Mark Imre Major : American Hungarian Relations 1918-1944

From the early Middle Ages, Hungary had evolved as a constitutional monarchy based on the royal recognition of the rights of the nation.⁽¹⁾ The whole Hungarian constitutional development was based on the doctrine of the Holy Crown of Hungary. According to this doctrine, the source of every right is vested in the Holy Crown of St. Stephen, which became not only a sacred relic used at the coronation and other solemn ceremonies but the symbol of national sovereignty and unity. The head of this entity (caput Sacri Regni Coronae) was the King, who attained this position only through the coronation performed by the nation (membra Sacri Regni Coronae). The duly crowned King and the nation together form the entire body of the Holy Crown (totum corpus Sacri Regni Coronae). A decision may become law only with the consent of these two components. As a consequence, without a crowned King the nation is not a perfect entity.⁽²⁾ So, in Hungary's case, the return

to the old monarchical form meant an unbroken allegiance to the principles of liberty and self-government in a world seething with ideas of state omnipotence and totalitarian authority.

Because of the Rumanian occupation, it was not until January, 1920, that the work of reconstruction could begin. It was universally recognized that constitutionalism must be restored, but it was at the same time clear to everyone that this could not be achieved simply by declaring the resumption of the old constitutional life at the point where it had been interrupted by war and revolution. The fact that the union with Austria had ceased to exist and the crowned king was unable to return necessitated the introduction of new measures and arrangements which, however, should not do away with old institutions and traditions.

After the collapse of the proletarian government, there followed a bourgeois administration. In the absence of a king the old legislative power could not function, and the government decided to convene a "National Assembly". General elections were ordered for January 25, 1920, on the basis of an equal, obligatory franchise by secret ballot. The largest party to emerge was the "United Agrarian Laborers' and Smallholders' Party", which got seventy-one mandates. This party, with sixteen other Liberals and Independents, represented the "Left". The "Christian National Union" gained sixty-eight seats and with nine other sympathizers represented the "Right".⁽³⁾ The Assembly was elected for the limited period of two years. It confined itself to the task of finding a provisional solution for the existing constitutional situation.

In Law I, which was enacted in February, 1920, the Assembly declared itself to be the depository of national sovereignty which entitled it to provide for the "restitution of the Constitution and for the organization of the sovereign power". It further declared that the laws and decrees of the Karolyi and Communist republics and Law XII of 1867, on which the vanished Monarchy had been

based, should be null and void, and that, until such time as the sovereign power could be definitely regulated, the Assembly should elect by ballot a Regent who, within certain limitations, should exercise the rights pertaining to the royal power.

The monarchy was thus maintained, but an interregnum set in. On the first of March, 1920, Admiral Horthy, at the time Commander-in-Chief of the national army, was elected Regent of Hungary. Twice King Charles attempted to regain his throne. He went to Hungary from Switzerland, where he lived in exile, in March and in October, 1921, but he failed in both cases. As a result, he was taken out of Hungary on a British gunboat in October, 1921. He died in Madeira Island, the next year where the English authorities had banished him. The heir to the throne, the Archduke Otto, was still a child.

Hungary's post-war era began with short-lived and ineffective governments. However, a change occured in 1921, when a new government was formed under the leadership of Count Stephen Bethlen. Since he served as Prime Minister for ten years, the first decade of Hungary's inter-war history was generally called the Bethlen era.

Count Stephen Bethlen came from a historic Transylvanian family.⁽⁴⁾ He had the same family roots as Gabriel Bethlen, the

Protestant ruling prince of Transylvania in the seventeenth century. His studies had taken him to Vienna and England. Bethlen was a Calvinist in faith and, like many Hungarian magnates, admired England, where he had received his education. He entered Parliament in 1901, and in politics he was a conservative. He distrusted all forms of revolutionary ideologies and extremisms whether they came from the country's socialists or from the right radical groups. He began his term of office by declaring that the revolutions and counter-revolutions were over.

Bethlen's chief aim was undoubtedly the restoration of Hungary to pre-1918 territorial form. He did not put it first on his time table, for he was convinced that any such adventure would be futile until Hungary had consolidated her internal position and gained powerful friends abroad. He looked on the problems of Hungary as those which local and short-term devices could not solve. Only a comprehensive and long-term plan could be successful, a plan which took into account the realities of the world forces. Hungary's first step must therefore be a general process of consolidation and reconstruction.

Hungary's immediate need was for investment capital. The resources of Hungary's native capitalists were insufficient; Hungary had never been rich in capital of her own, since many of her industries had been owned by holding banks outside the country.⁽⁵⁾ Thus capital was needed from aboard, but investors would not risk it in a country in which revolution was a possibility. Political and social stability were prerequisites to economic and financial reconstruction; for both, foreign help was needed. From this it followed that until reconstruction had successfully gotten under way, Hungary would have to adopt a political orientation satisfactory to those circles which could supply the financial help. This applied both to internal and external policy. First Hungary must

gather sufficient strength in order to make herself again a factor to be reckoned with in world politics. Only then could she hope to secure friends, and only after this would she be in a position to advance toward her national objectives.

Bethlen's first diplomatic success was the treaty between the United States and Hungary. On July 2, 1921, President Harding asked Congress to establish peace between the two countries. The message stated: "Considering that the former Austro-Hungarian Monarchy ceased to exist and was replaced in Hungary by a national Hungarian Government, considering that the Treaty of Trianon has not been ratified by the United States, it is necessary to establish peace and friendly relations between the two nations".⁽⁶⁾ Congress approved the presidential message on the same day. President Harding reposed authority to negotiate peace with Hungary on Ulysses Grant-Smith and Hugh Frazer, American Commissioners at Budapest.

The negotiations started on July 9. 1921, in Budapest. The commissioners of the two countries had no difficulty. During the war, the armies of the two countries had not fought each other. The Hungarians living in the States were treated with consideration, nor was a single American interned at that time in Hungary. There was such a great understanding between the delegations that the first draft was approved both by the President of the United States and by the Hungarian Government. The treaty was signed on August 29, 1921.⁽⁷⁾ This historic act, the first treaty signed between the two states, took place at Budapest in the Building of Parliament. Ulysses Grant-Smith and Hugh Frazer, plenipotentiaries, accompanied by Colonel Edwin C. Kemp, the military charge d'affaires, and the secretaries, Wallace Smith Murray and Warrington Dawson, represented the government of the United States. The chief representatives of the Hungarian government were the Foreign Minister, Count Nicholas Banffy, and the head of the

political section of the Foreign Ministry, Count Alexander Khuen Hedervary. Ambassador Grant-Smith welcomed the peace restored between the two countries with the following words: "I believe in Hungary's future and prosperity. Hungary will live for a long time to come, will live and thrive".⁽⁸⁾ On that occasion, as the Hungarian news-media pointed out, there were no references to the territorial changes of Trianon in the separate peace treaty. The Hungarian Nation, a monthly official periodical of the Foreign Ministry, wrote:

Mr. Ulysses Grant-Smith, during his nearly three years' stay at Budapest, has repeatedly proved his sympathy and valued friendship for our afflicted land. All this time he has been one of the unnamed actual factors in the American charity movement in Hungary. In this third year he witnesses the peace between America and Hungary. The conclusion of this peace is that the United States of America does not recognize the territorial provision of the Trianon Treaty.⁽⁹⁾

In any case, the peace treaty between the United States and Hungary meant that ordinary diplomacy was set up between the two states. The following month, Nicholas Roosevelt, the newly appointed American Minister to Hungary, arrived at Budapest. He held his office there for more than ten years and in doing so became the most permanent ambassador at Budapest. His reports to the State Department show that nothing disturbed the good relations between the two states during his term.

Another significant diplomatic event occurred between the two states in 1929, when Hungary joined the Kellogg Pact which condemned war as a means for the solution of international controversies. First, Hungarian public opinion looked upon the pact with suspicion. The Kellogg-Briand Pact was interpreted by the French press as a formal blessing on the Paris Peace Treaties, up to then withheld by America.⁽¹⁰⁾ The Pester Lloyd, in discussing

these remarks of the French press, stated on October 18, 1928

"Hungary is ready to condemn war, but must leave the door open to the revision of unjust and unnatural conditions".⁽¹¹⁾ Another paper, the Pesti Naplo (Diary), protested that the Central Powers had never dreamed of fighting the United States and stated that the grievances which led America into World War I could have been settled according to international law by the compensation usual to neutrals suffering from war. The paper stated further more that the United States, on the basis of the Monroe Doctrine, should have refrained from entering a war which was entirely the concern of Europe. The unlimited submarine campaign, the paper stated, was a pleasing pretext for the commencement of hostilities and concluded that "America, after playing a leading part in the breaking up of old Europe, would have nothing to do with the creation of the new Europe".⁽¹²⁾

The Hungarian Government really was in trouble. If it joined the Kellogg Pact, it could mean accepting the status quo. If Hungary did not join the Pact, it could be interpreted that she was on the side of the war. The eyes of her neighbors were watching her. The Echo de Paris, for instance, stated: "Hungary only feigns to preach peace as she attacks at the same time one of the most im portant guarantiees of European peace: the Trianon Treaty".⁽¹³⁾

Hungary's hope regarding the Kellogg Pact, that the United States would take some future interest in remedying injustices to Hungary, aroused unfavorable comments in Czechoslovakia, Rumania, and Yugoslavia. Before she joined the Pact, however, Hungary sent Tibor Eckhardt, one of her best diplomats, to Washington with a memorandum of the effects of the pact in Europe. The memorandum called attention to the fact that Hungary was of all the most cruelly ill-treated by the peace treaties and asked the United States not to concur in any legal stabilization of the present

territorial status quo in Europe. Kellogg, the Secretary of State, assured Hungary that the Pact did not have that intention. What was more, Senator Borah, during the debate in the Senate on the Kellogg Pact, stated regarding Central Europe: "It is quite clear to me that very much is wrong in that part of the world".⁽¹⁴⁾ Hungary joined the Kellogg Pact and the Budapesti Hirlap published an article entitled "The Ways of Hungarian Foreign Policy", which was more than usually inspired by government sources. The article stated:

The Hungarian Government emphasized the fact that it joined the Kellogg Pact with the assumption that the Government of the United States would try to find ways and means for ensuring, in the future, the remedying of injustices by peaceful ways. The United States cannot consider the root of its intervention in European politics to be closed by the Kellogg Pact. There is the fact that the United States, which had rejected the Treaty of Trianon and concluded a separate peace, ought to try to find ways and means to remedy injustices. The Hungarian government was very wise to seize the opportunity to remind America to go on with her mission for the sake of world peace and to open before her the closed book of revision, telling her to look and read that book which is full of serious injustices. ⁽¹⁵⁾

At a session of the Committee on Foreign Affairs of the Upper House of Parliament on the same date, Dr. Lajos Walko, the Minister of Foreign Affairs, referring to the Kellogg Pact, informed the Committee of the reasons which influenced his government to join the Pact. He stated that in its note the government intended not only to emphasize the final aim of Hungarian political life, but also to voice the principle that international life in general needs effective means by which unjust and unnatural relations may be peacefully remedied. ⁽¹⁶⁾

Ultimately, sixty-two nations signed the Kellogg Pact, but the futility of all such declarations was demonstrated by the attack of Japan on China. Nevertheless, European statesman saw significance in the willingness of the United States to cooperate in the effort to maintain world peace. For her part, Hungary hoped that American public opinion could be allied with that of Hungary in an endeavor to modify the Covenant of the League of Nations, and in creating a new spirit which would eliminate the one-sided privileges of the victorious states.

Far more important during this period were the economic relations between the United States and Hungary. As noted above, the economic development of Central Europe had been different from that of the West. Most of the large industry in Central Europe, and nearly all in Hungary, was directly owned or controlled by holding banks. The structure of Hungarian big business was even more oligarchic than that of the landed interests. It was controlled to an overwhelming degree by a relatively small number of persons, nearly all of them closely related by blood or marriage. ⁽¹⁷⁾ Hungary could never have achieved the economic results which she did during the Reconstruction period without the active cooperation of these citizens and without foreign capital.

On September 18, 1922, Bethlen scored his first success when Hungary secured admission to the League. The next spring she applied for a loan. The Little Entente announced that it would waive its rights only if it received serious guarantees that the loan would not be used by Hungary either to increase her armaments or to finance irredentist propaganda. More discussions followed, and at last it was possible to sign, on March 14, 1924, two Protocols. By the first Protocol, Britain, France, Italy, Czechoslovakia, Rumania, and Yugoslavia promised to respect Hungary's territorial integrity, sovereignty, and political independence, while Hungary undertook, in accordance with the stipulations of the Treaty of Trianon, strictly and loyally to fulfill the obligations contained in

the Treaty, and in particular the military clauses. The second Protocol laid down what guarantees Hungary was to give for a loan and fixed her total reparations. She was to pay two hundred million gold crowns, in installments rising from five million gold crowns in 1927 - 28 to an annual maximum of fourteen million to be reached in 1942.

This settlement provided the negotiation of a loan for two hundred fifty million gold crowns.⁽¹⁸⁾ The operation was an immediate success. As previously noted, the reconstruction loan was oversubscribed, and this proved only the first trickle of what soon turned into a flood of capital. Domestic capital repatriated itself, and foreign capital found remarkably favorable opportunities in Hungary. According to figures quoted by B. Kovrig,⁽¹⁹⁾ the capital imported into Hungary between 1920 and 1931 totalled 488,856,928 dollars. The currency at once became stable, and the new independent Bank of Issue replaced the old crown with a new unit, the "pengo" based on gold. That unit in its turn remained for years among Europe's most stable currencies. By July, 1924, the budget had been brought back into equilibrium, so effectively that every year there after it showed a surplus of revenue over expenditures. Two new universities, many high schools and thousands of elementary schools were built. New factories were founded to replace those lost at Trianon; new sources of raw materials were developed or foreign sources found, and new markets were opened abroad. The number of establishments ranking as factories rose from 2,124 in 1921 to 3,553 in 1928, while the index of industrial production rose from 100 to 294.⁽²⁰⁾ Agriculture flourished. The year 1929 found Hungary with a prosperous ownership class, both urban and rural. The former included not only the major financiers and industrialists but also many shopkeepers and artisans. The well-being of these classes was shared by the state employees of the higher and medium grade.

1 For full and good Hungarian history in English, see: Carlile Aylmer Macartney, Hungary (Chicago: Aldine Publishing Company, 1962; reprinted 1966, 1968), or see Denis Sinor, History of Hungary (London: Allen and Unwin, 1959.

2 For further details see Willam Solyom-Fekete, "The Hungarian Constitutional Compact of 1867," The Quarterly Journal of tbe Library of Congress XXIV, No. 4 (October, 1967), 287.

3 C. A. Macartney, October Fifteenth (2 vols; Edinburgh: University Press, 1956), I. 24.

4 Transylvania sometimes played a significant role in international relations. Stephen Bathory, prince of Transylvania (1572 - 1581) was elected king of Poland in 1575 and defeated the Russian Czar, Ivan the Terrible. Several of the Transylvanian princes, chiefly Gabriel Bethlen (1613-1629) and George Rakoczi (1630 - 1648) maintained close relations and often negotiated alliances with Western European Protestant powers and with France, in order to strengthen their position against the Habsburgs. In the second half of the seventeenth century, Transylvania was ravaged by Turkish and Tartar hordes. Thus she gradually withered away from the European scene as a power factor. In 1691, the Diploma Leopoldinum declared Transylvania a Habsburg province

For the history of Transylvania, see Ladislaus Makkai, Histoire de Transylvania (Paris: Presses Universitaites de France, 1946); and C. A. Macartney, Hungary and Her Successors (New York: Oxord University Press,, 1937), pp, 254 70.

5 For details on Hungarian social and economic history, see Bela Kovrig Hungarian Social Policies, 1920 - 1945 (New York: Published by Committee for Culture and Education of the Hungarian National Council, 1954).

6 U. S. For. Rel., Department of State, 711.64119/9 B.

7 Ibid., 711.64119/37.

8 Ibid.

9 II, No 9 (1921), 85.

10 U. S., For. Rel., 711.6412/27.

11 Ibid.

12 U. S., Nat. Arch., Micr. No. 708, Roll No. 11.

13 U S., For. Rel., 711.6412/25.

14 Ibid.

15 Ibid., 711.6412/26.

16 Ibid.

17 See Kovrig, Hungarian Social Policies, 1920 - 1945, p. 32.

18 It was issued at 8 percent and bore interest at 7-l/2 percent.

19 Kovrig, Hungarian Social Policies, 1920-1945, p. 37.

20 Ibid., p. 38.

Mark Imre Major : American Hungarian Relations 1918-1944