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PN N5.35Da I1711n5 Venter for AGRICULTURAL ECONOMIC RESEARCH 37g.5694 94506 t,PN n5.35Da I1711n5 _ vENTER FOR AGRICULTURAL ECONOMIC RESEARCH Working Paper No. 9506 NEW STYLE OF AGRICULTURAL COOPERATIVES IN THE FORMER SOVIET UNION by ZVI LERMAN vaiie ,_ibrary )ept. of Applied Economics !niversity of Minnosota 994 .Eiford Ave - 232 ClaOff 1JIAAN 5510a-8040 USA Rehovot, Israel, ROB. 12 411 % l The working papers in this series are preliminary nwr on It nilma ipnon nnrin and circulated for the purpose of discussion. The rnyin .nrwn n5api pr75 Invmi views expressed in the papers do not reflect those mi ninpvm irm DIa rnyamn of the Center for Agricultural Economic Research. .nni5pn n5D5D2 1pn)35 Dim rny-t e A Working Paper No. 9506 NEW STYLE OF AGRICULTURAL COOPERATIVES IN THE FORMER SOVIET UNION by ZVI LERMAN THE CENTER FOR AGRICULTURAL ECONOMIC RESEARCH P.O. Box 12, Rehovot NEW STYLE OF AGRICULTURAL COOPERATIVES IN THE FORMER SOVIET UNION Zvi Lerman Department ofAgricultural Economics and Management The Hebrew University ofJerusalem, Israel Paper prepared for the meetings of the Canadian Association for Studies in Co- operation Structures and Cultures of Co-operatives, University of Quebec in Montreal, Montreal, Canada, June 7-9, 1995. • NEW STYLE OF AGRICULTURAL COOPERATIVES IN THE FORMER SOVIET • .• UNION' • Zvi Lerman Department of Agricultural Economics and Management The Hebrew University. of Jerusalim,. Israel • The 15 countries of the former Soviet Union span nine time zones, with Eastern and Central Europe (without former Yugoslavia) adding 8 more countries in a tenth time zone to the economic and political block that during decades was dominated by the USSR, and more directly by Russia as the largest member and the main ideologue of the Soviet Union. EVen.Withthit the. enormous expanses ,of,.northern Siberia that are largely unpopulated and uncultivatable, this economic,space aCeounts .for 20% of the world's farmland and 8% of the world's population (FAO 1994). Agriculture is a very large sector in'the region, With a share of 15%-20 70: of total GDP and a correSpon*gly high share in total employment and productive assets (CWd and Lerman 1994; Brooks. thul Lerman 1994a). - • Agricultural cooperation has a long tradition in RiiSsia,.. and to a certain extent throughout the rest- of the region. In Tsarist Russia the 19th century was characterized by so- called communal agriculture. The Russian village comniiine. as an institution dates back to the 1lth-12th century, and it survived serfdern: The. Emanaipatitin Act of.1861 - abolishing serfddiri transferred land ownership to the village commune (obshchina), not to individual peasant.- Since then, until Stolypin's reforms of 1905 which reinstated individual land ownership, all pastures, meadows, and forests :Were. held in common, while the fields were parcelled 'out among the households and periodically. redistributed to suit the changing -nUmber and Composition of families and to ensure equitable allocation of plots of different Soil quality. The commune was obliged to allot land to all its Members, regardless of their Particular occupation or farming practices, and each peasant was entitled to participate in tl6liberatiOns and decisions on every aspect of life m .the commune — "from the choice., of 'a shepherd • to • the distribution or redistribution of the fields or the purchase of additional land" (Fitzlyon andi3rowning 1992). Periodic redistribution, strong equity*prhiCiples, and cdltective responsibility for village affairs led Aleksander Chayanov, the Russian th&O.rist.of coapdation in the 1920s, to speculate that Russian peasants operated as satisficers and 'gave priority td-Auity considerations within the family and the commune (Gregory 1994). .• common use• of land and a tradition of communal decision making, albeit not entirely .yoluntary in their. origin, proyi0ed.a fertile soil for the development of cooperatives in rural communities in„the .region. The history of cooperation:hi Russia and the former Soviet Union can be .clearly divided into four main stages:. .--.t4e era beforethe. 1917 Revolution, - the period of the New Economic'Policy i921:1929;'. .'• . • 1 Paper prepared for the meetings'of the Canadian Association.for Studies in • . _ • _ . Co-operation on the subject of Structures and Cultures of Co-operatives, University of Quebec in Montreal, Montreal, Canada, June 7-9, 1995. • : - the collectivization decades 1929-1991; - the post-Soviet period. The countries of Eastern and Central Europe, with their own 'system of agricultural cooperatives that has been developing in fits and starts since the middle of the 19th century, joined the Soviet-dominated block in 1945, after the end of World War II, when they were forced directly into the collectivization stage. Since 1990-1991, the agricultural cooperatives in these countries has also entered a new phase of evolution. • Pre-1917. Period Agricultural cooperatives (other than the traditional village communes) began to develop in. Russia....a*ls-,astern Europe in 1860s-1890s, soon after the introduction of cooperative principles in Western.Europe. Slovakia has the reputation of being the first country in. continental Europe where a "farmers society" was established only:50 days:aftek;thel- establishment'of the original. Rochdale Pioneers cooperative (Spear 1993). The .19th .century:cooperatives in the region were mainly societies or associations of peasants -specializing in_the:traditional- activities of credit, processing, input purchasing, and .farm product marketing: A source from 1895 describes in vivid terms. the initial development of agricultural cooperation in Russia (Prokgauz- Efron 1895): Small landowners join forces to establish a mill, a cheese-making dairy, to buy cattle, to cultivate a meadow or a forest, to drain. a .marsh.-. There are also , societies that pursue the development of one particular.-agricultural. enterprise, such as processing of dairy products, wine making; etc. -Recently, farmers' societies were established, in Perm'. Province, with the assistance of- local government, with the object of joint purchase of horses, improved seeds and . implements, and joint processing for all. or,some of the members. Such societies werealso established in Kherson Province [in south-eastern Ukraine]. Farmers' societies for the purchase:and marketing of products (which are very common in France) began to be established in Russia only in 1890, and today [1895] their number does not exceed 6. By 1915, there were 23,700 agricultural cooperatives in Russia, of which 60% were agricultural credit cooperatives (GSE 1953, vol. 38, p. .444). The development of, credit cooperation began in the rural areas, where its function was to help the millions of "poor" and: "middle" peasants avoid resorting to expensive commercial credit (Savchenko 1991). Just before the revolution of October 1917, some 10 million Russian peasants were members in 16,500 credit societies and over 2 million were members in 12,000 other agricultural cooperatives (GSE 1973, vol. 13, p. 107); over 90% of Siberian butter was'produced and marketed at that time by a union of cooperative creameries, with a membership of nearly half a million producers and . 3,000 creameries (Epshtein 1993). These pre-1917 cooperatives, however, were not particularly long lived: once the members had built up'theitinitial Wealth through cooperation ("had bought horses and farm implements"). they- tended to leave:the association and the cooperative would' eventually dissolve(GSE 1973, vol. 13, p. 107). 2 The information on agricultural cooperatives before 1917 in other parts of the Russian empire is, scant (Serova 1991). In Ukraine, the development of cooperatives paralleled that,in Russia (see the reference to Kherson Province in the above quotation from 1895). Belartth,. on the other hand, appears to have been a "cooperative desert" before .the 1917 Revolution. Among the Caucasus states, only Georgia had significant cooperation before 1917: some 250.credit societies, as well as unions of grape growers and wine .makers, fruit growers, sheep breeders, and tobacco growers. Wine making in Georgia was,. virtually 100% cooperative at that time. The commercially oriented cotton industry in Central Asia seems to have created favorable conditions for agricultural cooperation: credit cooperatives began to emerge in 1912 in Turkistan The Baltic region has the longest history of cooperation in the;former Russian empire,.and the first agricultural societies in the 19th century were actually established in these countries: The development of large-scale credit cooperation was followed. by :farm 'machinery and animal breeding societies, as well as cooperative creameries. Potato and peat marketing cooperatives were common in Estonia. In 1914,.Latvia had over 900 agricultural .societies organized in 8 cooperative centers. The promising agricultural base of the Baltic states, however, Was totally destroyed during World War I. The NEP Period 1921-1929 Russian cooperatives resumed their development in 1921, when the turmoil of the October 1917 Revolution and the subsequent Civil War had subsided. An enabling condition for the continued growth of cooperation in Russia was Lenin's ideological support of the cooperative movement as the road of the peasant class- to socialism. A government decree of August 1921 on agricultural cooperation allowed peasants to create agricultural cooperative societies and associations of all• forms. No less important •was the relatively permissive- and tolerant atmosphere under the New Economic Policy (NEP),
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