It is hard for most people to imagine how paradoxical this sounded then. Although the Sixth Congress of the Third International did mention this as a possibility, it was generally thought to be historically impossible to take such a retrograde step, as Hungary had already been a soviet republic in 1919.

People’s Democracy, a form of the dictatorship of the proletariat established in several European and Asian countries as a result of popular-democratic revolutions in the 1940s which developed into socialist revolutions. It emerged at a new stage in the world revolutionary process and reflected the specific way in which the socialist revolution was developing at a time when imperialism was weakened and the balance of world forces had tipped in favour of socialism. p The common features characteristic of people’s democracy as a form of the dictatorship of the proletariat (q. v.) were determined by the broad social base underlying the socialist revolutions that occurred in the European and Asian countries after World War II, their relatively peaceful development and the assistance and support rendered to them by the Soviet Union. Yet, in each particular country, people’s democracy has its own distinctive features, since the socialist changeover took place there under specific historical and national conditions.
Unlike the Soviet Union, where a single-party system emerged in the course of history, in most of the countries under people's democratic rule, a multi-party system was formed. The parties united in the Popular Front to fight fascism and imperialism; under these conditions, the multi-party system helped to expand the social base of the revolution and better fulfil the tasks facing it. Leading positions were held by Communist and Workers’ Parties (this was the case in the East Germany, Hungary, Poland and Czechoslovakia). To strengthen cohesion within the ranks of the working class, the Communist and Workers’ Parties in several European countries of P.D. merged with Social-Democratic parties on the basis of Marxism-Leninism (q. v.), while in Hungary and Romania the multi-party system was replaced by a single-party one.

Stalin fully intended to establish Popular Front-type governments, that is multi-class governments, states representing an alliance between the working class and the Bourgeoisie. It was quite explicitly envisaged that capitalist property would be protected.
When no bourgeois party could be found with whom to form a ‘popular front’ the Communist Party created their own. Artificial ‘parties’ were created to represent the various social classes who were ‘invited’ to form coalition governments. The presence of ‘deputies’ representing absolutely impotent ‘parties’ in rubber-stamp ‘parliaments’ does not make a two-class or three-class state.
The ‘Peoples Democracy’ program proved unworkable however. The combination of the pressure of the working class and peasantry in favour of expropriation of the capitalists and landowners and the inability of the Soviet bureaucracy to manage a capitalist economy forced Stalin into a policy that he never anticipated.
In Soviet-occupied Europe, the Red Army was the State. The social relations of production upon which the Red Army rested, i.e. the political-economy of the Soviet Union, imposed themselves upon the countries it occupied. Stalin’s diplomacy could not eradicate the fundamental antagonism between the workers’ state and international capitalism.
The same policy was carried in China under the banner of “Bloc of Four classes”.