The role of the socialist second economy experience in an entrepreneurial career after 1989

ABSTRACT

Our case study is the story of a successful entrepreneur who, thanks to the second economy, had already been successful before the regime change, and who, after the regime change, was forced to build a completely new career due to changes in the institutional environment and became successful as an entrepreneur again. What kind of “entrepreneurial spirit” does he have and where did he acquire it? How can this be explained, and what factors combined to make him successful beyond the regime change and independent of the system? How did his experience in the second economy contribute to his success after 1989? These are the questions we seek to answer.

KEYWORDS:

• Second economy
• regime change
• entrepreneurial strategy
• successful entrepreneur

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. I thank Sándor Horváth and Károly Mike for their comments on the manuscript.

2. At the turn of the millennium, the media representation of domestic entrepreneurs was the most negative: “the man who operates in the black-grey economy, is a (public) criminal, a tax evader, a profiteer at the expense of consumers, a regular violator of labour, safety and health rules” (Szerb-Kocsis-Kisantal 2008:258), the image of entrepreneurs in the Hungarian media has since changed/improved (Virágh and Szepesi 2022); the media still tends to write about businesses or entrepreneurs in general in a negative frame, while specific businesses and entrepreneurs are portrayed in a positive light (Barna 2023). For background, see footnote 38.

3. We have not changed János’ name, as it is often used in public.

4. We are aware of the multidimensionality of the concept of success, and therefore of social status, and we do not attempt to define all its aspects. We will describe and interpret the development of János’ career and career path primarily in terms of the dimensions of his occupation, job market, financial and income situation.

5. They are the less “compromised” generation, compared to the previous, so-called status-changing generation (40–54), whose members already had a mature social status before the regime change (Kolosi – Tóth – Keller 2008).

6. e.g., the legalized private sector; undeclared workers and labourers; illegal (nontaxpaying) tradesmen and service providers; backyard farming; household income flows linked to the socialist sector workplace (tipping); renting out flats, apartments, etc.

7. For an analysis of two other cases, see (Kelemen 2022).

8. For the elite, for example, the concept of converting social capital into economic capital is emphasized.

9. Interview conducted by the author. Quotes without acknowledgement of other sources are taken from this interview. Among the many different methods of interviewing, the author tried to talk as little as possible, letting her subject “tell stories”

10. János has one sister.

11. She and the father lived in a so-called “with or without” relationship, sometimes breaking up, sometimes getting back together.

12. Abbreviation of Tüzelő- és Építőanyag Kereskedelmi Vállalat.

13. He basically did not have to give back any of the money he earned.

14. Abbreviation of Magyar Légiközlekedési Vállalat, Hungary’s national airline between 1946 and 2012.

15. In other words, the “8 hours of work” standard of socialism was not characteristic of him, even from the outset of his career.

16. According to Dupcsik (2018), the micro-level self-exploitation in the second economy was at the macro level “more an involuntary but systematic support of the system than a mass struggle for freedom against the socialist socio-economic order” (Szelényi 1992, 9 cited in; Dupcsik 2018, 47)

17. The uncle was in a “serious position” at Fradi (FTC, or Ferencvárosi Torna Club, the most popular Hungarian sports club and football team), which also meant a wide network of contacts.

18. Abbreviation of Merkur Személygépkocsi Értékesítő Vállalat.

19. From 1964.

20. During the socialist period, no passenger cars were produced in Hungary, but the KGST (Kölcsönös Gazdasági Segítség Tanácsa) division of labour in Hungary produced buses (Ikarus). The incoming cars were therefore brands produced in the “socialist camp” (Kapitány 1996).

21. In the early 1950s, cars were nationalized, and in the Rákosi era car ownership was an exceptional right. After 1956, a centralized system of car distribution was established, which was prevalent until roughly the end of the Kádár era. From 1957, the possibility for private individuals to buy cars was opened up. In the 1970s, the car was still considered a luxury item, but by the 1980s it had become a relatively common product (Karlaki 2008; Valuch 2007).

22. „ Efforts to win the seller” (Kornai 1980, 91)

23. Anyone with the right “socialist connections” could save waiting time and the surcharge for a second-hand car by using an out-of-sequence payment (Valuch 2007:90.)

24. Three to five times (Valuch 2007):.90.

25. Merkur had only two used car dealerships in Budapest.

26. See in: „Mondj egy hiánycikket, megmondom hány éves vagy!” https://otpedia.esolr.me/egyszer-volt/konyhaablak-a-vasfuggonyon/mondj-egy-hianycikket-megmondom-hany-eves-vagy_2/.

27. This is not to say, of course, that the phenomenon of corruption has disappeared after the regime change, but only that the phenomenon has become obsolete in those goods markets where shortages have disappeared.

28. See in: Kolosi (1987) L-model, and Szelényi 1990, 1992) double triangle model.

29. In 1985 the average monthly earnings of full-time workers were 5,961 HUF. (KSH).

30. Even if travel to the West was limited (once every 3 years), tourism becomes mass tourism by the 1980s. The number of Hungarians travelling abroad was 299,000 in 1960, 893,000 in 1965, 1 million in 1970, 3.5 million in 1975 and 5.2 million in 1980. The number of inbound foreigners was less than a quarter of a million in 1960, but by 1970 it was over 3.5 million and by 1980 it was close to 9.5 million (Magyar Statisztikai Évkönyv 1970:375; Magyar Statisztikai Évkönyv 1980:343. cited by Valuch 2002).

31. Or the imminent liquidation of Merkur.

32. This level of entrepreneurial willingness did not remain constant: by 1995 it had fallen to around 20% (Lengyel 1989). The social tensions and unequal opportunities after the regime change strongly reduced the acceptance of market success narratives and the idea of success based on meritocratic principles. By the end of the 1990s, the myth of entrepreneurs as heroes had dissipated in both public and academic discourse (Virágh – Szepesi 2022; Kuczi 2011), and the perception of entrepreneurs (especially the way they access capital) became intertwined with images of informal relationships, unscrupulousness and criminality (Felkai 1997; Kuczi etal 1996). Unlike their Western counterparts, successful entrepreneurs in Hungary were surrounded less by glory and more by envy and suspicion (Halmos 2014).

33. János’ education is also technical, meaning that he has never formally studied economics, management or law.

34. János wakes up very early every morning, around 5am, when he has a little “me time” and reads the newspapers.

35. Founded in 1890, the Dutch-English (Royal Dutch) multinational oil company Shell is one of the world’s largest oil companies.

36. They are the second largest after MOL.

37. While the car parts shop was still running.

38. In 1991, there were 1,086 petrol stations in Hungary, by 1996 there were 2,175. However, the number of stations has not changed significantly since then, as by the second half of the 1990s, petrol stations covered the national road network. https://hirlevel.egov.hu/2017/04/10/interaktiv-terkepen-az-orszag-benzinkuthalozata/Time. of download: July 02, 2023

39. According to domestic research, brand loyalty is the most common risk mitigant for consumers when using petrol stations, and they always go to the same station if they can (Kolos – Berács 2000).

40. Hungarian small entrepreneurs – compared to their European counterparts – value personal freedom in particular, and being “their own boss” is a particularly important dimension of entrepreneurship for them (Luksander, Mike, and Csite 2012).

41. A good number of the determinants of success of what Ritzer (1993) calls McDonaldization are now well known; the activity is streamlined, efficient, fast, easy to control, the outcome (product/service) is foreseeable (constant quality), predictable (no surprises), measurable and (relatively) cheap (Ritzer 1993, 1997; Remák 1997).

42. 2 more in Kecskemét, 1–1 in Szekszárd, Gyöngyös, Szolnok and Békéscsaba.

43. 2023.

44. Meaning what you provide.

45. Employees.

46. The paternalistic manager cares for his employees as individuals and tries to improve their personal well-being (Aycan 2006).

47. In contrast to the negative (autocratic and manipulative) perception of Western cultures (Aycan 2006).

48. Both of his sons work with him in the management of the company, one of them for twenty years. This also means that the (later) generational change has also been solved. János (unlike most family businesses in Hungary/Kelemen 2020/) is consciously preparing for the future in both his business and personal life: “if I don’t wake up in the morning, I don’t want my family to be in trouble.”

49. There are currently (2023) 112 restaurants in Hungary and over 40,000 restaurants in more than 100 countries around the world.

50. The Business Ethics Award was founded in 2000 by Professor Ervin László.

51. This dichotomy can be linked to different theoretical contexts and conceptual frameworks; for example, the economics of happiness distinguishes between two conceptions of happiness; the utilitarian approach is characterized by the goal of maximizing individual utility and pleasure, while the virtue ethics approach is characterized by the aspirations for the well-being of the community (Baritz and Katona 2022). Or the bourgeois – citoyen conceptual pair; the bourgeois seeking profit and the autonomous citoyen responsible for the community, for democracy.

52. Especially in Budapest, as most of the new institutions were also linked to the capital. János’ restaurants are in the countryside, but his relationship with McDonald’s started in the capital.

53. Mihály Laki wrote about Gábor Bojár’s memoir on entrepreneurship (Graphisoft): “The message is clear: even in post-change Hungary, it is possible to build and run a company that is competitive in international markets largely on its own, with no state assistance, with resourcefulness and determination.” (Laki 2006, 75)

54. Shell came from a newspaper advertisement, and also “walked in off the street” at McDonald’s.

55. These traits are of course, not exclusive to big businesses, but are common to all independent, efficient and creative individuals.

56. Even during the Covid pandemic, it chose the forward escape route, developing (McDrive) and expanding home delivery in its restaurants. So, there was work. It did not lay off its permanent employees, they got paid despite the uncertainty.

57. The McDonald’s courses during the selection process.

58. This period (from the Settlement to the First World War) is known as the Golden Age.

Additional information

Funding

With the support of the MTA-BTK Lendület “Momentum” Work Research Group

Notes on contributors

Katalin Kelemen

Katalin Kelemen is a Hungarian economist, economic sociologist and associate professor at ELTE, Faculty of Law, Budapest. She received her PhD degree in 2002 from the BKE Sociology PhD programme. Her research interests include the sociology of entrepreneurs and enterprises. Currently, she is researching entrepreneurs in the period of regime change in the framework of the MTA-BTK Lendület “Momentum” Work Research Group.