The interwar Kingdom of Hungary, referred to retrospectively as the Regency and the Horthy era, existed as a country from 1920 to 1946 under the rule of Miklós Horthy, Regent of Hungary, who officially represented the Hungarian monarchy. In reality there was no king, and attempts by King Charles IV to return to the throne shortly before his death were prevented by Horthy.
Hungary under Horthy was characterized by its conservative, nationalist, and fiercely anti-communist character; some historians have described this system as para-fascist. The government was based on an unstable alliance of conservatives and right-wingers. Foreign policy was characterized by revisionism: the total or partial revision of the 1920 Treaty of Trianon, which resulted in the loss of 72% of Hungary's historical territory, 58% of its population, 32% of its ethnic Hungarian population, and much of its economic resources and industrial capacity. As a consequence, more than three million ethnic Hungarians found themselves outside the country's new borders, primarily in territories transferred to the Kingdom of Romania and the newly created states of Czechoslovakia and the Kingdom of Serbs, Croats and Slovenes (Yugoslavia). A significant Hungarian population also remained in Székely Land, within the greatly enlarged Romania. Republican Austria, the successor of the former other half of the dual monarchy also received some minor territory from Hungary. Thus the post-1918 kingdom can be described as a rump state. Hungary's interwar politics were dominated by a focus on the territorial losses suffered from this treaty, with the resentment continuing until the present.
Society in the Kingdom of Hungary was sharply divided. Budapest and other cities had a standard of living close to that of Western Europe, while most of the countryside was very poor and many rural people could not read. A small nobility owned most of the land, and social rank mattered a great deal. The regime promoted conservative Christian values and opposed liberalism, socialism and modernity, although art and literature still flourished in Budapest despite censorship. After the Treaty of Trianon, a bloated civil service and fierce competition for middle-class jobs fed antisemitism. Jews, about 6% of the population but prominent in business and the professions, faced restrictions such as the 1920 numerus clausus law on university places, and in 1944 many were rounded up and deported to their deaths. Romani people also faced discrimination, forced labour from 1941 and killings under the Arrow Cross.
Nazi Germany's influence in Hungary has led some historians to conclude that the country increasingly became a client state after 1938. The Kingdom of Hungary was an Axis power during World War II, intent on regaining Hungarian-majority territory that had been lost in the Treaty of Trianon, which it mostly did in early 1941 after the First and Second Vienna Awards and after joining the German invasion of Yugoslavia. By 1944, following heavy setbacks for the Axis, Horthy's government negotiated secretly with the Allies, and also considered leaving the war. Because of this Hungary was occupied by Germany and Horthy was deposed. The extremist Arrow Cross Party's leader Ferenc Szálasi established a new Nazi-backed government, effectively turning Hungary into a German-occupied puppet state. As the Soviet Union reached Hungary, its anti-fascist parties found it possible to create a counter-government which sided with the Soviet Union in the last months of the war and began progressive reforms and the transition towards a republic.
After World War II, the country fell within the Soviet Union's sphere of influence. It changed its name to the Hungarian State (Hungarian: Magyar Állam) and the Second Hungarian Republic was soon thereafter proclaimed in 1946, succeeded by the communist Hungarian People's Republic in 1949.
Upon the dissolution of Austria-Hungary after World War I, the Hungarian Democratic Republic and then the Hungarian Soviet Republic were briefly proclaimed in 1918 and 1919, respectively. The short-lived communist government of Béla Kun launched what was known as the "Red Terror", involving Hungary in an ill-fated war with Romania. In 1920, the country fell into a period of civil conflict, with Hungarian anti-communists and monarchists violently purging the communists, leftist intellectuals, and others whom they felt threatened by, especially Jews. This period was known as the "White Terror". In 1920, after the pullout of the last of the Romanian occupation forces, the Kingdom of Hungary was restored.
After the collapse of the short-lived Communist regime, according to historian István Deák:
Regency
On 29 February 1920, a coalition of right-wing political forces united and returned Hungary to being a constitutional monarchy. However, it was obvious that the Allies would not accept any return of the Habsburgs. Earlier, Archduke Joseph August had declared himself regent, but he stood down after two weeks when the Allies refused to recognize him.
It was thus decided to choose a regent to represent the monarchy until a settlement could be reached. Miklós Horthy, the last commanding admiral of the Austro-Hungarian Navy, was chosen for this position on 1 March. Sándor Simonyi-Semadam was the first prime minister of Horthy's regency.
In 1921 Charles returned in Hungary and tried to retake its throne, even trying to march on Budapest with some rebel troops in October 1921; however, his attempts failed as much of the Royal Hungarian Army remained loyal to Horthy and thus Charles was arrested and exiled to Madeira.
On 6 November 1921 the Diet of Hungary passed a law nullifying the Pragmatic Sanction of 1713, dethroning Charles IV and abolishing the House of Habsburg's rights to the throne of Hungary. Hungary was a kingdom without royalty. With civil unrest too great to select a new king, it was decided to confirm Horthy as Regent of Hungary. He remained in that powerful president-like status until he was overthrown in 1944.
Government
Horthy's rule as Regent possessed characteristics such that it could be construed a dictatorship. As a counterpoint, his powers were a continuation of the constitutional powers of the King of Hungary, adopted earlier during the federation with the Austrian Empire.
As Regent, Horthy had the power to adjourn or dissolve the Hungarian Diet (parliament) at his own discretion; he appointed the Hungarian prime minister. Horthy’s powers were similar to those of an enlightened absolute monarch.
The succession after Horthy's death or resignation was never officially established; presumably the Hungarian Parliament would have selected a new regent, or possibly attempted to restore the Habsburgs under Crown Prince Otto. In January 1942, Parliament appointed Horthy's eldest son István as Deputy Regent and expected successor. Whether this represents an attempt to gradually re-establish monarchy in Hungary is unclear; at any rate, István was killed in an airplane crash in August that year, and a new Deputy Regent was not appointed.
During his first ten years, Horthy led increased repression of Hungarian minorities. In 1920, the numerus clausus law formally placed limits on the number of minority students at university, and legalized corporal punishment for adults in criminal cases. Although the law seemingly applied in equal measure to all minorities, the ethnicity quota system was never fully introduced and the law acted largely to conceal anti-Jewish action from foreign observers. Limitations were relaxed in 1928. Racial criteria in admitting new students were removed and replaced by social criteria. Five categories were set up: civil servants, war veterans and army officers, small landowners and artisans, industrialists, and the merchant classes. Under István Bethlen as prime minister the electoral system was changed to reintroduce an open vote system outside Budapest and its vicinity and cities with county municipal rights. Bethlen's political party, the Party of Unity, won repeated elections. Bethlen pushed for revision of the Treaty of Trianon. After the collapse of the Hungarian economy from 1929 to 1931, national turmoil pushed Bethlen to resign as prime minister. In 1938 the changes to the electoral system were reversed.
Social conditions in the kingdom did not improve as time passed, as a very small proportion of the population continued to control much of the country's wealth. Jews were continually pressured to assimilate into Hungarian mainstream culture. The desperate situation forced the Regent, Horthy, to accept the far-right politician Gyula Gömbös as prime minister. He pledged to retain the existing political system. Gömbös agreed to abandon his extreme antisemitism and allow some Jews into the government.
In power, Gömbös moved Hungary towards a one-party government like those of Fascist Italy and Nazi Germany. Pressure by Nazi Germany for extreme antisemitism forced Gömbös out and Hungary pursued antisemitism under its "Jewish Laws". Initially, the government passed laws restricting Jews to 20 percent in a number of professions. Later it scapegoated the Jews for the country's failing economy.
In March 1944, responding to the advancing Soviet forces, Prime Minister Miklós Kállay, with Horthy's backing, established contacts with the Allies in order to open negotiations and switch sides; however, this became known to the Germans, who proceeded to invade Hungary and quickly overran the country, meeting only limited resistance. With the country now under German occupation, Horthy was forced to remove Kállay from his position and appoint pro-Nazi politician Döme Sztójay as the new prime minister. Sztójay legalized the antisemitic and pro-Nazi Arrow Cross Party, deported large numbers of Hungarian Jews to Germany and initiated a violent crackdown on liberal and leftist opposition.
As the months went by, Horthy became increasingly appalled by Sztójay's brutal methods and alarmed by the rapidly collapsing Eastern Front. In August 1944, he deposed the pro-German prime minister and installed a more balanced government led by Géza Lakatos, in an effort to engage with the Allies and avoid occupation by the Soviet Union. This did not sit well with Hitler and, in October, German forces overthrew Horthy and Lakatos and installed a puppet regime led by Ferenc Szálasi of the Arrow Cross Party. The Arrow Cross Party never abolished the monarchy as a form of government, and Hungarian newspapers continued to refer to the country as the Kingdom of Hungary (Magyar Királyság), although Magyarország (Hungary) was used as an alternative. From May to June 1944, Hungarian authorities rapidly rounded up and transported hundreds of thousands of Hungarian Jews to Nazi concentration camps, where most died.
After the fall of the Szálasi regime, a Soviet-backed government under Béla Miklós was nominally left in control of the entire country. A High National Council was appointed in January to assume the regency, and included members of the Hungarian Communist Party, like Ernő Gerő, and later Mátyás Rákosi and László Rajk.
Economy
Upon the kingdom's establishment soon after World War I, the country suffered from economic decline, budget deficits, and high inflation as a result of the loss of economically important territories under the Treaty of Trianon, including to Czechoslovakia, Romania, and Yugoslavia. The land losses of the Treaty of Trianon in 1920 caused Hungary to lose agricultural and industrial areas, making it dependent on exporting products from what agricultural land it had left to maintain its economy. Prime Minister István Bethlen's government dealt with the economic crisis by seeking large foreign loans, which allowed the country to achieve monetary stabilization in the early 1920s. He introduced a new currency in 1927, the pengő. Industrial and farm production rose rapidly, and the country benefited from flourishing foreign trade during most of the 1920s.
Following the start of the Great Depression in 1929, the prosperity rapidly collapsed in the country, especially in part due to the economic effects of the failure of the Österreichische Creditanstalt bank in Vienna, Austria. From the mid-1930s to the 1940s, after relations improved with Germany, Hungary's economy benefited from trade. The Hungarian economy became dependent on that of Germany.
Society
Hungary in the interwar era was divided sharply into essentially two worlds. Budapest and the other cities had a standard of living roughly equal to that of Western Europe and North America while the countryside was extremely poor and backward. Budapest was a modern city that served as a center of manufacturing for Eastern Europe. The Hungarian historian István Deák wrote: "Budapest remained a most sophisticated place in a much poorer and less developed countryside". There was a major cultural divide between Budapest and the rest of the country. The Horthy regime took ultra-conservative Christian positions, declaring itself to be implacably opposed to liberalism, communism, socialism, Judaism, freemasonry, secularism, divorce, feminism, homosexuality, abortion, the artistic avant-garde and modernity in general, but Deák noted that the "sinful" activities the regime was opposed to flourished in Budapest for most of the Horthy era. Deák described the Horthy era as "a golden age of literature and art" despite the strict censorship. The regime glorified the countryside and the past while in Budapest many intellectuals created modernistic art and literature that was out of step with the regime's ideology. The majority of the land in rural areas was owned by the nobility, who were in turn divided into the greater nobility with titles and the lesser nobility without titles. The lesser nobility corresponded to the gentry in England and were referred to as such by outsiders. Hungarian society was semi-feudal in nature and status was all important. It was expected to address socially superior people by forms of address such as Your Excellency, Your Dignity, Your Greatness and Your Authority depending upon their social rank. Hungarian society was extremely status conscious and people with high incomes tended to flaunt their wealth by wearing the most expensive clothing and jewelry possible; dining out frequently at equally expensive restaurants, night-clubs and cafes; and driving pricey automobiles. Both rich and middle class households routinely hired servants to do all of the household work as menial labour was considered to beneath a "gentleman" or a "lady".