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Vitaly V.Zinovchuk. Farmer cooperatives versus collective farms (American Studies on Ukrainian Problems). “The Quentin N. Burdick Center for Cooperatives and North Dakota State University”, 1995, 186 p.

FARMER COOPERATIVES
VERSUS
COLLECTIVE FARMS
American Studies on Ukrainian Problems
Vitaly V. Zinovchuk

Department of Agricultural Economics

The Quentin N. Burdick Center for Cooperatives

North Dakota State University
Fargo, North Dakota 58105

Preface

This manuscript was prepared while the author, Dr. Vitaly Zinovchuk, was on an eight-month Fulbright Research Scholar program at North Dakota State University. Dr. Zinovchuk is Chairman of Department of Management and Agribusiness at the State Academy of Agriculture and Ecology of Ukraine in Zhytomyr, Ukraine.

A striking feature of the manuscript is Dr. Zinovchuk's description of Ukraine's situation as an incredible disparity between potential and realization. The paradoxical conditions including pollution, poverty, inflation and other problems associated with a dysfunctional command economy and the resultant vacuum linked with the collapse of that system is contrasted with the natural endowment of the best soils in Europe and a relatively well-educated and willing population. All that is needed is the creation of a structure to unleash the creative power and incentives of the populace.

Dr. Zinovchuk's supreme hope is to contribute to the creation of just such a structure to provide for Ukraine a plentiful and desirable food supply, with a rural population sharing in economic prosperity and free from the shackles of state control to develop independence and self-reliance. His objective is to adapt the desirable features of market economy including incentives of private property and adoption of appropriate technology and the distribution of benefits according to contribution. His ideals for restructuring are balanced with a healthy respect for what is doable, both institutionally and time-wise. A concern for social needs and a respect for deeply imbedded historical linkages also pervades his analysis and recommendations.

A fresh historical perspective of Ukrainian agriculture provides a necessary back-drop and basis from which his model is launched. He then characterizes the salient features of American farm cooperatives as they relate to the Ukrainian situation, drawing a sharp distinction between what he calls pseudo-cooperatives of the dysfunctional communist regime and the real cooperatives of market economies such as those in the USA. Lessons drawn from these two sections are woven into the fabric of his recommendations or model for market transformation of Ukrainian agriculture with cooperatives playing a central role.

On a personal note Dr. Zinovchuk has been a most focused-single minded visiting scholar. He took advantage of opportunities for interstate travel to become familiar with the variety of life in the USA, gave seminars and cooperated with the media, but only up to a point. Beyond that point he studiously avoided any distractions from his self-imposed goal of completing this manuscript in the time allotted. This focused attention to the manuscript and loyalty to Ukraine was almost boundless. It has been a delight for our faculty to work and associate with Dr. Zinovchuk and understand more about Ukraine's struggles and potential. We wish him and his country success in their efforts in achieving the laudable goals he has set forth.

David W. Cobia
Director, Quentin Burdick Center for Cooperatives and
Professor, Department of Agricultural Economics, North Dakota State University

May 1, 1995

 

Acknowledgements

The idea of this study came some years ago, and realization of it became possible thanks to a special J. William Fulbright Foundation grant. The interest of this authoritative foundation in the problem of restructuring in Ukrainian agriculture was, for me, both a great honor and big responsibility. I also must state that without the understanding, goodwill, and support of the different people which I was lucky to meet in United States, this publication would remain only a dream.

My deepest obligation is to thank Dr. David W. Cobia, whose professional guidance, sincere sharing of tremendous cooperative experience, and personal belief in fundamental changes in Ukraine greatly contributed the achievement of the study goal. The kindness of he and his marvelous wife, Patricia, made my and my family's stay in their country both pleasant and fruitful.

I also owe thanks to Dr. William C. Nelson, Dr. William W. Wilson, Dr. David L. Watt, and Dr. David M. Saxowsky from the Department of Agricultural Economics of North Dakota State University for their consultations and important editorial suggestions.

I am deeply grateful to Professor Mykola I. Nyzhniy (Kiev, Ukraine) who taught me how important economic incentives are and how great the cost of their absence, and Professor Jerker Nilsson (Uppsala Sweden) who made me a staunch supporter of the cooperative idea.

Special thanks to Mr. Chandice M. Johnson, Jr., Director of the Center for Writers (North Dakota State University) for his stylistic advice, and Ms. Shelly Swandal and Mr. Bruce Dahl who provided computer assistance in formatting the paper.

I am also obliged to my students and colleagues from the Department of Management and Agribusiness at the State Academy of Agriculture and Ecology of Ukraine (Zhytomyr, Ukraine) who consented to my absence during a whole academic year.

And finally (unfortunately as always), I take a pleasure to thank my dear wife and colleague Nataly, who was an important consultant, the first reader and a severe critic; and son Rostislav who was patiently waiting for his father during long Dakota winter evenings.

Vitaly V. Zinovchuk Visiting Fulbright Scholar

April 23, 1995 Fargo, North Dakota, United States of America

 

Introduction

One of the brightest memories of my childhood is when my father and me, a five-year-old boy, were standing in a long line for bread. It was 1963. It was explained that this was a temporary difficulty caused by unfavorable weather conditions. We were also told that our country is a superpower which is successfully advancing communism, and then, there will be plenty of goods, and lines will disappear. True, my father joked that there is nothing more constant than temporary difficulties. And when in the middle of 1990s, on the threshold of the passing of the century, my five-year-old son is standing with me in long line for bread (if there is any in the shop), I no longer have ideological illusions about potential abilities of our economic system. I am absolutely convinced the system which was built on command methods and coercion will never allow food lines to disappear even in Ukraine, in the country with the best soils, at least, in Europe.

But besides convictions, people sometimes need bread. This motivates them to choose the shortest and the cheapest way to the desired result. So the faith in instantaneous effect is being born. A new decision of Communist party, a decree of government, a new agrarian program, a new reorganization and management, a new centralized increase of procurement prices, thousands of new specialists annually, new state investments, credits and other resources (when it still was possible), etc. -- with all of them the hopes of fundamental changes were associated. For a moment it was actually working, and gave even more confidence in the correctness of the chosen path. But it was only for a moment. After that there was again a new agrarian crisis, a new aggravation of food deficit, and a new need for governmental intervention in agriculture.

Was there another way for collectivized agriculture? Probably not. The experience of former communist countries demonstrated a certain variety of productivity and efficiency in agriculture, but generally each country was faced with the same set of collective farming problems:

dependance on state control and support;
depersonalization of property;
command methods of ruling and bureaucratization;
inefficient use of resources;
lack of management motives;
loss of individual labor incentives;
environmental problems.

These features of collective farming could not be considered as only shortcomings or imperfect practices. They are the fundamental characteristics installed in the system. It was impossible to eliminate them because for that it was necessary to change fundamentally the political system of the country and to terminate the supremacy of communist ideology. Fortunately, these unbelievable events had already occurred. The collapse of communist regime and the establishment of the independent Ukrainian state gives an incredible opportunity to progress in agrarian sphere. The problems of restructuring in agriculture of Ukraine moves from a political plane to an economic one.

The dysfunctional character of the existing system of collective farming in Ukraine is an essential obstacle for the new independent country to create a plentiful and desirable food supply. Ukraine is poised to not only accomplish this desirable domestic objective but to take its rightful place in the World economic community and play more important role for the World food balance and the international agricultural market. Ukraine is generously endowed with natural resources, a convenient geographical location, an early tradition of private farming, and a relatively well educated population.

There are no doubts that the first steps of a market economy transformation in Ukrainian agriculture must include privatization and the creation of equal legal rights for the development and competition of all reasonable forms of farming. These are the main problems which Ukrainian agroeconomists are currently addressing. Unfortunately, because of the immediate nature of the economic crisis, the question of a long-term perspective is yet to be fully considered. This means that there is little understanding of the mechanism by which independent agricultural producers coordinate their economic activities. This mechanism should totally replace current system of governmental control.

The cooperative initiative of independent producers can withstand organizational and economic chaos in agriculture. Real cooperatives (in contrast to the special phenomenon of communist collective farms or pseudo-cooperatives) are antithetical to the nature of a command economic system. That's why during the Soviet period this important direction of agrarian economics was not developed. Several generations of Ukrainian scholars have had a very slight comprehension of the Western type of agricultural cooperatives and the principles of their operations.

This study is an attempt to bring more understanding of cooperative fundamentals in agriculture. It will be done through comparing pseudo- and real cooperative ways in formation of organizational structure in agriculture. Such contrast presents an opportunity to illustrate the advantages of real cooperatives, and to re-examine some false values of collective farming. This assessment will be done within the context of the fundamental changes Ukrainian agriculture is presently undergoing, paying special consideration to the unique obstacles and difficulties of that transformation.

And finally, some notes on transliteration. All Ukrainian geographical and personal names are presented according to their Ukrainian spelling with only two exceptions for such world known names as Kiev and, unfortunately, Chernobyl. Russian names and places are given in their Russian or usual international spelling. Also Ukrainian and other non-English words were designed by cursive. Cyrillic soft sign was everywhere omitted.

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