La réforme des prix en Hongrie
Authors: Horchler Gabriel 
Published: November 2010

The Price Reform in Hungary.

Marx considered price not as a vital economic phenomenon but rather as an artificial attribute of a commodity. As part of the current economic reforms, Eastern' European planners are recognizing that price is an essential variable in a system of decentralized management. Only Hungary, however, has to date introduced a new price structure that transcends the usual revisions in response to changing cost conditions.

The pre-reform Hungarian price structure was typical of that in a command economy of the physical planning variety, with prices — and financial relationships in general — subservient to the centralized planning schema. Industrial wholesale, consumer or retail, agricultural, and foreign trade prices existed as independent strata, with no mechanism linking them and emanating more from the political than from economic environment. In terms of the goals specified for them, the prices were reasonably successful; however, the goals themselves were deficient. Price reforms were introduced in Hungary on January 1, 1968 as the centerpiece of the New Economic Mechanism. To achieve the major objectives of the N.E.M. (decentralized management, the optimum development of foreign trade, increased influence of demand on production decisions) it was imperative that prices reflect economic realities and serve as operative signals. No longer could they function merely as devices to transmit central directives and measure plan fulfillment. The reformers agreed on the following: the new prices must have a sound, non-arbitrary basis; prices must reflect cost conditions; they must respond more flexibly to supply and demand; world market prices must somehow be mirrored in domestic prices.

The initial task was to choose an appropriate price formula. From among the numerous variants, the Hungarians have accepted the "dual channel" formula, essentially a cost-plus price that apportions surplus value between the labor and capital employed in a certain production process. As a corollary to the acceptance of this format, a more accurate accounting of production costs was undertaken, including the ressessment of amortization allowances, capital and labor costs, and rent.

Through this more precise evaluation of costs, the dual channel format can approximate scarcity prices; but these prices still lack flexibility and are supply determined. Planometric, or "shadow" prices are a possible alternative. Derived through the solution of an optimal economic model, they would reflect both planners' preferences and economic realities. Considerable work has been done in Hungary with such prices, but bureaucratic and practical obstacles have prevented their full adoption. Planometric techniques have been used to predict the consequences of various price forms, to assist central planners and enterprise managers in setting prices, and to analyze the deviation of actual from "ideal" prices.

To obtain the desired flexibility and responsiveness to market conditions, without sacrificing central control over vital areas, the Hungarians have resorted to a pragmatic, mixed price system, consisting of fixed, maximum, limit, and free prices. The proportion of goods in each category varies according to the importance of the commodity, the degree of concentration of the industry, the availability of substitutes. The number of rigid prices is projected to decrease as the economic decentralization progresses and as competitiveness increases.

The danger of the reimposition of central controls and the monopolistic nature of much of Hungarian industry are the major obstacles to the evolution of this new structure, and in fact the proportion of market determined prices has increased less rapidly than originally envisioned. Nevertheless, the format of the price reforms has been preserved, prices and costs are more symmetrical, and the insulation of the price strata from one another has been ended.