postwar period has been at Szeged, Kaposvar, and Miskolc.
Since the end of World War II the cotton textile industry
has been hampered by the lack of domestic raw materials. The First
* The above percentages are based on figures for the value of produc-
tion which exclude private and cooperative production.
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Five Year Plan (1950-54) provided for the cultivation of cotton along
the Tisza River, but the climate in this area has not proved satisfac-
tory.
During the First Five Year Plan, production of cotton tex-
tiles increased by 34.9 percent. Production in 1955 reached 234 million
square meters (sq,m), or about 91 percent of the original goal of the
First Five Year Plan. 50/ Recent data on production seem to indicate
that the rate of growth of production of cotton textiles is leveling
off. The original Second Five Year Plan (1956-60) provided that pro-
duction of cotton textiles would increase only 6 percent, and Hungary
undoubtedly will attempt to rely increasingly on synthetic textiles to
supply domestic consumption needs. Consumption per capita* of cotton
cloth was 10.3 sq.m in 1955, compared with 11 sq,m in 1950 and almost
15 sq m in 1938.*-* In 1955, only about 45 percent of production
appears to have been consumed domestically, compared with 90 percent
in 1938.
Production of cotton fabric in 1956 was 181 million sq. m,
or 11 percent below production in 1951. The principal reasons for this
sharp decline in production were labor problems and shortages of raw
materials which prevailed during the fourth quarter of 1956 as a result
of the rebellion of 23 October 1956. It is expected that production
of cotton fabric in 1957 will increase to more than that in 1953 and
that a larger proportion of production will be allocated for domestic
consumption than occurred in 1955.
The woolen textile industry of Hungary is less important
than the cotton textile industry. The greatest hindrance to the develop-
ment of the woolen textile industry is a lack of raw materials, most of
which are imported. Woolen textiles account for about 20 percent of
* Consumption per capita includes goods purchased in retail stores,
at market places, or directly from producers, as well as goods origin-
ating from private production and consumed in public institutions such
as hospitals and military installations.
** On the basis of a postwar conversion rate, consumption per capita of
cotton cloth was 14.7 linear meters (lm) in 1955 and 15.7 lm in 1950. A
prewar conversion rate was used to obtain 1938 consumption per capita in
square meters; consumption per capita in 1938 was reported to be 18.5
1m.
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the value of production of textiles in Hungary. Approximately 98 per-
cent of the woolen cloth. is sent to the Administration for Readymade
Clothing. The main centers of production are generally the same as
those of the cotton textile industry -- Budapest, Gyor, Sopron, Szom-
bathely, and Baja.
Production and consumption of woolen textiles decreased
during the First Five year Plan. Although the First Five Year Plan
had called for domestic consumption to increase from 1.8 sq,m per
capita in 1949 to 3.6 sq,m in 1954, g actual consumption per capita
of woolen fabric was only 2.2 sq,m in 1955, 24 percent below consump-
tion in 1951.* ~Jj
According to the original Second Five Year Plan, production
of woolen textiles was to increase by 35 percent. The large increases
planned for the production of woolen textiles, compared with the plan
for cotton textiles, were the result of lower production of wool under
the First Five Year Plan. Planned production of woolen textiles for
1960 was actually only 12 percent above the level of production, of 1951.
Production per capita of woolen textiles in 1960 was originally planned
to be only 3.5 sq,m. There was an 8-percent decline in production of
woolen textiles in 1956, compared with 1955, and the goal for 1960 prob-
ably will not be attained.
The flax and hemp textile industry of Hungary is supplied
with domestically produced raw materials. Neither the supply of raw
materials nor the available capacity, however, are sufficient to meet
consumption needs. The First Five Year Plan called for the reconstruc-
tion of old plants and the construction of several new plants to meet
domestic needs. Production of linen textiles in 1955 was 22 million sq,m,
or 101.2 percent above that in 1949. In 1956, only 20 million sq,m of
linen textiles were produced. The original Second Five Year Plan did
not give a goal for 1960. Increases in production, however, will depend
on the ability to grow additional hemp and flax.
The principal flax factories are found in Budapest, Gyor,
and Komar~o~~m~. The hemp industry is concentrated in Budapest and
Szeged. L
* On the basis of a constant conversion factor, consumption per capita
of woolen fabric was 1.3 in in 1949, 2.1 in in 1951, and 1.6 in in 1955.
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The textile industry of Hungary probably will have to depend
on the establishment of a modern synthetic cloth industry on a large-
scale basis to offset the shortages of cotton, wool, and natural silk raw
materials. An increased use of synthetic fibers in the textile indus-
try of Hungary is especially important in view of current policy which
calls for a reduction of imports wherever possible.
Production of silk and synthetic textiles increased 23 per-
cent from 1949 to 1954. (See Appendix A, Table 3.*) The original
Second Five Year Plan provided for a 30-percent increase in the produc-
tion of silk and an increase in the use of nylon, perlon, orlon, and
other synthetic fibers.
The original Plan for 1960 provided that the proportion of
synthetic threads in silk, knitted goods, and haberdashery was to exceed
17 percent in contrast with 3 'percent in 1955 and that viscose synthetics
in cotton fabrics were to exceed 16 percent in contrast with 8 percent
in 1955? / Although the increase in the use of synthetic threads
would reduce raw material imports of these items, even further increases
must be planned and accomplished in the production of synthetics before
light industry can supply itself through domestic resources.
5. Knitwear and Clothing.
The production of knitwear (excluding stockings) in Hungary
increased by 222 percent ent during the First Five Year Plan, exceeding the
Plan by 10 percent. L In spite of large increases in the industrial
production of knitwear from 1949 to 1954, production in 1954 reached
only 93 percent of the level of production in 1938. Production in 1955
increased to 5,057 tons, or 14 percent above that in 1938. This increase
amounted to 7 percent per capita. In 1956, about 4,800 tons of knitwear
were produced in Hungary. Production of knitwear probably regained pre-
rebellion levels during the first quarter of 1957.
The First Five Year Plan provided for an unprecedented
development of the readymade clothing industry. Clothing, formerly
produced by artisans and concentrated in small enterprises, was to
become a large-scale industry with low overhead costs, producing a
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high-quality product. Most of the new enterprises were built east of
the Danube River.* The center of the industry, however, remains in
Budapest.
The ambitious plans for the clothing industry were not ful-
filled. The industry reported a 355-percent increase in the value of
production during 1950-54, although the Plan had called for an increase
of 750 percent. / The total number of readymade men's suits manufac-
tured during 1955 would have provided 1 suit to only about 25 percent
of the men of 15 years of age or over in Hungary as of 1 January 1956.
Based on the number of coats manufactured in 1955, each adult male could
obtain a coat only about once in every 5 years. The number of women's
dresses and suits manufactured during 1955 would provide 1 such item
per year to only about 20 percent of the women of 15 years of age or
over. A woman could buy a readymade coat only once in a little more than
5 years if Hungary were dependent on domestically produced readymade
coats for its total supply. G_I
Increases in production during 1957-60 will depend on the
ability of the textile industry to supply the necessary yarn and fabric.
Production of readymade clothing was planned to increase 28 percent
during the Second Five Year Plan. This relatively small rise in pro-
duction reflects the low rate of investment and the stabilization of
the labor force during the Plan period.
B. Leather and Footwear.
The leather and footwear industry of Hungary depends to a large
extent on imports of raw materials. In 1938, 75 percent of all the
leather used in the production of leather items was imported. There
has not been any indication that this condition has changed. The
leather industry is concentrated in Budapest and in the main animal
husbandry areas
`naround Szekesfehervar, Simontornya, Mohacs, Pecs,
and Debrecen. 11
Nearly 80 percent of the supply of leather in Hungary is used
for the production of shoes and boots. During the last 5 years the
footwear industry has undergone an extensive development, which has
resulted in a 199-percent increase in capacity. In 1955, production
* To a large extent, new enterprises were constructed in the area
along the Tisza Rivers where Hungary was experimenting in cotton gro
ing. See pp. 20-21, above.
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of leather shoes reached 12.4 million pairs, and total production of foot-
wear, including rubber footwear, reached 14 million pairs. The produc-
tion of leather shoes in 1956 was 44 percent greater than that in 1951
but was 13 percent below production in 1955. The original Second Five
Year Plan called for a 16-percent increase in the production of leather
shoes.
Almost all of the production of leather shoes in Hungary is
retained for domestic consumption. In 1950, consumption per capita
of leather shoes was 0.62 pair, compared with 1.06 pairs in 1955. The
consumption per capita of leather shoes in 1955 was lower than that in
1954 (1.12 pairs per capita). 60
The fur industry is very closely related to the leather indus-
try and is also under the jurisdiction of the Ministry of Light Indus-
try. Hungary has received help from the USSR in producing the better
grade of fur products. The center of the fur industry is in Budapest. 61
C. Woodworking and Paper.
The woodworking industry of Hungary contributed 8.3 percent of
the value of production by light industry in 1955, compared with 6.3 per-
cent in 1949.* L2/ Because most of the domestically available wood is used
as fuel, the industry is almost completely dependent on imports, princi-
pally from the USSR, Czechoslovakia, Rumania, and Austria. Deliveries
have been irregular, and specifications disregarded. As a result, short-
ages of raw materials are the most important obstacle to the development
of the woodworking industry. Obsolete machinery continues to be a factor
contributing to unsatisfactory conditions in the industry as a whole,
even though the furniture industry received machinery valued at 5.5
million forints in 1953 and 1954?
An important branch of the woodworking' industry is that produc-
ing furniture. Although statistics on production of furniture are not
available, the Hungarians claim that the industry satisfies domestic
requirements and permits a significant portion of production to be
exported. Such claims are noteworthy because the industry must rely
almost completely on imported raw materials. L4/ Most of the furni-
ture is of the luxury type, produced for export in small handicraft
* The percentages are based on figures for gross value of production
which exclude production by private and cooperative enterprises.
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enterprises. Furniture for mass consumption is produced in the factories.
The First Five Year Plan attempted to shift the emphasis away from handi-
craft production to mass production of low-cost, high-quality furniture,
without sacrificing the export market. Such a radical shift was prob-
ably impossible on a scale large enough to supply other than the domes-
tic consumer. The export market probably will remain the responsibil-
ity of handicraft enterprises.
The paper industry, too, is seriously affected by a shortage
of raw materials. In order to alleviate this difficulty, plans have
been made for the use of domestically produced straw as a substitute
for scarce woodpulp.
The development of paper processing began in the period between
World Wars I and II but did not satisfy domestic needs. Production of
paper in 1938 was 55,000 tons, 29 percent of which was used in the
printing industry. During the Three Year Plan the industry began to
develop on a large scale and in 1949 produced 71,000 tons of paper,
20,000 tons of which were used in the printing industry. By 1955,
production of paper increased 48 percent over 1949, and the Seconds
Five Year Plan stipulated that production in 1960 would be 56 percent
above that in 1955. This ambitious goal probably will not be met,
because of a 6-percent decline in production in 1956, compared with
1955? Production of paper is concentrated in and around Budapest,
Szentendre, and Miskolc.
Current production of consumer durables in Hungary is low, although
double that in 1949. The production of radiobroadcast receivers tripled
from 1949 to 1954 and almost doubled from 1954 to 1956. The increase
in production of bicycles from 1949 to 1954 was only 27 percent and
from 1954 to 1956 only about 10 percent. The production of household
sewing machines doubled from 1949 to 1954 and increased by about 44 per-
cent from 1954 to 1956. The increased emphasis on the production of
all these items in 1955 was the. result of efforts made to offset the
failure of heavy industry to meet the goals of the Five Year Plan in
1954..
* Production of radiobroadcast receivers, bicycles, and household
sewing machines in Hungary in 1938, 1948-56, and 1960 (Plan) is shown
in Appendix A. Table it, p. 34, below.
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During the First Five Year Plan, approximately 70 percent of the
radiobroadcast receivers and 66 percent ~o`! f/ the bicycles produced were
sold through the retail trade network. !L In 1955, retail sales of
consumer goods were 5 percent higher than in 1954. The number of bi-
cycles sold in 1955 was 60 percent above the level of 1953 and 18 per-
cent above that in 1954. Sales of stoves have also increased consider-
ably, the 1955 level having been 83 percent higher than that in 1954. 66
The domestic supply of durable consumer goods rose during the first
half of 1956, and sales, stimulated by the introduction of the install-
ment buying plan during February 1956, increased considerably.
X. Foreign Trade.
Until 1945, about 70 percent of total Hungarian exports were agri-
cultural goods'. In 1949, exports of livestock and food represented 43
percent of the total but in 1955 only 28 percent. Exports of machinery
and industrial raw materials expanded from 40 percent of total exports
in 1949 to 54 percent in 1955. Exports of nonfood consumer goods had
to be increased to help offset decreases in agricultural exports and to
provide foreign exchange for the imports of raw materials for light
industry. Exports of nonfood consumer goods amounted to only about
8 percent of total exports in 1937, 17 percent in 1949, 25 percent in
1951, 22 percent in 1952 and 1953, and 18 percent in 1955. The trade
pattern for imports of nonfood consumer goods also has changed. In
1937 these imports constituted about 8 percent of total imports but
in 1954 and 1955 only 3.9 percent.
Textiles are the most important single item among exports of non-
?ood'consumer goods. The position of Hungary in the world textile and
fiber trade has shifted from that of net importer before World War II
to that of net exporter. / Trade in cotton goods exemplifies the
interest in increasing exports of textiles. On the basis of avail-
able production and consumption data, the export of cotton fabrics in
1938 was estimated to be equivalent to 10 percent of total production.
Including finished articles, the export of cotton goods in 1955 repre-
sented sented approximately 50 percent of total production of cotton goods. Q
exports by Hungary of cotton and rayon goods 50X1
to the Satellites amounted to from 75 million to 80 million meters in
1953-54, or less than 50 percent of the total exports of these items. LO/
Exports of nonfood consumer goods also include some footwear and
readymade clothing and less essential goods such as radiobroadcast
receivers, bicycles, sewing machines, furniture, and toys. A
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conference on foreign trade held in July 1954 emphasized that the export
of consumer goods, particularly to non-Soviet Bloc countries, must con-
tinue even at the expense of the domestic market so as to retain exist-
obe met in
ing markets. Domestic shortages of consumer goods were tU/
part by imports from other countries of the Soviet Bloc.
In 1955, 45 percent of Hungarian imports came from the. West. 1_/
Hungary, however, has had difficulty in marketing some types .of con-
sumer goods in the West because of the high costs of production and
the inferior quality of the products. This difficulty in marketing domestic
products, in turn, has made increasingly difficult the repayment of
the large debts to the West which were incurred as the result of for-
mer credits extended for imports. As originally adopted, the Second
Five Year Plan (1956-60) called for an increase in exports of the
products of heavy industry and a reduction in exports of consumer
goods, especially cotton textiles. In conjunction with this reduction,
Hungary expected to reduce imports of textile raw materials by in-
creasing the use of synthetic fibers. Exports of the goods of light
industry during the Plan period were to center as much as possible
around such items as peasant embroidery, luxury furniture, and non-
essential consumer goods. The fulfillment of this Plan depended on
Hungarian ability to export an increasing amount of machinery and
agricultural products. The export plan for 1956-60 was ambitious,
and there would have been a long delay before its effects were appar-
ent to the domestic consumer.
The October rebellion and the subsequent disruption of foreign trade
have brought about some modification of foreign trade policy. Present
policy appears to favor the domestic consumer, and exports of goods of
light industry are to account for about 12 percent of production, com-
pared with about 35 percent before the rebellion. Increased efforts
also are being made to obtain consumer goods from other countries of
the Soviet Bloc and from the West in order to increase the supply of
goods available for domestic consumption. Substantial exports of in-
dustrial products, however, will be necessary during 1957-60 to pay
for these imports. Recent policy statements emphasize the fact that
foreign trade will not become less important, because Hunga'r'y~ needs
imported raw materials for both heavy and light industry. 13
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A. Capabilities.
Hungary can increase the availability of consumer goods immedi-
ately by increasing imports and reducing exports of these items. Such-
actions can only give temporary relief, however, because Hungary lacks
foreign currency and is dependent on imported raw materials to maintain
existing levels of production. Furthermore, the export of consumer
goods always has been an important part of Hungarian trade with the
West, and until markets for products of heavy industry can be developed,
consumer goods will continue to be exported.
Hungary can improve its supply of raw materials by developing
the synthetic fiber industry and by using domestically available sub-
stitutes for scarce raw materials.. Some progress has been made in
these fields, and it is expected that considerable gains will be made
in the next 5 years. It is inconceivable, however, that imports of
raw materials for light industry will be reduced significantly within
the next few years, partly because of the need of light industry for
an increased quantity of raw materials to meet goals of production.
Production of consumer goods by private industry can be
increased through the encouragement of independent artisans by the
state. Such a policy probably will be effected in 1957 as part of the
effort to increase the availability of consumer goods for the popula-
tion.
The development of light industry in Hungary is limited by its
dependence on imports of raw materials both from the USSR and from the
West. The supply of raw materials from the USSR is reportedly unsatis-
factory because of late deliveries and poor quality. Imports from the
West, although satisfactory, are not desirable, because of the scarcity
of foreign exchange in Hungary.
Light industry in Hungary is limited because of the large amount
of obsolete machinery in place and because of the inability of Hungary
to provide new equipment from domestic production. Unless existing
equipment can be replaced or modernized, Hungarian light industry will
be unable to increase the productivity of labor, to reduce costs of pro-
duction, to meet ambitious goals of production, or to improve the quality
of production.
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The concentration of enterprises in the Budapest area is another
limitation of light industry in Hungary. Such centralization makes
light industry dependent on an elaborate system of distribution and
requires that raw materials be transported long distances for processing.
The concentration of light industry in the Budapest area was slightly
-lessened during the First Five Year Plan (1950-54) as a result of new
construction in eastern and southern regions. Although the heaviest
fighting of the October rebellion was concentrated in and around Buda-
pest, damage to installations of light industry in this area is not
believed to have been extensive or permanent enough to retard produc-
tion by light industry.
C. Intentions.
Present policy in Hungary is geared toward an immediate improve-
ment in the levels of living of the population, largely through a rise
in the domestic consumption of consumer goods. The resulting emphasis
on production by light industry, however, is only of a temporary nature,
and the priority development of specific branches of heavy industry
probably will be resumed by 1958 or 1959.
As part of the program to increase domestic consumption, Hungary
intends to abandon temporarily its long-range foreign-trade objectives
and to increase the imports and reduce the exports of consumer goods
during 1957. It is expected that by 1959 Hungary will have reestablished
its plan to supply itself with domestically produced goods of light
industry.
Hungary intends to alleviate the shortage of raw materials for
light industry by developing its synthetic fiber industry and by using
domestically available substitutes for scarce raw materials such as
wood pulp. For example, the proportion of synthetic threads used by
the silk, knitwear, and haberdashery industries was planned to exceed
17 percent by 1960, compared with 3 percent in 1955. In the cotton
textile industry the proportion of synthetic threads was planned to
be more than 16 percent by 1960, compared with 8 percent in 1955.
The quality of goods of light industry is to be improved. Ful-
fillment of qualitative goals is hindered by the poor condition of the
machinery for light industry and by the emphasis on meeting quantitative
goals of production.
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APPENDIX A
STATISTICAL TABLES
Table 1
Gross Value of Production of Consumer Goods
and Producer Goods in Hungary a
1938, 1948-57, and 1960 (Plan
Light
Industry
Food
Processing
Industry
Total
Consumer
Goods
Producer
Goods
Total
Industrial
Production
1938
6.4
5.6
12.0
6.4
18.4
1948
5.5
5.4
10.9
8.o
18.9
1949
7.4
7.7
15.1
10.7
25.8
1950
9.5
11.4
20.9
14.5
35.4
1951
12.3
13.8
26.1
20.8
46.9
1952
13.9
16.7
30.6
27.4
58.0
1953
13.9
18.5
32.4
32.2
64.6
1954
14.7
20.5
35.2.
30.8
66.o
1955
15.9
22.4
38.3
33.2
71.5
1956
13.4
21.4
34.8
30.9
65.7
1957
13.4
22.4
35.8
27.3
63.1
1960 (Plan)
19.8
33.7
53.5
52.7
106.2
a. For methodology, see Appendix C. Absolute figures for 1949-57
and 1960 (Plan) exclude production by private and cooperative in-
dustries. Absolute figures for 1938 and 1948 are computed from
official indexes, which probably included in their coverage those
production facilities that were taken over by the state after 1947.
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Consumer Goods and Producer Goods as a Percentage
of the Gross Value of Industrial Production in Hungary
1938, 1948-57, and 1960 (Plan)
Light
Food
Processing
Total
Consumer
Producer
Total
Industrial
Year
Industry
Industry
Goods
Goods
Production
1938
34.8
30.4
65.2
34.8
100.0
1948
29.1
28.6
57.7
42.3
100.0
1949
28.7
29.8
58.5
41.5
100.0
1950
26.8
32.2
59.0
41.o
100.0
1951
26.2
29.4
55.7
44.3
100.0
1952
24.0
28.8
52.8
47.2
100.0
1953
21.5
28.6
50.2
49.8
100.0
1954
22.3
31.1
53.3
46.7
100.0
1955
22.2
31.3
53.6
46.4
100.0
1956
20.4
32.6
53.0
47.0
100.0
1957
21.2
35.5
56.7
43.3
100.0
1960 (Plan)
18.6
31.7
50.4
49.6
100.0
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Table 3
Production of Selected Goods by Light Industry in Hungary a
1938, 19149-56, and 1960 (Plan)
Unit
1938
1949
1950
1951
1952
1953
1954
1955
1956
1960 (Flan)
Cotton fabric
Million square meters
146
166
177
204
212
207
224
234
181
247
Cotton yarn
Thousand metric tons
21
31
35
40
42
41
44
46
36
49
Woolen fabric
Million square meters
20
23
27
31
23
16
21
26
24
35
Woolen yarn
Thousand metric tons
12
8
12
14
10
7
9
12
10
15
Linen fabric
Million square meters
10
11
16
17
19
20
21
22
20
N.A.
Silk (including synthetic) fabric
Million square meters
12
13
15
16
17
15
16
20
19
26
Knitwear
Metric tons
4440
1
280
1 585
2,180
2 671
3,069
4,124
5,057
4,769
7,800
Clothing
Footwear
Million 1955 forints J
695
950
2,049
3,531
4,385
4,287
4,326
4,770
4,300
6,106
Leather
Rubber and other
1.2
o.4
0.5
0.6
0.9
1.2
1.5
1.6
1.5
1.C
Million pairs
4
2
81
.10 1
12.2
14.0
12 3
16.2
Thousand metric tons
55
_
71
81
91
94
99
104
105
99
164
Thousand metric tons
16
20
26
27
27
29
32
28
27
N.A.
a. For methodology, see Appendix C.
b. At the official rate of exchange, 12 forints equal US $1.
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Production of Radiobroadcast Receivers, Bicycles,
and Household Sewing Machines in Hungary a/
1938, 1948-56, and 1960 (Plan)
Radiobroadcast Receivers
Bicycles
Household
Sewing Machines
1938
N.A.
74
N.A.
1948
24
81
N.A.
1949
70
137
12.9
1950
100
157
18.5
1951
165
185
23.0
1952
140
218
24.8
1953
150
136
22.9
1954
215
174
27.0
1955
373
217
46.1
1956
400
193
39.0
1960 (Plan)
455
410
68.5
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APPENDIX B
DATA ON COTTON MILLS AND WOOLEN MITI
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Number of Spindles in Place and Added
in Major Cotton-Spinning Mills in Hungary a
1949; 1954, and 1960 (Plan)
Magyar Pamutipar
Ujpest
44,000
Goldberg Samesfrai ,
Budapest
32,000
Francia-Magyar Pamutipar J
Budapest
24,000
Dreher-Hagenmacher
Budapest
30,000
Kistext
Kispest
20,000
Magyar Fonoipar
Pestszentlorinc
70,000
Lorinci Fonoipar
Lorinci
14,000
Kobanyai Fonoipar
Kobanya Hegy
16,000
Gyor-Sopron
Gyor Pamutfonogyar
Gyor
35,000
Veszprem
Perutz Testverek
Papa
19,500
Csongrad
Szegedi Textil Kombinat
Szeged
30,000
Somogy
Kaposvari Textil Muvek
Kaposvar
40,000
36,000
a. For methodology, see Appendix C.
b. After nationalization this factory was named Kelenfoldi Kombinat Textil Muvek.
c. After nationalization this factory was named Szombathelyi Pamutipar.
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Table 6
Major Wool-Spinning and Weaving Mills in Hungary a/
1956
Magyar Gyapjufono es Szovogyar Jb
Hazai Fesusfono es Szovogyar b
,Magyar Posztogyar b
Budakalaszi Gyapjuszovetgyar
Ujpesti Gyapjuszovogyar
Burettfono Fesusfonogyar
Gyori Gyapjufono Szovo, Festo, es Kikeszitogyar
Soproni Fesusfonalgyar
Soproni Poszto es Fesusfonalgyar
Takarogyar
Koszegi Nemez es Posztogyar
Baja! Gyapjuszovetgyar
Budapest
Budapest
Csepel
Budapest
Ujpest
Budapest
Gyor
Sopron
Sopron
Szombathely
Koszeg
Baja
a. In 1949 there were 107,600 spindles in the Hungarian woolen industry, but no specific
information on their distribution is available. No significant additions to wool-spinning
capacity have been made since 1949. For methodology, see Appendix C.
b. These are the three largest woolen mills in Hungary.
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APPENDIX C
METHODOLOGY
1. General.
The Hungarian Statistical Handbook published in 1956 is the chief
source of the statistical tables appearing in this report. Figures
which did not appear in the handbook were computed on the basis of
official indexes, Plans, and reports of Plan fulfillment. These reports
have been checked whenever possible to determine their consistency.
2. Methodology for the Tables.
Table 1*: The gross value of production of producer goods is con-
sidered to be the equivalent of production by heavy industry, and the
gross value of production of-consumer goods is taken as the sum of pro-
duction by light industry and the food processing industry. The gross
value of production of consumer goods and producer goods excludes pro-
duction by cooperative and private industries, which is normally less
than 10 percent of total industrial production.
The Hungarian Statistical Yearbook is the source of absolute fig-
ures for the gross value of production of consumer goods and producer
goods in 1955 and of index numbers for 1949-55. 3/ The figures for
1938 and 1948 were computed from separate official indexes.
In estimating the gross value of production for 1956, re16J ports on
Plan fulfillment for the first and second quarters of 1956 and
reported production by total industry for 1956 were considered.
It was assumed that the plan for light industry for the third quarter
of 1956 was fulfilled lfilled by 100 percent and for the fourth quarter by
50 percent. L The fall in production by the food processing indus-
try in the fourth quarter of 1956 is estimated to have been severe
enough to bring production for 1956 to a level 5 percent below produc-
tion in 1955. The estimate of the gross value of production by heavy
industry for 1956 was obtained by subtracting the value of production
of consumer goods from total industrial production.
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The gross value of production by total industry and light indus-
try for 1957 is an 'nes/timate based on reported production in January
and February 1957 Jam/ and the assumption that prerebellion levels
of production would be regained gradually during 1957. It is estimated
that the gross value of production by the food processing industry in
1957 will equal production in 1955. The gross value of production by
heavy industry in 1957 is a residual.
The figures for 1960 were derived from a percentage increase
reported in the original Second Five Year Plan. 80
Table 3x**-: Production of cotton, woolen, linen; and silk fabrics,
knit.nd paper in the years 1938 and 1949-55
Production of all commodities, except cotton fabric,
knitwear, and leather footwear in 1956 was estimated on the basis of
planned production on for 1960, 82 Plan fulfillment during the first
half of 1956, ? and an estimated sharp drop in production during
the last quarter of 1956 as a result of the October rebellion. Esti-
mates of production in 1956 have a range of error from plus 15 to
minus 10 percent. Production of cotton fabric, knitwear, and leather
planned production for 1960 were estimated by relating the production
of cotton yarn to the production of cotton fabric in 1950.
Production of woolen yarn during the years 1951-55 and planned
production for 1960 were estimated by relating the production of woolen
yarn to that of woolen fabric in 1950.
50X1
5u/-\l
50X1
50X1
Production of cloth* in 1955 and an index for the years 1949-55
Production in 1938 was reported in 1947 50X1
orints, which were converted to 1955 forints on the basis of pro-
duction in 1949. Production in 1949 was reported in both 1947 and 1955
* P. 32, above.
** P. 31, above.
** P. 33, above.
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forints. Planned production for 1960 was reported to be 28 percent
above that in 1955.
Production of leather and rubber footwear in 1938 50X1
1
1
_55
th
du
P
d
ti
f l
f
t
i
50X1
9
9
ro
uc
on o
ea
er
oo
wear
r
ng
________
.The percentage increase planned for
total buxi
footwear in 1960 was applied to leather footwear. The estimate
of production in 1956 was computed in the same way as were other.
estimates for 1956.
Production-of rubber footwear in 1949 50X1
rate of growth was the same as planned in the Three Year Plan (1947-49).
Production in 1953 was estimated to be equal to prewar production and
was reported to be 30.2 percent above that in 1952. / The estimate
of production in 1954 was arrived at by interpolation, and production
in 1955 was reported as 5.9 percent above that in 1954. Z1J Planned
production for 1960 is the difference between the plan for total foot-
wear and that for leather footwear.
3. Conversion Factors for the Textile Industry.
One lm of cotton fabric equals 0.7 sq_m. 102
One In of wool fabric equals 1.4 sq in.
10
One In of silk fabric equals 1.0 sqm.
*
P.
3 ,
above.
**
P.
33,
above.
***
P.
36,
above.
***X
P.
37,
above.
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SECRET
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