The Hungarian miracle.

As EASTERN EUROPE plods onward, day by day, in the direction of glasnost and perestroika, one Soviet satellite has burst from the pack and into the lead, ahead of Poland in most respects, ahead of even the Soviet Union itself That country is Hungary whose recent flirtations with capitalism and democracy could almost be called miraculous.

Though the pace of liberation has quickened in the past year, Hungary has been in a state of political and ideological ferment through much of this decade. The Seventies were a prosperous time for Hungarians, feeding the dangerous illusion that Communism could indeed deliver the goods. The Eighties, however, brought a nasty awakening, as the country's growing debt to Western governments and financial institutions resulted in a nearly desperate economic situation. Though Hungary did all it could to pay its debts, it succeeded only in producing a general impoverishment-in which old people, living on the Hungarian equivalent of Social Security, and the young, unskilled unemployed were hardest hit. Meanwhile, a shrewd, hardworking nation, with a system that is not 100 per cent totalitarian, will manage to build up a thriving black-market economy, providing a relatively comfortable existence for a small, enterprising middle class. And so it has been in Hungary. This demonstration of the superiority of free enterprise shook the hearts and minds of even the old Bolsheviks, and triggered a serious rethinking of Hungarian Communism-the results of which we are now witnessing.

There has been, first of all, a trend toward reappraising the official version of recent Hungarian history. Perhaps most significantly, Imre Pozsgay, a member of the Politburo, recently went so far as to declare the 1956 Hungarian Revolution a "popular rebellion"-although he was later corrected by the ruling Socialist Workers' Party Central Committee, which decided in a compromise that 1956 had begun as a popular rebellion, but degenerated into a treasonous "counterrevolution." Meanwhile, the four main leaders of the "counterrevolution," who had been executed as enemies of the state, have been exonerated, their mortal remains solemnly exhumed and reburied.

The Hungarian government has also been contemplating another rehabilitation-of Hungary's beautiful old coat of arms. Featuring Hungary's four major rivers and three major mountains under the apostolic cross, all surmounted by a Crown of St. Stephen, the coat of arms was abolished by Louis Kossuth, leader of the revolution of 1848-49, but will in all likelihood soon replace the five-pointed star as the country's national symbol. To most Hungarians, this will mean a great deal-as did the return of the crown itself from American custody, which some greeted kneeling in the streets.

Slowly, this new thinking about Hungary's past has helped produce a real change of heart, even among leading Party members, about Hungary's future. Indeed, Imre Pozsgay has dismissed the Communist economic model as "the wrong path in its entirety." By the middle of this year, Budapest plans to open an international stock exchange -the first in Eastern Europe-in which foreigners will be permitted to buy shares in Hungarian companies. A new joint-venture law allows 100 per cent foreign ownership of some Hungarian companies, and guarantees repatriation of profits. On the whole, the growing private sector of Hungarian industry, though small, is booming.

On the political side, there has been serious talk about free, multi-party elections, to be held next year within the framework of a new constitution. And already the constellation of opposition parties has begun to emerge. Hungary's Catholic bishops are opposed to the formation of a Christian party, but a formerly important small-landowners' organization has reappeared on the scene, and there are several strong nationalist groups (like those now to be found all over Eastern Europe), including the elitist Hungarian Democratic Forum, as well as a monarchist group, St. Stephen's League. The plan currently under consideration would guarantee the ruling Socialist Workers' Party a dominant role in government through 1995. After that, however, Prime Minister Karoly Grosz has commented, the SWP may emerge the loser. If it does, he said, it will have only itself to blame.

In another positive development, the Catholic Church, to which two-thirds of the population belong, is gaining momentum. Five bishops have expressed the hope that more of the old religious orders will be again permitted to function and that new ones will be created. The Hungarian bishops are especially keen on extending religious education in the state schools, where up to now it has been barely tolerated. (It was permitted, however, in a few private Catholic schools-which have survived over the years partly because the members of the Nomenklatura have valued the discipline they offer.)

It remains to be seen, of course, how far the process of liberation will go. There is no question that the return to private enterprise will be fraught with difficulties, especially in a country -as capital-poor as Hungary. Ultimately, though, the success of Hungary's economic experiment will depend on the willingness of foreigners to invest in Hungarian business, given that investing money in an unfree country is even more hazardous than giving it loans. (Then again, there are few limits to the self-deception indulged in by our Western businessmen, when they are eyeing the great "untapped" markets in the East.) Theoretically, Hungary could turn to the Soviets for hard cash, but, under Gorbachev, Moscow is more inclined to let its satellites fend for themselves. It would hardly bail out the Hungarians only to help them repay their debts to the capitalist world.

As for political liberalization, though Mikhail Gorbachev has encouraged economic reforms in Hungary and elsewhere, he recently condemned the notion of multi-party democracy as "rubbish." Here in neighboring Austria, we are reminded of 1956. One only hopes that no sudden gust of military violence will blow in from Moscow to extinguish the Hungarian miracle.