Socialist industrialisation or post-war reconstruction: understanding Hungarian economic growth, 1949-1967

This article reviews the existing literature on Hungarian economic growth between the communist takeover in 1949 and the launching of the New Economic Mechanism in 1968. Based on data derived from independent western estimates, I challenge mainstream theories of socialist industrialization and historical accounts and argue that, in the early post-war period, the growth of national income and industrial production was driven by a reconstruction dynamic. In a standard growth-accounting exercise, I compute growth rates of TFP for the economy as a whole and for industrial branches. In the process, I apply both official statistics and independent western data, and present new estimates on the gross value of capital stock in the Hungarian economy and on capital accumulation in industrial branches. Finally, shift-share analysis helps to determine the importance of structural shifts within industry in facilitating labour-productivity growth.