László Borhi
In the Power Arena
US–Hungarian Relations 1942–1989
[...]
The 1970s: US loans
At the beginning of the 1960s, first the Kennedy and then, more pointedly, the
Johnson administration declared the earlier general policy of undermining
Eastern-European regimes to have been a mistake. By then US policy was not
aiming to topple or destabilize these regimes but to consolidate them. The aim,
just as in the 1950s, was to strengthen European security, on the understanding
that the Soviet Union would continue its presence in Eastern Europe.
From the mid-1960s it appears that the Soviet occupation of Eastern Europe
was no longer regarded as running contrary to European stability. What is
more, it was said that a post-Soviet Eastern Europe would be more likely to
destabilize the continent due to the fear of the return of German influence and
the potential re-emergence of nationalist conflicts between some of the states.
The State Department believed that Eastern Europe could be a source of
danger: "Unbridled nationalism in Eastern Europe might lead to possible
renewal of the patterns of conflict that made the area such a cockpit prior to
pax communista. This potential is evident in the complex of latent and
potentially dangerous territorial and minority issues in the area." It was raised
that the reunification of the continent was not necessarily desirable, as "the
futile past could return".
From the 1970s, US diplomats started saying more frequently that the
United States did not want to disrupt the relationship between the satellite
states and the Soviet Union. In 1971, US Ambassador in Budapest Alfred Puhan
told American émigrés that Hungary's only hope of freedom was change in
the Soviet Union itself. Furthermore, in the 1970s they were already talking
about changes needed in the nature of Soviet occupation to avoid a third
world war. "Our policy must aim at a Finlandization of Eastern Europe,"
Helmut Sonnefeldt, the advisor in Eastern European affairs to the Nixon
administration, said in the mid-1970s. One example he mentioned was
the Polish–Soviet modus vivendi and Hungary, where Kádár "has found
ways which are acceptable to the Soviet Union, correspond with the natural
strives of the people, grow Hungarian roots." Stability and the restoration of
national independence had by then become mutually exclusive conditions.
However, politics is not decided at the drawing table. Some aspects of the
bridging policy proclaimed by Johnson and then Nixon—loans and cultural
ties—were, like it or not, undermining the foundations of the Hungarian
regime. From the middle of the 1990s economic relations between the US and
Hungary were developing fast. From Hungary's point of view, the US's role as
a lender was crucial. In the end, however, this is what created the Kádár
regime's debt trap, which eventually led to its end. Officially, the aim of the
lending policy was to transform the command economy, but its undesired
consequence became Hungary's bankruptcy.
At the expense of domestic political reforms, Kádár secured foreign loans
necessary to keep the system ticking: in the 1970s, the State Department
believed that Hungarian reforms served "the national interests" of the US.
Initially they tried to keep the consequences of the American open-doors
policy in check, but the machine, slowly setting into motion, was hard to
control. Normalization of relations with the US was unavoidable if Kádár's
economic reform was to succeed, as this was the gateway to international
capital markets, products and technologies. János Fekete, Vice President of
the National Bank of Hungary, said in 1975 that US banks were taking on
ever larger roles in financing Hungary's imports and lending operations
despite existing limitations. Besides the oil-producing Arab states, Hungary
regarded the United States as "one of its main creditors, with a growing
importance" on money markets "prone to suffer restrictions". This is
why closer economic relations were sought. But this could not be achieved
in isolation: American cultural penetration had to be let in alongside
American capital. Because of the great need for foreign loans the time had come
for the Communist regime to lay aside its reservations and make a truce with
the Americans for the sake of most favoured nation treatment (1978).
[...]
László Borhi
is a Senior Research Fellow at the Institute of History of the Hungarian Academy of
Sciences. He is the author of Hungary in the Cold War—Between the Soviet Union and
the United States, 1945–1956. Budapest–New York: CEU Press, 2004.
