Discussion Papers 1998. No. 21.
Transformation in Central European Postsocialist Cities
CENTRE FOR REGIONAL STUDIES
OF HUNGARIAN ACADEMY OF SCIENCES
DISCUSSION PAPERS
No. 21
Transformation in Central
European Postsocialist Cities
by
ENYEDI, György
Series editor
HRUBI, László
Pécs
1998
Discussion Papers 1998. No. 21.
Transformation in Central European Postsocialist Cities
Publishing of this paper is supported by
Strategic Task Force for European Integration
ISSN 0238–2008
© 1998 by Centre for Regional Studies of the Hungarian Academy of Sciences
Technical editor: Hrubi, László
Typeset by Centre for Regional Studies of HAS
Printed in Hungary by Sümegi Nyomdaipari, Kereskedelmi és Szolgáltató Kft., Pécs
Discussion Papers 1998. No. 21.
Transformation in Central European Postsocialist Cities
CONTENTS
Introduction /5
Characteristics of Urbanisation in
the State Socialist System /8
Urban Aspects of the Transition /17
New Integration of the Settlement System,
Growing Social Discrepancies /17
Transformation of the Urban Economy /20
Establishment of Local Governments /25
Evolution of the Real Estate Market /30
Transformation of Urban Society /33
Transformation of the Built Environment /36
International Relations and Participation in the
International Competition of Cities /37
Conclusion /39
Notes /43
References /44
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
Introduction
Cities have traditionally been the agents and co-ordinators, as well as the
subjects of the societal changes that have effected their transformation. An
analysis of urban transformation may thus contribute to a more fundamental
understanding of societal changes. However, few of the countless studies on
the postcommunist transition discuss the development of cities. Although
there has been considerable attention given to selected topics – e.g. local
government, privatisation of housing, urban development in Budapest, Pra-
gue and Warsaw –, comprehensive and authoritative studies are lacking.
The present work aims to provide precisely such a comprehensive descrip-
tion of urban transition.
In what follows, an attempt will be made to supply answers to two prin-
cipal questions:
1) What have been the main characteristics of the transition?
2) What position does the Central European urban network occupy in the
European urban network as a whole?
It is necessary to explain a few underlying assumptions before going on
to tackle the above questions.
1) What will be referred to in the following as postcommunist Central
Europe is deemed to consist the Czech Republic, Poland, Hungary,
Slovakia, and Slovenia. This is admittedly a rather limited definition,
but is not intended to have any political implications. It is simply that
comparable findings of research programmes are only available from
these countries.
2) It can be argued that transition in Central and Eastern Europe consti-
tutes only a part of a sweeping social and economic change through-
out the world. Postcommunist transition may have a significant num-
ber of unique characteristics, but it cannot be said to be the only tran-
sition currently taking place; nor can it be understood without refer-
ence to others. Postcommunist changes are often compared to Western
European conditions described as if they were static and fixed. This
approach ignores, however, the simple fact that everything is ‘in flux’
in Western Europe as well.
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
‘Transition’ can be defined as a particularly significant stage of societal
development in which more and more external and/or internal difficulties
hinder the reproduction of the social and economic environment that forms
the basis of society. New economic and social conditions emerge to become
generally dominant in due course. Whether rapidly or slowly, violently or
peacefully, these new conditions determine how the new system of society
will look.
These periods of transition, by no means brief, represent great epochs of
human history. Godelier holds the view that today’s global transition signi-
fies the last phase in the universalisation of capitalism. The economic system
engendered by the capitalist mode of production is now becoming dominant
over all non-capitalist ways of organising production and exchanging goods
(Godelier, 1987). In the second half of the last century, the ascendancy of
the capitalist mode of production was limited to the North Atlantic region.
This region, being the first to undergo this transformation, also became the
pivot of the world economy. Transformation (i.e. the transition from feudal-
ism to capitalism) first began to spread from the centre to the periphery
through existing trade relations; the periphery including Mediterranean
Europe as well as Central Europe. At the same time, due to its colonisation
or at least complete economic subjugation by the centre, social and economic
conditions on the second periphery have scarcely been affected until the re-
cent past. As a result of abundant state support and American influence, the
1970s saw, however, the growing dominance of the capitalist system of pro-
duction also on the periphery of the developing world.
The advance of capitalism on the periphery has also changed the status of
the centre. It has lost many of its former advantages in production, since
even sectors requiring considerable expertise have been moved to the pe-
riphery where qualified labour is cheaper, more willing to co-operate with
employers and does not demand state welfare. Europe’s relative decline has
been especially conspicuous (the giant domestic market of North America
mitigates the negative impact of falling competitiveness). The slowing down
of economic growth has been dramatic and high unemployment rates have
become permanent.
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Systemic transformation in Central Europe has become a part of this
global transition, but in a peculiar way. A few decades back, the semi-peri-
pheries of Central and Eastern Europe chose to run against the current, re-
jecting the course of development dictated by the centre. Now these regions
are voluntarily giving up their opposition. At the same time, the old centre
they would like to join seems itself to be disintegrating. One is obliged to
confess, however, that nobody knows exactly where these countries are
heading and what exactly is happening to them. Social sciences have yet to
come up with comprehensive explanations.
It can be concluded, therefore, that a combination of various kinds of
transformation is responsible for the unique features of transition in Central
and Eastern Europe. Obviously, one of these transformations has been
brought about by the dissolution of state-planned economies and the one-
party system and the subsequent emergence of the market economy and po-
litical democracy. The second type of transformation is induced by the transi-
tion from the industrial city to a service-providing and information-
concentrating city. Thirdly, one also has to consider the impact of global
transformation, for it is clear that the development of the postsocialist urban
network is not only influenced by European trends but also by processes of
an increasingly integrated world economy. It seems that these global proc-
esses are leading to a new phase of urban growth. This phase is marked by
the fact that after two decades of de-urbanisation, economic growth, and es-
pecially the control of the economy and outstanding achievements in the
fields of culture and science, once again become increasingly associated
with large cities. Given the proliferation of novel features, it is difficult to
assess which developments will be lasting and which not. Although urban
development has always been informed by a degree of continuity, it is diffi-
cult to say to what extent this will be the case in the future.
Western Europe has been serving as Central Europe’s model for more
than a thousand years. It has always been the pioneer, a self-renewing
source of new ideas and institutions. On the other hand, Central Europe is
an independent region in a distinctively cultural, as well as historical, sense.
At times it may have become closer to Western Europe, at other times it
drifted further away, but the two regions have never become one. What is at
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stake now is whether Central Europe will be able to accomplish a union that
has eluded it in the past in a new, integrating Europe. Some argue that it
stands a very good chance today, even if integration cannot be realised at a
stroke. Others are more pessimistic and in view of the rapid growth of urban
poverty even fear the possibility of decline to third world status. In my opin-
ion, a Western European type of development cannot be ‘decreed’. I share
Stark’s scepticism with regard to the feasibility, of artificially designed
forms of capitalism (Stark, 1992). On the other hand I feel that the possibil-
ity of being relegated to the third world is exaggerated. In the state-planned
economy as well as after 1989, the course of 20th-century urbanisation in
this region has run parallel to urban development elsewhere on the Euro-
pean periphery. It is a reasonable assumption that the Central European re-
gion will form a specific subsystem of the European urban network in the
foreseeable future. Even if economic disadvantages are reduced in this re-
gion, societal mechanisms, as well as individual values, are not likely to be-
come identical with those in Western Europe. The same is true of the Medi-
terranean urban network that has now joined the European Union. This as-
sumption also implies that I judge the Central European urban network to be
capable of integrating into the European urban system. It should not consti-
tute a disadvantage that a degree of difference is preserved. On the contrary,
this may even prove to be a cultural value; why should all countries be
obliged to follow the British and American model of development?
In the first part of this study, I will briefly summarise the characteristics
of the urban system in state-planned economy. This will help us to clarify
and understand the main consequences of the transition, and make it easier
to assess the chances of European integration. In the main part (the second
section of the study) I will analyse key factors of the transition process. Fi-
nally I will weigh the prospects of a new united European urban system in
the third, concluding part.
Characteristics of Urbanisation in the State Socialist System
Experts differ considerably on the nature of urbanisation in the state-
planned economy. Some define urbanisation in the state-planned economy
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as distinctly different from capitalist urbanisation. Despite certain formal
similarities, they view the former as an independent model of urbanisation
(Szelényi, 1983). I would be more inclined to agree with those who tend to
describe industrial and postindustrial cities in terms of the same spatial
structure, significant regional differences notwithstanding (Enyedi, 1992).
Most of this is already history and there seems to be little point in stirring up
old controversies once again. Nevertheless, I would like to summarise my
view of the characteristics of urbanisation in the state socialist system (En-
yedi, 1996). This will enable a better estimation of how much the initial
situation of 1989 in state-planned economies really differed from that of
other peripheral market economies in Europe at the time. It will also make it
possible to evaluate how much closer the Central European urban system is
to that of Western Europe as a result of the changes after 1989.
In my opinion, 45 years of state socialism only partly account for the pe-
culiarities of Central European urbanisation. It was also very significant that
urbanisation was considerably delayed in Central Europe (by comparison
with Western Europe). This delay is responsible, for instance, for the fact
that the urban network is much more loosely-knit than in Western Europe.
In Central Europe large cities are often surrounded by underdeveloped areas
with a low population density. A part of the urban network is constituted by
centres that resemble enclaves that are only connected with one another by
traffic routes (Braun, 1994). The weakness of the urban middle classes in
this region is another consequence of delayed urbanisation and some cities
have even preserved remnants of the feudal orders well into the 20th cen-
tury. Feudalism in Western Europe started to weaken as early as the 13th
century, giving rise to a significant wave of mediaeval urbanisation. Central
Europe only experienced the same trends some five hundred years later. Ur-
banisation in Central Europe can only partly be attributed to organic devel-
opment. Rather it was to a great extent generated by state intervention and
modernisation initiated ‘from above’. In this respect, it resembled the Rus-
sian rather than the western type of urban development.
The transition from a rural society to an urban society has also been de-
layed. The industrial revolution really got under way in the 1870s, but never
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completely came to fruition, and was finally halted after the First World
War. The majority of the population still lived in the countryside in most of
the Central European region in the 1950s. The ratio of rural population in
Hungary was 60%, in Poland 65% and the same in Slovakia. By comparison
with Western Europe, the growth of urban population has been much quicker
since the 1950s. The urban network has significantly expanded as well. The
number of cities with a population of more than 50,000 has tripled in these
countries. By contrast, the rate of growth was only 50% in Czechoslovakia,
which figure is identical with that in Austria and Germany. This indicates
that the urban network of Czechoslovakia differs from that of other post-
communist countries in a number of ways. The density of Czechoslovakia’s
small town network already resembled that of neighbouring German areas at
the beginning of the communist regime, whereas the growth of the small
town network in the eastern part of Central Europe only started to gather
momentum in the 1970s (Enyedi, 1992). Despite the fact that the develop-
ment of the Czech urban network was also slower, this delay did not cause
structural distortions. The development of the middle classes, the evolution
of an industrial society and the functioning of the urban network have all
been closer to that of the Austro-German part of Central Europe. By con-
trast, delayed development in the eastern part of Central Europe has resulted
in the fact that industrialisation and transition to an urban society have only
taken place in the state-planned economy and thus displayed typically east-
ern characteristics. In other words, the communist regime has interrupted a
vigorous urban development in Czechoslovakia (coupled with the deporta-
tion of 3.5 million Czechoslovakian citizens of German origin in 1945–
1946, the majority of whom were town-dwellers), while in other parts of the
region the first stage of modern urbanisation has only been completed in the
context of a state-planned economy. It is yet to be seen whether this dis-
crepancy will also influence the manner and pace of the integration of na-
tional urban networks. Some of the initial advantages of the Czech urban
network may be offset by a much more dynamic growth of the middle classes
in Poland and Hungary after 1968.
It must be noted that in spite of this delay, spatial forms of urban devel-
opment have in the main followed the Western European model. In no way
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can they be compared to those in developing countries. Such ‘western’ fea-
tures include the ageing of urban population, the slowing down of the
growth of metropolitan population (or in Budapest’s case, even the begin-
ning of its decrease), the disappearance of families in which more than one
generation lived together, the depopulation of the inner cities and the social
erosion of central residential districts. I would in fact argue that the Central
European urban network very strongly resembled that of the western part of
Central Europe in 1989.1
These similarities are explained by the following factors:
1) They reflect general laws governing the spatial development of ur-
banisation after the industrial revolution. Industrialisation has neces-
sarily led to the same spatial consequences everywhere, such as mi-
gration from villages to cities, urban concentration of the population,
suburbanisation, extension of the urban network, integration of vil-
lages into urban agglomerations.
2) Following the example of the Soviet Union, state-planned urban de-
velopment was combined with ideological aims at the beginning of the
communist period. It has sought to create the ideal communist city in
an egalitarian and communitarian fashion. It quickly became evident,
however, that planning was not omnipotent. Central authorities may
be able to modify some of the spontaneous tendencies of urbanisation,
but they cannot realise an imagined urban model in an artificial way.
Consequently, either the objectives of planning were pragmatically
modified to accommodate spontaneous processes, or the slogan ‘let us
catch up with the capitalist West’ made the application of western no-
tion of urban planning possible, at least in Hungary and Poland. What-
ever the cause, a similar course of urban development has produced
similar problems to solve.
3) Individuals can participate in processes of urbanisation even in a dicta-
torial political system. When moving house or building their own one,
when deciding whether to stay or migrate, when choosing between
educational institutions for their children, they influence the develop-
ment of their respective settlements. Since the value of urban spaces is
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deeply rooted in common European cultural traditions, it has not sig-
nificantly changed during the communist regime. The population has
rejected egalitarian ideology, preferring to live in better homes located
in areas of higher social prestige. Society established an unofficial and
highly effective mechanism, a kind of ‘second urbanisation’ in order
to affirm its traditional values.
Compared to its level of development in the interwar period, the Central
European urban system more closely approximated to that of Western
Europe in a number of significant ways by the end of the communist regime.
The discrepancy between preindustrial cities of an overwhelmingly rural
settlement structure and industrial and service-providing cities of a pre-
dominantly urbanised settlement structure had been significantly reduced.
Nevertheless, in view of the specific characteristics of state-planned econo-
mies, other differences can be said to have increased.
The impact of the system of state socialism on urbanisation can be sum-
marised as follows:
1) In spite of its loud proclamation of collectivist slogans, the totalitarian
system actually atomised and caused the disintegration of urban socie-
ties. Civil society was non-existent, collective leisure activities could
only be pursued in local groups of cultural, sports and other associa-
tions organised and controlled by the party-state. The principal scene
of socialisation was the place of work where the control and ‘education’
of citizens was easier than at their place of residence. The very tech-
niques of grassroots organisation of society had been forgotten. The
social activities of the churches were strongly restrained. A thor-
oughly individualised society, distrustful even towards its own democ-
ratically-elected leaders and hardly capable of making even minor
compromises, is now trying to reorganise itself in postcommunist cit-
ies. Urban planning, which previously ignored the interests of citizens,
has found itself in a very difficult position.
2) The development of the inner structure of society also took a peculiar
course. With the introduction of the economic system of state owner-
ship, almost everybody became a state employee. The economic sys-
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tem based on private property was abolished or at least very much
limited. Society became increasingly proletarianised, and few mem-
bers of the old middle class preserved their status as freelancers or
prominent intellectuals. The social elite was completely reshuffled,
and the economic and political elite of the times before the communist
regime was replaced by a new elite. Especially in the initial period,
this new elite was quite uneducated, but had a strong political com-
mitment. It was recruited from party officials, managers of large state-
owned companies and top functionaries of the state administration.
The official ideology called for the unification of society, while in fact
economy and society became more and more heterogeneous and the
complexity of the social structure also increased significantly. The
distance between the haves and have-nots actually increased despite
the fact that society continued to display some egalitarian features.
Poverty was mitigated by full employment, the homeless were ac-
commodated in workers’ hostels, and everybody could afford basic
foodstuffs and other essential needs.
From the 1970s onwards, the second urban economy increasingly
gained ground in Poland and Hungary. This not only provided a new
source of income, but also strengthened the middle classes, holding
out the possibility of exercising autonomous economic decisions and
making capital accumulation possible. It was by and large tolerated
that a parallel society of an increasingly middle-class character began
to be established ‘behind the scenes’ of the official society.
3) Cities preserved their overwhelmingly industrial character. The expan-
sion of the urban network was to a large extent caused by the location
of industry in the countryside. It was not the case that dynamic com-
mercial cities attracted industry (there were few of these), but industry
turned villages into cities. The transition from industrial city to a ser-
vice-providing city progressed slowly, although this trend was still
more manifest here than in Eastern Europe. This can partly be attrib-
uted to a large industrial demand for labour,2 and partly to the fact that
services were not profit-oriented and remained generally backward.
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The state-planned economy could not move beyond the industrial city.
In other words, it preserved a Fordist organisation of industry, even if
this was accompanied by different social mechanisms from those in
‘Fordist’ Western Europe.
4) Cities had access to development funds through the redistribution of
the central budget. Thus development did not depend on internal re-
sources, nor did the volume of available funds depend on the perform-
ance of the local economy, but merely on the ability of a particular ur-
ban settlement to represent its interests. The chief objective of urban
policies was to influence redistributing centres. This has had a number
of consequences. Firstly, capitals could lobby for their interests par-
ticularly well, given that in the centralised system of state socialism
all strategic decisions, including economic decisions, were made in in-
stitutions of the party and state administration located in the capital.
Nevertheless, the excessive growth of capitals was hindered by the
fact that other cities, regional and large industrial centres in particular,
also had a considerable lobbying potential. Consequently, the devel-
opment of centres in the countryside was also relatively well-
balanced. The losers in this race were clearly the villages that had
very limited access to funds for settlement development. As a result, the
urban/rural dichotomy, characteristic of early industrialisation, was
preserved under the command economy. This discrepancy was only
made even worse by the fact that infrastructural developments were
consistently ignored.3 Infrastructural investments in transport, energy
and housing were carried out only as long as they were vital to the
functioning of industry. Regional infrastructural developments have
also neglected rural areas. The rural population, amounting to 35–40%
of the entire population, was thus placed at a serious disadvantage.
These disadvantages have only increased in the competitive environ-
ment of market economies.
5) State-planned economies operated as closed national economies, and
economic, cultural and other relations over national boundaries were
regulated by international agreements. Cities, therefore, were also her-
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metically sealed in their respective national spaces and their sphere of
influence was never able to transcend the country’s borders. They could
only absorb immigrants from their respective areas and were organ-
ised into a planned hierarchy within their countries. The cities of the
Central European region were also non-participants in the competition
between European cities which led elsewhere to the formation of dif-
ferent specialised urban groups at various levels.
6) Urban development in the state-planned economy also influenced the
built environment and the urban land use in specific ways. One sees
here another instance of the preservation of early 20th-century forms
of spatial organisation. A good example is the peculiar course of sub-
urbanisation that conserved the semi-rural character of communes in
the urban agglomeration and kept the number of daily commuters at
high levels. The middle classes had not yet begun to move to the sub-
urbs, or at least this is how it looked on the surface. All large cities
sought to devour neighbouring settlements by administrative means,
because a large population brought benefits in the redistribution of re-
sources. One result of this, however, was that the inner suburban ring
was moved within city boundaries. Other anachronistic features of spa-
tial organisation can be seen in the continuing prestige of downtown re-
sidential areas and the mixing of a relatively small central business
district with retailing areas. Similarly, residential quarters merged
with industrial areas and proletarian districts continued to exist. Time
seemed to have stood still here. Modernisation in state socialism was
so obsessively focused on industrialisation that it was in effect imitat-
ing a past epoch, namely that of the industrial revolution. Nevertheless,
surviving forms of urbanisation disguised a much altered content.
Workers did not move to the suburbs because they could not afford
rents in downtown areas, but because they were excluded from the
state redistribution of housing, in certain cases even having to suffer
administrative restrictions. The central business area remained so
small because the state-planned economy simply did not need finan-
cial institutions and other commercial services. The decline of down-
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town residential areas is another phenomenon that on the surface may
appear to be analogous to corresponding developments in Western
Europe. Yet these inner residential areas did not start to decline be-
cause of the exit of the middle classes and real estate speculation, as in
Western Europe. Slums grew up rather because of physical decay and
failure to maintain state-owned residential buildings, as well as
through the allocation of low-quality flats to poor families with many
children.
State socialism has also left an indelible mark on the urban structure il-
lustrated, for example, by the fact that a considerable part of the population
still lives in large housing estates. Such estates were also built in Western
Europe, but they were only intended to accommodate those moving to the
city and low-income groups of the population. Moreover they went out of
fashion in the West more than twenty years ago. By contrast, the construc-
tion of housing estates has been the main form of housing until the recent
past in Central Europe.
Flats were allocated by local councils, partly according to needs, partly
according to ‘merit’. Since these flats were not only acquired by the poor, the
allocation of homes did not generate segregation. From the 1970s on, how-
ever, a limited form of real estate market began to develop in Poland and
Hungary. Those in higher income brackets, especially members of the intel-
ligentsia, began to buy or build homes in residential areas with higher social
prestige. This development was accompanied by the decline of housing es-
tates. It is interesting to note that, as already mentioned, residential segrega-
tion did not completely disappear in egalitarian societies. Its mechanism
simply became more complicated, because market conditions were only simu-
lated, although the address of a residence still more or less implied a corre-
sponding social status.
This was the general state of the Central European urban network at the
beginning of the transition: in some ways similar to the Western European
urban system, in some ways different. As I have already remarked, in my per-
ception the similarities were more fundamental and generally speaking, the
cities of the Central European region form a part of the European urban sys-
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tem. Changes after 1989 have made the similarities even more conspicuous.
I would define the following aspects to be the most important elements of
the transformation process:
• market-oriented integration of the settlement system, leading to an in-
crease in social discrepancies;
• transformation of the urban economy;
• establishment of local governments;
• evolution of the real estate market;
• transformation of urban society;
• transformation of the built environment;
• establishment of international relations, participation in the interna-
tional competition of cities.
These changes will be briefly discussed in the following section.
Urban Aspects of the Transition
New Integration of the Settlement System,
Growing Social Discrepancies
The settlement structure formed an integral part of the centralised system of
state administration under state socialism. Cities were organised in a hierar-
chical structure according to the level of administrative institutions located
in them. Their place in the hierarchy was assigned by central planning, hav-
ing regard to a number of priorities. The highest priority in the period of ex-
tensive industrialisation was the presence of industry, in particular heavy
industry. Later, the service-providing functions of a city with respect to set-
tlements in its attraction zone were also considered. The city’s share of the
central budget depended on its position in the hierarchy. The availability of
resources for development was determined neither by a city’s actual circum-
stances, nor by successful or unsuccessful management of its affairs, but
merely by the city’s effective bargaining potential in the process of redistri-
bution at its own level of the hierarchy.
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Three distinctly different levels of relationships between settlements
emerged. The first was constituted by economic relations. Companies in a
given settlement, whether co-operatives or state-owned, made business con-
tacts with other industrial companies or (also state-owned) domestic and in-
ternational trading companies. These connections, however, were not mar-
ket-oriented–not even in the Hungarian economy, which was closest to a
market economy. Links between companies were either determined by cen-
tral planning or by the economic organisations of the state, which enjoyed a
monopolistic position in the economy. At the same time, economic connec-
tions were regulated by one of the administrative centres, and neither local
authorities nor the companies in any city could influence the direction or in-
tensity of these connections.
The other level of relationships between settlements was represented by
connections in public services. The latter term stood for a fairly wide range
of services, including retail trade. Local authorities were not only tasked
with the supervision of education and health services, but also had to attend
to such fundamental matters as ensuring that there was enough bread in the
shops before official holidays. The scope of public services was determined
centrally. The centre regulated which hospital, secondary school and bank
could be used by any individual inhabitant of a given settlement. A city’s
sphere of influence, therefore, did not evolve on the basis of spontaneous
connections and boundaries were fixed in a bureaucratic fashion.
The third type of relationships between settlements was based on the
freely exercised preferences of the population. These could only manifest
themselves in retail trade, in the possibilities for shopping at different mar-
kets and in various leisure activities. Hungarian regional geography began
investigating certain preferences of the population with regard to markets
and shopping precisely because these implied the natural spheres of influ-
ence of various settlements and settlement hierarchies in the perception of
the population.4
The control of relationships between settlements diminished inequalities
between the living standards of various settlements, or at least did so at any
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given level of settlement hierarchy. Traditional social differences between
settlements were disguised by state paternalism.
The transition led to the dissolution of the former network of connections
organised by the state which has partly been replaced by market-oriented re-
lationships. The market, however, differentiates by its very nature, and thus
latent discrepancies have been dramatically exposed. Since this has been
coupled with a general economic recession, backwardness has meant not
only a reduced availability of services, but also unemployment and indeed
basic problems of subsistence for certain settlements. In the wake of the
transition, settlements had to adapt alone to radical changes, the balancing
and protecting role of the state having been radically curtailed. Jealous of
their newly discovered independence, local governments, which replaced
former councils, have been reluctant to form microregional associations
with other settlements, even when co-operation would have been the most
expedient way of managing the institutions providing public services (I will
come back to the functioning of local governments later.)
Market-oriented integration of settlements has been driven forward by
the privatisation of state property, a quickly expanding private sector and a
partial privatisation of public services. The possibility of turning local char-
acteristics and advantages to account has released enormous energies and
led to a spectacular development of certain settlements. The lack of com-
petitiveness, however, has been exposed in an equally spectacular way. Dif-
ferences between settlements depend first of all on the potential of the local
population to adapt to new circumstances, as well as on the geographical lo-
cation of the settlement (and therefore such things as its communication
links, and vicinity to dynamic centres). This is also the reason why geographi-
cal inequalities are much greater than before. They are not only palpable at a
regional level, since innovative centres may emerge in any part of the set-
tlement system, and even in underdeveloped areas. These centres are con-
nected to other, often remote dynamic centres through the integrative forces
of the market, and this may weaken traditional ties between ‘the city and the
surrounding country’, at least as far as the market sector is concerned.
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An in-depth understanding of the new forces shaping the settlement sys-
tem is not yet within our reach. The old network of connections has disinte-
grated too rapidly, and the new is taking a long time to develop. Connective
links, therefore, are not always effective, some of the relations between set-
tlements being either inadequately regulated or functioning in a deficient way.
Transformation of the Urban Economy
The prosperity of a city depends first and foremost on the local economy.
Business decisions lay the groundwork for growing employment and deter-
mine the nature and intensity of external economic relations. Local taxes are
also mostly contributed by the business sector. An awareness of this, how-
ever, is usually slow to strike root. Local governments are more focused on
gaining relatively moderate amounts of governmental subsidies than on try-
ing to involve local companies in settlement development. Needless to say,
business decisions are motivated by profit and not by settlement develop-
ment. Companies have to be made directly interested in the development of
the city.
The emergence of local economies signifies an enormous change when
compared to the economy of state ownership. Production, development and
economic relations of an industrial or services company located in a given
city used to be decided by a remote company or by administrative centres in
the state-planned economy.5 Only technological decisions were made locally.
By the same token, there were no business relations between branch plants
of state-owned companies in the same settlement, especially if they be-
longed to different company headquarters or ministries. The void left by the
lack of official relations was filled by an elaborate web of informal personal
connections, so that the company management was often involved in local
government. Provided that there was a good personal relationship between
the management and the local political leadership, companies participated in
the financing of public services or even provided these themselves in return
for favours. In small towns and in particular ‘new towns’, this ‘industrial pa-
ternalism’ played an important part in the provision of public services.
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Industry had a vital function in the economic structure of both small and
medium-sized towns and large cities. In the absence of market conditions,
business services were also underdeveloped in large cities, although these
showed a concentration of company headquarters, as well as centres of edu-
cation, research and cultural life. Industry progressively moved out of large
cities from the 1970s, but this tendency only resembled the deindustrialisa-
tion of large cities in Western Europe, which exhibited similar statistics of
relocations. Large state-owned industry, constantly trying to attract more la-
bour and not being faced with budgetary or market constraints, was simply
unable to find an adequate work force any more in large cities. This is why
companies started to relocate branch plants in rural areas that had an excess
supply of labour. This strategy was also supported by regional policy aiming
at the reduction of regional inequalities. However, such resettlements were
not motivated by the pursuit of higher efficiency.
Local economies have emerged gradually, depending on what stage the
privatisation of the economy has reached, or how far the state-owned econ-
omy has been transformed and integrated into the market economy in any
given country. There are two alternative forms of privatisation: either state
property is transferred into private ownership or new private enterprises are
launched. These alternatives have been put into practice in different ways in
each of the five Central European countries (Frydman–Rapaczynski, 1994).
The state-owned economy has remained strongest in Slovakia and Slovenia.
Figures suggest that private ownership is the highest in the Czech Republic,
but this is a peculiar form of private ownership that actually disguises the
conservation of an economic structure dominated by state ownership.6 The
participation of foreign capital and transnational companies in privatisation
has been the most active in Hungary. Significant amounts of domestic capi-
tal were accumulated during the fifteen years before the transition in Poland,
Hungary and Slovenia.
At present, urban economy in the region is constituted by the following
elements:
• A fully or partly state-owned economy. Despite its still existing access
to central subsidies it is not able to adapt to market competition other
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than by reducing the number of employees. Cities with large state-owned
companies, which enjoyed several privileges in the state-planned econ-
omy, have experienced serious unemployment problems.
Ownership rights of large state-owned companies are exercised by
administrative organisations of the state or state-owned shareholding
companies. Although the state-owned economy is still controlled cen-
trally in this way, it has been integrated into the local economy. State-
owned companies have lost a considerable share of their markets after
the collapse of the Comecon. A part of the companies still in majority
state ownership belong to the armaments industry. The future of these
companies is still uncertain. State-owned companies have an important
share in foreign markets and thus strengthen international relationships
between settlements. At the same time, they seldom establish subcon-
tracting connections to local private economy.
• A local, private economy. This is chiefly made up of individual entre-
preneurs and small enterprises with a handful of employees. It plays a
very important role in the development of local economies. The sig-
nificance of this role can be attributed to the following factors:
a) the local private economy has a direct and continuous interest in set-
tlement development;
b) co-operational, subcontracting relations formed within the local pri-
vate economy stimulate the entire economy and expand local mar-
kets;
c) a considerable part of the local private economy operates in the ser-
vices sector. It is more difficult for these enterprises to move to an-
other location than it is for manufacturing activities;
d) the majority of the owners of local private economy are local resi-
dents whose personal strategies are also accommodated to local cir-
cumstances. These entrepreneurs are therefore personally interested
in the development of their settlement.
• A local economy in majority or exclusive foreign ownership. Several
forms of this exist, each of which has a different impact on relation-
ships between settlements. It is worth noting, however, that a signifi-
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cant amount of foreign direct investment (FDI) is only present in the
Hungarian settlement network and has had a general impact only there.
In any case, FDI has settled very selectively in all Central European
countries. The number of settlements attracting significant amounts of
FDI has been relatively small.
The investments of transnational companies have had the greatest indi-
vidual impact. Settlements enjoying such investments have been rapidly
connected to the world economy. Rapid technological developments were
made possible through the large amounts of capital involved. These invest-
ments already contribute significantly to Czech exports and even more to
Hungarian foreign trade. Another advantage of non-European investments is
that these prefer to establish subcontracting networks locally, in view of the
greater distance involved and the possibility of easier access to markets of
the European Union. By contrast, Western European investors have been less
willing to spend time on local subcontractors unaccustomed to punctual de-
livery and steady quality. The successful operation of a transnational invest-
ment may be the best reference for a city and could become an important
element in its marketing policy. The settling of a transnational company is
also an incentive to improve the general environment in the settlement and
generates demand for a highly qualified work force.
The presence of transnational companies is, however, not without dan-
gers. For example, they may use their massive concentration of capital to
drive domestic companies out of the market. Products are usually developed
in research laboratories located in the most advanced countries, and there-
fore local industrial research institutes are not required. If local advantages
become less attractive, which usually means labour becoming more expen-
sive, they can relocate production to another country. Nevertheless, and in
spite of these risks, their presence is one of the most important factors in the
modernisation of the local economy.
Small and medium-sized FDI is also present. Smaller state-owned com-
panies, which have gone bankrupt or lost much of their market value, have
often been bought by medium-sized enterprises with moderate amounts of
capital. It is yet to be seen whether these companies will be able to recover
23
Enyedi, György : Transformation in Central European Postsocialist Cities.
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and start to grow again. This will also depend on the expansion of national
markets. A peculiar feature of Central European economies is the marked
presence of small foreign family enterprises. Some of these are owned by
returning immigrants, some by Austrian and German investors living in bor-
der regions. Investments by the latter usually remain close to the western
borders of Central European countries. Their personal know-how is a very
valuable source of applicable economic information.
The transition to a local economy – characterised by mixed ownership,
manifold spatial relations and governed largely through autonomous local
decisions – is also accompanied by a structural transformation of the urban
economy. The first phase of this structural transformation has proved to be
painful since it entails a sharp fall in industrial employment. The periphery
of the capitalist West also underwent this transformation a decade earlier.
The size of the industrial work force decreased by 20% in Ireland between
1979 and 1987 and by 28% between 1975 and 1985 in Spain. This can mostly
be attributed to the decline of traditional and ineffective economic sectors.
By contrast, the 1980s were marked by another upsurge of industrialisation,
due for the most part to foreign investments and the relocation of industry
from developed areas. The number of industrial employees increased by
20% between 1985 and 1990 in Spain. Nevertheless, this work force had a
different composition and was employed in other sectors than those hit by
the former recession. Foreign investments have been concentrated in large
cities: 57% of FDI has gone to Barcelona and Madrid in Spain, 82% has
opted for Lisbon in Portugal. Given its greater demand for infrastructure and
qualified labour, new industrialisation has been marked by a striking geo-
graphical polarisation.
Similar tendencies can be expected in Central Europe. The grave indus-
trial recession after 1989 lasted only two or three years and the ensuing pe-
riod has been characterised by renewed industrial growth. Economic
growth, however, has not been accompanied by improving employment fig-
ures, because competition calls for increased efficiency. The geographical
concentration of industry is not as strong as on the periphery of Western
Europe. Central Europe has traditionally had stronger industrial regions than
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Enyedi, György : Transformation in Central European Postsocialist Cities.
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Mediterranean Europe or Ireland. It is still unclear which sectors will prove
to be the most dynamic areas of industry and this will also determine the
new spatial location of industry. One cannot yet identify the most competi-
tive industrial sectors and respective positions in the spectrum of European
competition are also subject to periodic change. All industrial sectors may
offer some competitive products and technologies. High-tech industries
have formerly been helped by their advantageous position within Comecon
(as well as the western COCOM list). At present, however, high-tech sectors
can only function as subcontractors of transnational companies. Owing to a
highly-qualified and cheap work force, high-standard processing sectors
stand a good chance of development, including the relocation of investment
in these sectors from EU countries. This is well demonstrated by the rapid
expansion of the car industry that has already positively affected several
medium-sized subcontracting companies. There are examples of the com-
missioned manufacturing of cheap mass-products which may yield addi-
tional tax revenues and higher income, but has a negative effect on techno-
logical standards in industry. In the final analysis, I would forecast a partial
reindustrialisation of urban economies. Traditional industrial centres can
hardly avoid their decline, but structural transformation of industry in cities
with processing industries may be successful. Central Europe could be the
beneficiary of industry withdrawing from the most advanced regions of the
continent.
An important factor of the transformation of economic structure is consti-
tuted by the expansion of the services sector. The contribution of this long-
neglected sector to growing employment could be crucial. Business services
are the most underdeveloped area, and only gradual progress can be ex-
pected, parallel with the consolidation of the market economy. One may as-
sume that high-level business services will be strongly concentrated in large
cities. The development of international services with a macroregional sphere
of influence can only be expected in one or two metropolises that are also
competitive by European standards.
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The emergence of local economies means that the development of cities
is primarily dependent on their economic performance. The first priority of
urban policies should be to assist in improving this performance.
Establishment of Local Governments
The creation of local governments in place of the council system signifies a
landmark in urban development. Local governments are the most important
elements in the institutional network of cities. They are the main providers
of public services and should also represent the reactions of the local popu-
lation to governmental policies. A multiparty parliament is a necessary but
not sufficient condition of democracy, the basic units of democracy being
the workshops of civil organisations and local governments. Among the
postcommunist countries, only the Czech, Polish and Hungarian laws on lo-
cal governments have guaranteed the decentralisation of power and the sub-
sidiarity of government.
The Soviet Union imposed the council-system on its satellite states in the
latter half of the 1940s. The essential features of this council-system were
the following:
1) local councils of cities were to represent the will of central authorities
and were not supposed to articulate local interests;
2) the election of members of local councils was a purely formal proce-
dure within the framework of the one-party system;
3) councils at various regional levels were organised into a vertical hier-
archy;
4) councils had virtually no financial resources of their own, their func-
tioning and development being financed through central budget redis-
tribution.
The Hungarian and Polish council-systems had been significantly modi-
fied by the middle of the 1980s, while the Yugoslavian regional administra-
tion differed greatly from that of other communist countries from the very
outset. The legacy of the council-system makes the functioning of local gov-
ernments more difficult. The economic weakness of urban authorities entails
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Enyedi, György : Transformation in Central European Postsocialist Cities.
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a continual dependence on the central budget, yet the central government
has given very limited support to decentralisation. Having been freed from
the yoke of the former hierarchical system, local governments themselves
show little willingness to co-operate with each other. Expertise required for
autonomous government is also often missing. Nevertheless, it is highly
significant that the Central European system of local governments generally
meets the corresponding European standards.
Several types of local government have evolved in Europe (Bennett, 1993).
The Central European system corresponds most of all to the French model
in which locally elected bodies are subject to strong central control (some-
times even the mayor is nominated by the central government). New local
governments have also adopted the principle of the separation of powers,
consisting of a directly elected legislative (local governmental bodies) and
an executive (usually a directly elected mayor). The council-system is easier
left behind when the local governmental system preserves a degree of strong
central control, although it should also be noted that centralising traditions
date back to the times of the Austro-Hungarian Monarchy.7 With the excep-
tion of so-called free royal towns, settlements enjoyed little autonomy in the
large and multinational Monarchy, while regional (i.e. provincial and county)
governments were relatively powerful, acting as regional branches and re-
mote representatives of the central power. The emergence of new nation states
in the place of the Monarchy after the First World War was not the result of
a spontaneous development. These states represented the geo-strategic in-
terests of the victorious Western Powers with their arbitrarily drawn bor-
ders. The internal cohesion of the new states was weak, and the relative
status of cities and administrative regional units controlling individual set-
tlements underwent change. All this has justified the survival of centralisa-
tion in successor states of the Monarchy. This is why it is difficult to com-
municate the principle of autonomous local government to the population
and why authorities may sometimes falter in putting this principle into prac-
tice in the postcommunist countries of Central Europe.
An important consequence of the creation of local governments is the
strengthening of rural settlements. Among other indicators, this is demon-
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strated by the dissolution of the administrative mergers of the 1960s and
1970s. These mergers have generally been attributed to the authoritarianism
of a centralising communist power (although the modernisation of admini-
stration has led to administrative mergers in a number of democratic Euro-
pean countries as well). This is why the new legislation on local govern-
ments has established local governments at the level of individual settle-
ments. The number of settlements doubled in Hungary between 1989 and
1993, grew by a third in the Czech Republic and did not change in Slovakia
and Poland. Settlements are already quite small in Slovakia (two thirds of
all settlements in the country have a population of less than 1000 people).
This disintegration has been motivated by the local governments’ histori-
cally-rooted and profound distrust of regional and central governments.
This, however, has proven to be a trap, for the small size of settlements has
actually hindered the process of genuine decentralisation. The majority of
them have lacked both the expertise and the financial resources to enable
them to take up the responsibility of providing and developing public ser-
vices. ‘Sweet independence’ impedes the development of co-operation that
could offset the handicaps of small size (e.g. joint infrastructural develop-
ments, joint running of schools). To cite one example, lack of co-operation
has been standing in the way of a revision of the general physical plan for
the Budapest agglomeration.
The issue of control by regional governments over local governments has
been debated in all of these countries. Traditionally (before 1989) settlements
had perceived regional governments to be mere extensions of the central
power and it is therefore not surprising that no regional local governments
were established in 1990. However, since public services at the regional level
are obviously indispensable, ranging from courts of second instance to spe-
cialised educational institutions, irrational and emotionally-motivated de-
centralisation has once again defeated its purpose. Centralisation has in fact
intensified, since regional public services had to be provided by the central
government. There are presently discussions about elected regional govern-
ments in the Czech Republic and Slovakia. Such governments were to be in-
troduced in Poland in 1993, but the general elections prevented this reform.
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Only in Hungary has an amendment to the law on local governments in
1994 created some form of regional and decentralised government. Never-
theless, there are still ongoing debates about these issues in Hungary as
well, and the present form of administration will hardly prove to be an ulti-
mate solution.
A basic contradiction concerning the existence of local governments in
Central Europe lies in the fact that local governments have been assigned a
great number of duties, but have few resources at their own disposal. Local
taxes only play a significant role in Poland (a quarter of the local budget);
everywhere else they remain below 10% (5% in Hungary). The property of
local governments – real estate, bonds, enterprises – could also be used as a
source of income, but these often yield more problems than profit given that
buildings have to be renovated, landed property cleared of environmental pol-
lution, and so on. Consequently, dependence on the central budget remains
strong. The survival of old structures conserves old attitudes, and enjoying
independence does not mean that local governments will not try to stay on
good terms with governmental organisations allocating subsidies. It will be
necessary to give unwavering support to market-oriented decentralisation by
transferring various former public services to the market sector. This is mostly
only hindered by the lack of local capital, although privatisation of water and
energy utilities has occasionally provoked political resistance as well.
It should finally be noted that local governments of capitals usually enjoy
a unique legal position which in some cases is even regulated through spe-
cial legislation. Two specific problems present themselves with respect to
the status of capitals. The first of these concerns the relationship between
the capital and the local governments of individual districts. Although the
local governments of the capital and the 23 districts have an equal status in
Budapest, revenues from the share of personal income tax not remitted to
the central budget are distributed by the capital’s local government among
individual districts, a practice which gives rise to countless debates. The fact
that welfare housing is owned by the districts makes the elaboration of a
comprehensive housing policy for the capital impossible. In Warsaw, the
city is governed by the local governments of the seven districts and the capi-
tal’s local government is comparably weaker than in Budapest. The other
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problem is that co-operation between the local governments of the capital
and its agglomeration is even more difficult than that in the case of other cit-
ies. The distinction between the capital’s government and the central govern-
ment often seems less clear-cut from the perspective of local governments in
the agglomeration, which explains why distrust towards the capital is particu-
larly strong. This is in fact not a complete misperception, since the economic
and political weight of capitals is extraordinary; they require larger subsidies
for urban development and also have easier access to central funds than
other cities.
It may be concluded that the establishment of local governments has
been crucially important for the democratic functioning of society as well as
for the mobilisation of local resources and the development of programmes
meeting local needs. Paradoxically, it is precisely the excessive striving for
independence, the resulting fragmentation and weakness of local govern-
ments, and misgivings about co-operation that hinder a real decentralisation
of tasks. On the other hand, it will also take time before local governments
will be strong enough to check the traditional centralising ambitions of the
central government.
Evolution of the Real Estate Market
Housing policy has a great impact on urban development. Housing is con-
trolled by a mixture of market processes and state regulations everywhere in
Europe. Housing in the state-planned economy was completely dominated
by state regulations, the market only having a marginal function. The build-
ing of new homes formed a part of central planning and the distribution of
state-owned flats among applicants was also a state task (carried out by lo-
cal councils or state companies). At what rate the population of cities grew
depended on the scope of state housing programmes. Many homes, how-
ever, were still built privately, in particular by the rural population that was
practically excluded from state housing programmes; nevertheless the mar-
ket remained limited and controlled. A family could only own one house or
flat plus a second home in resort areas, and even the maximum size of this
was fixed. Building loans were lent by state banks that favoured certain
30
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forms of housing such as, for instance, those built by co-operatives. In Cen-
tral Europe, the share of flats in public ownership amounted to only 28% of
the whole, and 49% of all homes were occupied by the owner at the time of
the dissolution of the state-socialist system in 1990 (the rest belonged to co-
operatives and companies). There have been great differences among the
various countries. In 1990, 77.5% of all homes, for example, were in private
ownership in Hungary, the pioneering country of the transition to market
economy.8 The privatisation of homes accompanying the transition has only
had a significant impact in large cities where the value of real estate trans-
ferred into private hands was considerable.
Positive evaluations of the socialist housing model have been few and far
between. The contradictions underlying this model have been analysed by
several authors. The public has perceived a serious shortage of flats, since
tenements in public ownership were very difficult to obtain and their norma-
tive size fell short of actual demand. Hegedüs and Tosics have argued, how-
ever, that when compared to the general performance of Central European
economy, housing conditions were actually not as poor as was widely be-
lieved. If one compares the level of housing in Central Europe to that in
other countries with similar GDP figures (e.g. Greece, Turkey, Mexico, Chile,
South Korea), one finds that indicators of housing conditions are generally
favourable,9 being closer to corresponding figures in Western Europe than
those in countries with a comparable economic output. The purchase of an
own flat was the only case where housing conditions could be shown to be the
worst in Central Europe, because wages were not sufficient for the costs of
buying private flats. Hegedüs and Tosics claim that the oft cited problem of
housing shortage is based on an unjustified comparison of Central European
housing conditions with Western European countries, which had a six times
greater per capita economic potential than the former. The comparison ig-
nores the fact that, due to unrealistically low rents there were practically no
financial limits to demand in Central Europe.
Housing in state socialism was characterised by the small average size
and limited selection of homes. Coupled with the non-market oriented allo-
cation of houses, this resulted in the fact that there was hardly any correla-
tion between the income of a household and the size or quality of their home.
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Due to the small number of purchasable flats, their price was extremely
high, affordable only to households in high income brackets. The number of
households purchasing their own homes (i.e. the ratio of average income to
the price of an average flat) was much smaller than in either developed or
peripheral market economies.
The development of a real estate market first of all required the partial
privatisation of state-owned flats. First, state-owned flats were transferred
into the ownership of local governments. Privatisation was carried out in
turn by local governments, which used a variety of alternative procedures.
Privatisation had two basic forms. The property was either restored to the
original owner at the time of nationalisation (restitution) or sold to the ten-
ant living in the flat. Restitution has not been practised at all in Hungary,
and only in exceptional cases in Slovakia and Poland. It has only been ex-
tensively applied in Slovenia and the Czech Republic.10 Restitution has in-
volved a relatively complicated procedure and was in any case extended
only to pieces of property used as tenements at the time of nationalisation
and the time of reprivatisation. Serious conflicts have been generated be-
tween original owners and tenants that eventually required the regulative
and financial intervention of governments. In Hungary, 40% of all tene-
ments were sold to the tenants, 70% in Slovenia, but everywhere else the
figure remained negligible. Most flats in state ownership in 1990 were still
public property at the end of 1994 in the Czech Republic and Slovakia,
whereas their share decreased to 28% in Slovenia and 60% in Hungary.
The first phase of the privatisation of state-owned flats was primarily
motivated by political considerations and did not form part of a comprehen-
sive housing strategy. Hungary and Slovenia opted for predominantly mar-
ket-oriented alternatives, while the Czech Republic and Slovakia strove to
maintain the dominance of public ownership, with Poland seeming to have
struck a middle course. This has also influenced the building of new homes.
State and local governmental housing programmes have been curtailed in all
of these countries, but the participation of private enterprises in the con-
struction of new tenement buildings has only been significant in Hungary
and Slovenia, and the average size of newly constructed homes (101 square
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Enyedi, György : Transformation in Central European Postsocialist Cities.
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metres and 102 square metres respectively) has also been larger here than in
the other three countries.
The housing sector, of course, reflects the general development of the
Central European economy. Not only does it correlate with macroeconomic
tendencies, it also greatly influences several other economic sectors. The
social significance of housing conditions is also well known. The next cru-
cial step would be to develop the basic institutions of the housing market,
including the creation of the forms and resources of a mortgage system, wel-
fare schemes, efficient maintenance and renovation. The main question in
the ‘market-oriented’ group of countries is how the large group of private
owners will act in the future (how will they finance the costs of maintenance
and renovation), and to what extent and in what ways will the state (and lo-
cal governments) have to resort to restrictive measures limiting the freedom
of the market in order to protect social equality. The basic question in the
other three countries is whether they will follow the first group and privatise
state-owned tenements or keep a significant non-market-oriented housing
sector. If they do, a further question is whether they will attempt to turn it
into an efficient non-profit sector or preserve it as a state-controlled part of
the housing system requiring large state subsidies.
Transformation of Urban Society
The transition has transformed the structure, functioning and organisation of
urban society and altered the status and spatial location of individual social
groups in the city. The introduction of the market economy has made the
distribution of goods more unequal; thus one of the characteristic aspects of
the transition has been increasing social and spatial polarisation.
As already mentioned, social differences also existed in the egalitarian
society of state socialism. These differences, however, were associated with
social position and not with property. Nationalisation and industrialisation
carried out by the communist regime have not been solely responsible for
structural changes in society in the last fifty years, the events of the Second
World War having also played an important role in these developments. The
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Enyedi, György : Transformation in Central European Postsocialist Cities.
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majority of the large Jewish middle class fell victim to the Holocaust, and
later most of the town-dweller German minority of the Czech lands was also
deported. Consequently, many members of the middle class have not only
lost their former status, but simply disappeared from Central European cit-
ies. This has also changed the traditionally multiethnic character of these
cities. The void left was filled by migrants from the countryside who have
mostly increased the numbers of the urban proletariat and have found it dif-
ficult to adjust to an urban way of life that had in any case been much unset-
tled by previous changes.
The present transformation of urban society is in part a direct conse-
quence of the transition including, for example, the emergence of the new
elite or the presence of a large urban lower class. The other basic tendency
underlying the transformation seems to be typical of the general laws gov-
erning the transition from an industrial city to a service-providing city.
The new elite has few genuine newcomers. Entrepreneurs forming the
elite of economic life, well-to-do technocrats and freelancing intellectuals
had usually been members of the elite under state socialism, even if they
may not have enjoyed exactly the same social status. The majority of entre-
preneurs have been recruited from the ranks of the previous political elite or
the intelligentsia, former dissidents and technocrats; it is exceptionally rare
to find successful entrepreneurs who have risen from the working class. The
political elite also numbers few new members, although one might have
formerly encountered many of the familiar faces in research institutes or lit-
erary circles. The displacement of the elite is also to be attributed to a gen-
erational change, as many young people have joined the elite who were too
young to be active under state socialism; this is especially true of the new
professions requiring high qualifications. Despite personal connections, the
political, administrative and intellectual elite and the new capitalist class are
quite clearly separated from one another.
Węcławowicz (1992) identifies five distinct groups that make up the new
capitalist class. The first of these is the communist nomenclature. Members
of this group, party functionaries or former state officials of the political
administration and economic leadership, have successfully converted their
34
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
personal connections and monopoly on information, which they acquired in
their past positions of power, into various forms of property and wealth. The
second group consists of highly-qualified ‘self-made men and women’
whose enterprises have quickly become successful. The third is a group of
experts who work for the state administration, but also run their own consul-
tancies. They can use their influence and access to important information to
ensure the success of their private enterprises. Members of the fourth group
have based their enterprises on intellectual innovation, as in the case of
software laboratories and technological think-tanks owned by former re-
searchers and professors at technological colleges. Entrepreneurs of the fifth
group already had small enterprises in the state-planned economy and now
they are successfully expanding these under the new dispensation. A part of
the economic activities of the new capitalist class are illegal or semi-illegal.
The new middle classes comprise various groups that were also part of
state socialist society. Most of these are made up of white-collar workers,
many of whom are state employees, some having accumulated small amounts
of capital. Upward mobility from the working class to the middle class is lim-
ited. Blue-collar workers generally lack the necessary capital, expertise and
entrepreneurial spirit. The old comforts of state paternalism are still hoped for.
The statistical share of the urban lower class in the population is signifi-
cant. It includes most members of a working class that has lost its former
social status due to a dramatic fall in industrial production and industrial re-
structuring. The urban lower class has also absorbed a part of the middle
class, such as low-paid intellectuals (e.g. primary school teachers), and elderly
people whose pensions have lost their value. Further social decline down-
wards to the marginalised urban poor is also not unusual. This most disadvan-
taged segment of the population consists of those who have lost most from
the transition and their appearance in large cities en masse has been the
most shocking by-product of urban transformation. The two main groups of
the urban poor are made up of so-called ”small pensioners” and elderly peo-
ple living on social welfare, on the one hand, and unskilled workers on the
other. Big state-owned companies employed unskilled workers in large
numbers, most of whom had migrated to the cities from rural regions. Most
35
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
of them did not have a permanent residence in the city, being lodged in
workers’ hostels and often maintaining links to their rural background. They
were the first losers of industrial restructuring and privatisation, having been
laid off from economically superfluous jobs in vast numbers. Some of them
have returned to the countryside, thus increasing rural unemployment, where
they try at least to supply their own food self-sufficiently. Others have be-
come homeless, together with new rural migrants and illegal foreign immi-
grants. Homelessness is most widespread in precisely the most dynamic cit-
ies because job opportunities are the most likely there. In contrast to the
marginalised groups of Western European cities, some of the Central Euro-
pean homeless belong to the lower-middle class who have lost their homes
for some reason, such as divorce, have been unable to find a new place to live,
and have quickly become unemployed. The marginalisation of this group
can hardly be reversed.
Social polarisation has also been reflected in growing spatial segregation.
The seclusion of the elite is most visible in the most sought-after residential
districts. There are several reasons that can make an area attractive, such as
a pleasant natural environment, the vicinity of the most important centres of
urban life and cultural events in renovated downtown residential districts, or
simply the neighbourhood of other members of the elite. The appearance of
urban poverty is less conspicuous in the cities, but members of the lower class
may be found almost everywhere, with the exception of the most expensive
residential quarters. They live in larger or smaller concentrations in housing
estates, in dilapidated tenements of old residential districts, and in old prole-
tarian quarters as well as inner city areas. Due to restricted mobility in re-
cent decades, demographic separation is very strong. Pensioners are charac-
teristically concentrated in old residential districts of the downtown.
Transformation of the Built Environment
Although the built environment is relatively resistant to change and invest-
ments in the construction sector have dramatically fallen in the last seven
years, developments in this area are often spectacular. This is particularly the
36
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
case in cities where the business sector and the entrepreneurial class have be-
come much stronger.
The transformation of the built environment has been determined by
three functional changes: expansion of commercial areas, transformation of
industrial zones, and the altered character of housing. The image of the city
has also been shaped by a new and immature aesthetics, a peculiar blend of
obtrusive American shopping centres, newly rediscovered Central European
elegance, elements of a national style and the architectural insipidity of the
state socialist period. Next to a shabby tenement-building on the point of
collapse one may well find the glittering new premises of a bank; elsewhere
the garishness of new shops on the ground floor of an old building strikingly
contrasts with the dilapidated flats above.
New bank headquarters and office blocks bear spectacular witness to the
expansion of the commercial sector. International finance houses and large
foreign companies were the first to generate the kind of demand that could
not be met by available buildings. Buildings housing new business services
have also been primarily constructed by international investors, who have
tended to rely on the less refined and schematic solutions of postmodern ar-
chitecture. The first buildings were erected near or actually in the historical
centres of cities. In view of adverse traffic conditions, however, more remote
subsidiary business centres have started to appear in locations that can be eas-
ily accessed by cars. Central commercial areas have expanded everywhere,
mostly at the expense of downtown residential districts and the prestigious
status of historical centres has invariably been exploited. Half of the area
occupied by offices in Prague is to be found in the mediaeval centre (busi-
ness having quickly driven out residential functions). By contrast, one could
scarcely identify a central business district in Warsaw, where there are also
many vacant plots well-suited for further development.
The built environment is also enhanced by newly-built, high quality resi-
dential buildings. These have been scattered throughout urban areas on vacant
plots in prestigious residential districts. The launching of the rehabilitation of
downtown quarters has been accompanied by gentrification and the pace of
suburbanisation has also quickened. On the other hand, the construction of
housing estates has been stopped. Since the population of most cities was rap-
37
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
idly growing in the 1960s and 1970s, many people now live in housing es-
tates. The renovation and social rehabilitation of these is one of the unenviable
tasks of the coming decades.
Many old industrial areas have been left vacant due to the rapid decline
and privatisation of state industry. This is particularly true in Hungary
where the state has not saved uncompetitive companies from bankruptcy. The
rehabilitation of old industrial areas has posed an interesting task for urban
planning, although the lack of capital has not allowed for large-scale devel-
opments. The majority of former industrial buildings serve today as ware-
houses or house small industrial enterprises and discount stores. The first
two large shopping centres of Central Europe have recently opened to the
public in industrial areas of Budapest. One of these was built in the place of a
dismantled factory, the other used buildings of a former barracks of the So-
viet army.
International Relations and Participation in the
International Competition of Cities
The transition has put an end to the isolation of state socialism that severed
the development of national settlement systems from one another. The open-
ing up of borders has made the direct penetration of global economic trends
possible, a change that has also altered the conditions for the domestic com-
petition of cities.
The changing function of borders has also altered the hierarchy of cities.
Cities in border regions were condemned to stagnation for decades, but some
of these have been developing dynamically since 1990 (especially in regions
bordering on countries of the European Union). Small and medium-sized
companies have been particularly successful here, proximity of borders hav-
ing rarely attracted the location of large-scale investments.
It is highly significant that large cities have now joined the international
competition of cities. Up to now this competition has had few Central Euro-
pean participants, because only a few cities had a sufficiently competitive
local economy and infrastructure. Those cities that did, however, have be-
come the chief conduits of global trends. While they concentrate innovation
38
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
arriving from developed countries in their respective areas, only inade-
quately do they transmit them further to their local urban network. In the
first instance, competition drives them to establish connections with other
European cities. This new competitiveness has been limited to Europe, since
no Central European city can be said to play a global role, and in fact little
attention has been given to the competitiveness of Central European cities.
Nonetheless, the main conclusions to be drawn from a study by Conti
(1994) are the following:
1) only Budapest, Prague and Warsaw stand a good chance in the context
of European competition;
2) Budapest possessed certain advantages in comparison to the other two
cities at the beginning of the 1990s;
3) the principal characteristics of the three cities can be compared to
those of the second division of Western European metropolises, espe-
cially cities located in Mediterranean coastal areas and Alpine regions
(e.g. Lyon, Turin).
The European integration of the largest cities has increased discrepancies
within national urban systems. Many small and medium-sized industrial
towns have long grappled with the transformational crisis, their main ambi-
tion being the attraction of industry withdrawing from Western Europe. The
development of high standard business services and the transition to an in-
formational city will remain the privilege of a few, internationally competi-
tive metropolises in the near future.
Conclusion
In the light of what has gone before, I will now try to answer the two ques-
tions raised in the Introduction. The following is to be noted with regard to
the main characteristics of the transition. The Central European urban sys-
tem has been shaped by three types of transformation. First, the transition
from a state-planned economy and the political system of state socialism to
a market economy and a democratic political system; second, a delayed
transition from the industrial city to the postindustrial city; and finally, the
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Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
general transformation of the global economy. Another general trait of the
transition is characterised by a peculiar mixture of spectacular novelties and
uninterrupted continuity. Although the transformation of cities is generally a
gradual process, the last fifty years have brought about dramatic changes in
the composition and functioning of urban society and urban functions, as also
in the built environment, first during the period of state socialism and then
during the seven years of political and economic transition. At first sight, it
may seem that there was a complete change after 1948 and 1990. Yet a
marked continuity can be discovered beneath the surface. This continuity
has been maintained by the slowly changing values and behaviour of the ur-
ban population, on the one hand, and the stasis in the built environment, on
the other. This should also explain why European tendencies of urban de-
velopment can still be seen to have been at work in socialist urbanisation in
Central Europe, even if in a somewhat modified form. By the same token,
egalitarian values of state socialism are nowadays reflected in the uneasi-
ness about growing social inequalities and the fervent defence of the welfare
state.
The urban characteristics of the transition can be summarised as follows.
• Reshuffling of the urban hierarchy. Differences within the urban sys-
tem have grown. Some cities, traditional industrial centres in particular,
have been relegated to lower positions in the urban hierarchy. This
relegation entails a high unemployment rate, growing urban poverty,
decay of services and disintegration of the city’s cultural environment.
New dynamic centres owe their success to the adaptability of the local
population, and in some cases to a favourable geographical location as
well. Social discrepancies in urban conditions and the availability of
urban resources are not necessarily of recent date, but previously the
consequences of these were counterbalanced by state paternalism. The
same discrepancies, however, have been very strongly foregrounded by
the sudden appearance of market competition. Changing markets and
structural transformation account for the altered attitude to traditional
urban values. Alterations in urban hierarchy could also be observed in
traditional market economies in the 1970s.
40
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
A small number of cities have acquired international functions due
to the opening up of borders. Capitals of Central European countries in
particular have been able to enter the European competition of cities
and act as gateways mediating innovation from the West towards their
respective national areas, and in some cases towards Eastern and South-
eastern Europe as well. However, this has intensified inequalities within
the urban network.
• Transformation of urban society. An economic elite has appeared, in
part recruited from the members of the political and cultural elite of
state socialism. The immoderate consumption of this class may be
shocking, but their accumulated wealth is seldom significant. To date,
no Rockefeller dynasty has emerged in Central Europe (and in particu-
lar no phenomenon like the Rockefeller grandchildren, spending lav-
ishly on culture and charity from the inherited riches). Central Euro-
pean cities are characterised by underdeveloped middle classes, a gen-
eral absence of the ‘bourgeoisie’. This is not only a legacy of state so-
cialism since with the single exception of the Czech Republic, the mid-
dle classes have traditionally been weak in all Central European coun-
tries. It takes a long time before these middle classes gather strength and
middle-class values strike root. This will also depend on how perma-
nent economic recovery will prove to be. Nevertheless, the great num-
ber of private enterprises that now exist may provide the basis for the
strengthening of the new middle class.
The massive proportions and new forms of urban poverty, such as
permanent unemployment and homelessness, have provoked dismay
and outrage. The Central European lower class is to a large extent still
attached to its rural background. Many are unqualified migrants from
rural areas who have been attracted to large cities by large state indus-
try, but could never become part of urban society. They lived in cheap
flats, workers’ hostels or lodgings and maintained their links, which
sometimes also meant part-time jobs, to their rural background. They
have been the hardest hit by the dramatic decrease in industrial em-
ployment. Many have migrated back to their villages, hoping to be-
41
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
come self-sufficient. However, since rural crisis has been even deeper
than that in cities, they and other rural groups have soon returned to the
cities to join the black economy. The insufficiency of their income for
city rents, however, does not allow them to settle permanently in cities.
The appearance of foreign immigrants represents a new develop-
ment in large cities. The multiethnic city has had a long tradition in the
Austro-Hungarian Monarchy, but the various ethnic groups were al-
ways citizens of the Monarchy as well. After half a century of isola-
tion, immigrants from the Balkans, Eastern Europe and Asia have
caught the population unprepared. Postcommunist countries, them-
selves looking back on a history of emigration, are as yet unable to
form a clear immigration policy.
• Changing factors of urban development. Under state socialism, urban
development depended on the redistribution of the central budget, but
now it is shaped by several factors. It is possible to distinguish between
the main agents and main co-ordinators of urban development. The
principal agent of urban development is certainly the economy. Em-
ployment, investment and relations to other settlements are all the results
of economic decisions, ranging from the location of the investment of
transnational companies to the personal strategies of self-employed en-
trepreneurs. The local economy is responsible for the competitiveness,
and therefore the success or failure of a given settlement. The presence
of transnational companies has directly connected certain settlements
to global trends. In terms of their influence on urban development, pri-
vate households are the next most important factor. The savings of the
local population may significantly contribute to the development of lo-
cal infrastructure and most new homes are built by private households.
The future of a settlement is largely dependent on the strategies of
families (Will they move to other settlements? Will they educate their
children locally? etc.).
The decisions of these principal agents of the transformational proc-
ess are not motivated by objectives of urban development. They simply
seek profit or personal welfare. The main co-ordinators of urban de-
velopment include local governments and, in some cases, civil organi-
42
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
sations. Local governments aim to use financial resources, economic
decisions and public services to the advantage of the general develop-
ment of their settlement. The Central European system of local gov-
ernment is characterised by the following attributes:
1) the great number and regional fragmentation of local governments;
2) the absence or weakness of regional governments;
3) the considerable independence of decision-making of local gov-
ernments coupled with strong financial dependence on the central
budget.
• Transformation of the built environment of cities. The renovation of in-
ner districts and the expansion of central business areas have been
spectacular in all Central European countries. Although large-scale
construction works of state socialism had usually not been located in
downtown areas (politically motivated, demonstrative architectural un-
dertakings characteristic of Eastern European countries were a com-
parative rarity in Central Europe), many housing estates were built.
The construction industry has, of course, also been hit by the economic
recession of the transition period, but fresh demand has been generated
by the new institutions of the emerging market economy (banks, of-
fices, shopping centres) as also by a well-to-do segment of the popula-
tion that can now afford better housing. This has led to the renovation
of inner districts and accelerated suburbanisation. The rapid decline of
housing estates into slums represents the ‘time bomb’ of urban devel-
opment, a possible source of a grave urban crisis of the future.
In conclusion, I see no obstacles to the integration of Central Europe into
the European urban system. Central Europe has never been completely iso-
lated from European urbanisation processes during the period of state so-
cialism. In addition, the state socialist ‘detour’ lasted only a little longer than
forty years. The countries concerned all border on western market econo-
mies and European Union member countries. The existence of a common
geographical space may well contribute to the evolution of multifaceted re-
gional connections. It is also advantageous that the European core region of
urbanisation has begun to expand eastwards in the wake of German reunifi-
43
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
cation and the economic progress of the Mediterranean–Alpine region. Inte-
gration has already been taking place on the periphery of the European ur-
ban system. Typical characteristics of the Central European subsystem in
the near future may be the strong presence of industry, the concentration of
business centres of international significance in a handful of cities, the
weakness of the urban middle class, growing rural poverty and slow recov-
ery of the underdeveloped infrastructure. Integration will expose Central
European cities to strong external competition. This competition may over-
whelm them; on the other hand, it may accelerate a long delayed process of
modernisation.
Notes
1 This comprises Germany and Austria.
2 This large demand is to be attributed to low technological standards, cost-
insensitive production and the politically privileged status of industry as
well as the effective lobbying of industrial management.
3 Budgetary resources that could have been spent on infrastructural develop-
ments were used to subsidise a chronically unproductive economy.
4 Choice is always limited, for example, by the actual location of department
stores or that of the nearest optician. This is true of all economic systems,
but in the state-planned economy the location of the commercial sector did
not correspond to consumer demand. On the contrary, it was determined
by various priorities of planning and often followed the existing hierarchy
in administration or public services.
5 In Czechoslovakia and Poland, central planning directives governed the e-
conomy. These were issued by planning offices, sectoral ministries and
trusts controlling industrial groups. Sectoral planning was abolished in
Hungary in 1968. In principle, companies could make their decisions inde-
pendently. An overregulated, stimulated market and the strong dependence
of the management of state-owned companies on governmental authorities
appointing company managers rendered this independence illusory.
6 The Czech form of privatisation, the so-called coupon-privatisation, has al-
lowed all citizens to participate in privatisation. Majority ownership of for-
merly state-owned companies has been acquired by small shareholders.
The portfolios, however, are managed by investments funds. These are in
44
Enyedi, György : Transformation in Central European Postsocialist Cities.
Pécs : Centre for Regional Studies, 1998. 47. p. Discussion Papers, No. 21.
turn in majority ownership of state banks. Despite a formal privatisation,
therefore, the conservative government has maintained the possibility of
state control in the economy. It has also made use of this possibility by
keeping unemployment low through overemployment in these companies,
and by controlling inflation through the central regulation of wages. It
seems likely that the ‘moment of truth’ will soon arrive in the Czech Re-
public and the costs of transformation will also have to be paid by the
Czech economy and society as well. It is not impossible, however, that
these costs will be lower than in Poland and Hungary in 1990.
7 The majority of postcommunist Central European countries belonged to the
Monarchy.
8 The share of tenements in housing was higher in large cities: 54% in Buda-
pest, 59% in Prague and 45% in Warsaw.
9 For example, floorspace per capita, rooms per capita, number of homes per
1000 inhabitants, share of rents in average income.
10 Among all postcommunist countries, the share of flats returned to the ori-
ginal owner before the nationalisation was the highest in the Baltic states
(7% of all homes in 1990).
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No. 8 SZÖRÉNYINÉ KUKORELLI, Irén (1990): Role of the Accessibility in De-
velopment and Functioning of Settlements
No. 9 ENYEDI, György (1990): New Basis for Regional and Urban Policies in East-
Central Europe
No. 10 RECHNITZER, János (1990): Regional Spread of Computer Technology in
Hungary
No. 11 SIKOS T., Tamás (1992): Types of Social Infrastructure in Hungary (to be not
published)
No. 12 HORVÁTH, Gyula – HRUBI, László (1992): Restructuring and Regional
Policy in Hungary
No. 13 ERDŐSI, Ferenc (1992): Transportation Effects on Spatial Structure of Hun-
gary
No. 14 PÁLNÉ KOVÁCS, Ilona (1992): The Basic Political and Structural Problems
in the Workings of Local Governments in Hungary
No. 15 PFEIL, Edit (1992): Local Governments and System Change. The Case of a
Regional Centre
No. 16 HORVÁTH, Gyula (1992): Culture and Urban Development (The Case of
Pécs)
No. 17 HAJDÚ, Zoltán (1993): Settlement Network Development Policy in Hungary
in the Period of State Socialism (1949–1985)
No. 18 KOVÁCS, Teréz (1993): Borderland Situation as It Is Seen by a Sociologist
No. 19 HRUBI, L. – KRAFTNÉ SOMOGYI, Gabriella (eds.)(1994): Small and me-
dium-sized firms and the role of private industry in Hungary
No. 20 BENKŐNÉ LODNER, Dorottya (1995): The Legal-Administrative Ques-
tions of Environmental Protection in the Republic of Hungary