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This thesis provides an original contribution to ongoing debates within scholarly Political Economy and Area Studies literatures on the (neoliberal) transformation of the Hungarian political economy. Within this literature, the ‘transition’ to a (free) market economy and democracy is commonly dated to the annus mirabilis of 1989. The development of the Hungarian political economy since then has widely been considered as a ‘success story’ of (neoliberal) transformation and presented as model to be emulated by other countries in Central and Eastern Europe and elsewhere in the world. This thesis challenges this consensus. Drawing on central concepts in Marxist political economy, in particular state capitalism theory, and primary sources in Hungary, we argue that neoliberalism was not simply an ‘imported project’, which arrived ‘from the West’ on eve of the regime change in 1989. Rather, it emerged ‘organically’ in Hungarian society in the 1980s, as a response by domestic political and economic elites to the deepening economic and political crisis of the Kádár regime. The essential aim of the ‘neoliberal turn’ was thus to reconfigure the Hungarian political economy in line with exigencies of the capitalist world economy, while at the same time ensuring that the ‘transition’ went as smoothly as possible. As such, while at one level obviously a repudiation of past policy, policymakers in Budapest pursued the same objectives as central planners under ‘actually existing socialism’. For much of the 1990s and the early 2000s, this Faustian bargain proved relatively successful, as the Hungarian political economy became a model of (neoliberal) transformation in the region. However, since the mid-2000s, the inherent contradictions and limitations of Hungary’s neoliberal regime of accumulation have become increasingly evident. This has been confirmed by events since the onset of the global economic crisis, as Hungary has rapidly moved from being an erstwhile ‘poster boy’ of (neoliberal) transformation to a ‘basket case'.