Hungary has garnered much international attention throughout this decade due to the program of economic reforms undertaken by the Kadar regime. In particular, the introduction of new regulations which have for the first time permitted the development of small-scale private enterprise in the official economy, the tolerance shown towards some activities in the unofficial economy, and also the success of small-scale private agriculture have prompted a discussion concerning the increasing role of private initiative in socialist Hungary. Attention has also been focused on the impact of these reforms upon the stature of the Kadar regime, and whether or not they have provided a measure of popular legitimation for it. The amazing transformation of Kadar from traitor of the revolution to the popular reformist of Eastern Europe has been unique among the socialist states. Equally fascinating was his quick fall from grace in 1988. The recent reforms in the non-socialist sector in the Hungarian economy will be examined in terms of the model of bureaucratic centralism, as put forward by Andrew Arato, and the crisis of legitimacy it posits. / Master of Arts