After World War I, a conservative government ruled Hungary and made some progress toward economic modernization. The Great Depression, however, brought economic collapse, and the country's mood shifted to the far right. An alliance with Nazi Germany resulted, and Hungary fought on the Axis side in World War II. Again Hungary experienced defeat, and the country was occupied by the Soviet Red Army.
Postwar Political and Economic Conditions
In 1920 and 1921, internal chaos racked Hungary. The white terror continued to plague Jews and leftists, unemployment and inflation soared, and penniless Hungarian refugees poured across the border from neighboring countries and burdened the floundering economy. The government offered the population little succor. In January 1920, Hungarian men and women cast the first secret ballots in the country's political history and elected a large counterrevolutionary and agrarian majority to a unicameral parliament. Two main political parties emerged: the socially conservative Christian National Union and the Independent Smallholders' Party, which advocated land reform. In March the parliament annulled both the Pragmatic Sanction of 1723 and the Compromise of 1867, and it restored the Hungarian monarchy but postponed electing a king until civil disorder had subsided. Instead, Miklos Horthy (1920-44)--a former commander in chief of the Austro-Hungarian navy--was elected regent and was empowered, among other things, to appoint Hungary's prime minister, veto legislation, convene or dissolve the parliament, and command the armed forces.
Hungary's signing of the Treaty of Trianon on June 4, 1920, ratified the country's dismemberment, limited the size of its armed forces, and required reparations payments. The territorial provisions of the treaty, which ensured continued discord between Hungary and its neighbors, required the Hungarians to surrender more than two-thirds of their prewar lands. Romania acquired Transylvania; Yugoslavia gained Croatia, Slavonia, and Vojvodina; Slovakia became a part of Czechoslovakia; and Austria also acquired a small price of prewar Hungarian territory. Hungary also lost about 60 percent of its prewar population, and about one-third of the 10 million ethnic Hungarians found themselves outside the diminished homeland. The country's ethnic composition was left almost homogeneous. Hungarians constituted about 90 percent of the population, Germans made up about 6 to 8 percent, and Slovaks, Croats, Romanians, Jews, and other minorities accounted for the remainder.
New international borders separated Hungary's industrial base from its sources of raw materials and its former markets for agricultural and industrial products. Its new circumstances forced Hungary to become a trading nation. Hungary lost 84 percent of its timber resources, 43 percent of its arable land, and 83 percent of its iron ore. Because most of the country's prewar industry was concentrated near Budapest, Hungary retained about 51 percent of its industrial population, 56 percent of its industry, 82 percent of its heavy industry, and 70 percent of its banks.
Horthy appointed Pal Teleki prime minister in July 1920. His right-wing government set quotas effectively limiting admission of Jews to universities, legalized corporal punishment, and, to quiet rural discontent, took initial steps toward fulfilling a promise of major land reform by dividing about 385,000 hectares from the largest estates into smallholdings. Teleki's government resigned, however, after the former emperor, Karl IV, unsuccessfully attempted to retake Hungary's throne in March 1921. King Karl's return narhed a split parties between conservatives who favored a Habsburg restoration and nationalist right-wing radicals who supported election of a Hungarian king. Bethlen, a nonaffiliated, right-wing member of the parliament, took advantage of this rift by convincing members of the Christian National Union who opposed Karl's reenthronement to merge with the Smallholders' Party and form a new Party of Unity with Bethlen as its leader. Horthy then appointed Bethlen prime minister.
As prime minister, Bethlen dominated Hungarian politics between 1921 and 1931. He fashioned a political machine by amending the electoral law, eliminating peasants from the Party of Unity, providing jobs in the bureaucracy to his supporters, and manipulating elections in rural areas. Bethlen restored order to the country by giving the radical counterrevolutionaries payoffs and government jobs in exchange for ceasing their campaign of terror against Jews and leftists. In 1921 Bethlen made a deal with the Social Democrats and trade unions, agreeing, among other things, to legalize their activities and free political prisoners in return for their pledge to refrain from spreading anti-Hungarian propaganda, calling political strikes, and organizing the peasantry. In May 1922, the Party of Unity captured a large parliamentary majority. Karl IV's death, soon after he failed a second time to reclaim the throne in October 1921, allowed the revision of the Treaty of Trianon to rise to the top of Hungary's political agenda. Bethlen's strategy to win the treaty's revision was first to strengthen his country's economy and then to build relations with stronger nations that could further Hungary's goals. Revision of the treaty had such a broad backing in Hungary that Bethlen used it, at least in part, to deflect criticism of his economic, social, and political policies. However, Bethlen's only foreign policy success was a treaty of friendship with Italy in 1927, which had little immediate impact.
When Bethlen took office, the government was bankrupt. Tax revenues were so paltry that he turned to domestic gold and foreign-currency reserves to meet about half of the 1921-22 budget and almost 80 percent of the 1922-23 budget. To improve his country's economic circumstances, Bethlen undertook development of industry. He imposed tariffs on finished goods and earmarked the revenues to subsidize new industries. Bethlen squeezed the agricultural sector to increase cereal exports, which generated foreign currency to pay for imports critical to the industrial sector. In 1924, after the white terror had waned and Hungary had gained admission to the League of Nations (1922), the Bethlen government secured a US$50 million reconstruction loan from the league, which restored the confidence of foreign creditors. Foreign loans and domestic capital that had been removed from Hungary during the communist revolution flowed back into the country, further fueling industrial development.
By the late 1920s, Bethlen's policies had brought order to the economy. The number of factories increased by about 66 percent, inflation subsided, and the national income climbed 20 percent. However, the apparent stability was supported by a rickety framework of constantly revolving foreign credits and high world grain prices; therefore, Hungary remained undeveloped in comparison with the wealthier western European countries.
Despite economic progress, the workers' standard of living remained poor, and consequently the working class never gave Bethlen its political support. The peasants fared worse than the working class. In the 1920s, about 60 percent of the peasants were either landless or were cultivating plots too small to provide a decent living. Real wages for agricultural workers remained below prewar levels, and the peasants had practically no political voice. Moreover, once Bethlen had consolidated his power, he ignored calls for land reform. The industrial sector failed to expand fast enough to provide jobs for all the peasants and university graduates seeking work. Most peasants lingered in the villages, and in the 1930s Hungarians in rural areas were extremely dissatisfied. Hungary's foreign debt ballooned as Bethlen expanded the bureaucracy to absorb the university graduates who, if left idle, might have threatened civil order.
The Great Depression
In 1929 the New York Stock Exchange crashed. As a result, world grain prices plummeted, and the framework supporting Hungary's economy buckled. Hungary's earnings from grain exports declined as prices and volume dropped, tax revenues fell, foreign credit sources dried up, and short-term loans were called in. Hungary sought financial relief from the League of Nations, which insisted on a program of rigid fiscal belt-tightening, resulting in increased unemployment. The peasants reverted to subsistence farming. Industrial production rapidly dropped, and businesses went bankrupt as domestic and foreign demand evaporated. Government workers lost their jobs or suffered severe pay cuts. By 1933 about 18 percent of Budapest's citizens lived in poverty. Unemployment leaped from 5 percent in 1928 to almost 36 percent by 1933.
As the standard of living dropped, the political mood of the country shifted further toward the right. Bethlen resigned without warning amid national turmoil in August 1931. His successor, Gyula Karolyi, failed to quell the crisis. Horthy then appointed a reactionary demagogue, Gyula Gombos, but only after Gombos agreed to maintain the existing political system, to refrain from calling elections before the parliament's term had expired, and to appoint several Bethlen supporters to head key ministries. Gombos publicly renounced the vehement anti-Semitism he had espoused earlier, and his party and government included some Jews.
Radical Right in Power
Gombos's appointment marked the beginning of the radical right's ascendancy in Hungarian politics, which lasted with few interruptions until 1945. The radical right garnered its support from medium and small farmers, former refugees from Hungary's lost territories, and unemployed civil servants, army officers, and university graduates. Gombos advocated a one-party government, revision of the Treaty of Trianon, withdrawal from the League of Nations, anti-intellectualism, and social reform. He assembled a political machine, but his efforts to fashion a one-party state and fulfill his reform platform were frustrated by a parliament composed mostly of Bethlen's supporters and by Hungary's creditors, who forced Gombos to follow conventional policies in dealing with the economic and financial crisis. The 1935 elections gave Gombos more solid support in the parliament, and he succeeded in gaining control of the ministries of finance, industry, and defense and in replacing several key military officers with his supporters. In September 1936, Gombos informed German officials that he would establish a Nazi-like, one-party government in Hungary within two years, but he died in October without realizing this goal.
In foreign affairs, Gombos led Hungary toward close relations with Italy and Germany; in fact, Gombos coined the term Axis, which was later adopted by the German-Italian military alliance. Soon after his appointment, Gombos visited Italian dictator Benito Mussolini and gained his support for revision of the Treaty of Trianon. Later, Gombos became the first foreign head of government to visit German chancellor Adolf Hitler. For a time, Hungary profited handsomely, as Gombos signed a trade agreement with Germany that drew Hungary's economy out of depression but made Hungary dependent on the German economy for both raw materials and markets. In 1928 Germany had accounted for 19.5 percent of Hungary's imports and 11.7 percent of its exports; by 1939 the figures were 52.5 percent and 52.2 percent, respectively. Hungary's annual rate of economic growth from 1934 to 1940 averaged 10.8 percent. The number of workers in industry doubled in the ten years after 1933, and the number of agricultural workers dropped below 50 percent for the first time in the country's history. Hungary also used its relationship with Germany to chip away at the Treaty of Trianon. In 1938 Hungary openly repudiated the treaty's restrictions on its armed forces. With German help, Hungary extended its territory four times and doubled in size from 1938 to 1941. It regained parts of southern Slovakia in 1938, Carpatho-Ukraine in 1939, northern Transylvania in 1940, and parts of Vojvodina in 1941.
Hitler's assistance did not come without a price. After 1938 the fuhrer used promises of additional territories, economic pressure, and threats of military intervention to pressure the Hungarians into supporting his policies, including those related to Europe's Jews, which encouraged Hungary's anti-Semites. The percentage of Jews in business, finance, and the professions far exceeded the percentage of Jews in the overall population. The 1930 census showed that Jews made up only 5.1 percent of the population but provided 54.5 percent of its physicians, 31.7 percent of its journalists, and 49.2 percent of its lawyers. Jews controlled an estimated 19.5 percent to 33 percent of the national income, four of the five leading banks, and 80 percent of Hungary's industry. After the depression struck, anti-Semites made the Jews scapegoats for Hungary's economic plight.
Hungary's Jews suffered the first blows of this renewed anti-Semitism during the government of Gombos's successor, Kalman Daranyi, who fashioned a coalition of conservatives and reactionaries and dismantled Gombos's political machine. After Horthy publicly dashed hopes of land reform, discontented rightwingers took to the streets denouncing the government and baiting the Jews. Daranyi's government attempted to appease the anti-Semites and the Nazis by proposing and passing the first socalled Jewish Law, which set quotas limiting Jews to 20 percent of the positions in certain businesses and professions. The law failed to satisfy Hungary's anti-Semitic radicals, however, and when Daranyi tried to appease them again, Horthy unseated him in 1938. The regent then appointed the ill-starred Bela Imredy, who drafted a second, harsher Jewish Law before political opponents forced his resignation in February 1939 by presenting documents showing that Imredy's own grandfather was a Jew.
Imredy's downfall led to Pal Teleki's return to the prime minister's office. Teleki dissolved some of the fascist parties but did not alter the fundamental policies of his predecessors. He undertook a bureaucratic reform and launched cultural and educational programs to help the rural poor. Illiteracy dropped to about 7 percent by 1941. But Teleki also oversaw passage of the second Jewish Law, which broadened the definition of "Jewishness," cut the quotas on Jews permitted in the professions and in business, and required that the quotas be attained by the hiring of Gentiles or the firing of Jews. By the June 1939 elections, Hungarian public opinion had shifted so far to the right that voters gave the Arrow Cross Party--Hungary's equivalent of Germany's National Socialist German Workers' Party (the Nazi Party)--the second highest number of votes. In September 1940, the Hungarian government allowed German troops to transit the country on their way to Romania, and on November 20, 1940, Hungary signed the Tripartite Pact, which allied Germany, Italy, and Japan.
World War II
In December 1940, Teleki signed a short-lived Treaty of Eternal Friendship with Yugoslavia. The Yugoslav government, however, was overthrown on March 27, 1941, two days after it succumbed to German and Italian pressure and joined the pact. Hitler considered the overthrow a hostile act and grounds to invade. Again promising territory in exchange for cooperation, he asked Hungary to join the invasion by contributing troops and allowing the Wehrmacht (German armed forces) to march through its territory. Unable to prevent the invasion, Teleki committed suicide on April 3. Three days later, the Luftwaffe mercilessly bombed Belgrade without warning, and German troops invaded. Shortly thereafter, Horthy dispatched Hungarian military forces to occupy former Hungarian lands in Yugoslavia, and Hungary eventually annexed sections of Vojvodina.
Horthy named the right-wing radical Laszlo Bardossy to succeed Teleki. Bardossy was convinced that Germany would win the war and sought to maintain Hungary's independence by appeasing Hitler. Hitler tricked Horthy into committing Hungary to join his invasion of the Soviet Union in June 1941, and Hungary entered the war against the Western Allies the following December. In July 1941, the government deported the first 40,000 Jews from Hungary, and six months later Hungarian troops, in reprisal for resistance activities, murdered 3,000 Serbian and Jewish hostages--near Novi Sad in Yugoslavia. By the winter of 1941-42, German hopes of a quick victory over the Soviet Union had faded. In January the German foreign minister visited Budapest asking for additional mobilization of Hungarian forces for a planned spring offensive and promising in return to hand Hungary some territory in Transylvania. Bardossy agreed and committed onethird of Hungary's military forces.
Horthy grew dissatisfied with Bardossy, who resigned in March 1942, and named Miklos Kallay, a conservative veteran of Bethlen's government, who aimed to free Hungary from the Nazis' grip. Kallay faced a terrible dilemma: if he broke with Hitler and negotiated a separate peace, the Germans would occupy Hungary immediately; but if he supported the Germans, he would encourage further pro-Nazi excesses. Kallay chose duplicity. In 1942 and 1943, pro-Western Hungarian government officials promised British and American diplomats that the Hungarians would not fire on their aircraft, sparing for a time Hungarian cities from bombardment.
In January 1943, the Soviet Red Army annihilated Hungary's Second Army during the massive counterattack on the Axis troops besieging Stalingrad. In the fighting, Soviet troops killed an estimated 40,000 Hungarians and wounded 70,000. As anti-Axis pressure in Hungary mounted, Kallay withdrew the remnants of the force into Hungary in April 1943, and only a nominal number of poorly armed troops remained of the country's military contribution to the Axis Powers. Aware of Kallay's deceit and fearing that Hungary might conclude a separate peace, Hitler ordered Nazi troops to occupy Hungary and force its government to increase its contribution to the war effort. Kallay took asylum in the Turkish legation. Dome Sztojay, a supporter of the Nazis, became the new prime minister. His government jailed political leaders, dissolved the labor unions, and resumed the deportation of Hungary's Jews.
While Kallay was prime minister, the Jews endured economic and political repression, but the government protected them from the "final solution." The government expropriated Jewish property; banned the purchase of real estate by Jews; barred Jews from working as publishers, theater directors, and editors of journals; proscribed sexual relations between Jews and non-Jews; and outlawed conversion to Judaism. But when the Nazis occupied Hungary in March 1944, the deportation of the Jews to the death camps in Poland began. Horthy used the confusion after the July 20, 1944, attempt to assassinate Hitler to replace Sztojay in August 1944 with General Geza Lakatos and halt the deportation of Jews from Budapest. Of the approximately 725,000 Jews residing within Hungary's expanded borders of 1941, only about 260,500, mostly from Budapest, survived.
In September, Soviet forces crossed the border, and on October 15 Horthy announced that Hungary had signed an armistice with the Soviet Union. However, the Germans abducted the regent and forced him to abrogate the armistice, depose the Lakatos government, and name Ferenc Szalasi--the leader of the Arrow Cross Party--prime minister. Horthy abdicated, and soon the country became a battlefield. Hungary was sacked first by the retreating Germans, who demolished the rail, road, and communications systems, then by the advancing Soviet Red Army, which found the country in a state of political chaos. Germans held off the Soviet troops near Budapest for seven weeks before the defenses collapsed, and on April 4, 1945, the last German troops were driven out of Hungary.
SOURCE: Area Handbook of the US Library of Congress