On January 1, 1982, the Hungarian party-state institutionalized a property rights reform that made private enterprise a citizen's prerogative. Though radically at odds with communist ideology, and unparalleled in the communist world, the reform went largely unnoticed by outside observers. It was easy to miss. Hungarian reformers themselves downplayed the reform's importance. Martial law had been recently imposed in Poland. Perestroika and Glasnost had yet to appear on the Soviet stage. The Cold War was still on. And the Berlin Wall stood unperturbed, as if facing eternity.

In Hungary, however, the reform seized the imaginations and marshaled the energies of thousands of new entrepreneurs. It also incited resentment in state firms, and prompted resistance in a bureaucratic machinery that could not even fathom the practical, regulatory problems with which entrepreneurs presented them, first in a trickle and then in a flood. Finally, the reform provoked jealousy among a general population unaccustomed to sharp income differentials.