République démocratique hongroise
In the 1930s, Petö moved to Budapest, where he continued to work in his family's export business of Hungarian craft products. Through this, he was able to reach Great Britain before World War II. During the war, he lived in London and worked for the Ministry of Labour. He strongly backed the Allied war effort. In his free time, Petö worked with other Hungarians, planning for the postwar future of their country. He worked as personal secretary to Count Mihály Károlyi, who had been president of the short-lived Hungarian Democratic Republic. As the leader of the New Democratic Hungary, he was trying to create the next postwar government. They hoped to establish a socialist Hungary after its liberation at the end of the war, but did not anticipate the postwar domination by the Soviet Union. During the war Peto also advocated the development of an international exchange school of teachers and pupils once the conflict was over. this reflected his strong interest in the education of adults and children. Peto favoured progressive education systems and was a strong supporter of A S Neill, becoming involved with his Summerhill School in 1944.