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In an East European context 1968 is perhaps best known for the Soviet suppression of the Czechoslovakian experiment to reform 'actually existing socialism'. In Hungary, 1968 saw the introduction of the new economic mechanism, the planned harbinger of a socialist market economy, which included plans to decentralize economic decision-making, increase enterprise autonomy and expand the private sector. This article examines the relationship between the Communist Party (Hungarian Socialist Workers Party) and the working class in the formative period of the 1968 reforms by focusing on the reaction of workers at the Raba Wagon and Machine Factory, in Gyor-Sopron county, western Hungary. The Raba factory, the largest industrial enterprise in the county, had a workforce of over 19,000. The article argues that divisions between hardliners and reformers within the Communist Party over the economic reforms created the opportunity for a real social dialogue with the working class. Workers criticized the lack of enterprise democracy and growing inequalities within Hungary, and voiced their discontent at the political establishment. The Communist Party responded by promising an increase in the standard of living but offered no political concessions. The article explores the longer-term implications of this 'consumerist' turn and concludes that the party's failure to renew the social settlement with the working class can be seen as a 'prelude' to 1989.