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1.7. Pluses and minuses of "perestroika" - FARMER COOPERATIVES VERSUS COLLECTIVE FARMS American Studies on Ukrainian Problems Vitaly V. Zinovchuk

In the middle of 1980s, in Ukraine, as in the Soviet Union, as a whole, the process of fundamental reconstruction of all social and political system, moving towards democratic society, was started. This process, well known in the World as perestroika, was associated with Michail Gorbachev, who became the new Soviet leader. From a political point of view, perestroika had been developing successfully, with understanding and broad support by the World community. The termination of the Cold War and regrouping forces at the international scene in favor of peace and World security :was its main, most important result. With the same persistence and optimism the new Soviet leader also initiated entire economic reforms in the country. However, in this field the results were much more modest, often with new, unexpected problems.

At the beginning of Gorbachev's reforms, Ukraine was shaken by a catastrophe of global significance. In April 1986, the world's worst technological accident occurred at the Chernobyl nuclear power station. It led to a huge discharge of radioactive elements into the natural environment. Because of the nuclear disaster, 3.5 million hectares of agricultural land and 1.5 million hectares of forest (about 12% of the territory of Ukraine) was contaminated by long-lived radionuclides. Over 1,000 towns and villages were affected by radiation. At the end of 1980s, agricultural work was restricted-or prohibited in an area covering more than 500,000 hectares [Marples, p.io]. A lot of people had to leave their native places and remove to safer areas. The Chernobyl tragedy devoured enormous assets of the state budget, and decreased the effect of the economic reforms promoted by the new Soviet leader. Agriculture was one of the most painful problems.

The search for the panacea to bring a stagnating agriculture out of the prolonged crisis led to nothing: food deficits had been increasing, industry suffered from chronic lack of agricultural raw materials. Fundamental restructuring was urgently needed but Gorbachev began with an assertion of devotion to the collective farm system and support for wittingly impracticable Food Program. Politically, there was no another way for him because he was one of the authors of the program and most recently was responsible for agriculture in the Brezhnev's team. He sincerely believed (and may be still believes along with many other defenders of collective farming) in the unrealized benefits of this organizational structure. This belief created incentives for numerous experiments and structural innovations. The basic idea could be formulated as follows:

- to give as much as possible (of course, in general framework of command economy) economic independence for structural formations of all organizational levels by decreasing role of centralized planning, more flexible system of governing, and recognizing equal legal and economic rights of all forms of farm economies;

- to pay more attention to interfarm organization by formation of stable primary production collectives with selfmanagement, territorial autonomy, technological completeness, and higher responsibility for final results of production;

- to introduce more democracy in production relations in agriculture as well as in rural life generally.

For the first time in Soviet history a more realistic understanding of the role of planning was officially proclaimed. Before that (as it happened quite often, in ideological reason with economic consequences) the importance of planning was often exaggerated, and it led to an excessive detailization of indices directed to the collective farms by a higher organization. It fostered considerable economic independence of collective farms and represented one additional form of command, manifestation of power. Due to the new economic policy some attempts to limit the role of--subjectivesfactors at the stage of developing and implementing plans have taken place. The number of details associated with planning was considerably reduced and their; validity: on :the basis of using scientific approaches to valuation of resource potential have been strengthened. But the essence of a plan as mandatory for the execution requests of the state, or its directives still remained. The plans, as in the previous periods, strictly controlled production and distribution of the major products, although it was labelled the "state order".

Planning also remained a peculiar form over the asset accumulation and financing performance in collective farms. The state was deprived of a legal right to regulate internal processes in collective farms directly. But in fact the state could do that in an indirect way. Consider for example the practice of planning "from achieved level", i.e. the established indexes of plan were increased if in the previous period a higher performance was recorded. Effectively the praxis served as a latent form of taxation for well-to-do collective farms. Or another example -- the equalization of economic conditions, i.e. use of different economic methods to create more favorable conditions for worse collective farms at the expense of better ones regardless of why such differentiation occurred. In the next example, state loans, used mainly by weaker collective farms, were periodically written off. The solution to someone's problems by using others' resources money had a negative influence upon the economic interests of the latter and provided the origin for dependental sentiments of the former.

Several attempts to change the agriculture organization took place under perestroika. But the task was understood as to introduce new combinations using only existing structural elements, not to change the organizational structure as such. That is, new forms were introduced but their contents were just the same. The main spheres for the search of new organizational forms should be distinguished:

- the sphere of government authorities in agriculture;

- the sphere of interbranch and interfarm formations;

- the sphere of internal farm formations.

At the governmental level all reorganizational processes, as it already happened in the Soviet economy, had been initiated "from above". But facing the inertness of the lower links, the "rational kernel" of the new idea was quickly lost in the stream of bureaucratic instructions. The managerial apparatus was rapidly growing and accumulating new functions, unusual for it. The new reorganization was converted into one additional campaign. Thereby it was criticised as being incapable of leading to any positive results. Naturally, this process was repeated at all levels of the management hierarchy with the analogous effect.

At interbranch and interfarm levels formations some reformulations were achieved. In Ukraine, in the second half of 1980s, there were 43 agroindustrial combines, 30 agroindustrial associations, 48 agrofirms, and 18 agrotrade associations. More than 1700 collective and state farms, about 200 industrial enterprises, 500 trade, service, and other organizations were involved in their work [Sabluk, p.17]. The main task here was to find such a system of production which could be flexible enough to overcome the obstacles created by command-administrative methods of government. For this purpose collective farms united their efforts with enterprises of the processing industry, trade and service organizations. Such forms of vertical integration had the intent of producing a stimulating effect upon agriculture and enhancing the responsibility of both sides for the final results of the joint activities.

The concise characteristic or the principle forms of interbranch and interfarm enterprises, started in that period in Ukraine and continuing their work now, could be represented as follows:

1. Agroindustrial combines and agroindustrial associations. These are production systems formed at the territorial-branch basis. They were based on the combination of the activity of economically independent (relatively of course) collective farms on the one hand and processing industry enterprises on the other. They are subordinated to common economic interests and oriented to satisfaction requirement needs of a large consumer groups, for instance, a city or a whole district. Concentration of processing industry capacities and closed vertical integration is distinctive feature of these associations. The activity of such a production system is essentially hindered by departmental disconnection, hard dependence on higher bodies, serious technical and technological problems of processing industry and instability of agriculture as an economic partner.

2. Agrofirms. These are production enterprises created on the base of economically stable collective or state farms which possess enough capacity for processing and storage of agricultural products. The implementation of vertical integration processes is peculiar to them. Agrofirms-have bigger economic independence in the field of financing, pricing, wage setting and international economic activity. Their connections with consumers are closer. The possibility of transformation to the market relations can be realized quicker by such enterprises. But the number of such firms is not sufficient. They are also subject to the regulations of command economy, and their economic initiatives are often contrary to the existing instructions and norms.

3. Agrotrade enterprises. They seek to supply cities and districts with fresh vegetables and fruits avoiding all kinds of intermediary organizations in order to shorten the distance from producer to the consumer to minimum. They are created on the basis of agricultural enterprises and include vegetable storehouses and retail shops. Meanwhile they are not numerous and their functioning hasn't moved beyond the experimental stage.

4. Scientific-production systems. This is a new form of cooperation between agricultural enterprises and scientific centers. These systems are established on the basis of separate research institutes and developed collective and state farms, for broad application of advanced technologies"agricultural crops cultivation, livestock production, and other achievements of science and technology. Such collaboration is carried out under a contract based on mutual interests and responsibilities. Given the environment of the scientific-production system it is possible to obtain higher yields and productivity of animals, demonstrating by these potential possibilities of agriculture. But even with a broad diffusion scientific-production systems can not be realized in the typical organizational forms in agriculture because they are intended for developed farms only. Expansion of the sphere of cooperation between scientific centers and agricultural enterprises, requires a certain transfer of the scientific potential from research problems to production ones. There is also a concern that the passion for applied scientific projects may lead to underinvestment in fundamental research studies which are not likely to yield economic effects in a short time horizon but have the utmost importance for the future.

There was also growth of cooperation between collective farms. At the end of the decade there existed in Ukraine about 2,400 interfarm formations, 703 of them involved in agricultural production, and others processing and services. The majority of interfarm association took place in livestock-raising, including 150 in production of beef and pork, and 474 in poultry [Shchepienko, p.8]. Inter-collective-farm enterprises gave certain advantages to farm members and could correspond to the still dominating model of large-scale farming. At the same time the interfarm cooperation had some obvious problems which restricted optimism even of its zealous supporters. First of all, the use of the term "cooperation" was highly conditional since these enterprises were not always created on the exclusively voluntary basis. They generally did not take into account the interests of all partners involved. The intervention of local authorities in their work and substitution of economic incentives for commands along with the imperfect mechanism of compensation of production units for their original contribution, were, able to undermine the economic interests of the partners. In some cases, participation in such "cooperation" could be considered as forced. The interfarm enterprises also faced the problems of large-scale production with all the ensuing economical, ecological, and social consequences.

The special hopes for positive changes in agriculture were associated with restructuring at the primary level, i.e. within collective farms themselves. Many farms began to apply the new forms of production collectives. The basis of allotments of cultivated lands, machinery, equipment, productive animals, and other means of production among collectives was being held for a relatively long time. Their wages were directly influenced by quantity and quality of the products and production costs. In other words, they were very close to full responsibility for the final results of certain kinds of agricultural products.

These collectives established mutual relations with the collective farm's leadership under a contract. This document defined the obligation taken by the collective to produce an exactly determined amount of products. At the same time, the quality of the products and the size of production costs were established. The leadership of the collective farm assumed the obligation to promote necessary work conditions of the collective and to buy all its products at the prices stipulated in advance. The measure of responsibility in the case of nonfulfillment of the agreed obligations was also determined in the contract.

As a rule, contract collectives leased the means of production under conditions of lease. The rent might have one of the following two forms:

1. In the form of price difference - between the state procurement prices (at which the collective farm sold the product to the state) and the contract price (at which the contract collective sold the product to the collective farm). This means that state procurement prices always were considerably higher.

2. In the form of the direct money rent from the received income.<

The second form was the most distinctive variant of inter-collective-farm relations from all that existed before. It made the primary production collective be certainly interested in the increase of production because there were not any restriction for maximum level of compensation for labor. The quantity and quality of the final product was the only criteria of the spent labor (Figure 9). Total production costs must be subtracted from total revenue. The remainder is called gross income. Decrease of planned costs, reached due to rational and careful use of production resources, was fully appropriated by the collective. Then the collective must compensate for obligatory payments such as rent, interest on debt, assignments for general needs and management of the collective farm, and also social insurance. The rest of gross income could be considered as a net income of the collective. It was a internal matter of the collective members how to distribute this income. They were recommended besides salaries and bonuses to use a certain part of the income for establishing different funds; For example, a fund for expanding the collective's property and development of production, a fund for social development, and a reserve fund. But all these distributions were mainly acceptable for ideal production situation. Unfortunately, growing inflation, shortage of inputs and destabilization of price parity between agriculture and other branches of national economy made impossible further development of this type of contract collective, at least for a period.

Some elements of democratization in production relations could also be observed in these new organizational innovations. For instance, to be a member of such collective was a question of one's own will and agreement of collective. They had more rights making decisions concerning production issues, by using earned assets and distribution of collective compensation for labor in accordance with each member's individual labor share. The second form of lease contracts even permitted options in the choice of specialization.

In some cases, the work of primary production collectives under contract was effective indeed. Usually it happened due to competence and authority of progressively thinking leaders and success of specialists of collective farms in protecting their innovation from harmful influence of conservative environment. This means that they presented a comparatively high degree of independence for contract collectives instead of daily directives, provided better access to supplies, personally coordinate their interactions with other production partners and infrastructure, and tried to solve their social problems in the first instance. Such artificial autonomy of contract collectives promoted a special working atmosphere among their members, and even sometimes these structural formations were called production cooperatives.

The idea to create production cooperatives was attractive and popular among some scholars and economists, the attitude towards it from the side of practical workers of agriculture however was quite ambivalent. On the one hand, there were no doubts that it was a progressive idea compared with previous pressure practices of command system, and a relatively effective way to revive agriculture and stimulate its further development. But on the other hand, the idea was doomed from the very beginning because of its opposition to the essence of command economy, being a little rational cell in the general irrational system.

Being able to adapt quickly to market conditions, production cooperatives in the conditions of the command system had to fight persistently for their survival. Theoretically the state of affairs looked quite well but in practice, as in the previous times: there existed the state plan in this or that modified form, the state procurement prices transferred money from agriculture to other branches of the national economy, and incredible efforts to get new machinery, spare parts, fuel, building materials were required, and so on. That's why the attitude of realistically minded people to cooperative "shoots" was even more than quiet. It was possible to create an artificial cover round interfarm units but it was almost impossible to do that with a whole collective farm. Finally, the worsening economic crisis affected collective farms as well as their entire contract collectives causing their collapse and return to the previous, inefficient organizational forms.

And were the so called production cooperatives actually cooperatives ? The first counterargument was the absence of real private property. In relation to means of production, including land, members of contract collectives were only their users. Even final products did not fully belonged to them: there was no choice in channels of distribution, prices, time and other conditions of delivery. They did not even participate in marketing. The purchase of their final product by the collective farm in fact was a kind of piece-rate wage system. The next counter-argument could be focussed on the fact that collective farms never returned profit to contract collectives. Of course, collective farms also had to recover all losses of contract collectives if they occurred. And the last counterargument was connected with democratic control. A decision of the general meeting of collective farm members and even of the board of collective farms (executive body between general meetings) was obligatory to be executed by contract collectives. Very seldom anybody from contract collectives was a member of the board. Usually it was a privilege of main specialists and administrators.

From the horizon of this study the characteristic of the perestroika period would be incomplete without focusing on one general error of the reformers. That was too easy manipulation of the notions "cooperation" and "cooperatives". Gorbachev and his team obviously wanted to find certain analogies in the past. They reminded the public of the successful New Economic Policy of 1920s based on numerous cooperatives, Lenin's support of cooperative way of economic development, and even revised the official estimation of the Stolypin's reform. The revival of the cooperative idea was widely accepted as a result of perestroika also. In 1988 the Law on Cooperation was adopted, and actually it was an impetus for incredible spreading of cooperatives. They were to become an alternative to inefficient public sector of national economy and compensate its imperfection. Many cooperative succeeded in achieving these goals, and are still acting effectively.

New cooperatives were an air-way for private business in the system of the command economy. Their number had been increasing tremendously. Finally, all new, non-state-owned enterprises were named as cooperatives. At that time, the Soviet legislation simply did not know any other legal forms of private business. The number of cooperatives grew rapidly in small consumer goods production, small retailing, and mediator service, etc. But they functioned as profit oriented business venture. Because of an opportunity to avoid strict state control some cooperatives started to consolidate "black market" dealers and even criminals. The uncontrolled use of official position and state owned resources by a certain part of the state bosses who were also engaged in cooperative activities, became a real concern for the government. Many cooperators were convicted for economic crimes. Rackets, hitherto unknown, came into Soviet reality. There is no need to note that these "cooperatives" really were too far from real cooperative values and principles.

The government measures for regulation of cooperative activity and legalization of their form of private business were delayed. For the great majority of ordinary people the image of peresfroica-type-cooperatives became associated with low quality products, easy gains, making money by any, even illegal means. This discredited the great idea and moved aside a perspective of real cooperative development even further. The failure of the main part of Gorbachev's cooperatives was as quick as their raising. Very soon they took second place in the economic life, and were overshadowed by such unbelievable events as the collapse of the Soviet Union and establishment of new independent states.