Privatizing the Land
This volume offers an overview of reforms in late state socialist agrarian systems in Eastern Europe and the Soviet Union during the 1970s and 1980s, and assesses the effects of post-communist transformation on the rural economies in the region. It seeks to answer the question: why did collectivized agrarian systems perform so differently, and why does their performance vary so much when they face the problems of restructuring? Privatizing the Land explores the strategies, costs, and achievements of decollectivization and privatization after 1989 and is the first book of its kind to combine a comparative analysis of late state socialist reforms and the process of transition to capitalism in former communist countries. Using empirical evidence, contributors from economics, history, sociology, politics, and the environment provide an assessment of how agrarian economies performed in different communist countries. They document that although collectivized agrarian systems often failed badly, there were also a number of successful reform experiments—notably the breathtaking growth of the Chinese economy after 1977 and the Hungarian agricultural miracle of the 1970s. It also describes the techniques of privatization in post-communist countries, analyzes the depth of the transformational crisis in economies on the road to capitalism, and gives a first account of the rural systems that have emerged on the ruins of communism. The Soviet and East European experience is also contrasted with reforms on China, Vietnam, and Cuba to provide the first comprehensive account of agricultural restructuring after the collapse of communism in Euro-Asia. The contributors seek to dispel the myth of a single ‘collectivistic model’ and, instead, illustrate the diversity of experiences in these countries and their responses to the needs of economic restructuring. Privatizing the Land shows the excessive price of transition to capitalism and at the same time demonstrates that the collapse of communism was inevitable. Iván Szelényi is Professor of Sociology at UCLA.
Routledge Studies of Societies in Transition
1 The Economics of Soviet Break-up Bert van Selm 2 Institutional Barriers to Economic Development Poland’s incomplete transition Edited by Jan Winiecki 3 The Polish Solidarity Movement Revolution, democracy and natural rights Arista Maria Cirtautas 4 Surviving Post-Socialism Local strategies and regional response in Eastern Europe and the former Soviet Union Edited by Sue Bridger and Frances Pine 5 Land Reform in the Former Soviet Union and Eastern Europe Edited by Stephen Wegren 6 Financial Reforms in East European Countries A policy model for Poland Kanhaya L.Gupta and Robert Lensink 7 The Political Economy of Transition Opportunities and limits of transformation Jozef van Brabant 8 Privatizing the Land Rural political economy in post-communist societies Edited by Iván Szelényi 9 State and Nation Building in Ukraine Taras Kuzio
Privatizing the Land Rural political economy in post-communist societies
Edited by Iván Szelényi
London and New York
First published 1998 by Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2003. © 1998 Iván Szelényi All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Privatizing the land: Rural political economy in post-communist societies/edited by Iván Szelényi. p. cm.—(Routledge research societies in transition) Includes bibliographical references. 1. Agriculture—Economic aspects—Case studies. 2. Agriculture— Economic aspects—Communist countries. 3. Agriculture and state— Communist countries. 4. Land reform—Case studies. I. Szelényi, Iván. II. Series. HD1415.P69 1998 338.1′09171′7–dc21 97–35426 ISBN 0-203-16132-7 Master e-book ISBN
ISBN 0-203-16135-1 (Adobe eReader Format) ISBN 0-415-18204-2 (Print Edition)
Contents
List of figures List of tables List of contributors Preface
vii viii xi xiii
1 Introduction: a theoretical framework Iván Szelényi
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Part I Reforms: failures and successes 2 The Hungarian agricultural ‘miracle’ and the limits of socialist reforms István Harcsa, Imre Kovách, and Iván Szelényi
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3 The alchemy of reform: Bulgarian agriculture in the 1980s Mieke Meurs and Simeon Djankov
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4 Cuba: the reluctant reformer Carmen Diana Deere
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5 Agrarian change in contemporary rural China Joshua Muldavin
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6 After collectivization: continuity and change in rural China Mark Selden 7 Agrarian Thermidor: state, decollectivization, and the peasant question in Vietnam Michael Watts
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Part II ‘Revolutions’: the collapse and restructuring of agrarian systems during the post-communist crisis of transformation 8 The treadmill of socialist reforms and the failures of post-communist ‘revolutions’ in Russian agriculture: is there an alternative? Sergei Nickolsky v
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Contents
9 The price of privatization: the post-communist transformational crisis of the Hungarian agrarian system István Harcsa, Imre Kovách, and Iván Szelényi 10 Writing a new song: path dependency and state policy in reforming Bulgarian agriculture Robert Begg and Mieke Meurs Index
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245 271
Figures
5.1 5.2 5.3 5.4 5.5 5.6 7.1 7.2 7.3 7.4
Mixed average retail and purchasing price of grain in China, 1978–92 Grain output and grain per capita in China, 1952–93 Chinese per capita consumption and peasant/non-peasant ratio of consumption, 1952–93 Fertilizer use, sown area, fertilizer per hectare, and grain yield in China, 1952–93 Chinese cultivated area hit by natural calamity and state investment in water control and agriculture, 1953–93 Persons employed by TVPEs by type and sector in China, 1978–93 Growth rates in Vietnam, 1979–95 GDP growth in Vietnam and Eastern Europe, 1986–96 Vinh Phu Province, Vietnam Regional differences in GDP in Vietnam, 1993
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97 98 102 104 105 115 150 159 168 177
Tables
1.1 1.2 2.1 3.1 3.2 3.3 4.1 4.2 4.3 5.1 6.1 7.1 7.2 7.3 7.4 8.1 8.2 8.3 8.4 8.5 8.6 9.1 9.2 9.3 9.4
The five dimensions of socialist agrarian reforms and their impact on economic performance 9 Class capacities of major social actors in socialist and post-communist agrarian societies 10 Change in per hectare production of selected crops in Hungary, 1965–82 31 Bulgarian imports and exports by commodity group, 1970–89 46 Mechanization of agriculture in Bulgaria, 1975–92 47 Gross agricultural output in Bulgaria, 1960–89 48 Growth rates of sales of agricultural products to the state by sector in Cuba, 1965–88 66 Cuban food production, 1970–92 74 Emerging mixed agrarian economy in Cuba, September 1996 77 Chinese peasants’ per capita net income, 1978–93 96 Categories of township and village enterprises in China, 1978–93 135 Food production in Vietnam, 1976–92 153 Land, population, and production in Vinh Lac District, 1990–3 169 Dai Dông village statistics, 1993 170–1 Evolution of agrarian systems in the Mekong and Red River deltas, 1930–90 178 Russian agricultural production by selected crop, 1981–94 194 Russian per capita food consumption by selected item, 1985–94 194 Investment in Russian agriculture, 1981–93 195 Unevenness of reform measures in different epochs of Soviet/ Russian history 200 Use of natural and chemical fertilizers in Russia, 1986–94 207 Russian exports and imports of agricultural products and fertilizers, 1991–4 208 Role of agriculture in the Hungarian economy, 1960–95 237 Number of agricultural production organizations in Hungary, 1950–94 238 Yield of major crops in Hungary, 1950–94 239 Indicators of production in animal husbandry in Hungary, 1950–94 240 viii
Tables 9.5 9.6 10.1 10.2 10.3 10.4
Mechanization of agricultural cooperatives in Hungary, 1950–92 Number of employees in Hungarian agricultural cooperatives, 1975–94 Output of selected crops in Bulgaria, 1985–93 Economic decline in Bulgaria, 1989–93 Output on personal or private plots in Bulgaria, 1989–93 Bulgarian exports by selected trading partners, 1985–93
ix 241 242 250 257 258 263
Contributors
Robert Begg is Professor of Geography at the Indiana University of Pennsylvania. He has written extensively on agriculture, the environment, and regional development in Bulgaria. Carmen Diana Deere is Professor of Economics and Director of Latin American Studies at the University of Massachusetts, Amherst. She is past president of the Latin American Studies Association and the author of Household and Class Relations: Peasants and Landlords in Northern Peru (1990) and In the Shadows of the Sun: Caribbean Development Alternatives and US Policy (1990) and co-editor of Transition and Development: Problems of Third World Socialism (1986). Simeon Djankov is finishing a PhD in Economics at the University of Michigan. He is working at the World Bank, Washington, DC, on research into transition economies. István Harcsa is head of the Department for Social Statistics in the Hungarian Central Statistical Office and author of numerous articles on Hungarian stratification, mobility and agrarian change. Imre Kovách is senior research fellow at Institute for Political Sciences, Hungarian Academy of Sciences and vice-president, European Society for Rural Sociology. His publications include chapters in Rural Enterprise: Critical Perspectives on Rural Change (1991) and Eastern European Societies on the Threshold of Change (1994). He published an article in Sociologia Ruralis (1994) and is the author of the book Embourgeoisement Theories and Processes (1994). Mieke Meurs is Associate Professor of Economics at American University. She has published in a wide variety of journals, including Comparative Economic Studies, Politics and Society, Soviet Studies and World Development. She is currently writing a book on institutional evolution in East Central Europe. Joshua Muldavin is Assistant Professor of Geography at UCLA. He conducts research on the ecological impact of decollectivization in China. xi
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Contributors
Sergei Nickolsky lives in Moscow, conducts research on agrarian reform in Russia and has been the advisor of the Russian government on agrarian policy since summer 1996. Mark Selden is Professor of Sociology and History at Binghamton University. His books include The Political Economy of Chinese Development (1993), China in Revolution: The Yenan Way Revisited (1995), and Living with the Bomb: American and Japanese Cultural Conflicts in the Nuclear Age (1997). His co-authored book Chinese Village, Socialist State (1991) received the Joseph Levenson Prize of the Association for Asian Studies. Iván Szelényi is Professor of Sociology at UCLA and Member of the Hungarian Academy of Sciences. He is author or co-author of The Intellectuals on the Road to Class Power (1979), Urban Social Inequalities Under State Socialism (1983), and Socialist Entrepreneurs (1988), which was recipient of the C.Wright Mills Award. He co-edited Cities after Socialism (1996). He contributes to American Sociological Review, American Journal of Sociology, Theory and Society, and other journals. Michael Watts is Director of the Institute of International Studies and Professor of Geography and Development Studies at the University of California, Berkeley. His books include Reworking Modernity (1992), Liberation Ecologies (1996), and Silent Violence (1983). He has published on a number of issues pertaining to African and South Asia development, and is currently examining recent changes in Californian agriculture.
Preface Iván Szelényi
This book is the product of a collaborative research project, entitled Agrarian Transformation in Socialist Societies: Collectivization and Decollectivization in Bulgaria, China, Cuba, Hungary and the Former Soviet Union, which began in 1991 with funding from the MacArthur Foundation. The principal investigators involved in the project were Carmen Diana Deere, Philip Huang, Mieke Meurs, Teodor Shanin, Iván Szelényi, and Michael Watts. Our research had several aims. First, we wanted to set the record of socialist collectivization straight by studying collectivization strategies in different countries and examining what collectivization achieved and where and why it failed. Since the fall of communism the experiments with collectivization have often been dismissed as ‘dismal failures.’ We find this generalization simplistic, and we hope our study will offer a more balanced evaluation of collectivist and private methods for organizing agriculture. One of our main aims has been to dispel the myth of a single ‘collectivistic model,’ and in the process, to illuminate the diversity of people’s actual experiences with collectivism. We also wanted to show that—despite the economic crises that have occurred in so many socialist economies— collectivization proved successful in places. The authors of this work do not advocate the collectivization of agriculture; neither do we advocate privatization. We document the often excessive human toll that socialist collectivization imposed on people under communism, and we report the distortions and inefficiencies inherent in different versions of agrarian collectivism. It is also our aim, however, to show as objectively as we can the other side of the balance sheet: the success of agrarian collectives under certain conditions in fostering equality, reducing rural poverty, and, at least initially, creating some agricultural growth. Next we decided to monitor the ongoing transformation of agrarian systems in the 1980s and early 1990s. We made an effort to contrast the rather radical or ‘revolutionary’ changes which took place in Russia and Eastern Europe after 1989–91 with the earlier reform attempts in those countries and the ongoing reforms in countries that continue to proclaim themselves ‘socialist’ in 1995, hoping to learn why reforms in Russia and Eastern Europe—but not those in China and Vietnam—culminated in system breakdown. Did this collapse prove that socialism is ultimately unworkable, so that attempts to reform it are bound to fail, or could the collapse have been the result of a number of specific policy mistakes, reform measures that were excessively cautious or poorly sequenced? xiii
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We also wanted to study the effects of radical policies implemented after the fall of communism in Russia and Eastern Europe. We tried to understand to what extent the collapse of agrarian/cultural production which followed postcommunist transformations might prove to be ‘creative destruction.’ Would the post-communist decline in production and employment eventually create conditions conducive to dynamic and sustainable growth in food production and in the rural economy generally? Or is this transformational crisis simply a destructive process that threatens to transform the ‘Second World’ into the ‘Third World’? Are the former socialist economies which operated to a large extent outside the capitalist world system now being integrated into the capitalist world system as part of its new periphery? Other questions that intrigued us had to do with the contrast between the Russian and East European experience, on the one hand, and the East Asian experience, on the other. While socialist economies generally, and agriculture in particular, faced apparently analogous challenges, in Eastern Europe the outcome of collectivization was collapse, while East Asia, China, and Vietnam experienced unprecedented economic growth. How could this be? Are China and Vietnam doing something ‘right,’ while Russia and Eastern Europe suffer the enduring consequences of ‘wrong’ policy decisions? Or alternately, is it possible that Russia and Eastern Europe have simply advanced farther in a process, so their economic collapse foretells the ordained future of Chinese, Vietnamese, and Cuban socialism? Finally our third task was to bring social scientists, economists, historians, sociologists, and political scientists together with scholars who study the environment, for we wished to assess the environmental impact of collectivization and decollectivization. What was the environmental record of collectivism? To what extent had neglect of the environment caused, or at least contributed to, the collapse of agrarian collectivism? Was it possible to find collective forms of agricultural organization which achieved sustainable growth? Neo-classical economists theorize that market-integrated economies deal with externalities in general and with the problems of the environment in particular more efficiently than socialist redistributive economies, and thus they assume that marketization will help resolve the ecological crises that have emerged in so many socialist countries. Is their optimism warranted, or would the kind of marketization which characterizes the transition from socialism to capitalism aggravate the already gloomy ecological situation in these countries? In order to find answers to these three questions, we cast our investigation in a comparative and historical framework. We organized five country teams: Carmen Diana Deere directed the work in Cuba, Philip Huang was responsible for China, Mieke Meurs for Bulgaria, Teodor Shanin for Russia, and Iván Szelényi for Hungary. In each country we worked with a team of several scholars, natives, and residents. Michael Watts organized an ‘ecological panel,’ an international group of environmental experts. This group met twice with the national teams; they also acted as commentators on other aspects of the project, conducted their own research,
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and wrote papers on the ecological problems of collectivistic and private agrarian systems. Between 1991, the first year of the project, and 1995, we met three times in conferences. The first such conference took place in Ráckeve, Hungary in June 1992; there we discussed the diverse histories of collectivization in the five countries our national teams were studying. The papers presented at that conference after several rounds of revisions were edited as a volume by Mieke Meurs. This volume, entitled The Many Shades of Red, is being published by Rowman and Littlefield. The second conference took place in Shanghai in 1993 and focused on the reform of socialist agriculture and the experiences of decollectivization. I was asked to take responsibility for editing a volume on this topic: the result is Privatizing the Land. This book contains several of the papers presented at the Shanghai conference. In addition, I solicited contributions from Sergei Nickolsky, Mark Selden, Joshua Muldavin, and Michael Watts. Finally in June 1995 we met at a third conference in Havana. There our main task was to assess systematically the environmental impact of collectivization and decollectivization. The environmental papers presented at the Havana conference are now being collected and edited as a volume by Michael Watts. In brief, the results of the ‘Collectivization and its Alternatives’ project have been organized and gathered in three volumes which accompany and complement each other. Privatizing the Land is the first book in this series. We wish to express our gratitude to the MacArthur Foundation for its generous support, without which these books would not have been written. The ideas expressed in the book, however, are those of the authors, and the MacArthur Foundation is in no way responsible for them.
1 Introduction A theoretical framework Iván Szelényi
This book studies socialist agrarian reforms and the ‘revolutions’ and subsequent transformational crises that characterize post-communist agrarian systems. TOWARD A THEORETICAL FRAMEWORK: CONTRADICTIONS AND REFORM SCENARIOS OF SOCIALIST ECONOMIES In this section I will try to achieve two tasks. First, I use the framework presented by János Kornai in his book, The Socialist System (1992). Kornai identified five ‘dimensions’ in which socialist economic reforms have been attempted. I find his scheme extremely useful. It gives us a check-list of questions to address: which problems was a country ready to face at a given time? How did policy makers sequence various reform measures? How did multi-dimensionality and the sequencing of reform measures affect the economic performance of these economies? Second, Kornai’s scheme is a great help to researchers who wish to identify what problems and issues economic policy makers face when they try to ‘fix’ the contradictions of collectivized systems, but it often neglects to take account of human agency, and as a sociologist, I would like to bring agency into our analysis. I will therefore offer a scheme outlining the social structure of class relations. I assume that the outcomes of struggles involving different social actors are historically contingent. The differences in class capacities of different actors will affect what course of reform is taken, whether reform is attempted at all and whether there is a shift from reforms to revolution, that is, a shift away from collectivism. The five dilemmas socialist reformers face Kornai tried to explain the major economic problem of socialist economies, namely the reproduction of chronic shortages and resulting economic inefficiencies which lasted for some thirty years. In The Socialist System he provides a synthesis of his earlier work and identifies five factors, which are responsible for shortages in and eventual failures of socialist economies:
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Over-centralization Socialist economies suffer from a lack of sufficient information in the center where decisions are being made and absence of proper incentives at the point of production (Kornai 1959). In the case of agriculture, this can lead to the establishment of irrationally large farms where laborers lack sufficient autonomy to make decisions and feel little incentive at the family level to work hard and carefully. The chapters by Mieke Meurs and Carmen Diana Deere focus on the constraints imposed on collectivized agrarian systems by excessive centralization. Rushed growth In virtually all socialist countries, at least for certain periods of time, there is a clear tendency to give preference to the development of industry, in particular heavy industry, and to generate resources for this sector by overtaxing and exploiting the agrarian sector. Nickolsky’s major claim about Russia is that the main reason for the inefficiency of Russian agriculture can be attributed to the fact that agriculture was forced to subsidize industrial development. Joshua Muldavin, while generally quite sympathetic toward collectivism, also acknowledges that Maoism may have erred in its overemphasis on industrial development. Disequilibrium of prices Prices are administratively fixed, which means they do not reflect real costs and often conceal subsidies which cannot even be calculated. In the case of agriculture, this usually creates a price ‘gap’ between input and output prices. Prices of industrial products for agricultural use in the classical socialist model are often overpriced, while agriculture has to sell its products under market prices. Nickolsky points out how important ‘social justice’ is for agrarian producers: in his view, the main reason for the malfunctioning of agrarian collectives can be explained by the price system which devalues agrarian output prices, while overvaluing input prices. Muldavin does not believe that the changes in property relations after 1977 in China had much to do with the growth of agrarian production; instead he argues that an increase in agrarian output prices, which consequently reduced the gap between prices of industrial goods and food-stuffs, helped boost food production and productivity in the agrarian sector. Public ownership It is not perfectly clear whether state monopolies over the means of production and redistribution in capital accumulation, in addition to other forms of collectivization, cause dilemmas for socialist economies. The first three factors listed above were accepted as ‘problems’ by most economists who studied socialist economies up to the 1960s. It is far less obvious why and how state ownership contributes to the reproduction of chronic shortages, for state ownership appears
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to be one step beyond the more apparent causal links: over-centralization, rushed growth, and a disequilibrium of prices. In this book, the chapter on Hungary identifies the absence of property reform as the main reason for the failure of Hungarian economic reforms, though Muldavin, for instance, argues that in China there was no need to change property relations. Nickolsky, while accepting the necessity for changing property rights, believes this kind of reform can come only late in the game, and his main criticism of the Russian economic policy of the 1990s is that it attacked the problem of property without solving other problems first. Party state In The Socialist System, Kornai points out that reforms of property relations depend on political reform. He argues that state ownership is based on the party state; as long as the party state exists, it is unimaginable that sufficient property reform can take place. In Kornai’s view, the economic problems confronting a socialist economy will be solved only if reform moves effectively and simultaneously in all five directions. In other words, the past failures of various reform attempts can be largely attributed to the incomplete nature of the reform; in each case, reformers tried only to ‘fix’ one or two factors at a time, while neglecting others. This volume proposes to test the hypothesis empirically: by comparing cases of piecemeal reform with one another and with cases where reform measures were more radical, where those involved actually sought not reform, but revolution. Contributors will assess the differences in the economic, social, and political outcomes of these different strategies. For in the six countries studied, a great variety of reforms have been attempted since the mid–1970s. Some countries were selective and implemented reforms in only one or a few ‘dimensions,’ while others tried moving along all the fronts simultaneously. Those countries which applied reforms selectively often implemented their measures in sequences that varied from one nation to the next. There was also substantial variation in the economic performances of the different countries: some did very poorly, others were spectacularly successful. For example, one finds that a close analysis of the Vietnamese economic transformation raises questions about some parts of Kornai’s thesis. Michael Watts in his chapter on Vietnam and Mark Selden for China both show that dynamic growth and far-reaching economic reconstruction were possible without much political reform—an outcome that challenges one of Kornai’s fundamental assumptions, namely that so long as the one-party state is in power, no effective reform is possible. Watts goes as far as asking the question: is a strong party state not the precondition for the successful transformation of a collectivist economy into private capitalism? Nickolsky in his chapter raises the issue of sequencing of reform measures. He questions whether it is possible to conduct reform in all five dimensions at the same time—instead he speculates about differential sequencing of reform
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measures, which deviates in fundamental ways from Kornai’s approach. For instance, he insists that a ‘strong’ state has to be maintained in the early stages of a reform to guarantee a more equitable allocation of resources between agriculture and other sectors of the economy. He argues that creating a fairer distribution of resources is necessary before one can proceed to democratization or to changes in property relations. Almost all the authors in this volume, certainly Mark Selden, Carmen Diana Deere, Mieke Meurs, and Michael Watts, believe that a diversity of property forms, even hybrid property relations (a combination of cooperatives, state farms, private ventures), has contributed to improvements in economic performance in the countries studied. Interestingly, it is Joshua Muldavin, who is most critical of the Chinese reforms and most sympathetic to collectivistic systems, who most nearly approaches what I call Kornai’s ‘all or nothing’ position. Muldavin believes that the ‘hybrid form’ of property relations combines the worst of both worlds and argues that a ‘pure capitalist system’ would be preferable to the current Chinese hybrid economy, though his personal preference would be for a ‘pure’ collectivistic system of production. Contributors subject Kornai’s ‘all or nothing’ assumption to an empirical test in order to establish what combinations and sequencings of reform measures have produced the best economic performances in the countries studied here and to assess the socio-political outcomes in each case. And we look to see if general transformational patterns do emerge. For those who study postcommunist transformation, probably the most interesting question to be asked has to do with the density of a country’s reform efforts. Is the typical postcommunist transformational crisis the result of attempts to deal with too many dimensions at the same time, or is it the result of failing to plan and implement a sufficiently comprehensive reform package? Furthermore, if the destruction of productive capacities results from the implementation of an excessively comprehensive reform package, can this destruction be seen as ‘creative destruction,’ a kind of shake-up which must take place before restructuring of the economy can commence, which therefore lays the foundation for future dynamic growth? Reforms and revolutions: by whom, for whom? A sketch of social structure in socialist and post-communist societies For sociologists, a responsible study of economic reforms or full-scale economic revolutions cannot be conducted simply or even primarily by asking sets of questions meant to identify ‘right’ or ‘wrong’ policy choices. Whether a society enters a reform or revolutionary trajectory and what the characters of those reforms will be often depends on the actors who negotiate, or fight, to change certain terms and maintain others. A ‘good’ policy decision may be ‘good’ for some but devastating for others. So the scheme borrowed from Kornai, which focuses on policy dilemmas, must be complemented, by analysis of other significant factors. For instance, one must be alert to relationships between groups in each country: who are the main
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actors, who struggles with whom, and who benefits from a certain economic policy package, from a certain reform or the absence of reform? Who gains if the country moves successfully from reform to revolution? And who loses? At our conference in Havana in June 1995, Mark Selden posed an analogous question when he asked contributors to analyze where the impetus for each reform appeared to be coming from, the ‘top’ or the ‘bottom.’ In his chapter on China, Selden proposes that the impetus toward Chinese decollectivization in the late 1970s and early 1980s was primarily coming ‘from below.’ With this proposition, Selden offers an interesting alternative to Muldavin’s analysis of the same phenomenon. Muldavin sees decollectivization as a strategy of the Chinese technocratic elite, a strategy which, in his view, opposed the interests of Chinese agricultural producers and was therefore resisted by them. Selden sees the initiative towards the household economy and market in rural China coming from below. Mieke Meurs likewise explores relationships between social classes which helped determine the outcomes of economic reform measures. Meurs attributes the failure of the Bulgarian reforms to Communist Party resistance, and she argues that postcommunist attempts by the new politocracy to reinstitute precommunist property relations was successfully blocked by local resistance. AGRARIAN REFORMS IN SOCIALIST ECONOMIES—CROSSCOUNTRY VARIATIONS OVER TIME Agrarian and other economic reforms can be interpreted as attempts to ‘fix’ problems involving one or several of the factors listed above. Why certain policies are adapted will depend on the balance of power within elite groups, or the distribution of power across classes. It appears that policy makers may tinker with any one or all of the first four factors and thus lead their country through ‘reform’ proper, but once the fifth factor is called into play—once the party state is altered—that action always results in revolution. What follows here is a summary of the kinds of reforms that have been undertaken since the late 1970s in socialist societies. No socialist country achieved any significant reform of the party state. In each case, the party state either reproduced itself or eventually collapsed. As noted above, the very fact that political reform did not take place in any socialist country casts some doubt on Kornai’s assumption that in order for reform to be successful, it must proceed in all dimensions simultaneously. Also, judging from the situations in China and Vietnam, strong economic performance is quite possible without the elimination of the one-party state; this evidence conflicts with Kornai’s assertion in his book that the ‘final cause’ of economic inefficiency, or shortages, is in the hegemony of the Communist Party. There is in fact no empirically observable correlation between the nature of political system and economic performance. Some one-party states do well, others do poorly or very poorly.
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I would argue that balanced relationships between major social actors in each agrarian society under study are important in determining the success of each country’s reforms. The more balanced the class capacities of major antagonists in a given system happen to be, the more willing they are to compromise in developing a policy package likely to improve economic performance without violating the principles of social justice too seriously. I present below a schematic summary of the ‘class capacities’ of various significant actors in the countries under study during the relevant time periods. These are of course only hypotheses, and they should be tested by empirical investigations; chapters following in this book provide an early test of this kind. These charts enable us to begin an analysis of situations in individual countries. One notes, for example, that Hungarian agriculture enjoyed great economic success from the mid–1960s until the mid–1980s. In our chapter on reforms in Hungarian socialist agriculture, we argue that this success can be attributed to the fact that Hungary reformed agriculture by attending to each of the first three factors. These reforms resulted in benefits. Up to 1980, Hungarian agriculture was the most successful in the history of socialism. By the mid–1980s, however, the Hungarian economic reform in general and the agrarian reform in particular were deadlocked. Our hypothesis (presented in some detail in Chapter 2) is that this happened because Hungary failed to reform property relations. From the early 1980s onwards, Hungarian economists called for a ‘second economic reform,’ however political power struggles hobbled and ultimately defeated their proposed property reform. Hungary did not move to a socialist mixed economy; specifically, it did not diversify property relations. Little private property was allowed to evolve, which meant there was not much private accumulation of capital. This contrasts sharply with the situation in China during the 1980s, where significant private accumulation was under way. The dynamics of Hungarian agrarian reforms and their eventual failure reflected the changing balance of power in Hungarian society. During the late 1960s, the technocratic faction of the ruling bureaucratic estate gained a great deal of muscle, which they used to press for the 1968 reforms. Their efforts were also rather obvious in the agrarian sector. As Pál Juhász (1983) demonstrated, by the late 1960s and early 1970s a new agrarian intelligentsia appeared on the scene and took over the power in recently collectivized Hungarian agriculture. The new agrarian technocratic elite had close ties with the new technocratic elite in the party and state administration. As a result they were rather successful in securing the inflow of major funds into agriculture. Their allies in higher level party and state organizations trusted them. They were willing to decentralize decision-making power to the new agricultural intelligentsia while at the same time centralizing the agrarian organizations, thus practicing ‘centralized decentralization.’ Note that the nature of changes in Bulgarian agriculture, as described by Meurs, was not unlike the pattern in Hungary—amalgamation, mechanization, increased capital intensity—though the results in Bulgaria were somewhat disappointing. The technocratic reforms of Bulgarian agriculture were only sufficient to stop that
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country’s agricultural decline, which had begun by the late 1960s; reforms failed to generate growth similar to that in the Hungarian collective sector. In Russia too, as Nickolsky reports, familiar patterns of reform can be identified. A new management style was introduced and a major influx of investment capital poured into agriculture since the early 1970s, efforts which have produced positive results, as they did in Hungary. In fact, in all three countries the directions of change were similar during the 1970s, involving amalgamation of smaller units into larger ones, fast growth of chemical use and mechanization, and a major influx of investment capital. As a result, agricultural production grew rapidly in all three countries. Such a technocratic reform of the cooperatives was highly rational from the point of view of the agricultural technocracy, but agrarian producers, interested in overall performance, viewed it more dubiously. In fact, the reforms made little sense to groups interested in agricultural sustainability. It was not reasonable to experiment with highly capital-intensive agricultural development in low-wage countries, where natural advantages lay in their labor-intensive cultures. By the early 1980s, the costs of agricultural production in the large estates had become rather prohibitive, and the ecological costs of heavy chemical usage began to appear. The Bulgarian, Hungarian, and Russian large estates depended too much on central state subsidies, operated with soft budget constraints. In exchange for receiving central subsidies, they were expected to help subsidize the village by offering a high level of employment to village dwellers and securing provisions for the whole population. In the long run, this strategy proved unsustainable. Eventually, the agrarian technocracy came to ask for a change: they would accept hard budget constraints if in exchange they could be freed from the obligation of offering employment to all. Thus, the agrarian technocracy by the late 1980s was ready for privatization: they began to see the opportunity to increase their autonomy together with the hardening of budget constraints. Hungary still performed more efficiently and for a longer period of time than Russia or Bulgaria, for the ‘Hungarian agricultural miracle’ stood on ‘two feet.’ That is, the Hungarian bureaucratic old guard followed a dual strategy that involved making concessions to the agricultural technocracy and also to the peasant-workers, for Hungary’s old guard opened up the second agrarian economy to a much greater extent than did policy makers in Russia or Bulgaria. In Hungary, even the former middle and rich peasants who were squeezed out of the leadership of co-ops during the early 1970s did not then fall into subordinate positions: many of them became ‘socialist entrepreneurs’ (Szelényi 1988) who built profitable family mini-farms. The small-scale family production and technocratically managed large estate production coexisted peacefully, even symbolically. As Meurs shows, Bulgaria tried the Hungarian experiment during the 1980s with some success. However, since the Bulgarian agricultural producers never had the class capacities of their Hungarian colleagues, they could not win so many concessions from the old guard. This coexistence of small-scale family production and the latifundia, however, proved to be only temporary in all three countries. The interests of the ‘socialist
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entrepreneurs’ and ‘socialist managers’ were ultimately bound to conflict. Since the minifundia of the socialist entrepreneurs were supposed to be labor intensive and small scale, capital accumulation was discouraged; thus without a fundamental change in agrarian policies, this sector could not become the driving force for national agrarian development. The analysis so far agrees with Kornai’s ‘all or nothing’ assumption: one could argue that in all three East European countries mentioned, the agrarian systems eventually failed since the reforms remained ‘half-baked.’ However, if one examines patterns apparent in Tables 1.1 and 1.2, it is possible to reach a more complex understanding of why the reform worked in Hungary for a period of time, and why it was much less successful in Bulgaria and Russia. In this way, we also can gain better understanding of why certain policies of reform were pursued in some countries, but not in others. For instance, I attribute the relatively significant and lasting success of Hungarian reform to the ‘checks’ restraining the power of the bureaucratic old guard. Not only did the Hungarian technocracy have more clout than its colleagues in Bulgaria and Russia, but also agrarian producers had greater class capacity. The fact that family production was less important in Bulgaria and Russia (though there has been a stronger family farming tradition in Bulgaria than in Hungary) may have a lot to do with the fact that the class capacities of agrarian producers were more limited in Bulgaria and Russia (no memories of a 1956 revolution haunted their bureaucrats), and the old guard in each country was less threatened by the technocracy, and so less inclined to try playing agrarian producers against their technocratic opponents. Moving further along to analyze the experiences of East Asian socialist countries, one finds additional strong evidence to suggest that Kornai’s ‘all or nothing’ hypothesis is at least incomplete. Both China and Vietnam are instructive for our hypotheses concerning class capacities: the very fact that China and Vietnam did not adopt the ‘corporate’ system, the technocratically rationalized latifundia system, as a response to their agrarian problems can be attributed at least in part to the relative weakness of their technocracies and the relative power of their agrarian producers. China’s and Vietnam’s economic successes are closely linked with each country’s ability to rearrange the bundle of property rights, first in agriculture, later in other sectors of the economy. China created a multiplicity of property forms, which include private property, joint enterprises, village property, state property, and mixed forms including foreign-invested property. In fact, China generated dynamic growth in an economy where there was very little private ownership of the means of production, but where there existed instead a great diversity of mixed, or hybrid, property forms in which collective and state property remained pivotal. China implemented reforms in other dimensions as well. It went at least as far as Hungary did in decentralization; it abandoned the excessive emphasis on heavy industry; and it commenced its agrarian reform with a major price readjustment.
Table 1.1 The five dimensions of socialist agrarian reforms and their impact on economic performance
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Table 1.2 Class capacities of major social actors in socialist and post-communist agrarian societies
Of course, the processes of economic reform in China and Vietnam were not identical. Comparing these two countries, one discovers that the sequencing of reform measures may take different forms while having equally impressive economic outcomes. Michael Watts reports that continued excessive taxation of the agrarian sector in Vietnam has not prevented a dynamic growth of food production. In China, both Muldavin and Selden found a reduction in the state’s extraction of the surplus from agriculture and an equalization of incomes in urban and rural areas, at least for the first few years of post-1977 reforms. They both point out that the most dynamic growth in Chinese agriculture occurred between 1977 and 1982, before decollectivization proper, in a period when families, while accepting more responsibility for production tasks, still operated within the framework of communes. Furthermore, as Watts notes, Vietnam implemented a property reform which was rather different from the Chinese: Vietnam went much further in re-establishing private ownership in the countryside. Despite these differences, the performance of the agrarian sector in the two countries seems to have been very similar. Both are great success stories. We take this as evidence that economic performance depends on historically specific conditions; neither private property nor any other policy measure or economic institution has privileged status when one attempts to explain why one economic system works, while another fails. An ‘all or nothing’ hypothesis predicting that socialist economies or mixed socialist economies governed by one-party states must fail will be challenged by specific examples. We are bound to notice that neither China nor Vietnam has implemented major political reforms so far, yet political stasis has not prevented these countries from achieving, since the mid–1980s, what may very well be the highest growth rates in the history of agriculture.
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If one were to analyze the case of Cuba in this context, guided by Kornai’s framework, one would be tempted to claim that it is the incompleteness of the Cuban reforms which accounts for the poor, or at best fair, performance of the economy. As Deere points out, Cuba was the ‘reluctant reformer’—the Cuban leadership resisted the temptations of reform the longest, and when they began to implement reforms, they did so in a rather inconsistent way and only under external pressures. Did Cuba need reform at all or did Cuba have a wellfunctioning agrarian system which was forced to change in response to the US embargo and the withdrawal of Soviet aid? Deere finds evidence of economic successes in Cuba before the fall of the USSR, though it remains unclear to what extent Cuba’s problems were either created by US embargo or camouflaged by Soviet aid. On balance, the performance of Cuban agriculture seems at best underwhelming. During the 1960s and 1970s there was substantial growth and—vital for a formerly monocultural economy like Cuba’s—diversification in food production. However both growth and diversification were heavily dependent on aid from the former COMECON (Council for Mutual Economic Assistance) countries, not just the Soviet Union. In fact, several of our Cuban colleagues warned us not to attribute the need for reform in Cuba today to international pressures and asserted that the inefficiencies of Cuban agrarian system were ‘covered up’ by excessive COMECON aid. As Deere demonstrates, by the early 1990s Cuba gave up the ideology of the superiority of state farms and began to encourage the formation of cooperatives; whether this change was prompted by international pressure or internal needs is difficult to judge. Deere interprets this transformation as a promising sign for the future indicating that Cuba may now move towards a genuinely cooperative system, rather than following the destructive decollectivization policies of Eastern Europe. It should be noted, however, the co-ops Deere describes in Cuba today in some ways resemble the unreformed kolkhozes (collective farms) of the Soviet Union or Eastern Europe during the 1950s and before. The Cuban cooperatives receive strict planning targets both in terms of production and marketing; members cannot leave the co-ops with their land at will; the remuneration of co-op members resembles the old kolkhoz ‘work-unit’ system, as it offers little room for subcontracting and family responsibility, which means that those incentive systems which generated growth in China or in reform socialist Hungary are not functioning in Cuba. This is certainly a kind of reform, and since it moves away from bureaucratic structures, it promises to achieve somewhat greater decentralization, but it is certainly a very modest reform so far. In the fall of 1994, farmers’ markets in Cuba were reopened, and this can be seen as another important step in the direction of reforms. It remains to be seen whether these markets will substantially improve the supply of food and whether the Cuban authorities will maintain their commitment to these markets. The past record is mixed: as Deere shows, farmers’ markets were allowed to operate occasionally in the past, but as soon as the food supplies increased, authorities were likely to shut them down again. Cuba offers strong evidence for theorists who argue that classical, ‘pure’ collectivism is in need of reform.
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THE CRISIS OF POST-COMMUNIST AGRARIAN TRANSFORMATION In the years from 1989 to 1991, the post-communist societies of Eastern Europe and the former Soviet Union entered an economic crisis which may be the most severe in modern history; statistics indicate it is deeper and wider than the Great Depression was in 1929–33. Between 1988 and 1993, the gross national product (GNP) in this region of the world dropped by some 20 percent, industrial production fell at least by 30 percent, unemployment rates climbed well over 10 percent, and double- and even triple-digit inflation rates made themselves felt. The decline of agricultural production was also unprecedented. Between 1988 and 1995 in Bulgaria total agricultural output probably fell ‘only’ by some 20 percent. In Hungary, the fall was probably around 40 percent, and in Russia the decline is about 30 percent. Measured by the decline of animal stock—a measure that is particularly important and lasting in its impact—the effect of decollectivization was more devastating than the effect of collectivization! Most literature which deals with the post-communist phenomenon conceptualizes this entire process as ‘transition to market economy and democracy.’ But David Stark (1992) questions the accuracy of the term ‘transition’ and suggests substituting it with the notion of ‘transformation.’ Stark persuasively argues that the term ‘transition’ is teleological, for it assumes we know the end state towards which the societies we observe are heading. In his view, it is inaccurate to imply that new institutions are created on the ruins of socialism; instead these institutions are built with the ruins of socialism. Stark calls the change in institutional constellations ‘path-dependent development.’ This implies that the transformation that East European societies experience will be decisively shaped by the historic ‘path’ they were on at the time of the ‘break,’ in 1989 or 1991. Chapters in this book follow Stark’s recommendations and begin to answer Kornai’s question. Our analysis is guided by the theory of ‘path-dependency.’ Instead of presenting the post-communist years as an epoch of ‘transition to the market economy,’ our aim is to make a contribution to the theory of structural crises, of which the Great Depression and the current post-communist crisis of transformation are the main examples. We offer an account of the crisis of Bulgarian, Hungarian, and Russian agriculture and rural communities in the epoch of postcommunist institutional transformation. In summary I see the following four main causes of post-communist collapse of agricultural production. First, post-communist regimes inherited a problem-ridden economy. Communist political elites walked away from an economic system which was becoming increasingly unmanageable—this may be one of the reasons for the ‘velvet revolution.’ The old elite knew the extent of the problems and had no idea how to deal with them. They lost their will to rule. Second, as Meurs correctly points out, a great deal of decline in agrarian production actually has little to do with the internal restructuring of agriculture. One of the main reasons for the fall in food production was the shrinking of
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international and domestic markets. The crisis of post-communist agriculture is a classic crisis of overproduction: virtually overnight, with the penetration of the worldwide market, economies which had been suffering from chronic shortages for decades suddenly experienced severe over-production as a result both of loss of markets to more efficient producers and economic collapse. Third, the collapse to some extent is caused by a rather doctrinaire application of the neo-liberal ideology of the new political class. The new political class— largely composed of intellectuals—is committed to the ideal of a purist revolution from above. They intend to cleanse society from the sins of communism; and with a phrase that one might describe as inverse-Leninism, they call for the ‘smashing of the socialist state.’ Post-communist societies are driven by ideologies, ideologies of neo-liberalism, ideologies of ‘purification.’ Thus the collapse is the result of intolerance, lack of pragmatism, shock therapy. During the post-communist epoch, the first Hungarian and second Bulgarian governments were ideologically opposed to cooperatives, and for ideological reasons, they tried to destroy existing agrarian organizational structure. Fourth, economic interests may have also helped cause the post-communist collapse. Instead of maintaining a viable public sector and allowing the emergence of a new private sector, all post-communist societies opted for a massive and rapid privatization of all public goods. Those who have the means at such a time are determined to accumulate capital, so that state assets are rapidly transformed into private property, and in a highly inegalitarian way. Those who have the power or position to benefit from privatization have an interest in smashing socialist economic institutions—especially those which have proven viable and profitable. Often, top managers have found ways to privatize a formerly collectivized agrarian system so they could keep their managerial positions; occasionally they even used privatization as a means to accumulate private capital. In retrospect 1989 can be seen as the victory of the technocratic elite. For the agrarian technocracy, 1989 was a dual victory: they not only freed themselves from the control of party and planning bureaucracies, but also succeeded in defeating those whom I called the ‘socialist entrepreneurs.’ In Bulgaria, Hungary, and Russia large-scale production has been retained— though property relations changed: the enterprises were transformed from state or co-op firm into capitalist latifundia—and family farms grow slowly, so that family farmers are unlikely to become major players in the post-communist economic system. It is reasonable to predict that landholding is likely to consolidate with 60 or even 70 percent of the land under the cultivation by the latifundia. Agrarian producers in these countries have expressed little interest in starting up family farms; instead, they generally seem to support the reconstitution of co-ops as modernized, capitalist latifundia, which offer work for some of them and at least pay rent for the land they come to own. These producers are of course rational actors—they operate in institutional circumstances, which are shaped by the agrarian technocracy and their allies. The privatization of the former cooperative sector, as reported in the chapters on Hungary and Russia, was
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completed in a way that assured the survival of latifundia. The common feature of privatization in Russia and Hungary is that the former cooperative or kolkhoz leadership would create small subcontracting firms that then ‘rescued’ valuable equipment by selling it underpriced before or during the co-op auction. By the time the peasants received their land-share, there was not much of any value left. Thus, the agricultural technocracy monopolized the ownership of the means of production, so at least until now it has not even bothered trying to accumulate land of its own. With minimal capital investments, technocrats obtained a virtually complete monopoly over equipment, thus emptying the land itself of value. As a result, they can lease land for nominal fees, and the peasants are even grateful they do so. The post-communist countryside does not look much different from the way it looked under communism. Firm size has somewhat reduced, but it is still latifundium. The equipment used is about the same as it was before. The same people occupy the managerial positions too. The main differences are: change in property rights, from socialist co-ops enterprises were turned into capitalist latifundia; this happened together with a drastic reduction in the number of employees and the liberation of the latifundium from ‘social costs,’ which are now transferred to local governments. By 1997 in Bulgaria and Hungary agricultural production seems to have stabilized, and Russia may be moving into this direction too. Growth promises to be slow; the main limitation on it is market and consumer demand. But in terms of firm size and in terms of who is running agriculture, the dominant trend is pathdependence with late state socialism. CONCLUDING REMARKS: THE MULTIPLICITY OF PATHS FROM COLLECTIVISM The chapters in this volume show that what appears to be a monotonous drift away from collectivism can be seen as a multiplicity of paths, a great diversity of strategies with wildly different social and economic outcomes. Kornai’s scheme concerning different dimensions of reform proves to be an extremely useful way to identify the range of problems collectivized agrarian systems face. His hypothesis, however, according to which economic performance will only improve if reform proceeds in all five dimensions simultaneously, is supported only in part by our case studies. Undoubtedly reform measures have often failed because they were not sufficiently comprehensive or far-reaching. Arguably, in Eastern Europe, and perhaps among the socialist states, the Hungarian agrarian system was the most successful during the 1960s and 1970s because it adopted a reasonably comprehensive package; the country’s economic policy makers harmonized economic growth, greatly decentralized decision making, and did much to implement a rational price reform—neither Russia, Bulgaria, Cuba, China, nor Vietnam can claim to have done as much. Eventually, however, the Hungarian reform lost steam, perhaps because the Hungarian bureaucracy did not dare to
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experiment with changes in property relations; in particular, it resisted the creation of an economic subsystem for private property. Finally, I have little doubt that the gravity of Cuba’s agrarian crisis has a lot to do with Cuba’s ‘reluctant’ approach to reform. It moved toward change very late and even now advances very slowly. At the same time, the performance of the agrarian systems in East Asian socialist countries and post-communist economies casts some doubt on the assumption that a country’s economic success can be explained simply by the comprehensiveness of the reform package and the simultaneity of the reform measures. China and Vietnam did not adopt particularly comprehensive reform packages, and neither one reformed its political system. In some ways, the two countries diverged in their policies: in property reform, for example, they followed somewhat different paths, China remaining closer to a two-tier system, while Vietnam pushed further toward family farms. However both proceeded carefully with marketization, and both distributed land according to exceptionally egalitarian, socially motivated policies rather than market driven policies. They are the real success stories, though as Muldavin reminds us in his chapter, there may be a social and ecological price to be paid for this success. The post-communist countries on the other hand moved ahead on all fronts simultaneously. While their success in creating family farms was very limited, they moved far in transforming former socialist cooperatives into large capitalist enterprises. Still, if we measure them at this time, the social and economic outcomes of their reforms are disappointing, for in all these countries production fell dramatically, employment in agriculture declined sharply, and social inequities increased. I believe that an analysis of the balance of class forces helps to explain why the agrarian transformation in late socialist East Asia and in post-communist Eastern Europe took different paths and why, thus far, they have led to such different outcomes. In East Asia, the intra-elite struggles between the bureaucratic and technocratic factions of the nomenklatura remain deadlocked. This creates the window of opportunity for agricultural producers to expand family production, which stimulates fast growth of production and a rise in living standards. In 1989– 91 in Eastern Europe and in Russia, however, the technocracy defeated the bureaucratic faction and fast became hegemonic, leaving little room for agricultural producers and for family production. The transformation of agriculture took the ‘corporate road’; this led to a rapid decline in employment and a sharp fall in real incomes and consumer demand for agricultural products, resulting in falling production. It would be premature, though, to suggest that late socialist East Asian countries are doing it ‘right,’ while post-communist Eastern Europe are doing it ‘wrong.’ For China and Vietnam it remains to be seen whether their agrarian systems and their reform strategies in general are sustainable at all. They may be, but Muldavin seems to believe they may not. In certain ways, China resembles Taiwan during the 1950s and may successfully follow this path, with capitalism built gradually from below. One can also imagine, however, that the absence of political reform
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will backfire, and that eventually the technocracy here will defeat its bureaucracy, destroying the party state and entering a post-communist path analogous to the one we know from Eastern Europe. Kornai may be right: the one-party state may turn out to be a constraint on economic transformation, so it may only be a question of time before it disintegrates. In the case of East European post-communism, it is also premature to judge whether the remaking of the agrarian system is a failure or whether these painful processes are all part of a creative destruction which lays the foundation for future dynamic growth. It is possible that the post-communist Hungarian land-holding system, for instance, is more rational than the landholding system in Western Europe. The requirement for ‘economies of scale’ may be met, which is not necessarily the case in Austria, Germany, or France, where family farms are excessively subsidized. Making capitalism from the top down may actually turn out to be an efficient method, a way to move from the ‘Second World’ into the ‘First’ without imitating nineteenth-century capitalism and constructing a corporate form of market economy. An alternative hypothesis might be that we see in post-communist Eastern Europe not modernization, but involutionary adaptation. What we see here is not the making of competitive and efficient capitalist agribusinesses, but the growth of postcommunist latifundia, oriented in the long run to extensive production based on cheap labor, limited domestic markets, and an export orientation (in a world market where there is little market for food). Eastern Europe therefore may not be on an evolutionary path towards the peak of the world economy; on the contrary it may be sliding down towards the Third World, into the periphery of the world economy. The future in both parts of the world is therefore rather uncertain. But some things are clear. So far, all countries with formerly collectivized agrarian systems are drifting away from collectivism, and in this process they follow rather different paths from one another, with very different economic and social outcomes. Collectivized systems have to be reformed, but there is no cookbook containing the perfect recipe which tells us how this must be done. BIBLIOGRAPHY Bourdieu, Pierre. 1986. ‘The Forms of Capital.’ In Handbook of Theory and Research for the Sociology of Education, edited by John G.Richardson. Westport, CT: Greenwood Press. Hankiss, Elemér. 1990. East European Alternatives. Oxford: Clarendon Press. Huang, Philip. 1990. The Peasant Family and Rural Development in the Yanggzi Delta, 1350–1988. Stanford, CA: Stanford University Press. Juhász, Pál. 1983. ‘Az agrárértelmiség szerepe és a mezögazdasági szövetkezetek’ (The Role of Agrarian Intellectuals and Agrarian Cooperatives). Medvetánc 1:191–213. Kornai, János. 1959. Over-centralization in Economic Administration. Oxford: Oxford University Press. Kornai, János. 1980. Economics of Shortage. Amsterdam: Elsevier North Holland. Kornai, János. 1983. ‘Bürokratikus és piaci koordináció’ (Bureaucratic and Market Coordination). Közgazdasági Szemle 30 (9): 1025–1037. Kornai, János. 1992. The Socialist System. Princeton, NJ: Princeton University Press. Kornai, János. 1993. ‘Transformational Recession: A General Phenomenon Examined
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Through the Example of Hungary’s Development.’ Discussion Papers no. 1. Budapest: Collegium Budapest. Nee, Victor. 1989. ‘A Theory of Market Transition.’ American Sociological Review 56: 663–681. Oi, Jean. 1992. ‘Fiscal Reform and the Economic Foundations of Local State Corporatism in China,’ World Politics 45 (October): 99–126. ——1996. Rural China Takes Off. Berkeley: University of California Press. Staniszkis, Jadwiga. 1991. Dynamics of Breakthrough. Berkeley: University of California Press. Stark, David. 1992. ‘Path-dependence and Privatization Strategies in East Central Europe.’ East European Politics and Societies 6 (Winter): 17–54. Szalai, Erzsébet. 1992. Gazdaság és hatalom (Economy and Domination). Budapest: Aula. Szelényi, Iván. 1988. Socialist Entrepreneurs. Madison: University of Wisconsin Press. ——1995. ‘The Rise of Managerialism—The “New Class” after the Fall of Communism.’ Discussion Papers no. 16. Budapest: Collegium Budapest. Walder, Andrew. 1994. ‘Corporate Organizations and Local State Property Rights in China.’ In Changing Political Economies, edited by Vedat Milor. Boulder, CO: Lynne Reiner. ——1995. ‘Local Governments as Industrial Firms: An Organizational Analysis of China’s Transitional Economy.’ American Journal of Sociology 101 (2): 263–301.
Part I Reforms Failures and successes
2 The Hungarian agricultural ‘miracle’ and the limits of socialist reforms István Harcsa, Imre Kovách, and Iván Szelényi
Before the post-Maoist turnaround in China, Hungary was the only state socialist country which by the 1970s had created a dynamic agricultural sector. Hungary was the only socialist country where collectivized agriculture eliminated shortages of food, successfully became a food exporter, and created impressive rural affluence. Though collectivization initially caused agricultural output to fall, after 1964–5 production subsequently grew, and by the mid–1970s the agrarian sector was achieving impressive results (Berend and Ránki 1985). The period between the mid–1960s and early 1980s was the most successful epoch of Hungarian agriculture—probably the most successful in its entire history. If we define and measure agricultural production in 1950 as 100 on a comparative scale, then in 1965 the gross production increased to 127, and by 1982 it had reached 226; this level has not been surpassed since.1 The trend for net production figures is similar; setting the 1950 net agricultural production at 100, we find that the measurement reaches about 400 by 1982. The increase in production output coincided with the growth of agricultural commodity production. If the net sale of agricultural goods (both on domestic and international markets) was 100 in 1950, this grew to 144 in 1965 and to 290 in 1982. The production potentials of Hungarian agriculture were impressive even when compared with production internationally. Per acre crops in wheat and corn approached the levels reported during those same years by France, Denmark, the United States, and Canada. Per capita meat production was among the highest in the world. The agrarian sector during the 1970s and early 1980s was crucially important for the whole Hungarian economy. While less than 20 percent of the nation’s workforce was directly involved in food production, about a third of all export revenues in hard currency derived from agriculture. Almost half of Hungary’s agrarian exports went to the West. In terms of per capita value of agrarian exports, Hungary ranked sixth in the world, right after the Netherlands, Denmark, Ireland, Belgium, and France. The success of Hungarian collectivized agriculture reached its peak sometime during the late 1970s and then entered a long recession, culminating eventually in the deep structural crisis of transformation after 1989. Since collectivization in all other countries caused long-term stagnation of production and resulted in chronic food shortages, the exceptional performance of 21
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Hungarian agriculture from the mid–1960s into the early 1980s requires explanations. We also must explore to what extent the long recession of the 1980s was the consequence of mistaken policies, or whether collectivized agriculture simply exhausted its potential, so that decollectivization emerged as the most viable economic option by the end of the 1980s. Chapter 1, following the theoretical work of János Kornai, described the problems impeding socialist economies in general, and collectivized agricultural production in particular, as a multi-dimensional phenomenon. As various economic reforms in these countries were attempted, new dimensions of the problem emerged; consequently, further reform measures were developed and initiated. While all socialist economies experimented with some sort of reform, we will argue that Hungarian agricultural policy was characterized by a unique feature: it introduced reforms simultaneously in different spheres of the agrarian economy. Hungary was the only East European country which around 1968 undertook a triple reform. It decentralized decision making, notably by delegating a great deal of authority to technocratic managers of collective firms, but also by increasing, to some extent, the autonomy of individual agricultural producers. It also harmonized growth, abandoning the accelerated industrialization strategy. Last, it implemented far-reaching price reforms. Free markets, with prices determined by supply and demand, were allowed to allocate a substantial proportion of food items. As Nickolsky shows in Chapter 8, the situation in Russia was very different. In Russia before Gorbachev, the government’s agricultural reform policies either aimed at decentralization, but failed to harmonize growth, or they channeled new resources into agriculture, but relied on centralized agencies to manage the reallocation. Meurs (Chapter 3) reports that in Bulgaria the Communist Party was reluctant to allow much decentralization of decision making power; it continued extraction of surplus from agriculture for industrial development; and it limited price reform. Hungary’s triple reform was not simply the brainchild of an enlightened party bureaucracy, which figured out what is the ‘right thing’ to do at the right time. This rather successful combination of reform measures was implemented as the result of complex social struggles and compromises among different social actors, classes, and factions of elites. Judged in this context, the year 1956 marked a crucially important turning point. Following the Revolution of 1956 and a subsequent period of initial, rather brutal, oppression, the members of the ruling estate in Hungary decided that they did not want to risk another revolutionary confrontation with their people, and therefore turned to compromise and concessions. The Kádár regime followed a strategy of dual compromise: it tried to appeal to the intelligentsia, in particular to its technocratic faction, by offering this group a share in decisionmaking power and some civil liberties. At the same time, it also tried to demobilize and pacify the workers and peasants, initially by making sure that living standards improved, if not swiftly, at least visibly and without interruption. From the mid– 1960s onward, the Hungarian regime showed substantial tolerance toward family business activities which constituted the so-called ‘second economy,’ an attitude
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which, at least in the beginning, most benefited the peasant workers. Since the Hungarian post-Stalinist ruling estate understood that a rising standard of living for the populace was crucial if it hoped to gain and maintain legitimacy, it regarded agriculture as particularly important. To put it simply (János Kádár was a simple man and thought in such terms): people whose stomachs are full are unlikely to go on the barricades, thus food supplies in stores should be abundant. To insure abundant food supplies, it was the bureaucracy’s job to make certain that agricultural producers were encouraged, not discouraged, that prices for their products were set sufficiently high to act as incentives to production, and taxes were set sufficiently low to preclude disincentives. This then was the social base of the triple reform. The bureaucracy delegated substantial decision-making powers to the technocratic intelligentsia, in particular to the young agricultural engineers, who began to take charge of Hungarian agriculture by the end of the 1960s. It also showed tolerance towards peasant workers, as it ceased harassing them for productive successes in their small family firms, and even generated incentives by allowing free-market pricing for food, a system that encouraged peasant workers to produce and bring their products to urban markets (Held 1980). The reform effort was hobbled by two significant—and probably interrelated—limitations however. The bureaucratic estate gave some autonomy to peasant workers and substantial economic decision-making powers to the agricultural intelligentsia, but in exchange it hoped to maintain its hegemonic position in terms of political power. Economic reform and second economy, yes, but political reform? No thank you. The elites assumed that social powers would be balanced according to a triangular design that kept the Old Guard in control of politics, while the new agrarian technocracy managed the collective enterprise, and the peasant workers learned how to live ‘on the side’; this model assumed that property relations would not alter substantially. More petty ownership for peasant workers would have threatened the large estate and the agrarian technocracy. Privatization of the large estates might very well have been met with resistance by the peasant workers and would certainly have been perceived by the bureaucratic Old Guard as a long-term challenge to its political power. As a result, no serious reform of property or politics was attempted. The key hypothesis of this chapter is that the government’s unwillingness to institute property reform—involving either the petty property of the farmers or the private property of the technocrats—undermined the viability of the system, resulting in the long recession of the 1980s and, at last, system breakdown in 1989. China and Vietnam avoided the long recession and economic collapse visited on Hungary; we assume this happened because the class capacities of agricultural producers in those countries were greater and the powers of their agrarian technocracies more limited. In 1989, Hungary took the revolutionary path. Following the defeat of the bureaucracy, the victorious technocracy initiated its preferred property reform: the privatization of former collectives into private latifundia. This transformation will be examined in more detail in Chapter 9. In
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this chapter, we will limit ourselves to asking why the triple reform initially worked, and why and how it lost all momentum by 1980. THE TRIPLE REFORM AND THE SUCCESSES OF HUNGARIAN AGRICULTURE We identify five major causes for the success of the Hungarian agrarian reform. The first and second involve concessions granted by the government to the peasantry, concessions which evidenced a greater tolerance towards family production by the state and which facilitated the development of a more rational method for managing collectivization itself. The third and fourth causes worked to broaden the powers of co-op management, the first through technological advances—the ‘Green Revolution’—and the second through the diversification, as the state allowed collective farms to expand the range of their activities into subsidiary enterprises such as industrial production and service industries. Finally, the expansion of domestic and international markets also played a role in the dynamism of Hungarian agriculture during the period under investigation. Better management of collectivization Rural class struggle in pre-communist Hungary, the land reform of 1945 and the first wave of collectivization Large estates were the economically and sociologically characteristic features of Hungarian agriculture before 1945. Following the emancipation of the serfs in the mid-nineteenth century, the nobility was able to retain about half of the country’s arable land in its latifundia, which relied on the labor of a huge agrarian proletariat. The rest of the countryside passed into peasant control, but the evolution of peasants into family farmers was significantly slowed down by the unequal competition between the latifundia and the peasant household. Though particularly during the interwar years it appeared possible that the nation’s peasants might evolve into more fully independent farmers, at last the caste-like division of Hungarian rural society into landlords and peasants stymied progress of this kind.2 Under these circumstances, the most explosive social conflict in Hungary from the late nineteenth century onward was the rural class struggle, in particular the competition between the agrarian proletariat and poor peasants for land. Thus during the interwar years the future of Hungarian agriculture became the subject of intense controversy. A strong populist movement advocated radical land reform, calling for the elimination of large estates populists regarded as semi-feudal. Populists of the interwar years believed in a ‘Third Way’: they wished to dismantle the estates of the nobility, but they were also opposed to Soviet-style collectivization. They argued that either one of these forms of property ownership would accelerate the proletarianization of the rural population, and advocated, instead, methods they believed would encourage the ‘embourgeoisement’ of the peasantry, their
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transformation into efficient mini-farmers, or cooperative farmers, in a system of intensive agriculture, called by some ‘Garden Hungary.’ Opposing the populists, theorists of the latifundia argued that radical land reform would economically destroy Hungarian agriculture. They saw proletarianization as an inevitable trend, and they advocated not the dismantling, but the modernization of the large estates.3 Politically the populists during the inter-war years were a mixed bag. Some were closely associated with the political right, even extreme right (Dezsö Szabó, László Németh), while others had left-wing sympathies (Ferenc Erdei, István Bibó, József Darvas, Gyula Illyés, Péter Veres) (Némedi 1985). The Left, particularly the communists, played a careful game. They shared the anti-feudal sentiments of the populists, and even if they would have been attracted to the idea of Soviet-style collectivization, they were careful not to express this publicly. In 1919, the Hungarian Soviet Republic had lasted only a few months, and among the many reasons for its fall were the intolerant policies it employed in dealing with the peasants and its aggressive collectivization of agriculture. Learning from that example, the communists tried to form an alliance with the populist Left, and thus they supported the program of radical land reform at the end of the Second World War. Indeed, in 1945 a radical land reform was implemented in which the Communist Party played a crucial role. The land reform won broad political support, because advocates perceived the Second World War defeat as the defeat of the Hungarian gentry, the landed aristocracy. Land reform was carried out with genuine revolutionary enthusiasm, marking one of the greatest social transformations in the history of this country. The social structure of the countryside was altered overnight, as the latifundia, with the exception of a few state farms, disappeared, and the proportion of small agricultural producers, which had represented only 27 percent of the population in 1941, jumped to 43 percent in 1945 (Donáth 1969). Most land appropriated during this reform went to the former landless agrarian proletariat.4 Due to the large numbers of the rural proletariat, land-grants were relatively small—the average size for a land-grant was 5.1 acres—and thus the number of very small farms in Hungary increased rapidly. While for a short time after the dissolution of the latifundia, Hungarian agriculture made impressive progress, by 1948–9 it became obvious that communist support for the land reform was a tactical maneuver. The government, which was gradually brought under communist control, exerted little effort to create conditions that would enable the proper functioning of the new small farms. No credit was made available. Small producers were struggling for survival, and middle peasants found it impossible to expand their production (Szakács and Petö 1984). After 1948, collectivization became the policy of the Communist Party and the government. The first cooperatives were formed quite voluntarily, typically by former landless agrarian proletarians or poor peasants. Lacking proper credit, capital investment, and managerial expertise, increasing
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numbers of agricultural workers soon realized that they could cope better in cooperatives, and by 1948 they had created almost three hundred collective farms. After 1948 the process of collectivization was accelerated. A great deal of pressure was put on middle and rich peasants and as a result by 1952 almost 300,000 individuals worked in 3,632 cooperatives. At the peak of this first wave of post-war collectivization, about 40 percent of the land was cultivated by state farms and cooperatives. The years between 1953 and 1960 constituted a period of hesitation and transition. During the summer of 1953, Imre Nagy formed the first reformcommunist government in Hungary. Nagy, who was of peasant origin himself and who managed the 1945 land reform on behalf of the Communist Party, adopted a much more peasant-friendly policy. As policies kept fluctuating between 1953 and 1956, some of the co-ops were allowed to break up. Thus the number of co-op members decreased from its peak of 290,000 in 1952 to 193,000 in 1953, and then to 175,000 in 1954, before it started climbing again— to 253,000 in 1955—following the initiation of a neo-Stalinist program (Szakács and Petö 1984). The year 1956 was a black year for the co-op movement. As a result of the uprising of 1956, more than half of the co-ops were dissolved, and membership in cooperatives fell to under 100,000. After the uprising was crushed, the Kádár regime tried to pacify the countryside. However, its agrarian policy fluctuated as a result of internal struggles between government elites and in response to changes in the international situation, particularly changes in Soviet politics (Berend 1983). Generally, during this time the communist government applied relatively little pressure against the peasantry to force them into collectivized enterprises. As a result, while a number of co-ops which had been dissolved in 1956 reorganized themselves, the collective sector remained essentially stable and cultivated only about 10 percent of the arable land. The second wave of collectivization, 1959–60 After early and devastating experiences with collectivization during the early 1950s and almost a decade of shifting agricultural policies, the Hungarian regime adopted a pragmatic policy of collectivization in 1959–60. The Hungarian regime began to push towards recollectivization—first rather quietly—as early as 1959. During that year, the number of co-ops jumped from 2,755 in 1958 to 4,158, and the membership increased from 140,000 in 1958 to 548,000. The process was basically completed in 1960, when co-op membership approached 1 million. While official pronouncements emphasized voluntarism, substantial pressure was put on the peasantry to join the collectives. Some 4,000 activists invaded the countryside, and these collectivization brigades essentially did not leave a village until every resident had joined the collective. Though these enforcers stopped short of implementing massive deportation and imprison-ment5— features of the first collectivization drive during the early 1950s—they employed a variety of coercive methods which, if not life-threatening, were firm enough to
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notify the Hungarian peasantry (which had just experienced the bloody suppression of the 1956 revolution) that resistance would serve no purpose. Thus, in a relatively short period of time, using relatively little force, the government firmly guided agricultural workers either to join cooperatives or to abandon their land and escape to jobs in urban industry. While in 1958, the country’s peasant population still numbered 1.5 million, this number fell to 150,000 by 1963. By that time, half a million people had left agriculture for good and the rest had become co-op members (Szakács and Petö 1984). Despite the rapidity of the change and—to put it mildly—the thinly veiled coercive character of this move to collectivize Hungary’s agricultural sector, no dramatic decline in agricultural production occurred. For instance, the value of gross agricultural production was 82,000 million forints (HUF) in 1958 (measured in 1968 prices). This increased to 85,000 million HUF in 1959 and only slightly declined, to 80,000 million HUF in 1960 and to 79,000 million HUF in 1961, before it started climbing again and continued to mount from that point onward, surpassing the 1959 production peak as early as 1963.6 Most commentators agree that the measurable, initial success of collectivization can be largely attributed to new methods and, in particular, to the Hungarian regime’s cultivation of a reasonably broad social base.7 Previously, most collectivization initiatives were implemented despite the strong opposition of the rich and middle peasants; this was true in 1930s Russia and 1950s Hungary. Collectivization was represented by its advocates as part of the larger class struggle against the kulaks. In 1960, however, the Hungarian regime consciously tried to win the support of the middle peasants for collectivization. Though the middle peasants may have lacked enthusiasm for the proposed kolkhozes, they understood that the regime would continue to push collectivization, that this drive might become ruthless if the government encountered resistance, and that landowners therefore had little choice but to join the cooperatives. Some of them even accepted managerial positions; a number of the new cooperative presidents and other managerial personnel were originally well-to-do peasants who had the skills to run relatively large agrarian firms. Especially in larger settlements, in agrarian cities, the regime even allowed new co-ops to retain the shape and size of former peasant holdings, relying on kinship networks to help bind and define the new enterprises (thus it happened that occasionally middle and poor peasants would form separate cooperatives in the same area). The success of collectivization also resulted from plainly generous government policies towards the collectives and agriculture. In 1964–5, for instance, most of the debt the co-ops had accumulated immediately after collectivization was written off. Also, the state invested significant funds in agriculture; by the end of the 1960s, 19 percent of all state investments were directed into agriculture.8 In addition to these fairly direct methods for boosting the capital available to agricultural cooperatives, the regime instituted two more important reform measures that enabled the new enterprises to function profitably in the market. In 1966, a major price reform took place when wholesale prices for agricultural products were boosted. This was the first step towards a gradual deregulation of agricultural
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prices and the introduction of price incentives for commodity production, which would remain in place irrespective of the nature of work organization. Then in 1968, most central planning regulations for the economic management of cooperatives were eliminated. Cooperatives became quite autonomous. Attracted by this situation, a new generation of highly skilled agricultural engineers and economists began to enter the co-ops in the late 1960s, expecting to take advantage of the more rational price system and the decentralization of economic decision making. Tolerant policies towards family production—a mix of firm sizes In most other countries, collectivization crushed the small family enterprises. Some family production on small plots might be allowed, but family farms were tolerated only as temporary deviations and only so long as they served the subsistence needs of the peasant families. In the long run, a typically Soviet agrarian policy aimed at the creation of large latifundia, which were supposed to function as large industrial firms. Hungarian agrarian policies of the 1960s, 1970s, and 1980s differed markedly from the more typical Soviet reforms. In Hungary, the family plot did not represent a marginal, or decaying, sector of the country’s agricultural complex. Traditionally Hungarian agriculture was based on a mix of large and small holdings, or firms. Before World War II, about 40 percent of the agricultural land was held by the latifundia, while the rest supported family farms, which were usually rather small in size. For a century, Hungary’s large and small firms have divided up requisite agricultural labors between them. The larger ones have specialized in crop production, while the smaller ones finally came to specialize in market gardening, fruit production, and animal husbandry, especially pig and poultry farming. Before World War II, the latifundia often remained semi-feudal in character, operating with very cheap ‘servant’ labor. As for the small family farms, they failed to develop into marketoriented enterprises because agrarian over-population put such pressure on the land available; consequently, most of the small firms remained subsistence peasant holdings. Hungarian reform in the late 1960s accommodated the mix of large and small firms that had traditionally characterized agriculture in that country. The regime showed a great deal of tolerance towards family producers on family plots—each family in the cooperative was entitled to one acre of land, reserved for its own use—and eventually began to encourage intensified cultivation of these acre units. Family agricultural production was not limited to members of cooperatives either. Most rural households and even some urban households operated small-scale family farms. Even during the 1980s, approximately 60 percent of all Hungarian households produced some agricultural product or products. While only about 10 percent of the land was exclusively cultivated by family work organizations, the share these family firms played in agrarian commodity production began to grow. In time, about 10–15 percent of these small family units, or some 200,000 families, began to run specialized commodity producing mini-farms.
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On top of this, within the cooperatives, informal systems of enterprise involving family responsibility thrived. Sharecropping arrangements were worked out between families, even while ownership remained collective; in this way, an individual incentive system was created and family work organizations were reinvigorated. Unofficial sharecropping and family responsibility arrangements took a variety of different forms, making it difficult to assess how much of the country’s agricultural production during this time was indeed produced by family work organizations as opposed to collective work organizations. If one adds together production generated by family-plots, by different family owned and operated mini-farms, by sharecropping associations and family responsibility systems, some experts have argued that as much as half of all agrarian production came from these various family work organizations. According to Szakács and Petö, about a third of Hungary’s crop production during the mid–1960s was generated by sharecropping arrangements (Szakács and Petö 1984). According to other estimates, as much as 60–70 percent of all family income from agriculture originated in family work organizations. Collectivization in terms of land ownership represented a ‘deformation’ of the typical Hungarian firm-size mix. Given the evidence cited above, one may argue that this ‘deformation’ was corrected by creative work organization. As the end result, agriculture maintained something very near the traditional 50/50 percent division of property between small and large firms. The collective and the family, the cooperative’s land and the family’s plot, existed in a symbiotic relationship. While this mix resembled the pre-war mix of large and small firms, however, the cooperatives of the last three decades, unlike the latifundia of the pre-war years, did not suffocate the small enterprises, but instead integrated them. It would be imprecise to look at the family plot as an alternative to the cooperative. There were complex relations of mutual dependence between the two types of enterprises. The cooperatives offered services to the family plots. Their tractors plowed the land; their representatives offered fertilizers and bought up the products of the family mini-farms. In this same way, technological innovations were also diffused into the family farms by the cooperatives. Under these conditions, the family mini-farms were freed from the needs of subsistence production and enabled to progress towards commercially viable commodity production. Indeed, up to 70 percent of the products raised on the family plots were sold on the market. The portion of family production offered on the market as commodities varied a great deal over time and across family firms; it was as small as 30 percent immediately after collectivization and gradually grew to 70 percent by the late 1980s (Kovách 1988). The land reform of 1945, while socially progressive, had created a nonviable distribution of agrarian firms by size, for most agricultural land after 1945 was cultivated by very small, sub-optimal firms. Collectivization reorganized agriculture and reestablished economically efficient, large firms. The creation of viable, large firms through property reform proved to be
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advantageous in many ways, though there were certain drawbacks; for one thing, the collectivization process dichotomized agriculture into very large and very small firms, effectively eliminating the middle-sized farms, which are the most efficient for producing certain crops. On the whole, however, the mix of large and small firms functioned well. During the early years of the 1960s, the cooperatives which were formed usually cultivated some eight hundred to one thousand acres. These units were sufficiently extensive to utilize large equipment efficiently; this led to the development of an industrial-type production organization in agriculture. Despite the continued importance of family production in Hungarian agriculture and the viable mix of large and small family firms unique to this collectivized country, some major restructuring of the relationship between the new, cooperative latifundia and persistent minifundia did take place during the 1960s and 1970s. We can establish two important trends in this relationship. First, indicating the continued proletarianization of the rural population, the number of family firms and the land under their cultivation kept declining as the country’s rural population decreased. While in 1972 there were still some 1.68 million family ‘enterprises,’ their number had fallen to 1.5 million by 1982. The same trend can be observed in numbers of family plots. The proportion of co-op members who did not cultivate family plots was only 13 percent in 1967; this proportion increased to 20 percent by 1977 (Juhász 1979). The land under cultivation by families also declined from 17 percent to 12 percent between 1972 and 1981. After 1981, co-op members had the option of cultivating their family plots or receiving cash or a predetermined amount of some agricultural product— wheat, corn, or whatever—in exchange for allowing the collective to cultivate their land. Second, the remaining family businesses became more intensive, and they became more and more market oriented (Juhász 1982; Márkus 1980). This indicates that the proletarianization process was complemented by the ‘embourgeoisement’ of other family producers—while some abandoned family production, others turned into commodity producers, into entrepreneurs. Thus, according to Juhász, the proportion of co-op members who produced in their family enterprise mainly products for their own consumption declined from 64 percent in 1967 to 23 percent in 1977, while the proportion of those who were running primarily commodity producing mini-farms increased from 19 percent in 1967 to 57 percent in 1977 (Juhász 1979). According to other estimates, while family producers in 1970 had sold only 37 percent of the total of their produced goods, family farmers were selling 51 percent by 1975 and 60 percent by 1982 (Kovách 1988). The intensification of family production is evident in the evolution of the structure of production. In 1970, family enterprises still produced a substantial proportion of all crops, altogether over 28 percent, but this proportion declined to 9 percent by 1984. At the same time, the proportion of all vegetables produced on family farms increased dramatically from 36 percent to 62 percent; and the share of family production of fruit also increased slightly from 56 percent to 60 percent. The share of family production in animal husbandry slightly declined.
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On the whole, during the 1960s and 1970s both the collective and the private sector of agriculture blossomed, though the collective sector demonstrated even greater dynamism. As a result, the share of family-produced goods of all agrarian production was reduced from around 50 percent during the end of the 1960s to about 30 percent by the early 1980s. As we will discuss below, this trend was reversed during the 1980s. During the last decade of state socialism, family business proved to be the more dynamic component of the latifundia-minifundia complex, as it had been decades earlier in the 1960s. The Green Revolution As in many other countries of the world, the Green Revolution took place in Hungary too. New technologies were introduced, including, among others, biotechnology, which made possible a rapid increase in per acre productivity. Technological innovations were accompanied by massive investments in the agrarian sector; new industrial-type production systems were created, most notably in animal husbandry, but also in market gardening. The effects of these innovations were particularly evident both in crop production and in animal husbandry. The per hectare production in kilograms of selected crops changed in the ways shown in Table 2.1. Equally impressive production increases could be observed in animal husbandry over this period of time. Milk production, for instance, jumped from 123 hectoliter per 100 hectares in 1965 to 309 in 1982. Egg production for 100 hectares increased from 4,363 to 23,664 during the same time period. Cattle and pork production increased also by some 50 percent; poultry increased six-fold.9 These results were never quite surpassed, the reason being that these examples of remarkable growth could be attributed to chemicalization and mechanization of production, agricultural innovations whose benefits had reached their limits by the early 1980s. Major human capital investment in agriculture took place at the same time. During the 1960s substantial funds were invested in agricultural colleges to train a new generation of agricultural engineers, most of them descendants of middle or rich peasant families. These engineers would eventually take over command of agricultural cooperatives from the older generation of middle and rich peasants who had been appointed to these positions at the time of collectivization. Table 2.1 Change in per hectare production of selected crops in Hungary, 1965–82 (kg)
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Diversification of production in the cooperatives By the 1970s the cooperatives began to move towards increased diversification. Collectivization had served an important role after 1960 by acting to reduce the chronic rural overpopulation which had kept Hungary in poverty for centuries (Andorka and Harcsa 1982). Collectivization served to ‘push’ a significant proportion of the rural population off the farms and into the cities in search of jobs which were created as a result of socialist collectivization. Those who did not choose to leave the farms entirely often became commuters who maintained their rural residences, but worked in urban industrial jobs. As the cooperatives began to exploit the economic advantages of their firm sizes and to mechanize, rural overproduction recurred even though a substantial proportion of workers had abandoned agriculture. The cooperatives responded by diversifying: creating industrial or commercial subsidiaries. By the late 1970s and early 1980s, about half of all income earned by the cooperatives originated from such nonagricultural activities. The purpose of these industrial and commercial side branches was to offer employment to those who could not find full-time work in agrarian activities. The subsidiaries soon became an important source of revenue as well. In certain ways, the development of the industrial subsidiaries was analogous to the process identified in China as ‘rural industrialization.’ This became one of the most dynamic sectors of the economy, and it helped to subsidize agricultural production. At last, integration of family plot production with large-scale cooperative production, along with the increased diversification of kolkhoz production, resulting in rural industrialization and a substantial expansion of tertiary sector activities, all contributed to the Hungarian agricultural miracle. These developments would not have been possible without concessions made by the ruling bureaucracy both to agrarian producers and to technocratic managers of co-ops. Expansion of the domestic and international markets for food products The most successful years for Hungarian agriculture coincided with a general expansion of markets for food domestically and internationally. As it happens, the 1970s were also miraculous years for American agriculture. During this decade, the international market was strong; international demand for food remained high and wealth generated from Arab oil sales insured that those countries interested in purchasing Hungary’s food products had the means to do so. The domestic market was in good shape too. Hungary’s urban population had grown during the 1950s and 1960s, and citizens profited from a significant boost in real wages during the 1960s. Per capita food consumption, including the consumption of more expensive foods, such as meat, increased significantly. These favorable market conditions fueled agricultural production and profits at
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a time when Hungarian agriculture was prepared to benefit from such conditions, thanks to the pragmatic evolution of its organizational forms, characterized most notably by the symbiotic relationship between family plots and cooperatives and the diversification of cooperative economic activities. These related conditions contributed to the dynamism of the country’s agricultural system for more than two decades. The Hungarian agricultural miracle resulted from a multiplicity of factors, and certain unique Hungarian conditions made it possible for the country to profit from that fortuitous combination of factors in a way that proved difficult for other socialist nations. The world market conditions were the same for all socialist countries, and the responses of those countries to the market tended to resemble one another: many invested heavily in the Green Revolution and most sustained some combination of collective farms and family work organizations. The very fact that Hungary proved to be an impressive success, while other countries struggled with food shortages, requires an explanation. We would argue that Hungarian agrarian policies worked for two decades because Hungary experimented with more daring reforms than other countries. Hungary went further than any other country—including China—in deregulating prices, thus encouraging the establishment of proper market incentives to motivate producers, collective farmers, and family farmers. Furthermore, the Hungarian regime granted cooperative management a great deal of autonomy and even provided managers with substantial resources. Beyond the factors we analyzed above, these two reform measures proved to be decisively important: price reform and economic decentralization. The Hungarian success can be attributed to the fact that the Hungarian regime implemented a multi-dimensional reform, and in all these dimensions it pressed innovative reform nearly as far as possible. Yet as we will try to show in the following section, even these daring reforms eventually failed, primarily because Hungary, unlike China, did not dare to alter property relations. While price reform and decentralization powerfully boosted Hungarian agriculture, the efficacy of both these measures eventually reached its limits. By the early 1980s, as Tamás Bauer (1982) put it so succinctly, a ‘second economic reform’ was needed: the reform of property relations. Unfortunately, the Hungarian political elite did not have the courage or the imagination to push further. The price exacted for their failure has been long-term agricultural stagnation and, after 1989, collapse. HUNGARY’S SLOWDOWN DURING THE 1980S By the early 1980s the agrarian boom had begun to weaken. Growth of production slowed down, workers’ productivity ceased to increase, the profit margin for agriculture shrank, and the country’s competitiveness on the world market began to deteriorate. Environmental damage, wreaked over the previous two decades, became observable. Many of these weaknesses were caused by structural factors
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—by the socialist nature of the organization of agricultural production—while others resulted from changes in the world market. Limits of reform—causes of the long recession of the 1980s Absence of market in land During the first two decades after collectivization, it appeared that agricultural development might actually profit from the fact that there was no market for land. During the pre-war years, the yearning for land had crippled most Hungarian peasants. The high price of land had made it impossible for farmers to introduce capitalist innovations, for instance, to invest in new agricultural technology. Most peasants labored all their lives to buy an extra acre or two. The de facto elimination of private ownership of land after 1960 liberated resources for investment into productive assets and helped facilitate the Green Revolution and the agrarian miracle. However, by the 1980s it became apparent that the absence of any market for land and other capital assets had created certain inflexibilities in the nation’s agricultural system. During this decade, the domestic market for food became saturated. Extensive restructuring of the world market for food took place as well. Arabic countries’ demands for East European food products declined, and many West European countries that had previously relied on food imports became self-sufficient in food by the late 1970s and early 1980s. Hungarian agriculture proved unable to respond and adapt to these changing conditions. While elsewhere in the world ‘flexible systems of capital accumulation’ developed, Hungarian agriculture failed to enter this ‘post-Fordist’ state. Since land and other productive assets could not be sold, innovation and adaptation to rapidly changing market conditions progressed too slowly. Limits of the symbiotic relationship between family plot and large estates The characteristic Hungarian mix of large and small firms also turned out to be inflexible. During the first ten to fifteen years, collectivization facilitated the intensification of production on the family plots and enabled this agricultural sector to become increasingly commercialized, a transformation that would have been unimaginable otherwise. By the late 1970s, however, it became obvious that the mix of firm sizes was insufficiently various, for the agrarian system was now polarized into large estates and small firms, and none of the necessary middlesized firms existed. Firms with thirty, fifty, or one hundred acres would have been more functional than the large cooperatives or tiny mini-farms, especially for enterprises engaged in fruit production or animal husbandry. Yet firms of this size seemed to have disappeared, in part because the Green Revolution of the 1970s, which advocated the use of increasingly large machinery and the introduction of highly qualified agricultural engineers into cooperative
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management, ultimately caused the latifundia to grow in size and merge. While in 1960, there was usually two or three cooperatives in each village, each controlling about one thousand acres of land or even less, by the end of the decade the slogan was: ‘one village, one cooperative.’ The typical size for a coop farm increased up to two and three thousand acres. During the late 1970s, as the trend persisted, most smaller and middle-sized villages lost their own coops; cooperatives were amalgamated into huge enterprises, often comprising as many as ten thousand acres. While both the amalgamation of firms and mechanization and chemicalization have been typically justified by experts who cite the requirements of ‘economies of scale’ or the demands of ‘science,’ one must bear in mind that this transformational process was rooted in social struggles and influenced by the interests of the major ‘players’ in Hungarian agriculture. As noted above, the young generation of agricultural engineers, trained during the 1960s, began to invade and claim managerial positions previously controlled by experienced middle peasant or rich peasant cooperative leaders. While an experienced middle peasant was quite capable of running a firm of approximately one thousand acres, he was at a loss when confronted by an estate of ten thousand hectares. New production technologies—more complex machinery—also required that former peasant leadership be replaced with ‘scientifically trained’ agricultural specialists. It is not difficult to see the social rationale behind this development. It is less obvious that these massive increases in capital intensity were economically viable in a low-wage country like Hungary. In any case, at last virtually no firms of intermediate size functioned in the country. The absence of arable land for sale in any market prevented more successful family farmers from increasing their properties and their production. The lack of land for sale ultimately created disincentives to productive investment and insured that income earned even by the commercially oriented small family farm would not be reinvested into agricultural capital or production, but would be channeled into consumption. The general situation did lead to certain temporary positive results—between 1970 and 1985 rural housing construction of a fairly high quality took place at an astonishingly rapid pace—but ultimately the rigid collection of very large and very small farms paralyzed Hungarian agriculture’s productive capabilities. Labor’s loss of skills The steady increase in the average size of the Hungarian agricultural cooperative resulted in a decrease in the number of truly skilled agricultural laborers. While managers of the very large farms were highly trained, most workers required only very specialized skills or no skills at all. The family plot did not serve as a useful training ground in this respect. Most of the tasks necessary to the cultivation of a family plot were simple or could be learned quickly. The complex skills and judgment displayed by most successful farmers are best learned in middle-sized agricultural enterprises, and firms of this size no longer existed in socialist
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agriculture. The cooperative’s agricultural proletariat lost some of the skills peasants had and failed to gain more modern skills. As agriculture during the 1980s faced stronger international competition and cooperatives were pressed to introduce increasingly new technologies, it turned out that they lacked trained labor capable of handling these tasks. One should not push the ‘loss of skills’ argument too far. While the pool of skilled agricultural labor did diminish for the reasons listed above, many employees of the socialist latifundia did learn useful skills, a few of which were applicable even on their family firms. For instance, agricultural laborers had developed market gardening into a complex production process by the 1980s, much more complex than traditional market gardening had been prior to collectivization. Thus the epoch of Hungarian collectivization must be described with care as a time when some lost skills and others developed them. Separation of food production and food processing Marketing and processing of food were separated from food production in socialist Hungary. The cooperatives typically had to sell their raw materials to food processing companies through intermediaries. Both the intermediary commercial firms and the food processing companies often occupied monopolistic or oligopolistic positions. This system limited flexibility, a serious disadvantage during those times when a rapidly changing market required responsive adaptations. Cooperatives did not have direct access to foreign markets either; they could sell their products only through state foreign trade companies. Typically, they had no way to claim, spend, or invest the hard currency their exports generated. The international competitiveness of these cooperatives was thereby reduced. They were unable to compete with vertically integrated capitalist agribusinesses. Internal labor organization: sharecropping limits long-term growth When private property was outlawed, sharecropping arrangements created for a while an efficient system of incentives. Sharecropping was a compromise introduced to generate rewards for harder and more careful work without allowing private ownership. In the short run, this labor organization worked well; it certainly worked better than wage-labor under the classical kolkhoz system. Over the longer term, however, sharecropping fostered irresponsibility. Since they lacked security of tenure, sharecroppers were not invested in maintaining the long-term fertility of the land; they looked for short-term profits. Therefore, extensive sharecropping may well have contributed to the deterioration of the quality of Hungary’s agricultural land. This trend was counteracted to some extent by informal arrangements in certain collectives. Managers in some cooperatives recognized the problem and occasionally responded by establishing long-term agreements with cooperative members that guaranteed the land would remain in their possession for a longer, though legally unspecified, period of time.
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The Green Revolution backfires A number of the factors leading up to the long agricultural recession of the 1980s in Hungary were specific to that country. Others were more general and international. For instance, like so many other nations that had taken part in the chemical, mechanical Green Revolution, Hungary discovered that the extensive use of fertilizers damaged the environment in general and the quality of the soil and water in particular. Water pollution caused by the use of chemicals and fertilizers has been particularly harmful in Hungary. During the 1980s, some rural wells ceased to produce potable water; when the local water works shut down, many rural communities found it necessary to import water by truck from neighboring cities or villages. The Green Revolution also turned out to be capital intensive. Though agrarian production increased, this happened at prohibitively high capital cost and with the expansion of bureaucracies. The decay in the world market During the 1980s, the demand for food on the world market declined. The successful, international Green Revolution enabled countries that had once relied on food imports to feed themselves, and some even began to export. The saturation of the European market and the shrinking of the Arabic market was particularly painful for the Hungarian agricultural producers. The domestic market also became saturated. There were early signs of decay; for instance the cattle stock began to decline from the mid–1980s onwards. Profit margins shrank. This gradual degradation of Hungarian agriculture was related to the fact that family producers rarely behaved as real entrepreneurs. Rather than gauging the market and responding to its many signals, most producers simply followed consumption goals. A number of producers were involved in farming only because they wanted to earn extra income in order to purchase certain consumption items. Some wanted to build a house for their son or daughter, others hoped to purchase a new car. They kept producing until they had achieved a particular goal. As nonentrepreneurs, they felt no need to economize with their labor; they never calculated the number of hours worked, but only counted up the income earned. This explains why, despite deteriorating market conditions and shrinking profits, production continued. All goods were sold—though often underpriced—and no land left uncultivated. Hungarian agriculture was particularly affected by the decay of Soviet and Eastern markets. These had been ideal markets for a long time, particularly since they tended to ignore the poor quality of Hungary’s processed foods, which were often marked by problems with preservatives and packaging. These markets had been decaying for quite some time. Well before their collapse after 1989, the Eastern markets had experienced cash-flow problems; though they remained ready to buy goods from Hungary, they were not quite capable of paying for their purchases. Agrarian export continued for a while despite an accumulating deficit.
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Finally, after 1989, the Eastern market disappeared altogether. This happened at a time when the European Community was beginning to close its doors to East European exports. Thus, after two decades of glory and expansion, the 1980s figured as a decade characterized by slow growth and approaching stagnation. Capital goods became worn out. Dynamic production faltered. Investment slowed down. Like other sectors of the Hungarian economy—and other socialist economies— agriculture began to fall behind its competition in the West. Though for two decades it had appeared that Hungary was going to ‘catch up’ with the more advanced countries, after 1980 the country experienced great difficulties competing on the world market. The long agrarian recession of the 1980s: preparing the ground for the collapse of the agrarian system Over the decades, the internal contradictions of collectivized agriculture accumulated, and by the mid–1980s it became obvious that the system could not be sustained over the long run. In particular, the saturation of the domestic market, the shrinking of the international market, and the increasing cost of input, excessive capital investments and even increases in labor costs, made further expansion of production virtually impossible. Under these conditions, the agrarian sector lost its ability for extended development. Though even in the most difficult times its revenues covered its costs (some of this can be attributed to the ‘decentralized redistribution,’ involving the transfer of profits from the cooperatives’ non-agricultural subsidiaries into agricultural production proper), no new funds were generated for new investments. In 1990, for instance, out of 1,250 cooperatives, only about 300 were profitable. Another 300 required subsidies, and the rest just covered costs. In about twothirds of the cooperatives, even the amortization of fixed capital posed problems. Bereft of its industrial and commercial subsidiaries, the agriculture sector probably would not have survived. Yet the profitability of these activities was not connected to a flexible, economically rational, market system. The cooperatives’ subsidiaries produced high profits because they exploited the property vacuum. Disciplined by slightly harder budget constraints than those governing the state-owned industrial and commercial firms, the cooperatives’ supplementary ventures proved to be competitive and profitable in comparison with the state sector. After 1989, with the legalization of private property, the necessity for camouflaging such semi-private ventures as cooperative ventures evaporated, and it became impossible for such an enterprise to function competitively as part of the cooperative. These subsidiaries had to break away from the cooperatives, which meant they ceased to subsidize agricultural production. This process of divestiture, whereby the industrial subsidiaries became limited liability coporations (LTDs), began as early as 1988 and 1989, at which point their revenues became lost to agriculture, though not necessarily lost to the co-op’s management, for a number
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of managers succeeded in arranging to purchase these profitable enterprises for themselves and their partners. The agrarian sector, at least in Hungary, where it was relatively successful, did not face immediate collapse during the second half of the 1980s. The internal contradictions described above only resulted in a significant decline of growth, culminating in zero growth. Under the conditions of post-Stalinist state socialism, this proved to be sufficiently bad news. The relative legitimacy of post-Stalinist regimes, in particular the legitimacy of the Kádárist regime, was based on the promise that state socialism could foster economic growth and secure for virtually all strata of the populace a continuous improvement in real wages and incomes. Zero growth breached this promise, and long-term stagnation threatened to spark a major challenge to the regime’s legitimacy. Significantly, this line of thought suggests that the real crisis of socialism during the 1980s was not so much economic as political in character. Growth rates in the advanced West European and North American countries during this decade were similarly slow, and in the United States, especially among low-income citizens, Americans suffered through a long-term decline in their real incomes. While a relatively prolonged period of slow growth and even diminishing living standards appeared to be acceptable, or tolerable, to large segments of the populations in Western democratic countries, these conditions proved untenable, over the long run, in socialist countries. Ecological problems also contributed to the eventual collapse of formerly socialist agriculture. In a certain way, the successes of the 1960s and 1970s had been based on the ‘exploitation of the environment.’ Thus high per acre yield was achieved by excessive use of chemicals and fertilizers, and consequently, the ecological balance was undermined. This assertion cannot be understood narrowly. Typically, agriculture in Western European countries also relies heavily on chemical use and damages the environment; fertilizer consumption is greater in Denmark than it ever was in Hungary. Yet in Hungary, an ecological imbalance did emerge, for the extensive, interrelated system involving social organization, production technology, and population was unsettled by socialist reforms and consequences. Durkheim argues that social organization, production technology, and population constitute a kind of ecosystem. Using this construct, one can argue that Hungary’s ecosystem was seriously disturbed by the later stages of state socialism, and that the very structure of Hungarian socialist agriculture was responsible for the disequilibrium. We pointed out that the family plot, the most significant feature of Hungary’s so-called ‘second economy,’ was key to the success of Hungarian socialist agriculture. It should be added, however, that the second economy exacted high costs, especially high human costs. From the late 1970s onwards, according to data collected in time budget studies, the number of hours worked particularly by men, especially by middle-aged men, increased significantly. Excessive working hours may be directly related to a declining life expectancy. As the inefficient socialist economy began slowing down and proved unable to sustain increases in living standards for the great majority of workers from the
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mid-1970s onwards, Hungarian men responded by working extra hours in the second economy. It appears that the labor took its toll. In Hungary in 1977, men could expect to live for 66.6 years; by 1984 life expectancy had declined to 65.4 years. This quite unexpected and unprecedented decline in life expectancy, which was particularly sharp among men aged between 40 and 60, can be attributed to the high stress created by excessive working hours and related signs of anomie, such as an increasing level of alcoholism, excessive smoking, and eating. An economy that could function only when workers continually operated in two ‘shifts,’ working one shift for the State and the other in the semi-private sector, actually threatened the demographic reproduction of the Hungarian populace. Conclusions A multiplicity of factors contributed to the stagnation of Hungarian agriculture during the 1980s. The single most important factor around which all this culminated, however, was the absence of property reform. Reforms which had proved so successful during the 1960s and 1970s simply could not proceed because the existing social relations of production began to stifle economic dynamism. Family production, which constituted the so-called ‘second economy,’ was able to correct some of the conditions hobbling the statist sector, but short of private ownership of land and productive capital, it could not generate dynamism of its own. The Hungarian economy in general and agriculture in particular were therefore set on a trajectory leading to decay, for the economy lacked mechanisms to generate investment incentives. This economy was oriented towards consumption, and substantial resources were squandered on unjustified, excessive consumption supported by borrowing from international capital markets. The accumulation potentials of the statist sectors were finally exhausted, and the channels of accumulation in the secondary sector disallowed. Lacking proper capital and labor markets, the Hungarian agrarian system began its descent into fatal decay. NOTES 1 2
3
A mezögazdaság föbb történeti adatai (Main Historical Data of Agrarian Production) (Budapest: Központi Statisztikai Hivatal, 1993). See the works of Ferenc Erdei about the duality of Hungarian rural social structure and signs of ‘embourgeoisement’ of Hungarian peasants. Ferenc Erdei, ‘A magyar társadalom a két világháború között’ (Hungarian Social Structure During the Interwar Years) [1943], in A magyar társadalomról, ed. by Kálmán Kulcsár (Budapest: Akadémiai Kiadó, 1980); Ferenc Erdei, Futóhomok (Drifting Sand) [1937] (Budapest: Akadémiai Kiadó, 1977). The term ‘embourgeoisement,’ or ‘bourgeoisification’—polgárosodás in Hungarian— should be judged carefully. Like the German term, Verbürgelichung, it does mean simultaneously the process of making a ‘propertied bourgeoisie’ and a ‘citizenry,’ the emphasis typically being on ‘citizen’ rather than on ‘bourgeois.’
The Hungarian agricultural ‘miracle’ 4 5 6 7 8 9
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Not all demands for land were met though. Gypsies and prisoners of war were left out, which eventually became the source of some social tension. See Donáth (1969). For instance, just in 1951 400,000 sentences were handed down on peasants for one reason or another. See A mezögazdaság föbb történeti adatai, op. cit. Ferenc Donáth; Iván Petö and Sándor Szakács; Iván T. Berend. See A mezögazdaság föbb történeti adatai, op. cit. See A mezögazdaság föbb történeti adatai, op. cit.
BIBLIOGRAPHY Andorka, Rudolf and István Harcsa. 1982. ‘A községi népesség társadalomstatisztikai leirása’ (Social Statistics of Hungary’s Rural Population). In A falu a mai magyar társadalomban, edited by Vágvölgyi. Bauer, Tamás. 1982. ‘A második gazdasági reform és a tulajdonviszonyok’ (The Second Economic Reform and Property Relations). Mozgó Világ 11:17–42. Bell, Peter. 1984. Peasants in Socialist Transition. Berkeley: University of California Press. Berend, Iván T. 1983. Gazdasági utkeresés, 1956–1965. (Search for the Appropriate Economic Policy, 1956–1965). Budapest: Megvetö. Berend, Iván T. 1990. Hungarian Economic Reforms, 1953–1988. Cambridge: Cambridge University Press. Berend, Iván T. and György Ránki. 1985. The Hungarian Economy in the Twentieth Century. New York: St. Martin’s Press. Central Statistical Office of Hungary. 1993. A mezögazdaság föbb történeti adatai (Main Historical Data of Agrarian Production). Budapest: Központi Statisztikai Hivatal. Donáth, Ferenc. 1969. Demokratikus földreform Magyarországon, 1945–1947 (Democratic Land-reform in Hungary, 1945–1947). Budapest: Közgazdasági és Jogi Könyvkiadó. Donáth, Ferenc. 1977. Reform és forradalom. A magyar mezögazdaság strukturális átalakulása (Reform and Revolution. Structural Change in Hungarian Agriculture). Budapest: Akadémiai Kiadó. Erdei, Ferenc. 1977. Futóhomok (Drifting Sand). [1937] Budapest: Akadémiai Kiadó. Erdei, Ferenc. 1980. ‘A magyar társadalom a két világháború között’ (Hungarian Social Structure During the Interwar Years). In A magyar társadalomról (On Hungarian Society) edited by Kálmán Kulcsár. Budapest: Akadémiai Kiadó. Hare, P.G, H.K.Radice and N.Swain (eds.) 1981. Hungary—A Decade of Economic Reforms. London: Allen and Unwin. Held, J. 1980. The Modernization of Agriculture—Rural Transformation in Hungary (1884– 1975). New York: Columbia University Press. Hollós, Marida and Bela C. Maday. 1983. New Hungarian Peasants. New York: Columbia University Press. Juhász, Pál. 1973. ‘A mezögazdaság fejlödésében megjelenö tehetetlenségröl’ (On the Continuity in Agrarian Development). Budapest: Közgazdasági és Jogi Könyvkiadó. Szövetkezeti Kutató Intézet, Közlemények 93. Juhász, Pál. 1979. ‘A “második” gazdaság mezögazdasági kistermelés köré szervezödö alrendszeréröl’ (About the “Second” Economy, as a Subsystem of Agricultural Family Production). Manuscript. Juhász, Pál. 1982. ‘Agrárpiac, kisüzem, nagyüzem’ (Agrarian Market, Small Producers and Latifundia). Medvetánc 1:117–139. Juhász, Pál. 1983. ‘Az agrárértelmiség szerepe és a mezögazdasági szövetkezetek’ (The Role of Agricultural Intellectuals and the Agricultural Cooperatives). Medvetánc 1: 191– 213. Kovách, Imre. 1988. Termelök és vállalkozók (Producers and Entrepreneurs). Budapest: Társadalomtudományi Intézet.
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Márkus, István. 1980. ‘Az ismeretlen föszereplö—a szegényparasztság’ (The Unknown Actor of History—the Poor Peasants). Valóság 4:13–39. Némedi, Dénes. 1985. A népi szociográfia, 1930–1938 (Populist Ethnography). Budapest: Gondolat. Swain, Nigel. 1985. Collective Farms which Work? Cambridge: Cambridge University Press. Szakács, Sándor and Iván Petö. 1984. A hazai gazdaság négy évtizedes története, 1945– 1985 (The History of Hungarian Economy, 1945–1985). Budapest: Közgazdasági és Jogi Könyvkiadó. Szelényi, Iván. 1988. Socialist Entrepreneurs. Madison: University of Wisconsin Press. Vágvölgyi, András (ed.). 1982. A falu a mai magyar társadalomban (The Village in Contemporary Hungarian Society). Budapest: Akadémiai Kiadó. World Bank. 1984. Hungary—Economic Development and Reforms. Washington, DC: The World Bank.
3 The alchemy of reform Bulgarian agriculture in the 1980s Mieke Meurs and Simeon Djankov
From 1944 to 1989, Bulgarian agriculture was among the most completely collectivized in the world. Collectivization resulted in the rapid modernization of an agricultural sector backward even by East European standards. The new farms consolidated Bulgaria’s scattered, fragmented plots and state support permitted the introduction of machines and chemicals. This combination of extensive growth and borrowed technology resulted in growth rates of gross output averaging 3 percent per year 1960–9, impressive rates by both East and West European standards (Boyd 1991:101; Lazarcik 1973:463). By the end of the 1960s, however, the growth potential of land consolidation and technological ‘catching up’ had been exhausted. Agricultural growth rates slowed significantly. A shift to more intensive growth was necessary, but attempts in the 1970s to achieve this through increased centralization of production did little to relieve the stagnation. Growth averaged 1.5 percent per year from 1970 to 1979 (Boyd 1991:101). The agricultural slowdown was particularly problematic because of agriculture’s central role in supporting industrial development in Bulgaria. Agricultural exports financed imports of industrial machinery and energy, and promoted industrial exports through tied trade. In addition, agricultural growth supported improvements in the livelihood of both industrial and agricultural workers, contributing to the legitimacy of the Bulgarian Communist Party (BCP). Unable to reinvigorate growth rates through centralization, the Bulgarian government began experimenting with decentralizing reforms at the end of the 1970s.1 The reform program included many aspects of what János Kornai (1992) has called the ‘market socialist’ model: decentralization of decision making, increased attention to financial indicators as measures of performance, and reduced emphasis on industrial growth, in order to balance or ‘harmonize’ the different economic branches. To provide an appropriate economic context for firm-level decision making, the market socialist model also needed to include price liberalization, a decentralization of credit, and increased retention of net revenues or losses by firms. Under these conditions, firm management could receive and utilize better, decentralized information about necessary adjustments in production and would have an incentive to do so. 43
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While decentralizing control of state firms in the name of efficiency, the ‘market socialist’ reforms (known in Eastern Europe as the New Economic Mechanism or NEM) did not aspire to significantly reduce the degree of state ownership or the state role in guiding the economy. Instead, these reforms were to elicit some of the incentive and informational benefits common to private, market economies, while permitting the state to retain control of overall accumulation and economic development. In Bulgaria, several aspects of the NEM reforms were weakly implemented or missing. The BCP had, since the 1950s, kept particularly tight control (even by East European standards) of resource allocation throughout the economy. Discussion of decentralizing prices, accumulation, and investment created serious divisions within the BCP, despite the continuation of state ownership and central control over major economic aggregates. In the face of these divisions, one reform package after another through the 1980s stopped short of freeing these crucial decisions from central control. The Bulgarian reforms also ignored the need for ‘harmonization.’ Rather than decreasing the emphasis on industrial investment, throughout the 1980s Bulgarian planners increasingly sought to boost slowing industrial growth by squeezing agriculture. Evidence from the Bulgarian case supports the argument, by Kornai (1992) and others, that this failure to decentralize pricing and investment severely undermines effective firm-level adjustment. Under these conditions, the incentive and information problems associated with centrally planned production cannot be alleviated. The weakly implemented NEM undermines top-down control by the Party, but fails to provide a context for effective decision making by firms. The central policy of underinvesting in agriculture exacerbated the productivity slide. Somewhat more successful were the reforms extended to the traditional ‘household plots’ (small plots farmed as a sideline by rural households). The state encouraged increased production on these plots, which relied on household labor and minimal technology, hoping to mine one last potential source of extensive growth. By channeling the majority of commercialized production from these selfsufficiency plots (LPS: lichno pomoshtno stopanstvo) into the (price-controlled) state distribution system, planners could reap the benefits of mobilizing household resources without losing control of accumulation. As will be seen, the BCP attempt to improve firm performance without giving up either control of accumulation or the prioritizing of industrial growth failed. Despite a ‘treadmill’ of slightly differentiated NEM reforms throughout the 1980s, growth rates in collectivized agriculture continued to worsen. A certain amount of ‘cheap’ growth was obtained by reducing the constraints on household production, but growth based on mobilizing LPS resources would have been quickly exhausted as household production, too, came up against constraints on decentralized accumulation and investment. Despite more than a decade of reform in the collectivized sector and growth of household farming, Bulgarian agriculture was in much worse shape in 1989 than it had been when reforms began in the mid-1970s.
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THE RISE AND FALL OF THE AGRO-INDUSTRIAL COMPLEXES (APK) During the second half of the 1960s, agricultural growth rates fell rapidly,2 from an average of 5 percent per year during 1961–5 to an average of 1.2 percent for the period 1966–70 (Boyd 1991:86). This decline had important implications for overall economic growth and BCP plans for rapid industrialization. As a small economy, Bulgaria had long been highly dependent on trade. Dependence rose significantly over the period 1960–70, however, with trade turnover (exports plus imports) rising from 31 percent of net material product (NMP) to 46 percent (Lampe 1986:178–82). Much of the trade consisted of imports of industrial machinery and equipment for the development of Bulgarian industry. These accounted for 41 percent of imports in 1970. Fuel and other industrial raw materials made up another 29 percent (Table 3.1). Agriculture provided much of the export base to support the growing imports— the highest percentage in Eastern Europe (Lampe 1986:156, 181; Wiedeman 1980:104). In 1970, agriculture accounted for 43 percent of exports, but only 16 percent of imports (Table 3.1). Within the food-short Council for Mutual Economic Assistance (CMEA) Bulgaria was able to use agricultural products as ‘hard goods,’ the sale of which could be tied to purchases of industrial goods from Bulgaria’s developing machine and manufacturing industries. Given the importance of agricultural production to overall economic growth, poor agricultural performance met with a concerted response. In the early 1970s, the Bulgarian state developed a program of centralization and capitalization of agriculture. Centralization was to raise efficiency by reducing coordination problems among individual units and by capturing economies of scale, while increased capitalization was to raise productivity through the ‘industrialization’ of agriculture. By 1976, Bulgarian agriculture was transformed from a system of approximately 900 village-based cooperatives (TKZs) and state farms (DZs) in 1970, to a structure of 146 centrally directed Agro-Industrial Complexes (APKs), each averaging 24,300 hectares and 5,836 workers (Table 3.1). Approximately 88 percent of agricultural land was farmed in APKs. The remaining land was farmed as LPS plots, averaging under 0.5 ha (Meurs and Dobreva 1993). Capital intensity did rise. The APK offered 77 percent more capital per worker and 57 percent more capital per hectare than had been available in collective agriculture in 1970 (Table 3.1).3 Average available tractor power in 15 hp equivalents rose 55 percent for the period 1975–8 over 1970, while the number of combines rose 37 percent (Central Statistical Office (CSO) various years; CSOa 1986:34). At the same time, however, the productive potential of these machines was reduced by the declining availability of many attachments, such as plows, cultivators, and sprayers, which fell 10 percent to 19 percent (Table 3.2). To further increase centralization, the state extended planning to the LPS plots. Beginning in 1973, APKs began to integrate some of the LPS production of APK workers into APK plans (State Newspaper (SN) 101, 1973). In a kind of
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Table 3.1 Bulgarian imports and exports by commodity group, 1970–89 (valued in millions of foreign exchange leva)*
Source: Vienna Institute (1991) Note: * CMEA trade based on convertible ruble valuation Non-CMEA trade valued in currency of trading partner
subcontracting system, the APKs delivered inputs for the planned production to households and purchased the resulting production, linking the results of the two sectors. For example, piglets would be sold to the LPS producers at a subsidized price. The APK would provide a set amount of feed free, and later buy back the pigs at a set price. Initially, the APK produced good results. From 1970 to 1972, gross output in constant prices rose 5 percent per year, from 43,480 to 50,722 million leva (Table 3.3). In his careful econometric evaluation of organizational change in Bulgarian agriculture, Michael Boyd argues that part of this growth resulted from the ability
Source: CSO, various years; NSI, various years
Table 3.2 Mechanization of agriculture (selected machines) in Bulgaria, 1975–92
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of the large APK to exploit economies of scale (1991:101). The potential for increasing agricultural growth rates through centralization was quickly exhausted, however. For the period 1971–5 average growth of gross output slowed to an average of 0.3 percent per year, improving to 2 percent per year for the period 1976–80 (Table 3.3). Boyd finds that the benefits of scale were outweighed in this period by the organizational and informational problems emerging in the large, centralized complexes. Had inputs been utilized as efficiently as in previous periods, the changes in capital and other inputs from 1970 to 1979 would have supported a rate of growth of output of 1.9 percent, 0.4 percent higher than the 1.5 percent realized (1991:101). The overall system of central planning and the priority planners gave to industrial growth also contributed to slowing growth, however. While central planning successfully borrowed Western technology to industrialize quickly, the system was notorious for its inability to generate new technologies after the initial ‘catching up.’ In Bulgarian agriculture, growth due to disembodied technological change, which had been the main impetus for agricultural growth throughout the 1960s, ceased during the 1970s (Boyd 1991:98–101). Despite the goal of capitalizing agriculture, the actual commitment of resources was minimal. Agriculture’s share of total investment fell steadily, from 21 percent Table 3.3 Gross agricultural output in Bulgaria, 1960–89*
Source: Boyd(1991) Note: * Gross output calculated by Boyd on the basis of weighted averages of 16 crops and 3 price series
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of total investment in the fourth five year plan (1961–5) to an average of 15 percent over the three five year plans up to 1979 (CSO 1988:130). Bulgarian investment in agriculture was low by East European standards even in the peak period of the 1960s, when the ratio of agriculture’s share of investment to its share of GNP was 50 percent, compared to 82 percent for Hungary, 57 percent for Poland, and 77 percent for Romania (Dobrin 1973:72–3). Falling investment rates resulted in deterioration in the capital stock and declining availability of tractor attachments, reducing capital productivity. By the mid-1970s, growth rates in Bulgarian agriculture had barely improved on the stagnant rates of the late 1960s. Due to both organizational problems on the enormous farms and the increased concentration of resources in the industrial sector, the APK had failed to provide a basis for renewed growth. THE NEW ECONOMIC MECHANISM 1977–84 With aggregate growth rates stalling out, a ‘treadmill’ (Schroeder 1979) of decentralizing reforms began in 1977. Many of the reforms were designed to boost efficiency in the economy as a whole, but these often began in, or paid special attention to, agriculture. Decentralization of state agriculture Convinced that the effort to revitalize agriculture through centralization had failed, in 1977 the BCP adopted the New Economic Mechanism for agriculture (the NEM was extended to the rest of the economy in 1982).4 Bulgaria’s NEM reforms were designed to address the problems of stagnating productivity and slowing growth by decentralizing decision making, hardening the budget constraint, and improving incentives, without abandoning central control (Spetter 1984). As a result, decentralization was carefully balanced by mechanisms to streamline central guidance. In the case of agriculture, the Ministries of Agriculture and of Food Industry were consolidated to form one National AgroIndustrial Union. The system of twenty-eight administrative regions was consolidated to nine, and a Regional Agro-Industrial Union (OAPS) was established in each. Much of agricultural planning was then decentralized to these nine centrally managed organs. From the OAPS, decision making was decentralized to the APK through a reduction in the number of planning targets they received from twenty-four to eight categories. These included tax payments, maximum-use levels for inputs, and export targets. Net income became the main measure of APK performance. Firms were expected to use their decision-making rights and locally available information to improve economic performance. Decentralization was also implemented through the breakup of some APK into smaller units, and the organization of these into brigades. The number of production units increased from 146 in 1977 to 296 in 1982, average landholdings fell by 34
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percent, and average workforce by 46 percent (Table 3.1). In many cases, this meant a return to the previous TKZs structure. The APKs were then subdivided into brigades, divisions of about 300–400 people. The brigades were the lowest level planning and accounting units under the NEM. At this level, the transition to financial indicators was less complete, because brigades did not always produce a final, priceable output. Instead, targets were given for costs, volume and quality of production, and the wage fund (Interview Grosev, 1989). To ensure that firms used their new latitude to improve performance, selffinancing was encouraged. The APKs were to keep an average of 20 percent of net revenue, although the majority of this would be earmarked for various investment and social welfare funds (Lampe 1986:216). Revenue from over-plan and extraplan production was also to remain in the APK. Two price reforms, in 1980 and 1982, raised relative agricultural purchase prices in an effort to increase the feasibility of self-financing. These increases were not sufficient, however, to put self-financing within the reach of the majority of farms. Price liberalization, already introduced in Hungary by the early 1980s, was not introduced at this time. While permitting firms to retain more of net revenues, the NEM also attempted to harden budget constraints. Interest payments on planned investment credits and other loans were to be enforced, and after 1982, borrowing to cover wages was to be eliminated. Wage funds were to be calculated as a residual (a share of revenue, net of all production costs). The NEM also included a number of initiatives to improve incentives at the level of the brigade and individual workers. Piece rates were extended wherever possible, and a system of bonuses was instituted, linking approximately 10 percent of pay to brigade performance. In 1982, to further improve the use of local information and increase incentives, the accord system was introduced. Under this system, part of APK work could be subcontracted to groups of workers (and later, also to individuals). In an attempt to simulate the incentive benefits of ownership, the groups were encouraged to rent machinery and land from the APK for a fixed period of time (usually one or two years). Other inputs would be supplied by the APK under contract.5 Sometimes these groups would contract to fulfill a specific task, such as weeding a given area, but increasingly the contracts (accords) were for final production. In these cases, pay was to be linked closely to performance: workers would receive an advance, and then final payment when contracts were fulfilled. Production above contracts could be sold either to the state or, less commonly, on the local cooperative market, and the revenues retained by the accord group. The NEM in practice Despite the massive legislative changes, little real decentralization took place under the NEM. Implementation of the reforms was very limited and apparently
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resulted in few changes in the day-to-day behavior of firms (Jackson 1988:3; Lampe 1986). Ministries and Regional Agro-Industrial Unions, still politically accountable for fulfilling the national plan, continued to impose many plan indicators on APKs. The APKs responded by strictly controlling brigades and accord groups. It is not at all clear, however, that fuller implementation of legislated changes would have resulted in better results, given that legislation failed to liberalize prices, decentralize credit, allow firms to change specialization, or create institutions for reallocating unneeded machines or labor. With so many factors still outside the control of farm managers and workers, self-financing and the linking of pay to performance could foster at most marginal adjustments in effort or input use and would be politically difficult to enforce. In agriculture, the variables outside the control of enterprises were particularly important. As aggregate growth rates slowed, the low relative prices for agricultural goods were used by the BCP to hold down industrial wages, and to assure that a larger share of surplus generation would be credited to the industrial sector, justifying further industrial investment. Even after the price reforms of 1980 and 1982, prices for many agricultural goods covered costs only for those farms with the newest technology. Investment in agriculture continued to decline. Investment levels, which had fallen to 13.3 percent of total investment in the seventh five year plan (1976–80), fell to 8 percent of total for the ninth (CSO 1988:130). This level was, at best, sufficient to cover the annual depreciation on existing equipment (World Bank 1991:74). Tractor power in 15 hp equivalents continued to grow slightly (up 5 percent over the average available in the period 1975–8). The average number of complementary attachments, such as plows, cultivators, sprayers and harrows, continued to decline, however, falling by 10–25 percent over the average for the previous period (Table 3.2). Between 1980 and 1984, the percentage of APK tractors eight to ten years old rose from 16 percent to 21 percent, while the share over ten years old rose from 27 percent to 35 percent (CSOa 1986:36). Implementation of the accord system was mixed. A few, highly trained workers leased large-scale livestock farms (100 pigs or sheep, or 20,000 chickens, for example), producing up to 10 tons of milk or 29 tons of meat per year with a minimum of state control (Kapitanski and Hristozov 1984:78–9). In most cases, however, the APK simply assigned workers to accord groups and imposed a plan on them. Workers had little possibility of adjusting inputs or technologies, but they did bear a share of losses when machinery broke down or inputs were not delivered. Perhaps as a result, the relative wage of agricultural workers and employees fell relative to industrial wages, from an average of 101 percent of industrial wages for the period 1975–8, to an average of 93 percent for the period 1979–84 (CSO, various years). Some of this decline may have helped to bring wages into line with relative productivity. Nonetheless, it increased the difficulty in retaining skilled, high productivity workers in agriculture.
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Developing the LPS sector Throughout the 1960s and 1970s, the LPS sector had shown its potential to efficiently employ land and labor underutilized by the state sector, producing approximately 20 percent of total production on about 12 percent of arable land (CSO, various years).6 The importance of LPS production was concentrated in certain goods. For example, in the period 1975–8 the LPS sector produced 50 percent of potatoes and eggs, 40 percent of meat, 30 percent of corn, and 24 percent of milk. LPS crop yields reached 62–104 percent of state levels; in livestock, meat, milk and egg yields per animal exceeded state levels (Meurs and Dobreva 1993; CSO, various years). In its ability to employ underutilized resources, including marginal lands and the labor of pensioners and the non-working hours of employed persons, the LPS sector offered a last pocket of potential extensive growth. In addition, household production relatively closely simulated private production in its use of locally available information and the close link between work and reward, organizational characteristics which the state sought to develop under the NEM. After 1977, therefore, the state increased support for LPS production. Restrictions limiting the distribution of LPS plots to households of agricultural workers were eliminated, so that almost anyone could receive a plot (SN, 18, 1974). Over the period 1979–84, the LPS share of arable land increased only slightly, from 12.8 percent to 13 percent (CSO 1988:261) and average plot size remained quite small (0.3 hectares) (Vulchev and Pamukchiev 1988:72). Labor mobilization in the sector was extensive, however: 94 percent of village dwellers cultivated a plot, as did 76 percent of those living in small towns, 50 percent of those in regional capital cities and 35 percent of those living in Sofia in 1986 (Institute of Sociology 1986). To permit households greater freedom to adjust production, APKs were to open agricultural shops for LPS producers. Ownership of small scale agricultural machinery was legalized and LPS producers were offered additional opportunities to borrow for agricultural construction (SN, 22, 1982; Shishkov 1985:54). Much of the resulting production (36 percent) was commercialized through sales to the state, allowing continued control and centralization of agricultural surplus. Another 4 percent was sold on the relatively free cooperative markets (Ivkov 1985:303–4). Performance Agricultural performance under the weakly implemented NEM was uneven. Boyd’s data indicate that, as had been the case with the APK reforms, the initial reorganization produced a burst of growth. Gross agricultural output rose 4 percent per year from 1978 to 1982. For the six year period 1979–84, output averaged 13 percent above the previous period (Table 3.3). But after 1982, performance worsened, with gross output falling 9 percent, from 5978 million leva in 1982 to an average of 5427 for 1983–4. Severe weather played a significant role in the
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poor performance in 1983 (McIntyre 1988:108), but performance in 1984 was weak as well. There is evidence that this declining performance resulted, in part, from a worsening of the informational, organizational, and incentive problems on the large farms. While losses attributable to organizational and motivational problems were estimated at 0.4 percent of agricultural growth under the APK, these more than tripled, reaching 1.4 percent of growth under the NEM. Unrealized changes in output increased from 27 percent of actual change for the period 1970–9, to 85 percent of actual change for 1980–5 (Boyd 1991:101). Unfinished investment rose from 79 percent of investment in 1980 to 91 percent of investment in 1995 (CSO, various years). Perhaps, as Kornai (1992) suggests, this was due to the reforms’ undermining the tight system of command without providing a coherent alternative. Part of this gap, however, must also be attributed to the continued deterioration and declining complementarity of the capital stock. Boyd’s analysis, which measures capital in tractor horsepower available, cannot account for these changes. While this ‘disinvestment effect’ is conceptually separable from the logic of the NEM, it is clearly linked to centralization of investment decisions and the particular priorities of the BCP. Perhaps the main benefit of the NEM reforms lay in their ability to stimulate LPS production. While still limited in their access to inputs and technology, LPS producers responded by increasing the time spent in production. A survey of the Kazanluk region found that aggregate time spent on LPS plots more than doubled between 1965 and 1985, from 6,000 hours weekly, to 15,000. On average, individuals increased their working time from two to four hours weekly (Team of Authors 1991:23). These LPS producers increasingly specialized in vegetables and livestock, labor intensive production which the APK happily subcontracted. By the mid-1980s, the LPS share of agricultural production had risen to about 29 percent, on 13 percent of arable land (Vulchev and Pamukchiev 1988:70). Again, the relative increase in LPS production was concentrated in certain crops. LPS meat production for the period 1979–84 rose 17 percent over the period 1975–8, compared to a 9 percent in the state sector, while milk production grew 41 percent, compared to 21 percent in the state sector. At the same time, LPS wheat production rose 113 percent and tomato production rose 86 percent, compared to changes in the state sector of 33 percent and –66 percent, respectively (CSO, various years). Since LPS land increased little, the growth in LPS production resulted mainly from improvements in yields. From an average of 81 percent of state yields in tomatoes and 58 percent of state yields in wheat in the period 1975–8, relative yields increased to an average of 89 percent and 84 percent respectively for 1979– 84 (CSO, various years). Both increased labor input and state-supported intensification contributed to yield increases. Because of the concentration of LPS production in important food crops, the impact on living standards far exceeded what might have been expected from a
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change in the use of 13 percent of arable land. Per capita consumption of vegetables and meat for 1979–84 rose 12 percent and 11 percent respectively over the levels of 1975–8, and per capita consumption of bread declined, as consumers improved their diets (CSO, various years). The increases also contributed to a 41 percent rise in agricultural exports, only partially offset by a small increase in food imports (Table 3.1). While the mobilization of leisure hours, pensioners’ labor, and certain marginal lands permitted a burst of output, the potential of these factors to propel sectoral growth was limited. Weak development of input and credit markets limited productivity growth. Moreover, with LPS production still heavily dependent on state enterprises for inputs and services, LPS growth often involved a direct tradeoff with the production of the APK. Experiments with self-management 1985–7 By 1985, there was increasing recognition that the NEM reforms alone could not motivate the needed improvements labor incentives and mobilization of local initiative. At least among the younger generation of Party leaders and intellectuals, this created support for a more radical decentralization of the economy along the lines of self-management. Published documents reveal a vision of self-managed firms engaged in bottomup planning, in which firms operated with substantial freedom and government used taxes and other economic levers to guide macroeconomic outcomes (Petkov 1987). The reformers, well acquainted with the Western literature on selfmanagement, hoped that the self-managing workers would use their knowledge of local conditions to form more accurate plans and, identifying with the goals they had set, implement plans more efficiently. The NEM structures linking pay to work were retained, to ensure accountability for decisions. In self-managed firms, enterprise employees (or their representatives in firms over 500 workers) would form a General Assembly. The Assembly would approve management amendments to the state-proposed plan, including wage and investment guidelines (Petkov and Thirkell 1988:33–6). After 1986, the Assemblies gained the right to elect, and recall, enterprise directors and members of the managing Economic Council. At the level of the brigade, too, assemblies were to be formed. These could submit and vote on changes to the brigade plan and wages, and elect brigade leaders. Members might draw on their experience to propose changes in crop specialization, change pensions, or allocate net revenues to social and cultural funds. To a limited degree, the brigade members could also influence investment—the purchase of small-scale agricultural machines. As a basis for improving the possibility of participation, brigade size was to be reduced. One report suggested a limit of 35 workers (Jackson 1988:23). To create a context for effective firm adjustment, changes in the planning structures were also envisioned. Price liberalization was promised, with the state setting only price ceilings, allowing actual prices to be negotiated by contracting
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parties. New ‘commercial’ banks were to be established from which enterprises could borrow competitively. Implementation of self-management fell far short of proposed changes. At the enterprise level, implementation depended to an important degree on the motivation of the individual managers. In agricultural establishments, self-management was frequently implemented only formally. Members of Assemblies of Representatives of the immense APKs were barely acquainted with each other, gathering only twice a year to hear production reports (Interview Grosev, 1989). Under these conditions, the expected benefits of information sharing and goal internalization were unlikely to be realized. Still, at least in some places, farm management was able to use the reform to extend control over output mix. Creed (1992: Ch. 3) describes a number of examples of management initiative, including the introduction of strawberry production for export. The important reform of the planning structures was delayed until 1987, however, by which time official support for self-management was dropped. As a result, the self-managed system suffered from the same internal contradictions as the NEM. Without some liberalization of prices and credit, firms could adjust production only to a very limited extent, and hard budget constraints remained difficult to justify. Farms also continued to suffer from central investment priorities. The number of 15 hp equivalent tractors fell for the first time since 1944, with average availability falling 10 percent compared to the 1979–84 period. The availability of combines and plows fell by 25 percent, that of cultivators and sprayers by another 16 percent (Table 3.1). Fertilizer and chemical inputs fell for the first time, with average annual fertilizer use falling by 18 percent, while pesticide and herbicide use fell by 10 percent (CSO, various years).7 At the brigade level, however, some significant changes accompanied the self-management campaign. Brigades remained quite large (180 people in one farm visited) (Interview Blagoevgrad APK, 1989), but additional decentralization was achieved through changes in the accord system. More accord groups were permitted to form voluntarily, and family and individual accords became more popular. In many places, collectives were permitted greater latitude in adjusting input and output combinations, even refusing to take on production of certain unprofitable crops. The APK also continued to impose production targets (Creed 1992: Ch. 3). Income of accord participants became increasingly dependent on fulfilling accords (33 percent on average in two regions surveyed in 1989) (Killian 1992). The LPS sector also continued to expand production. The share of LPS income in total cash income of farming households rose accordingly, from 6 percent of household income in 1980 to 12 percent in 1985 (CSOb, various years). Nonetheless, overall agricultural performance continued to worsen. From 1985 to 1987, average annual gross agricultural output in constant prices was 49,144 million leva, down 11 percent from an average of 55,368 million leva for the period 1979–84 (Table 3.3). Yields in state agriculture continued to fall across the board (CSO, various years).
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In line with this performance, agricultural wages again fell relative to industrial wages, from an average of 93 percent of industrial wages for 1979–84, to 90 percent for 1985–7 (CSO, various years). Accord workers increasingly fought with APK officials as wages were more closely linked to performance, but the promised local control failed to materialize. Of broader economic importance, agriculture’s contribution to the balance of trade worsened sharply. Average annual exports of food and food products fell 23 percent, from a peak of 2896 million leva in 1984 to 2236 million leva in 1987. Food imports rose by another 35 percent over the 1979–84 level (Table 3.1). Pluralism in property forms 1987–9 By 1987, it was clear to Bulgarian officials that no decentralizing reforms could generate the desired economic improvements without substantially greater freeing of prices, enterprise decisions, and accumulation from central control. When the net hard currency debt exploded from a low of 1413 million US dollars in 1984, to 8025 million US dollars in 1989, this greatly increased the pressure to implement the needed decentralization (Vienna Institute 1991:391).8 If decentralization were really necessary, the conservative wing of the Party (resurgent after the ‘failure’ of the self-management experiment) preferred that reliable Party members be firmly in control of the most important decentralized firms. With the ‘commanding heights’ of the economy secured, more decentralization and reliance on market mechanisms might then be permitted without threatening Party control. Highly motivated firms and individual farmers might also be permitted to operate more extensively, providing competition with the state sector, while also helping to satisfy consumers and certain export markets. This vision appears to have been inspired by the Chinese, and to a lesser extent, Hungarian experiences. Decree 56 of 1987 (On the Regulation of Economic Activity) finally legislated the reduction in planning and increased enterprise autonomy promised under the self-management reforms. State enterprises were to return to a system of one-man (sic) management. The rights of the General Assembly of workers were reduced to electing 49 percent of the Board of Management, with the other 51 percent appointed by the state. The Board, in turn, would elect the Director. Worker rights to influence wages and long term investment were eliminated. Brigade leaders, however, were still to be elected by brigade members (Jones and Meurs 1991). This new structure, known as ‘companies management,’ was to be accompanied by a substantial increase in the independence of Party-appointed firm managers. The share of state orders in a firm’s plan was limited to two-thirds, while the rest of enterprise production was to be determined through negotiation between the enterprise, the Ministry of Economics and Planning, suppliers, and customers (Jones and Meurs 1991). Enterprises were also freer to choose among the (limited) potential suppliers.
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More resources were to be left under the direct control of firms by reducing the tax on profits to 50 percent (20 percent for firms in the weaker, agricultural sector), and eliminating regulations targeting firm profits to particular funds (Interview State Statistical Committee, 1989; Interview Grosev, 1989). At the same time, interest payment on state loans was reasserted. Substantial pricing autonomy was finally to be extended, with state-set prices limited to goods constituting 50–60 percent of wholesale production. Other prices were to be fixed through negotiations, subject to a state set ceiling. Wholesale prices for most agricultural goods would be excluded from this reform, however (Jackson 1988:24; Interview Grosev, 1989). Agricultural firms were thus unlikely to benefit from the right to retain funds for investment. An estimated 15–20 percent of farms were likely to be able to finance some of their own investment under prevailing cost structures, down from about 80 percent of farms a decade earlier, when the relative prices of agricultural goods had been more favorable (Interview Grosev, 1989; also see World Bank 1991:79). In a January 1987 decree on banking and credit regulation, the Bulgarian National Bank relinquished its monopoly power on investment decisions. Lending was decentralized to sectoral banks which were initially to lend mainly to their sector, but eventually compete with each other as ‘commercial banks.’ Under companies management, incentives were again changed. The attempt to limit wages to a residual from firm net revenues was dropped. Instead, wages could be set freely by the enterprise, subject to a 7 percent tax on the wage fund if it increased more than 1 percent yearly (Interview Blagoevgrad APK, 1989). At the brigade level, the accord system continued to expand. After 1987, the system of subcontracting was extended from APK employees and their families to individuals who did not work in agriculture (citizen accords). By 1988, 78 percent of those working in agriculture worked under the accord system. Only 30 percent of agricultural workers were in group accords, while 20 percent were in family accords, 10 percent in individual accords and 18 percent (over 97,000 people) were engaged under citizen accords (National Agro-Industrial Union (NAPC) 1988). A limit of 10–15 percent was placed on the share of brigade output which could be imposed to fulfill APK plans. These changes appear to have had some economic impact, at least in certain brigades. Although no comprehensive data are available on accord performance, data for selected farms show that workers under family accords had yields 1.6 times that of normal brigades, and net output per decare 2.8 times that of normal brigades. Under citizen accords, the ratios were 2.1 and 2.5 times, respectively. Predictably, the improved labor incentives provided by the accords had less impact in the more mechanized labor processes: yields in highly mechanized brigades equaled only 1.2 times those of normal brigades (NAPC 1988). In May 1989, decentralization of agriculture was radically extended, under Decree 922. This decree mandated the disbanding of the 290 Agro-Industrial Complexes into more than 1000 community-based farms. In many places, the old TKZs regained administrative autonomy.
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The farms were expected, in turn, to parcel land out to employees under a new arenda system. Under this system, employees were eligible to rent land up to the amount they or their ancestors had contributed during collectivization, as long as contracts were signed for the sale of some of the production to the state. Leases on this land could extend for up to fifty years, and those farming individually were permitted to hire up to ten workers (Decree 922, 1989). These changes promised a closer simulation of private production within the state sector, but significant problems remained. The partial liberalization of prices and credit created a context for effective adjustment by farms, while making the individual producers responsible for production results. The subcontractors often had problems getting the necessary inputs, services, and credit from the farms in a timely manner, since farms had little incentive to ensure delivery. Creed reports that in Zamfirovo Farm management directed resources first to those areas for which the cooperative farm was completely and directly responsible, and only subsequently to those areas where workers bore greater responsibility themselves…People growing watermelons on accord complained that the…APK never did anything for them except take their money. (Creed 1992:153) The political tensions arising from the ever closer linking of pay to results, in the absence of effective control over production, finally erupted into outright battles between APK leadership and producers. These were captured in a number of Bulgarian documentary films from the late 1980s (see, for example, Studio Ecran 1989). The need to harmonize sectoral investment, ignored from the beginning of the NEM, was also not addressed. Although the availability of 15 hp equivalent tractors recovered somewhat (up an average of 3 percent over the previous period, but still below the average for 1979–84), the availability of other equipment declined across the board (Table 3.3). Average annual fertilizer application fell by another 5 percent, while average pesticide and herbicide application fell by 32 percent (CSO, various years). Some initial improvements in agricultural output did result from the reorganization, but this was also the case in the initial stages of previous reform efforts. Output levels remained steady, and even rose slightly (about 0.3 percent per year), despite the continued fall in inputs. Nonetheless, average annual gross output for the period 1985–9 remained 8 percent below that for the period 1979– 84. Agricultural exports for the 1987–9 period fell by another 6 percent, while agricultural imports continued to rise, by 8 percent (Table 3.1). Yields in the state sector improved slightly in number of crops, but the LPS sector continued to improve more rapidly (CSO, various years). Because the initiative was interrupted by the changes of November 1989, the attempt by the state to mobilize private initiative without actually privatizing resources (under the somewhat confusing slogan of ‘pluralizing property forms’) cannot be adequately evaluated. The Chinese experience suggests that such a
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strategy might have been possible, if a commitment to providing a viable context for firm adjustment had been achieved. CONCLUSIONS The Bulgarian experiment with decentralizing reforms was characterized by their limited implementation—by the reluctance of the BCP to sacrifice either central control of accumulation or the prioritization of industrial growth in order to revitalize agriculture. Policy makers tinkered with decentralizing plan implementation and material responsibility, but failed to provide farm employees with a context in which they could make meaningful adjustments in production. Under these conditions, material responsibility was difficult to justify and enforce. Information and incentive problems associated with central planning continued to plague the agricultural sector. At the same time, the decade of decentralizing rhetoric began to erode the tight system of production by command. Creed illustrates this problem with an example of a state initiative to expand silkworm production: Officials at town hall ended up raising the silkworms because no one else was willing. The retired village mayor was appalled when he heard this. ‘What has happened to political power? When I was mayor I simply went to the villagers and said, “Here are some silkworms, you have a mulberry tree, you have to raise them. Now (the officials) do not have any power at all”.’ (cited in Creed 1992:158) Liberalization of LPS production did create some dynamism on the fringes of the agricultural sector. Further development of this sector was constrained, however, by continued state control of most means of production and of distribution networks. By 1989, decapitalization and organizational problems in the agricultural sector had reached crisis proportions. Agricultural production and agricultural exports were well below their 1979 levels. The agricultural capital stock was substantially depreciated, and tensions were high among farm managers and workers, increasingly held responsible for productivity declines they could not reverse. The BCP attempt to alchemize central planning into efficient adjustment had failed, and a new program of agricultural reform was sorely needed. NOTES 1 2 3
An early reform attempt of the mid-1960s, inspired by the Liberman reforms in the Soviet Union, failed to make significant changes and was gradually reversed in the late 1960s. Growth rates are measured in gross output. This is the form in which output data appear in the Statistical Yearbook of the People’s Republic of Bulgaria, as well as in the econometric study by Michael Boyd which we will draw on below. This figure is given in current prices. All other figures given in this chapter are also in current prices, unless otherwise noted.
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4 5
The exact Bulgarian title for the NEM was Nov Ikonomicheski Pohod. In many cases, the APK owned little of their own machinery. The machinery was managed by a separate enterprise, the MTS, which contracted with the APK to provide the needed machine services. Data on the LPS share of total production give a distorted picture of relative productivities, however. Whereas LPS productivity in certain products was very high, this high productivity would not have been possible in other products, which exhibited economies of scale. For this reason, we will focus mainly on relative performance of the two sectors in particular products. Centrally planned agriculture was notorious for extracting ever-higher yields through excessive chemical applications which resulted in soil damage over the medium term. Some of the fall in chemical applications may therefore have been beneficial, despite the initial decline in yields which accompanied it. Surprisingly, Bulgaria faced few problems in covering its trade deficit through international borrowing. In 1981, Bulgaria was ranked 58 of 112 countries by International Investor. The rating was improved to 47 by the mid-1980s and 39 by the late 1980s (International Investor, various issues). Perhaps the government’s unwillingness to impose hard budget constraints on firms can be attributed to the soft budget constraint it faced in international markets.
6
7
8
BIBLIOGRAPHY Boyd, Michael. 1991. Organization, Performance, and System Choice: East European Agricultural Development. Boulder, CO: Westview Press. Boyd, Michael. 1988. Unpublished tables (data from Central Statistical Office). Sofia, Bulgaria. Creed, Gerald. 1992. ‘Economic Development Under Socialism: A Bulgarian Village on the Eve of Transition.’ PhD dissertation, City University of New York. CSO (Central Statistical Office). Various years. Statisticheski Godishnik na NR Bulgaria. Sofia: Central Statistical Office. CSOa. 1986. Selskoto Stopanstvo na NR Bulgaria. Sofia: Central Statistical Office. CSOb. Various years. Biydjeti na Domakinstvata v Bulgaria. Sofia: Central Statistical Office. Dobrin, Bogoslav. 1973. Bulgarian Economic Development Since World War II. New York: Praeger. Institute of Sociology. 1986. Unpublished tables. ‘Isledvane Grada i Seloto’ (Town and Village Survey). Ivkov, T. 1985. Za Efectivno i Intenzivno Selsko Stopanstvo. Sofia: Sofia Press. Jackson, Marvin. 1988. ‘Bulgaria’s Attempt at Radical Reform.’ Berichte des Bundesinstituts für ostwissenschaftliche und Internationale Studien. Cologne 2. Jones, Derek and Mieke Meurs. 1991. ‘Worker Participation and Worker Self-Management in Bulgaria.’ Comparative Economic Studies 33 (4):47–81. Kapitanski, Iordan and Hristoz Hristozov. 1984. Trudut v Lichnoto Stopanstvo-Sustoyanie, Efektivnost, Problemi (Labor in Self-sufficiency Agriculture: Conditions, Efficiency, Problems). Sofia: Profizdat. Killian, Mia. 1992. ‘The Accord Form of Organization in Agriculture,’ PhD dissertation, University of Sofia. Kornai, János. 1992. The Socialist System: The Political Economy of Communism. Princeton, NJ: Princeton University Press. Lampe, John R. 1986. The Bulgarian Economy in the 20th Century. London: Croom Helm. Lazarcik, Gregor. 1973. ‘Bulgarian Agricultural Production, Output, Expenses and Net Product, and Productivity, at 1968 Prices, 1939 and 1948–1970.’ In Occasional Papers of the Research Project on National Income in East Central Europe (OP-39), edited by
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Thad Alton. New York: Riverside Research Institute and L.W. International Financial Research. McIntyre, Robert. 1988. The Small Enterprise and Agricultural Initiative.’ Soviet Studies 40 (4):602–15. Meurs, Mieke and Stanka Dobreva. 1993. The State and Private Agriculture Under Collectivization: A Re-examination of the Symbiosis Thesis.’ MacArthur Conference on Collectivization and its Alternatives, Budapest, Hungary, July 1992, revised 1993, Ministry of Agriculture, 1991. NAPC (National Agro-Industrial Union). 1988. Chelni Posttizhenia po Prilagane na Akorda y Selskoto Stopanstvo (Best Results in the Application of Accord in Agriculture). Sofia: NAPC. Petkov, Krastyu. 1987. The Transition to Self-Management in the Socialist Countries. Sofia: Georgi Dimitrov Research Institute. Petkov, Krastyu and John Thirkell. 1988. The Brigade Organization of Work. Sofia: Sofia Press. Schroeder, Gertrude. 1979. The Soviet Economy of a Treadmill of Reforms.’ In US Congress Joint Economic Committee. Soviet Economy in a Time of Change: A Compendium of Papers. Washington, DC: US Government Printing Office. Shishkov, Angel. 1985. Correct Bases for Personal Agricultural Production Sofia: Zemizdat. SN (State Newspaper), official medium for publication of laws and decrees. Sofia, weekly. Spetter, Henry. 1984. The New Economic Reform in Bulgaria: Background Problems and Prospects of the New Economic Mechanism.’ Berichte des Bundesinstitut fur ostwissenschaftliche und Internationale Studien. Cologne 42. Studio Ecran. 1989. ‘Petko’s Troubles.’ Sofia. Team of Authors. 1991. The 1965–1985 Longitudinal Time Use Survey of the Kazanluk Population: Main Results.’ Time Use Studies World Wide. Sofia: Socio-Consult. USDA (United States Department of Agriculture). 1988. World Agricultural Trends and Indicators 1970–1988. Washington, DC: USDA. Vienna Institute (for Comparative Economic Studies). 1991. Comecon Data 1991. New York: Greenwood Press. Vulchev, Nikolai and Hristo Pamukchiev. 1988. Strukturno i Organizatsionno Preystroistvo na Lichnoto Stopanstvo na Naselenieto (Structural and Organizational Conditions Foundations of Self-sufficiency Production of the Population). Sofia: Bulgarian Academy of Science. Wadekin, Karl-Eugen. 1982. Current Trends in the Soviet and East European Food Economy. Berlin: Dunker and Humbolt. Wiedeman, Paul. 1980. ‘The Origins and Development of Agro-Industrial Development in Bulgaria.’ In Agricultural Policies in the USSR and Eastern Europe, edited by Ronald Francisco, Betty Laird, and Roy Laird. Boulder, CO: Westview Press. World Bank. 1991. Bulgaria: Crisis and Transition to a Market Economy. Washington, DC: The World Bank.
Interviews Blagoevgrad APK, Blagoevgrad, Bulgaria, June 1989. Ivan Grosev, Chair, Department of Agriculture, Karl Marx Higher University of Economics, 1989. State Statistical Committee, Varna, Bulgaria, June 1989.
4 Cuba: the reluctant reformer Carmen Diana Deere with The Rural Studies Team of the University of Havana
Significant changes have taken place in Cuban agricultural policy since 1989, the year of the fall of the Berlin Wall and the subsequent crumbling of the Soviet trading bloc. The most important development occurred in September 1993, when it was announced that Cuba’s huge state farm sector was to be dismantled and reorganized as worker-managed production cooperatives. Moreover, the dismantling of the state farm sector was subsequently followed, in October 1994, by the opening of free agricultural markets for above-plan production. We argue in this chapter that these reforms are as potentially a significant a development for Cuba as was the reform of the Chinese commune system for China in the late 1970s. The moves of the Cuban state toward a mixed economy have only been taken reluctantly, after all else failed to produce a turnaround in domestic food production and when sugar production, Cuba’s critical export, dropped from 7.6 million tons in 1991 to 4.2 million tons in 1993. During these years the country experimented desperately with a number of new initiatives to maintain agricultural production levels. While these strategies did assist in maintaining a minimum level of food security, by 1993 it was apparent that only a radical reordering of incentives on state farms, and of those for Cuba’s private sector, would halt the continuing decline of the agricultural sector. Cuba’s current reforms differ from those attempted in the 1970s and 1980s by the former socialist Eastern European countries and the Soviet Union in a number of respects. First, the reforms appear not to be driven as much by economic stagnation as by an externally induced economic crisis. Cuba’s agricultural sector performed reasonably well in the 1970s and 1980s, leading to reduced food import dependence, higher per capita food consumption, and growing exports. But Cuba is a small, trade dependent economy. Since approximately 80 percent of its external trade was with the socialist bloc, the latter’s disintegration, not surprisingly, ravished the Cuban economy. Second, Cuba’s reasonable agricultural performance was in many ways underwritten by the favorable terms of its participation within the Council of Mutual Economic Assistance (CMEA) which assured Cuba stable markets and guaranteed prices. Moreover, the terms of trade, particularly, the relative prices of sugar and oil, were tilted in Cuba’s favor. In addition, any trade deficits which 62
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Cuba incurred with the Soviet Union were automatically financed by the latter, allowing Cuba to live above its means. It has been estimated that Soviet subsidies (just from the terms of trade and deficit-financing mechanisms) amounted to approximately 22 percent of Cuban disposable income between 1980 and 1987 (Pastor and Zimbalist 1995:7). This highly favorable external situation allowed Cuba to invest heavily in agriculture and in industries supporting the agricultural sector, leading to a high degree of mechanization and the heavy use of modern inputs. This modernization of agriculture, however, remained heavily import-dependent. Not surprisingly, then, the demise of the socialist trading bloc produced a severe crisis for Cuban agriculture. Another consequence of Cuba’s privileged position within the CMEA was that it also served to mask the inefficiencies characterizing Cuba’s highly centralized and bureaucratic state farming system (Figueroa 1996). Cuba, in many ways, was able to put off the reforms undertaken by other socialist countries precisely because these countries were subsidizing its own growth. When Cuba was forced to accept the inevitable in 1993, and began dismantling its huge state farm sector, it also faced a different set of alternatives than other socialist countries. While the Cuban leadership was long characterized for its exceptionally ‘statist’ view of socialism and socialist agriculture, it also engendered a highly successful cooperative movement in the 1980s. In addition to a huge state sector, the 1959 and 1963 agrarian reforms created an important sector of individual peasant producers, one that quadrupled the number of property-owning farmers. The Cuban state did not attempt to collectivize the peasantry until the late 1970s. By that time, the state had the capacity to use the lure of mechanization and better living conditions to carry out a voluntary process of collectivization. Moreover, the production cooperatives have performed reasonably well, contributing towards an increased supply of foodstuffs and export crops (Deere, Meurs and Perez 1992). In 1990 there were 1,305 production cooperatives (Cooperativas de Productión Agropecuaria: CPAs) with 62,130 members. In that year 85 percent of them were generating year-end profits for their members. Most were also characterized by a high degree of food self-sufficiency. Not surprisingly, as conditions deteriorated in Cuba in the post-1989 period, this form of organizing production gained increasing attention as an alternative to the faltering state farms, leading to the decision to cooperativize the latter. We argue in this chapter that the process of reform (and, perhaps, recovery) of socialist economies is indeed, path-dependent, as laid out in Chapter 1. Different initial conditions and trajectories lead to totally different outcomes. In the Cuban case, the fact that the pre-revolutionary agrarian sector was characterized by the dominance of large sugar plantations and cattle haciendas largely explains why, through the initial agrarian reforms, a huge state farm sector was created. Moreover, the fact that production cooperatives have been relatively successful provided the model for the current reorganization of the state farm sector. This has allowed the Cuban state to decentralize production and create new incentives to
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elicit greater worker effort while maintaining ‘collective’ relations of production. By making workers owners of their means of production (except for land) and of the product of their labor, this move has also provided considerable political legitimacy to the revolutionary regime, perhaps providing it with the basis to withstand the current economic crisis. The subsequent analysis is based on interviews and participant observation between 1991 and 1996 in three municipalities of Cuba: Guines, located in the western province of La Habana; Santo Domingo, in the central province of Villa Clara; and Majibacoa, in the eastern province of Las Tunas. These municipalities share a specialization in Cuba’s main agricultural products: sugar cane; root crops and plantains (viandas), vegetables, and grains; and livestock production. Where they differ most is in terms of their natural and infrastructural endowment. Guines boasts the best natural and physical infrastructure. Located only an hour’s drive from the capital city, this prosperous municipality has long been an important food bowl for the country’s major urban area. Majibacoa, in contrast, located some 715 kilometers away from the capital, is situated in one of the more poorly endowed regions of the country. Santo Domingo represents a midpoint both in geographical terms and with respect to its natural resource endowment and level of development. This chapter is organized as follows: the next section sets the context for Cuba’s reform process by providing an overview of the state of Cuban agriculture prior to 1989, and of the disruptions which this sector subsequently experienced. Then, the various strategies employed on state farms to attempt to maintain production levels during 1989–93 are described. This section is followed by an analysis of the process of decentralization of the state farms and of the prospects for the new cooperatives on state enterprises. The subsequent section analyzes the impact of the opening of the new agricultural markets. In the concluding section, Cuba’s reform is compared to the Chinese case and some implications are drawn. CUBA’S STATE FARM SECTOR: EVOLUTION AND CRISIS As noted above, the fact that Cuban agriculture came to be dominated by state farms is partly explained by the historical legacy of land tenure. In 1946 sugar cane plantations and cattle haciendas larger than 500 hectares in size, while representing 1.4 percent of Cuban farms, held at least 47 percent of the nation’s farmland. Moreover, only one-third of the total farmland was worked directly by their owners, the majority of farmers being cash renters, sharecroppers, or squatters (Cuba 1951). In the first agrarian reform of 1959 all landholdings greater than 401 hectares in size were expropriated and 40 percent of the nation’s farmland passed to the state. The second agrarian reform of 1963 reduced the maximum size landholding still further, to 67 hectares. After it was implemented, 71 percent of Cuba’s farmland was in state hands (Trinchet 1984:22–3). The 1959 agrarian reform law provided for the expropriated estates to remain intact and to be worked as cooperatives. There was little question of dividing
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these up, due to the perceived economies of scale of large-sized production units. It was also not a demand of the rural proletariat. While in theory, the workers were to elect their own councils to manage these enterprises, participatory forms of management never were consolidated. The managers of these estates were appointed by the National Institute of Agrarian Reform (INRA) and there was little worker participation in decision-making (MacEwan 1981:48; Rodriguez 1965:64). Among the reasons cited for the subsequent decision to operate the large cane plantations as state farms rather than as production cooperatives was the fear that the heterogenous production conditions and productivity of the estates would lead to severe inequality among rich and poor cooperatives. Moreover, it was felt that cooperatives run by permanent workers would do little to ameliorate the seasonal unemployment problem of temporary workers and would exacerbate income inequalities among the rural workforce. Further, the lack of experienced administrators and technicians at the local level favored the centralization of production decisions within INRA. Thus in 1962 the cane cooperatives were formally converted to state farms (Granjas del Pueblo—people’s farms), the organizational form already characterizing the livestock sector (MacEwan 1981:49–81). After the US-backed invasion by Cuban exiles at Playa Giron (the Bay of Pigs) in April 1961 and Fidel Castro’s announcement that Cuba was following a socialist path, socialism in Cuba was increasingly defined by state ownership as were markets with capitalism (Figueroa 1996:3). Thus, state farms came to be viewed as the ‘highest form of socialist agriculture,’ and after 1967, all free market transactions were proscribed. In the late 1960s the Cuban leadership began a concerted effort to integrate the land of peasant producers into state enterprises. Carried out with the intention of more fully specializing and modernizing agricultural production, peasants residing near state farms were encouraged to sell or lease their land to state farms and to become wage workers on these enterprises. By 1974 state farms accounted for 80 percent of Cuba’s land surface and the private sector, for 20 percent (Trinchet 1984). The First Congress of the Cuban Communist Party in 1975 marked a watershed in Cuban agricultural policy. The Cuban leadership adopted the Soviet-style planning system known as the System of Management and Planning of the Economy (SDPE). The SDPE intended to combine greater administrative autonomy for state farms with new material incentives and greater worker participation in decisionmaking (Meurs 1992:232; Kay 1988:1247). Under the SDPE, enterprises were constituted as independent economic units (rather than as individual branches of one economy-wide enterprise), with their own system of cost accounting and ability to enter into commercial relations with other firms. In terms of material incentives, the objective was to boost labor productivity and efficiency in resource use by relating remuneration to the quantity and quality of work performed and to the final results of production.1
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The First Party Congress also adopted the ‘Thesis on the Agrarian Question’ which broadened the definition of socialist agriculture to encompass production cooperatives. Henceforth, rather than attempting to incorporate peasant farmers into state farms, government efforts and those of the peasant association, the National Association of Small Producers (ANAP) would concentrate on encouraging peasants to pool their land and other means of production to form production cooperatives. The First Party Congress also considered whether free peasant markets should be opened for above-plan production. While many considered this proposed reform to be the most effective way of increasing the supply of foodstuffs, particularly vegetables and fruits, and of diversifying Cuban diets, the issue was way too decisive, and a decision was postponed until 1980, when these markets were legalized for what turned out to be only a six year period. Taking a long-run view of Cuban agricultural development, from 1959 until the beginning of the ‘Special Period,’ the Cuban agricultural sector performed reasonably well.2 As Table 4.1 shows, since 1970 the growth rate of sales of agricultural products to the state procurement system was maintained at well above the rate of population growth (the latter which fell to less than 1 percent over this period) leading to growing food availability. Moreover, although Cuba continued to specialize in sugar production for export within the socialist trading bloc (just as before the revolution), the country had also pursued a strategy of food import substitution. Between 1959 and 1989 the share of food and animal feed dropped from 20.5 percent of the value of Cuba’s total imports to 11.4 percent. The most important gains in food import substitution centered on the food processing industry. Wheat imports increasingly substituted for wheat flour as Cuba’s domestic milling capacity increased over this period. Similarly, in the dairy industry, domestically produced cheese and butter steadily replaced imports, and the value of Cuba’s imports of powdered milk also fell, both due to growing domestic milk production. Beginning in 1980 Cuba also became a net exporter of potatoes and of certain vegetables (onions and green peppers) (Deere 1993). Nonetheless, Cuba was still highly vulnerable, depending on imports for Table 4.1 Growth rates of sales of agricultural products to the state by sector (average annual percent change) in Cuba, 1965–88a
Source: Deere and Meurs (1992: Table 2), based on CEE (1989) Notes: a Excludes sugar cane, livestock, and minor crops b Includes individual farmers and production cooperatives (CPAs)
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approximately half of per capita caloric and protein requirements. It was most vulnerable in terms of a number of key items in the Cuban diet: wheat, corn (primarily for animal feed), beans, lards and oils, and rice. Moreover, growth rates were slowing down in the agricultural (Table 4.1) and food processing sectors. The state farming sector was also not very efficient. The Ministry of Agriculture’s enterprises were still highly subsidized. While the losses of state agricultural enterprises had been reduced from over $400 million pesos in 1980 to just $70 million pesos in 1985, largely attributable to the implementation of the SDPE and the new system of cost accounting, losses soared again in 1986, reaching $291 million pesos. Moreover, the percentage of state agricultural enterprises earning a profit never exceeded 50 percent (Meurs 1992:236–7). A vigorous debate has taken place in Cuba whether the problem was intrinsic to the SDPE, or to the fact that this reform was not fully implemented (Ibid.: 233–5). But besides the lack of full implementation of the SDPE, other problems plagued the Cuban agricultural sector. One was the very size of the state enterprises. For example, cane farms averaged 13,413 hectares and livestock farms 28,000 hectares (Figueroa 1996: Appendix I). While there might have been economies of scale in mechanization, there were clearly diseconomies in management. In addition, while the SDPE intended to incorporate greater worker participation in decision-making, this proved difficult to implement, as was decentralization. In fact, under the SDPE, planning was extended, requiring ever-growing numbers of reports on economic indicators on the part of state enterprises (Meurs 1992). As a response to some of these negative trends, at the Third Party Congress in 1986 the Cuban leadership launched a process of ‘rectification of errors and negative tendencies.’ It was argued that intensified political work was needed to reduce tensions between individual and social interests. Government officials were criticized for coming to rely too heavily on individual material interests and economic mechanisms to motivate people and for down-playing moral incentives and popular participation. In numerous speeches during 1986–8, Fidel Castro called for increased participation at all levels of society, including in solving the problems of the SDPE (Meurs 1992:238). The first casualty of rectification were the free peasant markets which were closed in 1986 for generating too much inequality and for slowing the collectivization drive (Deere and Meurs 1992). This move was certainly counter-trend to what was occurring in the rest of the socialist world, where state reforms were embracing greater reliance on market mechanisms and material incentives. At the same time, the government launched an ambitious National Food Program to deepen import substitution, particularly in rice, dairy, poultry and pork production. Major new investments were planned and carried out in agricultural infrastructure, especially in irrigation systems. Many of these new investments were heavily importdependent, depending, in particular, on continued access to cheap oil. Expanded dairy, poultry and pork production also relied on growing quantities of imported animal feed.
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Thus, in a number ways, the Cuban economy was particularly vulnerable to the events of 1989–91: the collapse of the Berlin Wall, the demise of the CMEA, and the disintegration of the Soviet Union. In 1990 (when Soviet wheat and petroleum deliveries became unreliable) the National Food Program took on a new urgency and focused not only on reducing Cuba’s food dependence, but also on food security: assuring the population adequate nutritional levels, if not the normal, and more generous, composition of proteins and calories. The Food Program became increasingly focused on achieving self-sufficiency in vegetables and root crops and plantains, particularly in the provinces of Havana and of Havana City (which contain almost one-third of Cuba’s population). During 1991 Cuba received only $1.7 billion worth of imports from the former Soviet Union, its main trading partner, 60 percent less than 1990 deliveries of $4.1 billion. By 1992 the value of Cuba’s trade with the countries that once made up the CMEA was only 7 percent of 1989 levels. Overall, Cuban imports fell from a high of $8.1 billion in 1989 to less than $3 billion in 1992 (Deere 1993). Among the main casualties in terms of the agricultural sector were imports of petroleum, fertilizers, pesticides, agricultural machinery, and animal feed. In 1992 Cuba imported only 6.1 million tons of oil, down from 13.3 million tons in 1989. Fertilizer imports fell from 1.3 million tons in 1989 to 300,000 tons in 1992 and animal feed, from 1.6 million tons to 475,000 tons in this same period. The 1993 and 1994 sugar harvests were undertaken with only 22 percent of the inputs characterizing the pre-crisis period.3 Not surprisingly, the shortfall in imports sent the Cuban economy reeling. While in 1990 the economic decline had been only on the order of 3 percent, in 1991 there was a 25 percent drop in domestic output, followed by a 14 percent drop the next year (Pastor and Zimbalist 1995: Table 2). Were this not enough, in March 1993 Cuba was hit by what came to be known as the ‘storm of the century,’ which caused approximately $1 billion worth of damages, 20 percent of this to the agricultural sector. The fall in real GDP in 1993 was on the order of 20 percent (Ibid.). This is the context which provided the impetus for a number of different experiments within Cuba’s state farm sector, finally leading to the cooperativization of the state farms. THE EXPERIMENTS In the 1990–3 period, Cuban officials experimented with a variety of ways to maintain production and productivity on the state farms under increasingly unfavorable conditions. Among them were large-scale mobilizations of urban volunteers for two-week stints in the countryside; recruitment of under- and unemployed urban workers for two-year sojourns on state farms (known as contingents); decisive moves towards the decentralization of management on the state farms; and concerted efforts to increase self-provisioning efforts on these, including the tolerance of individual self-provisioning parcels on state farms.4
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Labor recruitment efforts Since the early years of the revolution, one of the main problems affecting the Cuban state farm sector has been a relative labor shortage. The distribution of lands through the 1959 and 1963 agrarian reform laws, the expansion of educational opportunities as well as of the military and the construction sector, both eliminated surplus labor in agriculture and drained away labor from rural areas (Pollit and Hagelberg 1994). The labor shortage partly accounts for Cuba’s rapid pace of mechanization of agriculture, particularly of the sugar harvest, during the decade of the 1970s. But mechanization never completely solved the labor shortage, as successive generations of relatively well-educated young people continued to leave the countryside for the towns and non-agricultural occupations. Under the conditions of the Special Period, with imports of petroleum halved from previous levels and a severe shortage of spare parts for its tractor fleet, Cuba had to partially abandon its highly mechanized strategy of agricultural production. Moreover, achieving provincial self-sufficiency in root crop, plantain and vegetable production in Havana required expanding the cultivated area and intensifying production on irrigated land. Achieving either under conditions of the Special Period depended critically on expanding the size of the agricultural labor force. By November 1990 plans were in place both to transfer excess urban labor into permanent agricultural work and to mobilize Havana city volunteers for two-week stints in the countryside. The former initiative were called labor contingents (contingentes), and followed the model of work previously developed in the construction industry, where workers volunteer for a two-year stint to work tenhour or more days for a relatively high wage and above-average living conditions. In order to ensure that urban workers, indeed, volunteer, major investments were made throughout Havana province in new and attractive camps, which offer quite decent accommodation. By early 1991 the Food Program was almost fully in place and by September sixty-one new camps were in operation in Havana province. The number of twoweek volunteers from Havana city fluctuated from 3,600 in February 1991, to 26,000 in the peak weeding and harvesting months of March and April, to 17,000 in June 1991. All told, some 146,000 Havana city residents participated in agricultural work during that year. In terms of additions to the permanent agricultural labor force, by September of that year thirty-two contingents had been organized, with 7,600 workers (Deere 1993). The municipality of Guines, as one of the most productive and well-endowed regions of the province, was targeted to play a crucial role if the province was to meet the target of self-sufficiency. In this municipality there was one large (3,839 hectares of cultivable land) Mixed Cultivation Enterprise (Empresa de Cultivos Varios (ECV) Miguel Soreira). By 1991 ten new camps had been built on this enterprise to house the temporary Havana volunteers and five contingents.
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In February 1992, the ECV had 965 contingent members and 1,033 volunteers working for it. With a total of 1,162 permanent agricultural workers, the size of its workforce had almost tripled. The number of temporary workers and contingent members decreased by about 20 percent in 1993 compared with the previous year. Part of this decrease was envisioned in late 1992, as the Cuban leadership realized that it would be difficult to sustain the high level of participation in the two-week mobilizations for a third year. The drop in the number of contingent members reflected the fact that many of these workers were now completing their two-year commitment and were opting not to remain in the agricultural sector due to the lack of permanent housing. While five new agricultural communities were planned to be built on this enterprise, to encourage workers to settle in the area, the severe shortage of building materials resulted in the construction of only one new community, frustrating efforts to settle the agricultural labor force. Material incentives and the organization of work While the rectification process has generally been viewed in the literature as a return to moral incentives, there is strong evidence coming from the agricultural sector that material incentives were not discarded. Rather, the task of rectification was to evaluate the errors in the previous planning system and to design improved forms of work organization and remuneration. For example, one of the major criticisms directed at the state farms was the unrealistic structure of ‘norms’ to which the previous system of bonuses and prizes had been linked. The new system was designed to strengthen the role of material incentives by making work teams directly accountable for all aspects of production in a given area, so that remuneration could be directly linked to productivity as well as production.5 The new system was first developed in 1990 on the state farms in Havana province which were putting in plantain seedlings with the microjet irrigation system. On these farms, the work teams were charged with putting in the irrigation system, planting the seedlings, and with their subsequent care and harvest. Each team’s final annual wage was determined according to the yields which they achieved in their area. The new system was found to be so successful that during 1992 it was officially extended to all enterprises of the Ministry of Agriculture and of the Ministry of Sugar. Nonetheless, its actual implementation was quite uneven. The new system of payment according to productivity was applied fully only in the case of plantain production. Plantain production lent itself particularly well to the new system of remuneration since plantains are a perennial, requiring year-round care which can be carried out by a permanent collective of workers. It was much more difficult to implement the system in the case of crops with short growing cycles and where the labor-intensive tasks of weeding and harvesting are often carried out by volunteer workers. Another of the problems in implementing the new system was that without fertilizer and pesticides, yields fell dramatically making it difficult to establish the norm by which changes in productivity were to be evaluated.
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More generalized was a move toward the decentralization of management of the state farms and a change in the structures into which these were organized, both pre-conditions for the new system of remuneration. Between January 1992 and September 1993 all of the state enterprises were sub-divided into large farms (granjas). In the case of the mixed cropping enterprises, the granjas were subdivided into basic production units (unidades basicas de produccion—UBPs) which, in turn, were sub-divided into smaller farms (fincas). To give an example, the Mixed Cultivation Enterprise of Guines was reorganized during 1992 into seven granjas, each with an area of between 540 and 675 hectares. Each granja contained three to four UBPs, each of which was made up of two to three small farms consisting of approximately 27 hectares each. In theory, each small farm was to have around ten workers permanently assigned to it with the idea that the workers would be responsible for all tasks and thus productivity on that parcel of land. In practice, only the farm chief remained attached to (and responsible for) this micro-unit while the workers were assigned their daily tasks at the level of the basic production unit. Turning to the sugar sector, the reorganization of the enterprises belonging to the Ministry of Sugar also began during 1992 and was completed much earlier in Majibacoa than in the other municipalities. What were termed permanent production brigades were now also called granjas; the latter were sub-divided into sections (lotes) rather than the former battalions. According to the head of human resources on one of the six granjas of the Majibacoa Sugar Complex (Complejo Agroindustrial Integral—CAI) the idea was that the management of the sections begin to resemble that of the production cooperatives so that workers feel more responsible for a given area and be more motivated. For example, from 30 to 44 workers were assigned to each of four sections of the Granja Noel García Gómez, with each section consisting of 20 to 26 hectares of cane land. The workers of each section were responsible for their own hours of work and for the cane yields which they achieved. If yields increased or if the work team saved on materials or salaries, it was awarded a salary premium (prima). The number of administrative and technical personnel assigned to the granja was also reduced in a cost-saving effort. Probably the most important insight that we gleaned from our field work in this period—forewarning the changes announced in September 1993–had to do with how state farm managers were looking to the production cooperatives as models of efficiency and labor effort. Nonetheless, while the trend had been toward evolving management and responsibility for production to the smallest unit of production possible, we saw little evidence in the summer of 1993 of greater worker participation in decision-making on the state farms. The latter, along with the distribution of significant profits and foodstuffs from collective effort, are among the salient features of Cuba’s agricultural production cooperatives. In a household income survey of state farm workers, cooperative members and peasants which we undertook in these municipalities in 1992, we found the great majority of production cooperatives to be profitable (Deere et al., 1995). Moreover, the income of CPA households was 35 percent higher than that reported
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by households of state wage workers. One of the factors, in addition to the profit distribution, accounting for the higher income of cooperative members, was their very high level of self-provisioning. The implicit subsidy of the products purchased by CPA members from the cooperative’s self-provisioning efforts represented 14 percent of gross household income. In contrast, for state wage workers, the implicit subsidy of such sales represented only 1 percent of gross household income. The stress on self-provisioning Under the conditions of the Special Period—with virtually all foodstuffs and other consumer goods once again subject to rationing—other incentives besides tying remuneration to productivity were needed to elicit labor effort and to stabilize the size of the agricultural labor force. With the amount and frequency of the distribution of a number of food products, including eggs, poultry, milk and cooking oils greatly reduced, the sale of foodstuffs to workers at the workplace as well as the quality and diversity of the meals served at the farm canteens became incentives as important as the money wage. Since 1980 the Ministry of Sugar had been setting aside land on the state cane farms for the production of root crops and vegetables as well as for raising animals. Initially intended to make the farms’ canteens self-sufficient in these products, plans were drawn up to increase production in order for these farms to sell foodstuffs to their workers. The Ministry of Agriculture’s enterprises did not begin their selfprovisioning efforts until much later, generally supplying their canteens out of their general production of grains, root crops and vegetables. Only after 1990 were efforts begun to set aside a given area of land to supply the canteen, with the surplus production to be sold to the workforce. In practice, we found that the level of self-provisioning was quite heterogenous in the three municipalities and that there was often a striking difference both in the level of canteen self-sufficiency and in the practice of selling products to workers among enterprises in a given municipality. Moreover, not until 1992, when both ministries announced that the only products they would supply the state farm canteens would be salt and sugar, did all of these begin concerted self-provisioning efforts. In a major departure from previous practice, state farms during 1992 began allowing workers to cultivate parcels of unused state farm land for their own selfprovisioning. Apparently in response to Fidel Castro’s October 1991 call (during the Fourth Party Congress) that not an inch of land should be left unutilized, we found this practice in all three municipalities. We also found that a not insignificant number of non-state farm workers had also responded to this invitation. Moreover, during 1993, as food supplies became increasingly tight, there was a noticeable increase in the number of individuals planting crops on public lands surrounding the roads and highways of rural Cuba. For example, in Santo Domingo in April 1992 all three CAIs (Jorge Washington, 26 de Julio, and Bolino) of this municipality were leasing small parcels (up to 0.15
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hectares) to their workers for them to plant rice for their own self-provisioning. The most common mode was for a group of workers to plant the usufruct parcel collectively, and in return for access to the land and seed, they provided the CAI with 20 percent of the harvest. The state enterprise then used this rice to supply its canteens. On the ECV Cascajal and the Livestock Enterprise of Santo Domingo, workers were also cultivating private parcels, but the process appeared less orderly than on the CAIs, resembling land take-overs rather than usufruct contracts between workers and the state enterprise. Moreover, we were told that not just state farm workers but also town residents were taking advantage of the fact that the state enterprises had considerable amounts of unused land and that they were putting it to work. In an effort to regulate the land take-overs while spurring self-sufficiency efforts, in September 1993 the Council of Ministers approved a measure that would allow small, dispersed parcels (never more than 0.5 hectares and depending on household size) of unused state land to be given in usufruct, preferentially, to retirees but also to others who cannot work in agriculture full-time.6 Results The increase in the size of the workforce on the state farms was partially successful: production of vegetables and root crops and plantains on state farms increased notably in 1992, notwithstanding the drastic decline in the use of modern agricultural inputs (CIEM 1993) (see Table 4.2). According to press reports, the state farms of Havana province increased their deliveries to the state marketing agency, Acopio, by an impressive 67 percent during 1991. During the first quarter of 1992 (the main growing season for vegetables), deliveries were 28 percent higher than in the previous period in 1991, and the Havana state farms had exceeded the plan, notwithstanding the shortfall in inputs. The ECV of Guines was among those contributing to this increase. In 1991 it produced a record 913,000 quintals of grain, root crops, plantains and vegetables, and in 1992, 1,079,000 quintals. According to ECV functionaries, this increase was possible only because of the notable increase in the size of its labor force. Without the contingents and temporary volunteers production would have undoubtedly fallen abruptly, given the shortfall in other inputs. But the increase in the size of the workforce, and of production, was not sustainable. In 1993 it became increasingly difficult to recruit volunteers. And, indeed, combined with the adverse weather conditions of 1993, production declined significantly. On the ECV of Guines the value of production plunged from 12.6 million pesos worth of sales to 7.4 million.7 In the dairy industry, notwithstanding the attempt to switch to a more decentralized and less input-intensive system, milk production dropped drastically nationally, from 924.1 million liters in 1989 to 415.8 million liters in 1992 (Ibid.). The Livestock Enterprise El Cangre in Guines produced 82,000 liters of milk per day in the peak year of 1984; in January 1993 production fell to an all-time low of
Sources: Comité Estatal de Estadísticas, Anuario Estadistico Cubano 1989, Tables VIIL20, VIII.32, VIII.37, VIIL41, VIII.42, VIII.47. Data for 1990 for pork, poultry and eggs are estimates drawn from Poder Popular (1991); those for other products for 1990 and all 1991 and 1992 figures are taken from CIEM, Boletin de Información sobre la Economía Cubana, 2 (15), 1993; from Deere (1993: Table 1) Notes: a Fresh milk, state sector only, in millions of liters b Based on deliveries to slaughter houses, live weight, by state and private sectors c Deliveries to slaughter houses, live weight, by state sector only d Million units; state sector only
Table 4.2 Cuban food production (000s tons), 1970–92
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6,000 liters per day. The dramatic plunge was due to low yields per cow and the fact that fewer cows were producing milk, both factors related to the lack of sufficient feed. In addition, reproduction rates fell while stock mortality increased. The total number of head on this enterprise fell from 32,000 in 1990 to 24,000 in 1993 (see Table 4.2). With respect to cane and sugar production, the trend has also been steadily downward. Sugar production fell from 7.6 million metric tons in the 1991 harvest, to 7 million in 1992, and 4.2 million in the 1993 harvest. The sharp drop in 1993 was primarily due to falling yields due to the lack of sufficient fertilization over several years. For example, at the CAI Oswaldo Sanchez in Guines—considered one of the most productive in the country and one that was decentralized early on—state yields fell from 89,200 arrobas per caballería in 1990 to 50,800 in the 1993 harvest.8 On the less productive, neighboring CAI Amistad state yields fell to 36,400 arrobas per caballería. Under similar, adverse conditions, the private sector (individual peasants and production cooperatives) outperformed the state sector. The private sector which supplies the CAI Amistad reached average yields of 51,800 arrobas per caballería in that latter year. In sum, the various strategies that the Cuban government implemented between 1990 and 1993 were insufficient to overcome the effect of the shortage of inputs. While the mobilization of thousands of urban workers was partially effective in substituting for agricultural chemicals and in allowing an expanded acreage to be planted in root crops and vegetables, leading to an increase in production in 1992, this could not be sustained. While some effective decentralization was instituted, devolving decision-making to smaller units of production within the state farms, the degree of such was uneven. Also, the proposed system of tying wages to productivity proved unfeasible. The main incentive for workers to remain on state enterprises increasingly became the possibility of food sales from the enterprise’s self-provisioning parcel. But as noted above, the self-provisioning efforts were uneven as well, and the state enterprises tended to prioritize meeting the needs of the farm canteens over sales to workers. At the same time, under the same adverse conditions, the production cooperatives seemed to be performing much better than the state enterprises. They were, in many cases, maintaining or even increasing their deliveries to the state, while moving towards near self-sufficiency in foodstuffs. Under these conditions, the Cuban leadership, rather reluctantly, came to realize that it faced only two options: the parcelization of the state farms, as was already beginning to occur, or their total decentralization, through their cooperativization. In keeping with its socialist principles the Cuban leadership chose the latter route. COOPERATIVIZATION OF CUBA’S STATE FARM SECTOR The main features of the current reform are as follows. First, former state farm workers may form what are called Basic Units of Cooperative Production (Unidades
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Básicas de Productión Cooperativa—UBPCs) by leasing land (rentfree) from the state in permanent usufruct; these lands remain national property. Second, the new cooperative members are collective owners of the other means of production that previously belonged to the state farms. The Cuban National Bank has made available long-term credit (at 4 percent interest rates with a threeyear grace period) for the UBPCs to purchase the machinery, capital investments (such as irrigation systems and installations), and where applicable, their investment in perennial crops and livestock. Third, the members of the UBPC are the owners of what they produce. They must negotiate their production plans with the relevant state enterprise, including the purchase of inputs, and (until October 1994) could sell their production only to the state procurement agency. But the profits that they generate are their own to divide among the membership or to reinvest. Fourth, the UBPCs elect their own management team from among their membership. Workers make their own decisions about when and how to plant. What they plant as their principal crop is negotiated with the state enterprise with which the UBPC is associated. Cooperative members themselves, however, are responsible for all decisions regarding their own self-sufficiency efforts on the lands set aside for this purpose. The cooperativization of the state farms was initially implemented on the state sugar enterprises. It was done with impressive rapidity, in time for the harvest which began in late December 1993. Between September and December over 1,500 sugar cane UBPCs were formed, encompassing almost 90 percent of the land previously held by the state sugar agro-industrial complexes (CAIs) (Figueroa 1996:25). The urgency was due not only to the timing of the cane harvest, but also to its importance. The hope was that this new form of organization—though greater worker effort—would bring about a recuperation in cane production, or at least halt the trend of falling cane yields and declining sugar production. Concurrently, the state mixed cultivation enterprises began experimenting with the new system. By February 1995, 1,440 non-case UBPCs had been constituted, holding 1.2 million hectares of land and consisting of 126,723 members (Ibid.: Table 3). Almost half of these UBPCs have been formed on the state livestock enterprises, with the remaining dedicated to mixed cultivation, coffee, citrus and tobacco production. As Table 4.3 shows, in September 1996 the cane and non-cane UBPCs held 41 percent of Cuba’s agricultural land while the state enterprises now farmed only 30 percent of the total. The cooperative sector, including both the older one (formed on private lands), and the new one (formed on state lands), now control the majority of Cuba’s agricultural lands, 52 percent. Also worth noting in this table is that the private sector of individual peasant producers (organized and non-organized) still own or hold 15 percent of Cuba’s agricultural land. This sector has recently been boosted by the policy of handing out small parcels for tobacco and coffee cultivation; some 22,000 hectares were handed out in usufruct for this purpose between 1993 and the end of 1994 in an
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Table 4.3 Emerging mixed agrarian economy in Cuba, September 1996 (000s hectares)
Source: Victor Figueroa, ‘La III Reforma Agraria y el Modelo Mixto de Economía Agrícola en Cuba,’ Rural Development and Cooperative Group, Central University of Las Villas, February 1997, Table 7
effort to revive production of both crops.9 This practice reinforces our contention that Cuba is moving toward a mixed agrarian economy—one characterized by multiple forms of property, tenure and organization of production. Case studies best convey the significance of the move to cooperativize the state farm sector.10 In the non-sugar sector, the cooperativization process in early 1994 was most advanced in the province of Havana. In November 1993, the Mixed Cultivation Enterprise of Guines was sub-divided into seven new cooperatives. The bulk of our fieldwork here has centered on farm #4 of this enterprise, which had a large contingent of Havana city workers attached to it, housed at the camp ‘Bizarrón.’ With the transformation of this farm into a UBPC, the contingent members were given the option of becoming cooperative members; approximately half decided to do so, committing themselves to remaining in the agricultural sector. Part of their motivation for doing so was the promise that the cooperative would build new housing for them. Also, some of them had no jobs to return to in Havana city, since so many factories had closed or were working on reduced shifts due to the shortage of petroleum and spare parts. For most who joined the UBPC the
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prospect that the cooperative would generate high levels of self-provisioning was an additional motivation; they could thus help augment food supplies for their families in Havana city. In this UBPC there were contested elections for cooperative president. The administration of the enterprise had proposed the previous farm chief as president; but at the assembly, the members proposed one of the leaders of the contingent. After five rounds of voting, it was apparent that neither would garner the necessary 75 percent of the vote. The assembly then revised its statutes and elected the contingent leader as president by majority vote. The new cooperative management soon realized that they needed much less labor than was previously employed on the state farm. With 714 hectares, the cooperative was formed with approximately 220 members. Since the UBPC must now pay for contracting contingent workers as well as the costs of feeding the twoweek volunteers, they prefer to work longer hours themselves to ensure that the cooperative is profitable. Whereas it was not uncommon in the past for workers to meet their norm on the state farm in four or five hours, the UBPC members are now working ten to twelve-hour days. As a result, the UBPC is requesting fewer and fewer Havana city volunteers, and the contingent modality is likely to disappear, altogether. To give another example of the functioning of the UBPCs, on the state Livestock Enterprise of Majibacoa ten UBPCs were constituted between November 1993 and January 1994, eight as dairy cooperatives and two dedicated to mixed cultivation. The dairy UBPCs were quite huge, averaging 2,187 hectares with 108 members. They also assumed a significant debt, an average 1.1 million pesos, due to their purchase of livestock and other means of production. In contrast, the two mixed cultivation UBPCs average only 337 hectares and their initial debt was only an average 57,900 pesos (MINAGRI 1994). Still, in June 1994, the final debt for means of production had not been settled, nor had the UBPC’s received the credit to begin repaying this debt to the state enterprises. Problems had arisen regarding the initial valuation of crops and animals, with many cooperatives feeling that the prices they had been charged for these had been way too high. As one member of the UBPC Cuba Va put it, ‘only after we started working as a cooperative did we realize that plantain yields would never be sufficient to cover the cost of what they were charged for the plantain stand.’ Apparently prices for perennials had been fixed at the national level, not taking into account that yields vary tremendously by region and depending on whether or not irrigation systems were in place or functioning. Similarly, in the dairy UBPCs there were disputes over the valuation of the dairy stock. In Majibacoa, as in Santo Domingo and Guines, many of the livestock and mixed cultivation UBPCs declined to purchase buildings and installations, either because they considered these too costly or they did not need them. As a result, the state has been left with all sorts of unused structures representing millions of pesos of previous investment. Since there is very little irrigation in Majibacoa, both the livestock and mixed cultivation cooperatives were hard hit by the draught that plagued this region in
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the winter and spring of 1994. Productivity on the UBPCs fell to an all-time low of 1.9 liters of milk per cow in production; the heavy rains which followed brought about renewed pasture growth and in June productivity was back to near normal levels of 3.0 liters/cow. At the end of May 1994, only three of the ten UBPCs on this enterprise were profitable. And only two of the dairy UBPCs had met their milk production plans. In June there was still the expectation that the majority of dairy UBPCs would be profitable in their first year; there was little expectation that the mixed cultivation cooperatives would be so, since these were having greater production difficulties. Because of these difficulties, it was decided not to constitute two more mixed cultivation cooperatives on this enterprises’ lands, as had initially been planned. All told, the enterprise still directly controls some 35 percent of the area once pertaining to it. The mixed cultivation cooperatives seem to be the ones subject to the most supervision and control by the enterprise. According to one UBPC president, the administration comes out to supervise their plan every ten days and there are way too many forms to fill out, which keep them away from agricultural work. Part of the problem is that given the food shortages, it is mixed cultivation UBPCs that are the most subject to pilfering. On the UBPC Cuba Va, for example, it was estimated that 30 percent of the crop was lost due to pilfering. Seven of the original ninety cooperative members had already been expelled for taking home products not assigned to them, although apparently, the worst offenders were urban residents who do not have access to self-provisioning parcels. Actually, self-provisioning efforts on this UBPC had improved dramatically as compared to when it was a state farm. Workers were sold ten pounds of plantains and root crops weekly, so even though it is not expected for this cooperative to soon be profitable, morale was generally quite high. Also, when the UBPC was constituted the members voted themselves a daily advance of 6 pesos as compared to the 5.36 pesos they were previously earning. But they were also working longer days, seven hours or more, as compared to six previously. Prospects Our interviews in three municipalities revealed that the cooperativization of the state farms was generally received relatively enthusiastically by Cuba’s state farm workers. They saw the UBPCs as offering them substantial potential benefits. Foremost in the mind of most members was that they were now themselves responsible for their own self-provisioning; they expected to produce enough foodstuffs and minor livestock to be self-sufficient. In addition, most expected their cooperatives to eventually become profitable and that their incomes would reach the level approximating those of production cooperative members in the private sector. Because they believe that they will be the beneficiaries, UBPC members are also working longer hours, and with much greater effort. Moreover, it is apparent that as owners of the means of production they take better care of their equipment
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and farm implements. The UBPC members also feel empowered to a certain degree, for they are now participating in production decisions and have elected their own management, sometimes in contested elections—something quite new in the Cuban political scene. Whether the new cooperatives will be able to realize their full potential, however, depends on a number of factors. First, the cooperatives have inherited a highly mechanized, large-scale agricultural system heavily dependent on modern inputs. Even under the best of conditions, this system was not very cost-effective. With supplies of petroleum and other inputs more than halved, this system has been undermined. While it is still unclear what will replace it, and whether what emerges is more or less productive, it will almost certainly be a more ecologically benign agriculture, as oxen replace heavy tractors and compost substitutes for the use of chemical fertilizers. In the meantime, it is clear that the UBPCs have been formed under the worst of conditions, and that the shortages of petroleum, spare parts, tools, etc., have made real gains from greater labor effort difficult to achieve. In the sugar sector, production fell from 4.2 million tons in 1993 to 4.0 in 1994 and to an estimated 3.3 million tons in 1995. But according to Cuban sugar analysts, production would have fallen even further had it not been for the formation of the new cooperatives. Preliminary data from at least Majibacoa also indicate that under these adverse conditions, the cane UBPCs are performing at higher levels of efficiency than the previous state farms, generating profits rather than losses. Nonetheless, a government report considered only 9 percent of the cane UBPCs nationally to be performing well, with another 50 percent performing according to expectations. The remaining 41 percent were experiencing severe difficulties, with the principal problems being the lack of inputs and spare parts, or insufficient labor to adequately work the assigned land (MINAZ 1995). In terms of the non-cane UBPCs, in October 1996 it was reported that 40 percent of these were profitable, suggesting that the non-cane UBPCs were outperforming those in the sugar cane sector. However, the UBPCs have a long way to go in order to emulate the private sector CPAs; in 1996 88 percent of these were reported to be generating profits (Paneque 1996:8). One of the problems is that the new cooperatives are quite large in size and cumbersome to manage. The cane UBPCs average 1,199 hectares in size nationally. While much smaller than the cane enterprises which proceeded them (those averaged 13,413 hectares), they are much large than the average cane CPA of 899 hectares. Similarly, the new cattle UBPCs are much smaller in size (1,597 hectares) than previous state farms (28,000 hectares), but they are more than twice the size of the private sector cattle CPAs (631 hectares) (Figueroa 1996: Appendix I). The size of the new cooperatives on state land is related to one of the main problems that these have been facing: the lack of sufficient labor to effectively work all the land which they have been assigned. In the case of the previously cited study of cane cooperatives, some 75 percent reported suffering from this problem. A subsequent survey of 630 UBPCs nation-wide found that 24 percent of
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the UBPCs reported suffering from this problem, with the greatest labor shortage found among the cane cooperatives (Molina and García 1995: Table 3). In addition, many cooperatives have been plagued with labor instability, particularly those that have been unable to generate sufficient levels of foodstuffs for self-provisioning or profits to distribute to the membership (Torres and Pérez 1996). The 1995 national survey cited earlier found that 36 percent of the UBPCs were still not generating adequate levels of self-provisioning products to sell to their members (Molina and García 1995: Table 9). Moreover, 51 percent of the UBPCs suffered from insufficient or inadequate housing, another factor which contributes to the problem of labor instability (Ibid.: Table 10). Aggravating the problem of labor instability is the fact that, in certain regions, cooperatives members can earn much higher incomes working for private peasants, particularly since the new agricultural markets opened in October 1994. Another issue is whether the cooperatives will have sufficient autonomy from the state enterprises to become viable production units. Cuba’s experience with the private sector production cooperatives in the 1980s demonstrated that attempts to exert too much state control, which reduced cooperative autonomy and members’ participation in decision-making, usually resulted in membership disaffection and a lowered commitment to the viability of the cooperative. Not infrequently, state directives in terms of what the cooperatives should plant undermined their profitability (Deere, Meurs and Pérez 1992). There is concern that the UBPCs were formed under more unfavorable circumstances than were the CPAs—not only with respect to timing, in conditions of macroeconomic crisis rather than growth, but also due to the fact that the new cooperatives are directly linked to state agricultural enterprises. In most cases, the enterprises feel responsible for the performance of the cooperatives and do not hesitate to intervene in their decision-making. This intervention, in certain cases, has already produced discontentment and some disaffections (Pérez and Torres 1996). Cooperative members complain that the administrators of state enterprises make them fill out too many forms, that they frequently make them change their production plans, and that, at times, some administrators have even intervened to dictate the disposition of the crops grown for the membership’s self-provisioning. Nonetheless, our research has revealed that production plans are generally negotiated between the UBPCs and the state enterprises, and that there is considerable give and take. Some mixed cropping cooperatives, for example, have sometimes refused to plant crops which are unprofitable at official prices or which are too labor-intensive. But it is unclear what will happen if some of the cane UBPCs decide that cane production is too unprofitable under current conditions and attempt to switch from cane to more lucrative crops. Under the regulations governing the UBPCs they cannot change their main line of production. There is a growing consensus that the maintenance of the cooperatives under the structure of state enterprises simply serves to bloat the bureaucracy and raise the social costs of agricultural production (Figueroa 1994). According to one local official with whom we spoke,
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Compounding the problem, UBPC members do not have their own autonomous organization to represent their interests before the state. The members of the UBPCs are to remain members of the national Confederation of Cuban Workers. In contrast, members of the private sector CPAs are members of the peasant mass organization, ANAP. While ANAP has a checkered history in terms of effectively defending peasant interests before the state, it has played a critical role in consolidating the private sector production cooperatives. Another problem had to do with the marketing system. In their first year of operation, the UBPCs were regulated by the same regime governing the private sector until the fall of 1994: under the plan, they contracted to deliver a given amount of produce to the state at the official price. If they exceeded their quota, they were awarded a premium for above-plan production. While this system worked reasonably well in the late 1980s, providing incentives for the CPAs and individual farmers to produce above the plan and to sell this surplus to the state, the severe shortages of the 1990s brought about an explosion in food prices on the black market reducing the incentive to sell surplus production to the state. It was this price explosion that led to the second major reform, the legalization of free agricultural markets. THE FREE AGRICULTURAL MARKETS By June 1994 the black market in foodstuffs was totally out of hand. Black market prices had escalated during that year, reflecting growing food shortages. From early 1993 on the state food distribution system had been increasingly unable to deliver the normal quantity of foodstuffs guaranteed to all Cubans through the rationing system. Throughout that year Cuban households began to find that the basic allotments of rice and beans did not cover a full month, forcing them to turn to the black market for these staples. Moreover, deliveries of poultry, fish and cooking oil, and sometimes even root crops and plantains, came at larger and larger intervals, forcing consumers to turn to the black market to purchase these and prized luxuries, such as pork meat and garlic. The state was caught in a double-bind. First, the shortage of inputs (particularly fertilizer and petroleum) had lowered crop yields, so that both state and private sector farmers were increasingly unable to meet their planned deliveries to the state procurement agency, Acopio. Second, the high and accelerating prices on the black market were undermining ‘revolutionary morality,’ leading to growing pilfering on state farms while encouraging private sector farmers to engage in
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black market sales. In addition, all sectors were facing a growing number of robberies of their livestock and crops, reducing their deliveries to Acopio even further. As the state became increasingly unable to deliver normal levels of foodstuffs under the rationing system, this pushed black market prices up even further, creating further incentives to reduce planned production and deliveries to the state. An additional factor worrying Cuban officials in the summer of 1994 was that the black market was becoming increasingly ‘dollarized,’ with a growing amount of trade taking place only in dollars. Concomitantly, the peso was rapidly depreciating. While in 1989 the black market exchange rate had been on the order of 8 pesos to the US dollar, by June 1994 that rate hit 100 pesos and by July, 120 pesos to the dollar. The inequality that was being generated between those who had access to dollars, primarily through remittances from relatives overseas, and those who did not, was resulting in tremendous differences in consumption levels. The leadership finally realized that the inequality being generated by the current situation far surpassed that which characterized the period when Cuba experimented with free peasant markets, 1980–6. These had been closed down precisely for this reason. The final reason why the Cuban leadership abandoned its long-standing opposition to a free market in foodstuffs was that it came to realize that if the new UBPCs were to be successful, that additional incentives were needed. It was hoped that by opening a free market for above-plan production, the UBPCs (as well as the private sector production cooperatives and individual farmers) would be stimulated to produce more, meeting their production plans as well as realizing higher incomes and financial solvency through free market sales. The new agricultural markets which opened on October 1, 1994, differ from the free peasant markets of the 1980–6 period in three important ways. First, not only peasants may participate in these markets, but also the CPAs, the UBPCs (of the non-cane sector), state enterprises, and all other individuals and collectives with self-provisioning plots. Before the former three can participate in the new markets, however, they must receive a certification from Acopio that they have met their delivery quotas. Second, in the free peasant market period, after concern that the opening of these markets had led to the enrichment of middlemen, after 1983 only peasants who were members of ANAP were allowed to sell in these markets. This, of course, restricted the participation of many farmers, and thus the quantity of foodstuffs available for sale, since many farmers do not want to take the time away from their fields and are often reticent about dealing with consumers face to face. While concern with the possible emergence of a class of wealthy middlemen continues, this has been recognized as inevitable if the markets are to succeed. Under the new regulations, farmers are allowed to officially designate ‘a representative’ to sell their products in the free agricultural markets. A third difference is that an effective system of taxation has been designed which should allow the state to benefit directly from the volume of market
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activity. The tax rate ranges from 5 percent of the value of gross sales in Havana city to 15 percent in the small, rural markets of the interior. This differential is due to the government’s objective of channeling the greatest volume of foodstuffs to the capital, where the food shortages are potentially the most politically volatile. When the markets opened in October 1994, the state enterprises (including the farms run by the military) played a major role in supplying these, with the aim of bringing down prices from their black market level. The state pork enterprise was successful in immediately bringing down the price of pork in Havana city from its black market level of 75 pesos (in June) to 45 pesos per pound in January 1995. It was estimated that pork sales made up 30 percent of the value of total market sales in the first two weeks of its opening. The greatest volume of sales, however, by weight, was of root crops and plantains, which encompassed 68 percent of the 164,913 quintals of products sold nationally in this period (Torres and Pérez 1994). Interviews in three markets of Havana city in January, March and June 1995, and again in January 1996, revealed that the overwhelming number of those participating in the free agricultural markets were either smallholders (parceleros) or representatives of farmers from Havana province. 12 Representatives of the CPAs and UBPCs from the province were also present. The state presence had diminished considerably, being confined primarily to pork sales, although each market had at least one stand of produce supplied by a state farm or enterprise. The lower tax rate being charged in Havana city has been successful in attracting suppliers from the interior of the country. Among those interviewed in Havana markets in January 1995 were smallholders from the provinces of Pinar del Rio, to the west of Havana, and from Las Villas, Sancti Spiritus and Granma, to the east. Turning to the impact of the opening of the free agricultural market on the black market, by early 1995 it was clear that the markets had had a significant impact both in terms of the availability of foodstuffs in Havana city and with respect to prices. For example, in June 1994, rice was selling for 50 pesos per pound in the black market; in January 1995, it was available in the free market for 7 pesos. The price rose somewhat during March and June, but by January 1996. rice could be purchased at 4 pesos per pound in most Havana markets. Black beans had reached a high of 30 pesos a pound in June 1994; in January the going price had fallen to 13 pesos, and then stabilized at 9 pesos per pound in the second half of 1995. Yuca, one of Cuban’s favorite foodstuffs, had sold for 15 pesos a pound in June 1994; in January 1995, it was readily available in the free market for 2–3 pesos a pound and a year later for 1 peso per pound. The continuing fall in the price of pork meat is largely due to the role of state enterprises. In January 1995, the state was selling pork meat at 38 to 40 pesos per pound while the prevailing price in all three markets was 45 pesos. This practice continued, and in June the prevailing price was 35 pesos, falling to 28 pesos per pound in early January 1996.
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Prices of a number of other products continued to fall between January 1995 and 1996, suggesting that the markets triggered a supply-response on the part of farmers. Moreover, food deliveries through the state rationing system have stabilized, suggesting that contracted deliveries through the state procurement system have not suffered as a result of the opening of the new markets. Another feature of the Havana markets is the large number of people selling prepared foodstuffs, ranging from sweets, soups (caldozas) and drinks to full meals including pork steak, mixed rice and beans (congrí), yuca and a tomato salad, packaged in a paper box. Moreover, the prevailing price of this full meal dropped from 30 pesos in October 1994, to 25 pesos in January 1995, to 15 pesos in June, basically following the falling price of pork meat; in January 1996 this basic meal cost between 10 and 18 pesos, depending on the size of the pork steak. The dynamism of the free agricultural market raises the question of whom the consumers are and where the money comes from to purchase meals such as these and other foodstuffs. The minimum wage in Cuba is 105 pesos per month while the average wage nationally in 1995 was 193 pesos per month (Rodríguez 1995:5). This means that the average Cuban in January 1996 could spend his or her whole monthly income on either a dozen or so prepared meals or six to seven pounds of pork meat, demonstrating the broad gap which continues to exist between peso wage levels and free market prices. One explanation for the apparently high volume of sale in the free agricultural markets is the high level of savings which many Cubans have accumulated. This itself is a product of the shortage of consumer goods upon which to spend money, and the high degree of state subsidization of the basic foodstuffs made available through the ration card. In addition, utilities and transportation are still highly subsidized and health care and education continue to be provided free of charge. One of the objectives of the Cuban government in opening the new agricultural markets was precisely to try to tap into this ‘monetary overhang.’ Another, was to reverse the depreciation of the peso. With respect to the latter it has been extremely successful. In July 1994, the dollar reached a peak of 120 pesos in the black market. With the opening of the free agricultural markets, the peso appreciated to 40 pesos to the dollar in January 1995, and then to 30 pesos in June. By late fall the peso had stabilized at around 25 pesos to the dollar, the prevailing rate in early 1996. What is clear is that while not all Cubans have access to the free agricultural market, and that the majority of those that participate make relatively small purchases, the opening of the free markets has met the objective of reducing the potentially explosive level of inequality in consumption levels characterizing the summer months of 1994. The black market in foodstuffs has been effectively reduced in size and prices for above the ration card food consumption have more than halved or reached one-tenth of their June 1994 levels. This means that more Cubans now have access to above the ration card foodstuffs and that the comparative advantage of Cubans with relatives in the United States and elsewhere who receive
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remittances has been considerably reduced, although not eliminated. Just as important, through the appreciation of the peso, incentives to work have partially been restored. Finally, the opening of the free agricultural markets has provided a means for the Cuban leadership to foster the viability of its collective forms of production, both the UBPCs and the private sector CPAs. Free market sales should allow most of these to be profitable, raising the income of their memberships.13 The incomes of the individual farmers of Cuba will also continue to grow through free market sales, maintaining their status as the wealthiest group in the countryside.14 But while inequality will increase, it should grow at a slower rate than without a free market in foodstuffs for above-plan production. And, if the reforms succeed in significantly increasing agricultural production, while encouraging private and collective farmers to meet their quotas, the state’s capacity to guarantee a basic bundle of foodstuffs to all at a subsidized price will be enhanced. If so, this will be an important element in enabling the Cuban leadership to maintain social cohesion by guaranteeing the maintenance of basic human needs. Not only will the state be able to supply minimum food supplies, but through increased fiscal revenues from the free agricultural markets, it may also be able to maintain its commitment to its vast array of social programs. CONCLUSION The Cuban case demonstrates how fundamental reforms are path dependent. The Cuban agricultural sector evolved into one of the most ‘statist’ forms of organization of socialist agriculture both because of the legacy of pre-revolutionary land tenure patterns and because of the unbridled faith of its leadership in economies of scale through mechanization. At the same time, Cuba was capable of producing a successful production cooperative movement later on in the country’s development, partly because of the regime’s political legitimacy among the peasantry (the latter which was largely created by Cuba’s initial ‘land-to-the-tiller’ agrarian reform). In addition, through socialist development planning, Cuba was able to develop an industrial sector linked to agriculture which allowed it to use the lure of mechanization to foster the development of production cooperatives. The economic crisis produced by the disintegration of the CMEA sent the Cuban leadership off on a path of experimentation. It was unclear, still in 1993, the extent to which the tendency toward decentralization of the state farms would lead towards its convergence with the CPA production cooperative model. While there was growing acceptance among state officials that the production cooperatives were the more productive of the two socialist forms of production, the decentralization achieved by mid-1993 was still a far cry from the production cooperative model. While farm chiefs at the most micro-level were being granted more autonomy, we uncovered little evidence of greater worker participation in decision-making prior to the move to convert the state farms into new production cooperatives.
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The new system of remuneration on the state farms introduced in 1991 did attempt to create a stronger bond between ‘workers and the land,’ enhancing collective responsibility for production results. Nonetheless, it was difficult to implement the new system under conditions of falling yields and relative labor shortage. It was also unclear for how long higher pesos wages would entice greater labor effort, given the tendency toward dollarization of the economy. The most important incentive that the state farms had to offer their workers in the Special Period were sales of foodstuffs from the collective self-provisioning plot. As the conditions of work became more difficult, such sales as well as plentiful food in the canteens were crucial to stabilizing the size of the agricultural workforce. The increase in self-provisioning efforts was quite significant, overall, and broke the dependency of state enterprises on the centralized distribution of foodstuffs through the ministries. It also reduced waste and certainly saved on petroleum and other transportation costs. But perhaps the most important incentive to achieving the goals of food security and local self-provisioning was the distribution of individual and collective parcels to workers of unused state farm land in 1992–3. In recognition of this incentive, and the continued urgency of increasing self-sufficiency efforts, the Cuban leadership endorsed the policy of distributing unused portions of state farm lands to private citizens in September 1993. The September 1993 reforms, however, assured that collective forms of productive organization would out-weigh individual, private forms. Moreover, the cooperativization of the state farm sector has the potential to generate a profound transformation in Cuban agrarian class relations. To the extent that the UBPCs become truly participatory and self-managed units, the Cuban transition could generate more profoundly ‘socialist’ (or collective) relations of production than those evident in the statist model since the mid-1960s. At the same time, it remains to be seen whether truly self-managed UBPCs are allowed to consolidate themselves. Our interviews suggest that ministry and party officials have not fully begun to internalize the principle of ‘cooperative autonomy’ in dealing with the new UBPCs. Yet there is growing recognition that relative autonomy may well be the pre-condition for these new cooperatives to be successful.15 As mentioned at the outset, we consider the cooperativization of the Cuban state farms as potentially a significant a reform as the Chinese reform of the communes. There are also a number of similarities in these reforms. Where they are most similar is that in both cases ownership of land has remained national property. Where they differ is that in the Chinese case, when the communes were abolished, usufruct rights passed to peasant households; in Cuba, these have passed to production cooperatives. The state retains a critical role in planning production in both cases. Farmers sign a contract to sell an agreed-upon amount of their primary production to the state at state-determined prices. In China, as now in Cuba, above-plan production may be sold at market-determined prices, although the scope of the free market is
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much broader in China than in Cuba. Another similarity is that the state continues to play a major role in the provision of agricultural inputs and services, although the state’s role with respect to the latter is greater in China than in Cuba. In China the state (at the level of the township) often carries out most mechanized activities on private plots; in Cuba, in contrast, the cooperatives have the opportunity to purchase their own machinery and equipment. What is emerging in Cuba, as in China, is the emergence of a reformed socialist agriculture characterized by multiple forms of organization and property rights (see Table 4.3), with a blending of planning and market mechanisms. In addition, in both countries the state has retained its determining role in orchestrating production; moreover, in both, the Communist Party has retained its monopoly on political power. What appears to be unique to Cuba is that the reform of socialist agriculture has given new impetus to collective class relations. Theoretically, the Cuban experiment has the potential to redefine socialism in a manner consistent with the Marxist classics: the collective appropriation and distribution of the surplus produced by a collective of workers. The macroeconomic effect, of course, of the Cuban reform program remains to be seen. The economy did grow during 1995, a reported 2.5 percent; the non-sugar agricultural sector contributed to this growth, registering a healthy 4.2 percent growth rate (Rodriguez 1995:4). The 1995–6 sugar cane harvest produced a 30 percent increase in production, reaching 4.45 million tons. This contributed significantly to the 7–8 percent growth rate predicted for 1996. But expectations are that this growth rate cannot be sustained, for sugar cane production should remain in the 4.5 million ton range, still far below the average 6 million to 7 million tons produced in the late 1980s (Tamayo 1996). Nonetheless, in the short term, it is evident that the reforms have proved a great stabilizing factor, and perhaps given Cubans hope that there might be a way out of the economic crisis. ACRONYMS ANAP CAI CCS CPA ECV UBP UBPC
Asociación Nacional de Agricultores Pequeños: National Association of Small Producers Complejo Agroindustrial Integral: Integral Agroindustrial Complex (of the Ministry of Sugar) Cooperativa de Credito y Servicios: Credit and Service Cooperative Cooperativa de Producción Agropecuaria: Agricultural Production Cooperative Empresa de Cultivos Varios: Mixed Cultivation Enterprise (of the Ministry of Agriculture) Unidad Basica de Producción: Basic Unit of Production (of the Granjas of the Mixed Cultivation Enterprises of the Ministry of Agriculture) Unidad Básica de Produccion Cooperativa: Basic Units of Cooperative Production (the new production cooperatives on the enterprises of the Ministry of Agriculture and Ministry of Sugar)
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ACKNOWLEDGMENTS I would like to acknowledge the contributions of Niurka Pérez, Cary Torres, Miriam García and Ernel Gonzales of the Rural Studies Team to this chapter; it draws upon much of our previously co-authored work. Also, I would like to thank Mark Selden and Iván Szelényi for their helpful comments on earlier drafts. NOTES 1
2
3 4 5 6 7 8 9
10 11 12
13
14
Under the SDPE, a three-tiered structure of salaries was instituted based on work norms, bonuses (primas) and profit sharing (premios). Whereas the primas were aimed at individual worker performance, the premios focused on the performance of the enterprise as a whole or of the permanent production brigades into which enterprises were sometimes divided. As a result of the dismantling of the CMEA, in August 1990 the Cuban government announced that the country was in a ‘Special Period in Time of Peace.’ See Deere (1991) for the measures that were taken in response to the first shock to the Cuban economy, a cut-back in the level of petroleum imports from the Soviet Union. Interview with Carlos Lage, Vice-President of Cuba, as reported by Frances Kerry, ‘Cuba Says Sugar Industry Open for Foreign Capital,’ Reuter’s Wire Service, October 30, 1994. This section draws heavily on Deere, Pérez, and Gonzales (1994). The new system was officially called the Sistema Tecnologico, Organizativo, y de Pago por los Resultado Finales de la Producción (Technical, Organization, and Payment System According to Final Production Results). See Poder Popular (1991:83). Granma, September 15, 1993, and Agreement 2708 of the Council of Ministers, September 21, 1993. Data provided by the State Statistical Committee of Guines, March 2, 1994. The value of 1993 sales by the ECV of Guines still exceeded the average value of sales by this enterprise in the 1989–91 period, which was on the order of 5.5 million pesos. An arroba is equal to 25 pounds; a caballeria is equal to 13.47 hectares. The amount of land farmed by these ‘new farmers’ continues to increase. By the end of 1995 there were some 30,000 households who had received land to pursue coffee and tobacco production. Carlos Lage, ‘La Economía continuará creciendo en 1996,’ Granma International, January 3, 1996. Other case studies of the process of cooperativization are offered in Deere (1997). Interview with provincial president of ANAP, Las Tunas, June 1994. Niurka Pérez, Cary Torres, and the author carried out interviews and collected price data in the markets of Alta Habana, Marianao, and Egido on January 18 and June 10, 1995 and on January 6, 1996; on the latter date we were joined by Miriam Garcia. The markets were also surveyed on March 30, 1995 by Perez, Torres, and Carollee Bengelsdorf. However, it should be noted that the cane UBPCs were prohibited from participating in the free agricultural market, which will certainly hinder their profitability. There is considerable discussion surrounding this policy at the moment. Apparently, the state is concerned that if they are allowed to participate in the free market, cane UBPCs will dedicate most of their time to raising production on their authorized self-sufficiency parcels, to the detriment of cane production. See Deere et al. (1995) for the results of a 1991 household income survey of state farm workers, cooperative members and individual peasant producers.
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15 There is certainly concurrence among Cuban scholars on this point; see Pérez and Torres (1996) and Figueroa (1994, 1996). The need for cooperative autonomy is also increasingly being stressed in radio programs and in the press; see Sexto (1995).
BIBLIOGRAPHY CEE (Comité Estatal de Estadísticas). Various years. Anuario Estadistico de Cuba. Havana: CEE. CIEM (Centro de Investigatión de la Economía Mundial). 1993. Boletin de Informacion sobre la Economia Cubana 2 (15). Cuba, Republica de. 1951. Memoria del Censo Agricola Nacional, 1946. Havana: P.Fernandez y Cia. Deere, Carmen Diana. 1991. ‘Cuba’s Struggle for Self-sufficiency.’ Monthly Review 23 (3):55–73. ——1993. ‘Cuba’s National Food Program and its Prospects for Food Security.’ Agriculture and Human Values 10 (3):35–51. ——1995. ‘The New Agrarian Reforms.’ NACLA Report on the Americas: Cuba: Adapting to a Post-Soviet World 29 (2):13–17. ——1997. ‘Reforming Cuban Agriculture.’ Development and Change 28 (4):649–669. ——and Mieke Meurs. 1992. ‘Markets, Markets Everywhere? Understanding the Cuban Anomaly.’ World Development 20 (6):825–839. ——Mieke Meurs, and Niurka Pérez. 1992. ‘Toward a Periodization of the Cuban Collectivization Process: Changing Incentives and Peasant Response.’ Cuban Studies 22:115–149. ——Niurka Pérez, and Ernel Gonzales. 1994. ‘The View From Below: Cuban Agriculture in the ‘Special Period in Peacetime.’ Journal of Peasant Studies 21 (2): 194–234. ——Ernel Gonzales, Niurka Pérez, and Gustavo Rodriguez. 1995. ‘Household Incomes in Cuban Agriculture: A Comparison of the State, Cooperative and Peasant Sectors.’ Development and Change 26 (2):209–234. Figueroa, Victor. 1994. ‘Hacia una Formula Cooperativa del Sector Estatal Agricola en Cuba.’ Mimeo, Rural Development and Cooperative Group, Central University of Las Villas, March-April. ——1996. ‘El Nuevo Modelo Agrario en Cuba Bajo los Marcos de la Reforma Economical In Colectivo de Autores. UBPC: Desarrollo Rural y Participation. Havana: University of Havana, pp. 1–45. ——1997. ‘La III Reforma Agraria y el Modelo Mixto de Economia Agricola en Cuba.’ Mimeo, Rural Development and Cooperative Group, Central University of Las Villas, February. Kay, Cristobal. 1988. ‘Economic Reforms and Collectivisation in Cuban Agriculture.’ Third World Quarterly 10 (3):1239–1266. MacEwan, Arthur. 1981. Revolution and Economic Development in Cuba. London: Macmillan Press, Meurs, Mieke. 1992. ‘Popular Participation and Central Planning in Cuban Socialism: The Experience of Agriculture in the 1980.’ World Development 20 (2):229–240. MINAGRI, Ministerio de Agricultura, Empresa Pecuaria Majibacoa. 1994. ‘Informe al Chequeo de Emulacion de la Empresa—Mayo 1994,’ (Report on the State of the Enterprise). Mimeo, Majibacoa, June 15, 1994. MINAZ, Ministerio del Azucar. 1995. ‘Categorizacion de las UBPCs y Principales Problemas.’ Mimeo, Havana, February. Molina Soto, Juan and Ermela García Santiago. 1995. ‘Informe sobre el perfeccion-amiento de UBPC seleccionadas.’ Mimeo, Centro de Estudios Demograficos de la Universidad
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de La Habana and Escuela Nacional de Cuadros Sindicales ‘Lazaro Peña’, Havana, July 1995. Paneque B., Antonio. 1996. ‘Agricultural Reforms: Are They Working?’ Granma International. November 27:8–9. Pastor, Manuel and Andrew Zimbalist. 1995. ‘Cuba’s Economic Conundrum.’ NACLA Report on the America’s 29 (2):7–17. Pérez, Niurka and Cary Torres. 1996. ‘Las UBPCs: Hacia un Nuevo Proyecto de Participacion.’ In Colectivo de Autores, UBPC: Desarollo Rural y Participacion. Havana: University of Havana, pp. 46–67. Poder Popular, Asamblea Nacional de. 1991. El Programa Alimentario. Havana: Ed. Jose Marti. Pollit, Brian H. and G.B.Hagelberg. 1994. The Cuban Sugar Economy in the Soviet Era and After.’ Cambridge Journal of Economics 18(6):547–569. Rodriguez, Carlos Rafael. 1965. ‘The Cuban Revolution and the Peasantry.’ World Marxist Review 8 (10):62–71. Rodriguez, Jose Luis. 1995. ‘Informe sobre el plan economico y social para 1996.’ Granma, December 27, 1995:4–5. Sexto, Luis. 1995. ‘UBPC: Ser o no ser…autonomas, esa es la cuestion.’ Bohemia 8 (September): 27–30. Tamayo, Juan, ‘Cuban Officials Fear an Economic Slowdown in ’97.’ The Miami Herald, December 19, 1996. Torres, Cary and Niurka Pérez. 1994. ‘Mercado agropecuario cubano: proceso de constitucion.’ Economia Cubana, Boletin Informative 18 (November), pp. 29–42. ——1996. ‘Apuntes sobre el problema de la fluctuacion laboral en las UBPC.’ In Colectivo de Autores, UBPC: Desarollo Rural y Participacion. Havana: University of Havana, pp. 94–103. Trinchet, V.Oscar. 1984. La Cooperativización de la Tierra en el Agro Cubano (The Cooperativization of Land in Cuban Agriculture). Havana: Ed. Política.
5 Agrarian change in contemporary rural China Joshua Muldavin
THE LIMITS OF MARKET TRIUMPHALISM China’s spectacular economic growth since the mid-1970s has, in large measure, been built upon a foundation of environmental degradation. Marketization and privatization—the mantras of the reform movement—have introduced new, qualitatively different, and deeply troubling environmental problems on top of those bequeathed by the collective period. In agriculture, these new problems will become increasingly apparent as more critical assessments are made of China’s rapid economic transformation. The story of economic growth in post-socialist China is by now well known. For over seventeen years the Chinese economy sustained growth rates that averaged 10 percent per annum (China Statistical Yearbook (CSY) 1994), and even higher than that in some of the southern provinces. Much of this growth stems from an export-oriented restructuring of industry and manufacturing. The ratio of exports to national production has climbed from 5 percent in 1978 to 20 percent in 1992 (CSY 1994). Clearly, China’s increased articulation into globally competitive markets has involved a rapid and thoroughgoing reorganization of domestic production (Hussain and Stern 1994). All of this has excited Western business observers, who see in China evidence for their conviction that market systems will eventually bring East and West, North and South, together. This China has been represented as ‘capital’s salvation,’ promising to investors an immense new market, a huge labor pool, a vast resource base, and a powerful and diversified agricultural and industrial economy. It appears to be an ideal home for East Asia’s surplus capital. The World Bank trumpets China as its number one success story for post-socialist transition, contrasting its achievements with the difficulties experienced by Russia. In all these cases, the yardstick for ‘success’ remains narrowly economic. What this yardstick fails to measure is the hard fact that market reforms and increased privatization have contributed to what can only be called an environmental and social crisis. Moreover, the crisis cannot be dismissed as a transitional phenomenon, for it stems from contradictions inherent in the reforms.1 In other words, the very ‘success’ of the reforms has led to environmental degradation and deepening social 92
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polarization, as the gulf widens between the haves and have-nots in China. Rapid social stratification is emerging in China as a new wealthy elite gains increasing control of productive—particularly non-agricultural—assets (Odgaard 1992). The failure of the commandist state to redistribute the wealth of the rapidly developing coastal and southern regions to the poorer, agriculturally dependent hinterlands exacerbates regional inequality and produces a mosaic of growth and poverty. The wealthier regions (particularly in the eastern portion of the country) utilize the hinterlands in ways which structurally limit the potential of those areas for meeting the needs of the majority of their own populations. Latin American economists once referred to this pattern as the ‘development of underdevelopment.’ In the new Chinese variant of this functional dualism, privatization and reform permit a relocation of risk and uncertainty to the weakest class of producers. This privatization resources and risks that were previously shared throughout the community has profound implications for nature.2 One alarming example of this regional heterogeneity involves changing and paradoxical trends in population growth. In regions where poverty is increasing, population is also increasing, even while other regions show fertility decline. Social insecurity and economic instability following decollectivization have intensified this trend. Not surprisingly, the state’s population policies now appear to punish peasant households in the disadvantaged regions particularly (Davin 1988). Indeed, this factor alone should give pause to those who celebrate the great successes of decollectivization. Within the new context provided by China’s hybrid system, one finds deepening contradictions that are lowering the productivity of the resource base and reducing the long-term development potential of many rural areas. There are some agrarian policies which, though not specifically designed to conserve resources, do indirectly contribute to more sustainable agriculture; for example, subsidies that support rural incomes can deter peasants from exploiting and wasting their resources. But the inequitable growth since 1980 has been achieved through the mining of communal capital—a reckless appropriation of assets built up over the previous thirty years. The shift from planned economy to market economy releases peasants from more organized collective units into a more chaotic and competitive arena and simultaneously frees them from the political exhortations that characterized central planning. China’s new path to development without politics, i.e. ‘developmentalism,’ crosses uncharted terrain; whether it will lead to sustainable development remains to be seen. In any case, what seems certain at this point is that the problems emerging now will not simply go away with the completion of transition to a market economy. The exact nature of the hybrid economic system fueling this nation is difficult to grasp. Within the Chinese economy today one can find a complete range of development models where industrialization is at once centrally planned, market driven, export oriented, protectionist, and import substituting. We use the word ‘hybrid’ as a sort of shorthand, although it does not fully capture the complexity of the Chinese system. Actually we may be witnessing the evolution of an entirely new phenomenon, one historically specific, difficult to repeat, fitting like a missing piece into the global jigsaw puzzle of the new international order.3
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POLITICAL ECOLOGY AND INTERNATIONAL POLITICAL ECONOMY Much work has been done in political ecology on the transformative effects of the penetration of capital into different aspects of the production process, the commodification of production and reproduction, and subsequent shift towards destructive land use practices (Blaikie 1985; Blaikie and Brookfield 1987; Neumann 1992; Carney 1993).4 However, few researchers have taken the next step and sought to unravel specific aspects of the production process in order to study the means by which capital penetration actually occurs. Too few theorists have focused on the environmental effects of changes in the organization of production; those addressing the problem have tended to emphasize interactions between peasant/ indigenous and capitalist forms of production organization. The framework I propose below allows a more comprehensive multi-level analysis of environmental degradation. In global relations between nation-states and the international economy, broad changes in the capitalist production system—what might generally be termed global restructuring—provide more efficient means for transnational capital to penetrate societies and, in the process, transform nature in new (and often disastrous) ways. China has now joined countries like Mexico or Cameroon in the race for world position that pulls nations and regions into a cascade of international economic activity that threatens to erode the rural environment.5 Rural China has entered this international race as part of a more general quest for economic change. Reforms made by the central government encouraged the rapid transition from collective to household as new forms of production and organization were devised by the state, which chose to relinquish some part of its role as paternal caretaker for the peasantry. By comparing collective with household forms, we can identify how production organization affects land use practices, for example, through shifts in decision-making strategies involving changing perceptions of risk, social security, and stability. As the state retreats, exposing individuals to greater burdens, it also moves to accommodate large corporations as they eagerly arrive in China. THE CHINESE ROAD TO TRANSITION There are a number of important differences between the Chinese transitional experience and those of Eastern European countries and the CIS states. Eschewing the shock therapy promoted in Eastern Europe and the CIS states, China has taken a gradual approach to reform. Rather than transforming the whole economy at once, reforms have been aimed at specific sectors, often in experimental areas, and (usually) have been extended across the country only after some success has been demonstrated. This approach has allowed for a variety of practices, each functioning under the same overall guidelines. This flexibility has enabled local cadres in some ways to shape policy to fit particular
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historical, geographic, and political-economic circumstances, and thus engender more widespread support for the overall reform process. China has also benefitted from its special relationship with Hong Kong, its major supplier of foreign capital and major outlet for export goods. In addition, China began the reform period with no international debt, extremely low inflation, a functioning physical infrastructure, and a relatively stable state apparatus (Hussain and Stern 1994). China’s ‘pragmatic’ reforms have favored those policies that ‘work’ and have slowly won political tolerance for continuing innovations and reforms (Watson 1992). A gradual shift towards economic incentives has taken place without a complete transformation of the institutional context. Property rights have not completely devolved to the individual, yet individually oriented incentives have been improved. In the rural sector, this was done through a complex process of subcontracting—the Household Responsibility System (HRS)—begun experimentally in 1978 and completed nationwide by 1984. Under this system, for example, in exchange for selling a certain portion of their production to the state at set prices, peasants were given long-term leases on land plots. As we have noted, economic growth, though variable, has been consistently high by any standards throughout the reform period. Inflation has become more serious since the late 1980s, but it is still comparatively low. The majority of Chinese living in both rural and urban areas have enjoyed a rise in living standards (see Table 5.1), though there is significant evidence of social and geographic inequities (Muldavin 1992a; Fan 1995). As we have also noted, export markets have sustained China’s boom as production shifts to meet new demands. Much of this production shift was funded through a combination of foreign direct investment and foreign loans. Yet, even now, with a rapid rise in state borrowing, China’s debt is comparatively small in relation to overall GDP (approximately 15 percent: CSY 1994). State-run enterprises remain an important mainstay of the economy, despite their declining share of industrial output overall. While many enterprises have become increasingly burdensome to the state because of their continued high losses, some are adapting to competitive pressures and increasing their efficiency. The private portion of the economy has been allowed to grow substantially (CSY 1994). And yet maintaining the boundary between state ownership and private property remains central to the regime, for reasons that extend beyond the strictly economic. In a public pronouncement, President Jiang Zemin reassured members of the Central Committee that there will be no dismantling of big state industries. According to Mr.Jiang, ‘only by ensuring the dominant position of the public sector can we prevent polarization and achieve common prosperity’ (Mufson 1995). Yet while maintaining a strong state presence in the economy, China has managed to move beyond the kinds of shortages associated with command economies (Hussain and Stern 1994). Infrastructural bottlenecks continue to plague the country, but this has not prevented continued economic growth. Gradual price reform continues and may slowly assuage the state’s budgetary woes. For example, the immense
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Table 5.1 Chinese peasants’ per capita net income (% of households), 1978–93
Source: CSY (1993:311; 1994:276; 1989:742) Note: Constant RMB yuan, not adjusted for inflation
drain on state revenue that resulted from simultaneously buying grain at high prices from peasants and selling it at low prices to urban consumers is slowly being relieved as prices in both contexts are now approaching the market price (Figure 5.1). Energy prices have been gradually increased, which should help improve energy conservation efforts, which are commonly acknowledged as critical for both economic and environmental reasons (Lenssen 1993). (On the other hand, higher energy prices may be used to legitimize further destructive hydroelectric projects such as the controversial Three Gorges Dam—the largest dam project in the world—and a rapid expansion of China’s nuclear energy program.) While trying to maintain Third World status upon entry into the World Trade Organization, China is rapidly approaching a fully convertible currency and is removing many import barriers (Hussain and Stern 1994). Recent official statements suggest that sharply lowered tariffs will be implemented in the late 1990s for a wide range of goods (International Herald Tribune, November 20, 1995). By focusing on economic, rather than political, changes, the Communist Party has struggled to maintain its monopoly on power, following to some extent the example of the NICs. Yet a massive decentralization of political power has inevitably occurred through the transfer of economic control to lower levels, particularly to the county level (Unger 1994). Counties now operate in a quasi-independent fashion: as long as they fulfill certain responsibilities, including collection and payment of tax revenues required by central and provincial authorities, they are allowed an unprecedented degree of autonomy. What is surprising is the level of adaptability shown by the state as it has shifted ideological ground to incorporate new aspects of the reforms; note, for example, the institution of stock markets, the rapid expansion in the number of private enterprises, and the development of private urban real estate markets (Hussain and Stern 1994).
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Figure 5.1 Mixed average retail and purchasing price of grain in China, 1978–92
In short, the emergence of dualism and regional inequities in China was neither advocated nor sought by the regime’s economic planners. Indeed, the regime should be credited for its cautious, pragmatic, experimental approach to market transition, which differed from the actions of policy makers in Eastern Europe and Russia. Yet the Chinese state’s reform policies have inadvertently produced dualism, and the resultant migration of labor and capital between sectors and regions works directly against the state’s long-term goals, which favor regional stability; ultimately, distinct boundaries between sectors and regions are eroded by the process (de Janvry 1981). Thus, the emergence of dualism in China must be seen as an unintended consequence of reform. COLLECTIVE ENTERPRISE IN CHINA, 1949–78 The farming system of pre-revolutionary China was characterized by small peasant holdings of less than one hectare. Vast numbers of landless peasant households sharecropped or worked as low-wage laborers for large landholders. The Communist Party instituted land reform—taking land from landlords and rich peasants and redistributing it to poor and landless peasants—in areas under its control before 1949, and completed the process nationwide by 1952 (Hsu 1995). Subsequently,
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during the first five year plan (1953–7), individual household farms were slowly collectivized through a series of steps beginning with mutual aid teams and culminating in the creation of people’s communes in 1958. Collective farming prevailed until the reform period began in 1978. Two frequently cited achievements of collective farming in China are that it fed a rapidly expanding population and supported a structural shift in China’s economy from agriculture to industry. Between 1949 and 1978 there has been a 44 percent decline in the cultivate land per capita.6 Yet, through collective farming, food production kept ahead of population growth: per capita availability of grain increased 16.7 percent over the twenty-six year period of collective agriculture (Figure 5.2). In aggregate terms, the average growth rate in grain production was 1.33 percent per year between 1952 and 1965, and fully 3.51 percent per year between 1965 and 1978 (CSY 1989). Over the nearly three decades of collective agriculture, the per capita income of the rural farm population increased 50 percent (Lin 1993). This was accomplished without massive migration to urban areas— the urban proportion of the population remained fairly steady at below 20 percent (CSY 1994). Simultaneously, rural surpluses invested in industry brought a dramatic economic transformation: industry grew in importance as its contribution jumped from 12 percent of the economy in 1949 to 50 percent in 1978. Of course, footing the bill for industrialization meant that peasants retained a limited surplus for local
Figure 5.2 Grain output and grain per capita in China, 1952–93
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reinvestment and consumption, but this problem did not negate the general success of the larger transformation. It is no wonder that among Third World economies, China’s collective farming represented an important model of self-reliant agricultural development (Robinson 1970). It is also no wonder that much of the legitimacy of the Maoist period derived from the overthrow of a ‘feudal’ oppressive landlordism, combined with the actual positive transformation of the lives of poor peasants—the majority of the people of China. The Maoist model differed significantly from the system of collective agriculture in the USSR, for it emphasized collective labor organization and an egalitarian distribution of surpluses, with individual incentives deriving from social and political ideals guided by commitment to the collective good. It was composed of a spectrum of organizational forms, from state farms to communes, and ranged from large-scale mechanized capitalintensive production on flat open plains, to small-scale non-mechanized laborintensive production on narrow terraces. Communes and state farms—the former were always much more numerous than the latter—were part of a planned agricultural system. Ideally, coordination was managed through communication and negotiations that flowed in two directions, both from the top down and from the bottom up (Gurley 1976). The commune was hierarchically divided into ‘production brigades’: although there was considerable variability, usually each village was organized into one brigade. Brigades in turn were divided into a number of ‘production teams,’ each consisting of ten to twenty households. The greatest responsibilities and risks were shared by members of each team, a situation that fostered cohesiveness. At all three levels, collective labor was applied to social infrastructure (schools, clinics, etc.) and physical infrastructure (levees, roads, reforestation projects, etc.) to enhance productivity and quality of life. For instance, collectives purchased machinery and operated small industrial facilities to process agricultural products and produce construction materials. I will refer to this combination of social and physical infrastructure as ‘communal capital’—a broad-based investment accumulated under a collective system of production organization with the expectation that long-term benefits will accrue to all members of the commune. THE PATH OF REFORMS SINCE 1978 By 1978, the year which marked the beginning of the post-Mao, so-called ‘pragmatic’ period, collective production was being dismissed by many as a stagnant and economically restrictive system; a return to household- and individually based enterprise units was thought the best hope for overcoming these perceived weaknesses. In fact, the communes of the Maoist period had proved a mixed success, with one-third failing, one-third holding their own, and one-third running quite efficiently by 1978 (Muldavin 1986; Hinton 1990; Chossudovsky 1986). The legitimacy of veteran leaders, who were purged during the Cultural Revolution (1966–76) and regained power after Mao Zedong’s death in 1976, was based on the state’s historical success in bringing social justice to
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the countryside. In the course of developing his own reforms, Deng Xiaoping brilliantly played on the problems of collective agriculture (as he had done earlier following the Great Leap Forward of 1958–60) as a means of catapulting himself into power. Deng’s message appealed to both the Chinese peasantry’s historically rooted desire for land and its strong allegiance to patriarchal family structures. Disillusionment with command production in the socialist period, combined with disillusionment (particularly among the urban elite, but also among some peasants) as a result of the Cultural Revolution, led to a general willingness to abandon the political character of Chinese rural development policy. State legitimation based on ideals and shared responsibilities rooted in the collective shifted under Deng to legitimation based on an appeal to ‘pragmatic’ state action characterized by a retreat from active intervention in the rural economy. Over a period of six years beginning in 1978, Deng was able to dismantle much of the collective control of land through his Household Responsibility System, a plan that involved subcontracting and land division, and that parceled out equivalent per capita shares of land to every family.7 The restructuring of collective industries proceeded parallel to Deng’s land reforms. As in Russia, this process can be interpreted as a transfer of collective assets to the elite, for it transforms political power into material, inheritable wealth (Cooper 1993). This process functioned typically in urban areas dominated by the new ‘princelings’—the children of China’s aging leadership (Malhotra and Studwell 1995). The resulting class stratification is a national, as well as a highly localized and intra-familial, phenomenon. In rural areas, at the team and brigade (village) level, individuals, families, or small groups of families usually contracted out the collective’s industrial works and sideline industries; at the commune level, a combination of individuals and hired managers came forward to direct the industries; at the county level, the local state apparatus maintained control of most industries. The most unequal distribution occurred at the village level, since industrial assets there were often quite small (tofu factories, flour mills, machine shops, etc.). As a few lucky peasant households gained control of collective assets and were transformed, as a group, into a new class of petty industrial and commercial entrepreneurs, rapid social stratification emerged in many rural areas. By comparison, land distribution was carried out (in most places) in a roughly egalitarian manner. Communes not only distributed their assets, but also gave up much of their regulatory power, while distancing themselves from the risks associated with production. Ultimately, these shifts towards privatization and decentralization undermined important revenue sources for the state, while leaving intact the people’s high expectations for delivery of social welfare services and maintenance of infrastructure. The resulting gap between service provision and expectations functions to erode the state’s political legitimacy. Thus the results of reform have been complex and contradictory. While the impact of the restructuring has varied from place to place, overall China has undergone a fundamental—one even wants to say revolutionary—structural shift in its development strategy. In evaluating this shift, it must be asked what effects
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the rural reforms have on the long-term sustainability of production; that is, what effects do they have on environment? As China’s economy has grown increasingly dualistic, two corresponding kinds of environmental problems have emerged which are precisely the sort requiring the concomitant development of sophisticated, independent interventionist agencies. First, one finds environmental problems associated with unwise agriculture practices and resource use (principally in hinterland and rural areas), from soil erosion to deforestation, as communal capital is mined. Second, one sees evidence of environmental problems that typically accompany rapid industrialization (principally in the eastern coastal regions and suburban highgrowth urban peripheries), from land conversion to effluent pollution of air, water, and land; the dynamic township, village and private enterprises (TVPEs) play a significant role in this dilemma. It is perhaps understandable that the dazzling success of the post-Mao reforms, particularly in the first six years after 1978, have blinded many observers to the problems engendered by those very reforms. Between 1978 and 1984, the agriculture sector grew 7.4 percent annually, while the growth in grain output averaged 4.8 percent. These growth rates are significantly above the 2.9 percent and 2.4 percent achieved during the previous twenty-six years of collective agriculture (CSY 1993). At the same time, the annual rate of population growth dropped from 2 percent in 1952–78 to 1.4 percent in 1978–84 (CSY 1994; Rural Statistical Yearbook of China (RSYC) 1994). Hence the overall rise in the standard of living of both urban and rural residents (see Figure 5.3). Boosted by such rapid increases in grain production (Figure 5.2), Deng’s call for the complete decollectivization of agriculture and the transformation of other areas of society gained political legitimacy. Indeed, China’s top political leaders (Deng Xiaoping, Zhao Ziyang, and Hu Yaobang), internationally hailed as the architects of a new ‘revolution’ in China, launched the country on a series of more market-oriented urban and rural reforms in late 1984. But the success of their reforms was not sustained. Although agriculture as a whole (including rural sidelines) kept a positive growth rate of 4.1 percent per year after 1984 (RSYC 1994), grain production stagnated after reaching a record 407 million tons in 1984. As the principle of grain selfsufficiency is a central political tenet in China,8 the optimism that the rise in agricultural output elicited during the transitional period was quickly replaced by pessimism in the subsequent downturn. Poor grain production between 1985 and 1988 gave certain political leaders reason to reemphasize plan-oriented agricultural policies. Proposals circulated for re-collectivizing agriculture in order to regain economies of scale.9 However, reformers held their ground, attributing all successes to their six years of new policy. Many analysts (e.g. Lin 1993) cite increased grain production as evidence of the successes resulting from the introduction of individual incentives, private ownership, and secure land tenure, which they argue overcame the agricultural stagnation caused by the opposite policies—collective incentives (or lack thereof), public ownership, and lack of land tenure.
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Figure 5.3 Chinese per capita consumption (RMB) and peasant/non-peasant ratio of consumption, 1952–93
However, it is far from clear that these particular reforms brought about the rapid increases in grain production. Farmers could increase production through many means once decollectivization was underway. As we shall see, the evidence shows that a simple private appropriation of public goods, in combination with increased producer prices and use of fertilizer, all contributed to increased production. The exact role of decollectivization is not easy to discern here. But it is important to note that credit for the increase was still attributed to decollectivization of agriculture, and this interpretation encouraged an acceleration of the reform process. In fact, grain production began to surge forward in 1978, with two-thirds of the increase occurring before decollectivization was initiated on a wide scale in 1982. Following record production in 1984, reported grain yields stagnated for the five years just after the completion of the decollectivization process (in 1984). Therefore, we need to look to explanations besides implementation of the HRS to explain at least the first four to five years of rapid increases in grain production, since a direct correlation between a return to household fanning plots and increased production does not exist. In any case, confronted by evidence of stagnating production after 1984, analysts must recognize that announcements trumpeting the ‘solution’ to China’s rural question are, at very least, premature. If one wishes to argue that the reform of
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1978–84 was responsible for the increases in grain output during that period, one would be hard pressed to explain how reform produced stagnation after 1984. The solution to this quandary, it seems to me, involves surrendering easy ideological assumptions in favor of a careful examination of important, but often overlooked, factors. Such an examination will reveal that three major factors help explain the production gains attributed to decollectivization: prices, fertilizer, and communal capital. Prices paid to farmers for grain jumped 30.5 percent in 1979 alone, and increased a total of 54 percent by 1984 (see Figure 5.1). In 1984, peasant farmers also sold to the state grain usually held in reserve, adding to the peak in grain ‘production’ reached that year. In addition, production was intensified by peasants seeking to cash in on historically high prices. Fertilizer use more than doubled in this same period (see Figure 5.4), allowing farmers to realize potential increases in yield from improved seed varieties developed in the 1960s and 1970s. This increased use of fertilizer was made possible by the expansion of fertilizer output from factories that had been constructed over the previous decade (Stone 1988).10 Thus, collective and communal surpluses invested in fertilizer factories only began to see real returns on investment in the late 1970s. Communal resources—built up at great cost in capital and labor during the preceding three decades—were recklessly mined during the reform period. At the broadest level, the exploitation of communal capital involved redirecting agriculture investment away from maintaining—let alone expanding—the existing infrastructure (discussed in detail below) and toward investments that insured shortterm increases in production (purchasing fertilizer, for example). In short, much of the gain during the boom period (1978–84) can be attributed to technical factors of production, such as fertilizer application, rather than social reorganization of production (Stone 1988). These same technical factors help explain the subsequent period of stagnation. Between 1984 (when most of the institutional reforms had been completed) and 1989, total grain production fluctuated below the 1984 peak, while unit yields stagnated (see Figure 5.4). Although prices paid to farmers were level in 1985, input costs for crop production continued to rise. In fact, between 1984 and 1989, official fertilizer prices rose 46 percent (RSYC 1994). When the state monopoly on agricultural inputs was lifted in the mid-1980s, the potential for huge profits in the black market (where prices were much higher than those set by the state) further undermined much of the benefit expected to result from freer input flows. In part due to the long chain of middlemen, prices rose so high that the already minimal profitability of grain production simply vanished. In addition, inflation during this period both reduced the positive impact of increased state grain prices paid to farmers and raised the real cost of inputs (until 1989), and hence decreased the profitability of planting grain. Finally, the impact of the wholesale appropriation of communal capital (which had begun in earnest in 1978) began to be felt by the mid-1980s (see Figure 5.5). It took some time for the reduction in investment in agricultural infrastructure and intensified exploitation of the soil to work their effects.
Figure 5.4 Fertilizer use, sown area, fertilizer per hectare, and grain yield in China, 1952–93
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Figure 5.5 Chinese cultivated area hit by natural calamity and state investment in water control and agriculture, 1953–93
Thus, the transfer of production risk to households, combined with decreasing delivery of social welfare and increasingly unstable local markets, shifted production practices towards those providing short-term returns, often through rapid (frequently degrading) exploitation of natural resources and labor, both household and hired. Doubtless, there were numerous examples of environmentally unsound practices prior to the reform period (Smil 1984; Ross 1988; Smil 1993; Howard 1993). But the reforms introduced new, negative elements that exacerbated qualitatively different environmental problems and decreased sustainability in China’s new hybrid agricultural system (Edmonds 1994; Muldavin 1992a). THE QUESTION OF STATE SUBSIDIES The traditional alliance between the Communist Party and the peasantry is threatened by the new hybrid regime and appears to be unraveling in many areas of the countryside. As it becomes further enmeshed in national and international markets, Chinese agriculture encounters problems experienced all over the world; subsidies are a case in point. For any state there are few subsidies harder to reverse than those destined for agriculture. Farmers need the state to maintain stable markets for inputs and outputs and to insulate them from some market influences. Given the complexity and importance of the
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rural sector, states continue to subsidize agriculture in various ways, even when this threatens fiscal balance. For China, the Communist Party’s political legitimacy is grounded on the state’s support for the peasantry. Thus, agricultural problems and consequent disaffection in the countryside are not just economically, but politically important. The early reform period involved high levels of state subsidies to agriculture. Unable, or unwilling, to continue footing the bill, the state has found itself impelled to cut back on many subsidies. As a direct result of the reforms and the reorganization of production and exchange relations, peasant producers in the new system have been forced onto production treadmills, similar to those typical of capitalist agriculture (Perelman 1979; Muldavin 1994b). The rise in agricultural production costs drives a corresponding rise in surplus extraction from rural areas as farmers redouble their productive efforts by squeezing their own households (Bernstein 1977). Agricultural workers in post-communist and capitalist countries alike expect the state to intervene and shield them from the worst consequences of such systems. Subsidies in the Chinese system range from price subsidies for inputs and commodities to subsidies for interest on savings that guarantee an acceptable return above the rate of inflation, thus providing urban and rural residents with ‘inflationproof savings. The total percentage of state revenue used for subsidies to rural producers and urban consumers was roughly 38 percent by 1989. Necessary state investment for long-term production, both agricultural and industrial, has been redirected primarily to price subsidies in order to placate peasants and workers. The resulting fiscal squeeze forced the proportion of total government expenditures allocated to agriculture to drop precipitously (CSY 1991). Declining input subsidies necessarily raise local production costs and bring peasant farmers into competition with more advantaged regions inside and outside China. In response to this competition, Chinese farmers have resorted to a variety of problematic methods, including increased use of marginal lands and soil mining (i.e. cultivation without regard to maintenance and repair of the soil’s fertility). Tensions have increased both between peasants and representatives of the state, and within villages (Muldavin 1992a). For instance, as inflationary cycles for inputs consumed potential profits of peasant agricultural producers in the early 1990s, frequent incidents of militant peasant protest erupted (Muldavin 1992b, 1993a). Inflationary pressure has also impacted urban dwellers who find their subsidies dwindling as prices for basic needs rise (CSY 1992). The declining agricultural subsidies of the post-Mao period are representative of a larger crisis of the Chinese state. That crisis essentially involves shortsighted actions that favor the current generation by passing the costs of their policies on to future ones. This dilemma, well known in developed countries, presents ideological problems for China’s leaders, who have been moved by political necessity to seek legitimation in a narrower sector of Chinese society. Shortfalls in subsidies to broad sectors of domestic producers are now covered through international borrowing, a debtor’s dilemma well known to developing countries. By 1988 one-third of the Chinese state’s investment in agriculture was financed by foreign sources,
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principally the World Bank (Muldavin 1992c). Between 1980 and 1990, China’s cumulative new debt escalated to US$44 million–52 billion (Beijing Review) (BR) 1993a; WBWP #7 1990). By 1993, cumulative indebtedness was approximately US$70 billion (ZTNJ 1993). The role of inflation in reducing the effectiveness of subsidies cannot be overstated. During the early 1980s, inflation rose at a rate of less than 3 percent a year. By the first quarter of 1989, however, the annual rate had increased ninefold, to 27 percent (CSY 1992; BR 1993b). With the sudden cooling off or contraction of the economy after the Tian’anmen Square incident of June 1989, inflation declined dramatically. But by 1994 it had risen again, to 21.7 percent a year, the highest official rate since reforms began (World Bank 1994; CAAS 1993; BR 1995). Inflation has certainly had a negative impact on China’s high GDP growth rate in all sectors (USNWR 1990; BR 1993b; Muldavin 1993c; BR 1995).11 As we have noted, immense regional variation in growth exists in China. Even within the boom area of eastern China, the benefits of growth are increasingly uneven. The vast majority have not gained in the ways that generalized figures of GDP seem to suggest. A significant number of China’s peasants, and to a lesser degree urban residents, are experiencing declining living standards (Muldavin 1992a, 1993b, 1993c). In 1993, while 4.3 million people saw their incomes soar to thirty-two times the rural average, the incomes of 400 million people—one-third of the population of China—declined (Schell 1995). Looking at these three phenomena together—rapid growth, subsidies, and inflation—one sees a picture of China’s prosperous period (1980s and 1990s) quite different from that portrayed in most of the literature. The political consequences of these three phenomena are plainly visible. Inflation in the latter 1980s delegitimized the state to the point where urban and rural interests allied in a series of protests, the Tian’anmen movement being the most obvious manifestation.12 For ordinary workers and peasants, inflation meant a decline in real wages and living standards, undermining many of the gains of the past fifteen years. The economic consequences of high growth and high inflation in statist systems such as China elude most analytical models. Environmental declines and political delegitimation are not normally linked in most development research. However, these two overlooked dimensions of dynamic change in China must be considered if a more tempered and balanced evaluation is to emerge. Indeed, environmental problems need to be seen as part of political change—a fact of life for agrarian society. REFORM IN ZHAOZHOU AND BAYAN: A CASE STUDY Heilongjiang province spreads over 454,000 square kilometers of far northeast China. The province’s 35 million people are economically dependent on significant grain and agricultural commodities traded to Russia and the rest of China (HLJSY 1992). In addition, Heilongjiang is a major industrial center and source of raw materials such as oil and lumber. Heilongjiang accounts for one-twelfth of the total cropland and one-sixth of the total commercial grain production of China
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(Zhao 1981). In addition, vast areas are devoted to grazing cattle, sheep and horses, as well as exotic species, such as deer. Freshwater fisheries along Heilongjiang’s extensive river systems produce large quantities of fish for the domestic market, as well as high-value caviar for the world market. Beginning about a century ago, during the twilight of the imperial era, Heilongjiang began to be developed into ‘the great northern granary’ of China. The project has always been hampered by the harsh and long winters which limit the region to single-season crop production and prevent the intensification of production through multiple cropping prevalent in other parts of China. Yet Heilongjiang serves as an important indicator of changes throughout China. Reforms in Heilongjiang have been felt in all the key sectors. New foreign investment in agro-industry and manufacturing (Economist Intelligence Service) (EIU) 1995) are reshaping the region’s economy. This reshaping has been attended by environmental problems associated with both traditional and new types of development, so that the province can be identified as a kind of a weathervane in the emergent new hybrid system in China. The following discussion focuses on Zhaozhou and Bayan counties and is based on twelve years of fieldwork there. Examined over this stretch of time, these two counties reveal how changes in political economy and patterns of resource use have contributed to environmental degradation (Blaikie 1985). Three central features of that degradation outlined below are: land use intensification; agro-industrial pollution; and declining social/ communal capital.13 Environmental degradation Changes in agricultural production practices, often welcomed as improvements, result from a series of interrelated choices made by peasant households but driven by state policies pressing for intensified production. The risks associated with market opportunities are, in fact, heightened by state policy. Intensification of land use in Zhaozhou and Bayan counties in the early 1980s led to a rapid decline in overall soil fertility. Organic matter declined rapidly in the years immediately following the reforms, signifying a departure from sustainable agronomic practices (Muldavin 1986, 1992a). Increased use of chemical fertilizers, a continuing decline in the use of organic manure, and a 50 percent decline in green manure area accounted for much of the loss of organic matter. The result was decreasing soil fertility and the pollution of ground water (Muldavin 1989d; Liang 1988). For example, all green manure cropping ended one year after the implementation of reforms in Zhaozhou. Likewise, manure delivery to fields for composting and spreading declined rapidly in Bayan (these were reinstated only through an enforced system of compost quotas in the late 1980s). Annual crop rotation was simply abandoned throughout Heilongjiang in favor of monoculture— corn was a favorite crop because it provides good, quick returns. The concomitant five-fold increase in chemical fertilizer use, from 175,000 metric tons in 1978 to over 900,000 metric tons in 1993, is indicative of a growing
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dependence on a complex of unsustainable practices (HLJSY 1992, 1994). This trend typified China through the 1980s into the 1990s; nationally, fertilizer use increased from 10 million metric tons in 1978 to over 30 million metric tons by 1994 (see Figure 5.4). The worst problems—salinization, ground water pollution, and micro-nutrient deficiencies—are all consequences of changes in local practices (Muldavin 1983a, 1986, 1992a). As a result, yields stagnated and then declined. Peasant farmers now complain about the ‘soil burning’ caused by long-term fertilizer use. Because of a loss of structure and decline in overall quality, the soils have become harder, less friable, with available nutrients actually diminishing. A combination of insect resistance to pesticides and repetitive monocropping has also intensified disease and pest problems. Lagging investment in the crumbling irrigation infrastructure and an accompanying decline in the availability of water have rendered agricultural production increasingly unstable as it has intensified. Internal desertification is accelerating in Heilongjiang, and this process is tied closely to the rapid increase in the use of marginal lands following the decline in collective control (Muldavin 1986). A direct correlation between decollectivization and increased use of marginal lands is a result of the fact that many of the most marginal lands are part of the collective holdings. Officially designated desert area in China increased from 1.3 million to 1.5 million square kilometers between the late 1970s and 1990 (Liang 1988). In Zhaozhou, following the reforms, tall prairie grasslands were transformed into crop fields or intensively grazed pasture. Whether the choice was to rapidly increase grazing or to plow under the grass lands, the movement into marginal lands and the shift of land use from forests, marshes, and grasslands to cultivated crop land (extensification of agriculture) were important means of increasing overall production. In the northeast China plain, however, such lands can only support crop production for a limited time. The rapid expansion in the area of barren sodic alkali land (Muldavin 1986) requires water-intensive and expensive tile drainage systems to flush out the salt accumulations. This is not an economically viable practice for large areas of extensive grain production such as one finds now in the northeast China plain. A more intensified use of grazing lands in Zhaozhou County in 1983–5 resulted from decollectivization and subsequent decontrol over livestock numbers and grazing area rights. Peasant herders rapidly increased their herds after the reforms (doubling the number of livestock between 1978 and 1984) as a means of improving security and laying claim to previously communal grasslands (Muldavin 1986). Herders moved their expanding flocks further away as pastures near villages were either degraded or transferred to crop production. Temporary housing was set up to guard investments and help stake claims to land. But the effective deregulation of grasslands meant that the rapid decline in land quality was difficult to monitor, let alone reverse. In some areas, no contracts (like those promoted under the HRS) have been established between herders and the village government to provide at least minimal land use regulation: lands are used by whoever can seize control of them. Hinton (1990) documents a similar process in nearby Inner Mongolia.
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Enclosures of grassland by wealthier peasants force larger numbers of livestock into an area of diminishing size (Muldavin 1984, 1988, 1989e). As large areas go out of productive use through rapid degradation, grazing pressure is increased on the remaining lands.14 Lands lost to animal and crop production through improper and intensified utilization are often used as sources of adobe, a resource that attracts the rural and urban construction sector to these remote lands. Since the high pH and sodic-alkali nature of these soils acts as a water repellent, the topsoil makes bricks of good quality. However, soil for bricks is taken from only the top meter of surface land, often in areas that still have a short grass cover. In Zhaozhou, thousands of hectares have been pockmarked in this fashion, and this practice has increased rapidly due to the construction boom of the last fifteen years, compounded by the building of larger homes in the cities and villages. Increased standing water in this minefield of holes supplies a perfect breeding ground for mosquitoes and other disease vectors. In this area the mosquito carries Japanese encephalitis, a major threat to public health. (One of the rarely noted results of decollectivization has been a breakdown of largescale pest control programs. In Zhaozhou the collective’s former method of running sheep through a cementlined pesticide dip to control scabies is no longer practiced. Responsibility for control of such diseases falls on the household, usually untrained female children, poorly shielded by any protective measures against exposure to toxic chemicals.) The construction boom has increased the demand for wood, cement, iron products, and other housing materials. Roadside windbreaks, nurtured collectively over thirty years, have been rampantly destroyed. It is now possible to drive for miles among stumps of trees felled in the last few years. Peasants call this ‘nibbling’—every night a few more trees disappear (Muldavin 1988). Despite fines and increased policing, the practice only accelerates (Muldavin 1989c). This process of harvesting forests for lumber and fuel increases soil erosion, already accelerated by intensified grazing pressures, by breaking through the protective cover (Muldavin 1986, 1992a; Hinton 1990). Critical reassessments of recent reforestation programs (throughout China) show large areas of poor quality stands (Delman 1989). Changes in production practices in Zhaozhou and Bayan were accompanied also by a shift in scale, from large unified plots to a mosaic of small holdings reminiscent of pre-revolutionary China. Large tractors and harvesters were abandoned after the reforms, for it was no longer possible to utilize them efficiently on the myriad individual plots (Muldavin 1983a, 1986, 1992a). The return to laborintensive methods in agriculture has been dubbed the ‘feminization of agriculture,’ as increased labor demands are borne primarily by women and children. In turn, throughout China there has been a realignment of power relations within the household, with a corresponding reinforcement of patriarchal domination in decision-making and a cultural devaluation of women’s labor despite its increased importance (Davin 1988; Muldavin 1992a). At the center of this complex of new environmental pressures in the rural sector
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one can identify a shift from long to short-term goals in decision making. Immediately following decollectivation, the perception of market-based opportunities served to temper any conservative misgivings that might have prevailed at local and household levels in the wake of increasing deregulation and decentralization of agriculture. Even age-old aversions to risk—so characteristic of peasant producers—gave way to the enthusiasm engendered by the promises of the market, where quick returns are increasingly emphasized in a riskier production environment. Not all of the nation’s environmental problems have resulted from exploitative agricultural practices. Industrial pollution occurs on such a large scale in both rural and urban areas and is so completely uncontrolled that China faces ongoing ecological disaster. With over 80 percent of industrial waste water re-entering waterways untreated it is no wonder that almost 50 percent of inland water is too polluted to drink or support aquatic life (Liang 1988). Unregulated local enterprises—the so-called TVPEs—pose serious health threats at the village level through ground water contamination and other forms of pollution. In most places in China, TVPEs expanded rapidly in the new hybrid economy, spurred on by demands from subcontractors producing for national and international firms. TVPEs have proliferated thanks to their characteristic combination of flexibility and lowcost production methods, made possible through the use of cheap labor, and older, dirtier processes and machinery, as well as through a total lack of environmental and occupational regulations. These TVPEs are often built on the limited arable land (land which declines by 1 percent each year, nationally) and are geographically far-flung, making them exceedingly difficult to monitor and regulate. Therefore, Chinese TVPEs are potentially more hazardous to the environment than spatially concentrated urban industries typical of both China and the highly regulated Western economies. In Zhaozhou and Bayan, industrial and agricultural pollution have certainly contributed to public health problems. These problems are compounded by the declining quality of health care since the early 1980s as collective services have disappeared through lack of funding and organization. The potato starch noodle mills in Bayan villages simply empty their effluent into dirt ditches lining the roads. A purple-colored chemical is used to process potatoes into starch; thus it was easy to identify the contamination of local ground water, as families began drawing violet water from their household wells. In a village in Bayan, all the fish raised by two households were killed by chemically contaminated water from a number of small village industries. Fishermen along the Songhua river reported rapid declines in fish yields as chemical runoff from TVPEs and agriculture increased dramatically. Brick works in many villages in Zhaozhou and Bayan burn huge quantities of low-quality coal. By the end of the day, a low, fog-like inversion spreads across the villages. Combined with widespread use of small fires for cooking meals, this smog makes ‘rural’ air quality abysmal. The high level of paniculate matter in the air leads to rising rates of associated illness and disease, according to local health workers (Muldavin 1989a, 1989b).15 The land, the air, and the people are being ravaged.
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Decline in social/communal capital By 1984, virtually everywhere in China the collective ceased to exist as allocator of capital and labor. This has led to two profoundly important interconnected results: a decline in capital and labor investment in large-scale infrastructure, and a redirection of capital and labor into short-term projects and investments. Both neoclassical (e.g. Lin 1993) and Maoist (e.g. Hinton 1990) analysts recognize that state investment in agriculture and infrastructure has fallen significantly since the reforms were implemented, with resulting negative impacts on production. But observers disagree on the causes and therefore on the solutions. One thing seems clear, however: realistic solutions will have to be localized. It is not too late to reconsider current views regarding the importance of collective assets. Villagers have been hard pressed to organize the necessary labor and capital investment for agricultural infrastructure. Reservoirs, dikes, irrigation canals, tube wells, newly planted trees and erosion-control structures, all critical to sustaining and increasing production over the long term, receive little investment for maintenance, let alone improvement or expansion, and are in a state of serious disrepair (Peasant Daily [Nongmin ribao] April 12, 1989:3; Muldavin 1992a, 1994d; Hinton 1990). Furthermore, loss of control over the utilization of resources has led to severe overdraft of water resources in many areas (Hinton 1990). Although collectively owned equipment and facilities were often distributed along with land (People’s Daily [Renmin ribao] May 22 and July 24, 1982), water control infrastructure remained under collective management. Yet these collective structures experienced a massive decline in investment capital while simultaneously being stripped of authority and assets (ZNTN 1992). A rapid acceleration in local-level ‘natural’ disasters in the last few years is attributable largely to the delayed effects of this decrease in capital investment. When irrigation systems fall into disrepair, villages are left with no buffer against unpredictable rains. Village informants describe in detail the contradiction between their attempts to meet subsistence needs and the demands of local state authorities for higher taxes, despite a precipitous decline in local infrastructure investment by these same authorities. Widespread anger against local representatives of the state, an increasing trend throughout much of rural China (Muldavin 1987, 1988, 1989e, 1994a, 1994d), is a portentous sign of rapidly eroding legitimation. The frustrated local attempt to build a levee in Hesheng village, Bayan county, is a case in point. Since 1984, work has been organized annually using contracted labor-duty days to construct a levee protecting the village from floods.16 Yet the village is unable to complete construction. Failure to collectively organize and invest the requisite capital and labor necessitates starting the project over from scratch annually, as the product of each year’s labor is washed away. The villagers are so demoralized by the Sisyphean nature of this task that it is no longer possible to rally their support for the project. The result is the progressive impoverishment of Hesheng village. For a number of years the village could not deliver its quota of
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grain to the local government because the entire harvest was destroyed and the village completely dependent on state relief. Families have moved out in order to survive, further complicating the attempt to complete the levee. These migrants join the millions of peasants wandering across China in search of work of any kind (Muldavin 1989a). In late 1994 it was impossible to reach the village for a followup research visit because it was under water (Muldavin 1994a). The abandonment of tree-planting programs in Zhaozhou county in 1983 and 1984 is another case in point. When the management of forest plots was contracted to individual households, trees were felled on a massive scale. Rapid destruction of tree-based erosion control systems had advanced in Bayan county in 1988 and 1989 (Muldavin 1989e). Both counties are unable to organize sufficient labor and funds to replant denuded hillsides or windbreaks, a situation that highlights the recent decline of investment in sustainable land use. In merely four years, between 1985 and 1989, China experienced a 48 percent decline in area covered by windbreaks nationwide (ZNTN 1992). Since the reform, a great many farmers have also fallen prey to short-term investment strategies. Credit available from the state tends to favor short-term investments. Capital previously used for large-scale infrastructure and collective projects has been diverted to satisfying more immediate needs. Expenditures for increased applications of chemical fertilizer and other agro-chemicals, plastic sheeting, small pumps for water control, etc. (ZNTN 1992; Muldavin 1990), soak up rural funds. Funds are accumulated only to be spent on housing materials, consumer durables, and traditional ceremonies (Muldavin 1983b, 1989e; Zhang 1993; BR 1989). Similarly, investment in TVPEs comes at the expense of other needed investments in infrastructure. Since many unregulated TVPEs contribute to increased local air, water, and soil pollution, the much-touted change in locus of control over capital investment and planning, from the center to local authorities, has not engendered the attendant host of legal and institutional enablers necessary for defining and implementing production that is sustainable over the long term. Expenditure on agriculture as a whole, as a percent of total (national) state expenditure, has been in continual decline since the late 1970s (see Figure 5.5). Measuring over 13 percent of the state budget at the time of Deng’s assent (in 1978), state expenditures on agriculture (including water control) had fallen to less than 7 percent by 1981, and were approximately 3 percent of the national budget from 1986 to 1990 (ZTNJ 1991, 1992, 1993). This rapid decline in state capital investment in agriculture prefigured the agricultural stagnation between 1985 and 1989. The low state investment in agriculture remains a major barrier to the improvement of land and labor productivity (Lardy 1984; Stone 1985; Walker 1984; Muldavin 1986). In the last few years, officials have repeatedly called for the diversion of state revenues to agriculture. In 1989, the Vice Minister of Agriculture claimed that large capital construction projects in agriculture were indeed being successfully implemented (Wang 1989), with a new land conversion tax imposed as major source
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of funds. Yet problems in collection of this and other agricultural taxes hinder proposed increases in investment. Another difficulty is the translation of top directives and transfer of monies down through the institutional maze into productive investment; too often, most of the funds get ‘lost’ along the way. Estimates of the total projected investment needs of rural China over the last fifteen years of this century exceed 1.5 trillion renminbi (approximately US$ 200 billion), with the state expected to contribute less than one-fifth and the rest expected to come from peasant savings, the savings of TVPEs, and the now weakened collectives (Delfs 1984; Du 1985; Riskin 1987). With institutional structures at a local level severely weakened by the reforms, it is difficult to imagine that funding and implementation of this project might actually be possible. At last, the disintegration of China’s infrastructure contributes to its environmental dilemmas. The mining of communal capital ultimately increases the frequency and intensity of natural disasters both real and ‘reported.’ Actual disasters seem to be occurring in greater numbers but, as in the case of floods in the village of Hesheng, not all of them can be attributed to the weather. We have noted the overgrazing and clear cutting, as well as cultivation of marginal lands, that rapidly increase soil erosion while further limiting water absorption and increasing runoff. To this evidence of environmental and infrastructural degradation must be added the raised silt loads and deposits in lower reaches of the major rivers, which threaten dike systems weakened by lack of repairs and investment. The effect is felt through greater volatility of river flow and higher crests in flood levels. Reservoirs are rapidly silting up, undermining water conservation efforts, decreasing flood control and the electricity-generating potential of the large-scale hydroelectric projects on China’s major rivers. In China there was a 25 percent increase in the area covered and affected by natural disasters between 1985 and 1991 (see Figure 5.5) (ZNTN 1992). Hinton (1990) discusses the collapsed terraces, ground water overdraft, and other aspects of declining capital investment as well as unbridled resource exploitation. CONCLUSION China’s reform experience challenges preconceived, optimistic notions promulgated by advocates of private property and markets. First, the implicit assumption that private property rights are essential for improving economic incentives, increasing production, and shaping an increasingly market-oriented economy is not borne out by the Chinese experience. The state sector has in many ways improved its performance during the reform period. It has also generated external economies highly conducive to the rapid expansion of TVPEs, as well as networks of subcontracting relationships. But more importantly, Chinese agriculture and TVPEs have enjoyed significant growth under a system of contracts where private property has not been emphasized and has remained in a kind of gray area. The astounding growth of the TVPEs between 1978 and 1993 allowed the transfer of 95 million rural laborers from agriculture into rural industrial and other non-agricultural enterprises (see Figure 5.6), helping to ease the historic labor surplus in rural China
Figure 5.6 Persons employed by TVPEs by type and sector in China, 1978–93
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(Huang 1990). Analyses show that between 1978 and 1988, 108 million workers were added to the rural labor force, of which 62.3 percent entered rural enterprises as wage employees (Knight and Song 1993). Thus, without formal privatization, China’s rural economy has continued to grow, though hobbled by a persistent functional dualism that favors thriving regions and sectors over their poorer counterparts. But as the evidence shows, not all the results of China’s enormous growth have been beneficial, and the populace has begun to grow restive in reaction to increasing insecurities and hardships. Should the Chinese state find itself unable to introduce new policies that address the negative impacts of the reform process, it runs the risk of exceedingly serious consequences. Resistance to the new order has emerged among workers and peasants. Reformers inside the state are fearful that this might develop into an openly active politics. However, they are loathe to create a social space for dissent and discourse. As the Chinese leadership has made abundantly clear (the Tian’anmen incident being just one example), it will not make the ‘mistakes’ of the former USSR by freeing politics along with economy. In the short term, political disaffection and the delegitimization of the state will remain hidden, surfacing only in small acts of everyday resistance. Rural resistance is typically overlooked by foreign observers. Indeed resistance periodically flares into local, but nonetheless important, incidents, some of which almost have the character of rebellion. By 1987, rising real costs of agricultural and agro-industrial inputs caused unrest and demonstrations among the peasantry. In 1992 there were dozens of reported incidents of rural unrest, many of them violent. A recent peasant revolt in Renshou in Sichuan province highlights the difficulties of a state trying to impose levies on peasants when rural household incomes are stagnating or declining (Muldavin 1992a). Poor peasants in areas not officially considered impoverished bear the greatest burden of an immensely regressive taxation system (Riskin 1995). When peasants refuse to pay taxes in rural Heilongjiang, local police (whose wages are dependent on tax income) accompany local cadres to peasant homes to demand payment. If the peasants still do not pay, the police seize household goods of equivalent value. When peasants accuse local leaders and police officers of unfairness, they are often punished through the cancellation of the state contract for their fields. This leaves them with only a postage-stamp-sized parcel of land, what is called ration (subsistence) land (Muldavin 1990, 1993a). In this context, peasants develop indirect forms of resistance (cf. Scott 1985; Peet and Watts 1993). In a state which declares that each person contributes according to his or her ability, disasters figure as legitimate occasions to call on the state’s forbearance—the state has little moral choice but to come to the aid of the stricken communities. Despite sustained favorable weather during the mid-1980s, there was a ‘strange’ increase in peasant declarations of natural disasters as village cadres mastered the art of ‘poor-mouthing’ to strengthen their claims (Muldavin 1989a, 1989c). Thus between 1981 and 1989, natural disaster claims were made for seven of nine years on behalf of villages in Songhuajiang Township in Bay an
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County (Muldavin 1992a) to justify changes in demands for lower annual quota requirements, disaster relief, development aid, cheaper and more abundant inputs, and cheap or free credit. This method of garnering state funds, or refusing to relinquish local surplus to the state, provides an avenue for peasant resistance through legitimate and illegitimate claims on state assets (Swift 1989). In Hesheng Village, the residents’ good record for repaying debts from the township credit cooperative declines in years of natural disasters, when loans are either pushed forward or written off. Alert to this pattern, both local officials and peasants are tempted to pressure the state to have their area declared eligible for disaster relief, since then the costs of bad debts accrue to the provincial and central governments, which must replenish credit sources each year. Peasants can thus leverage assets from the state based on historical agreements between the Communist Party and the peasantry. The ‘party of the peasants’ is under pressure to provide a morally correct patronage system of asset distribution to its supporters. If it were to lose its rural support base, it would be further weakened in relation to pressing urban demands. Thus the environment has become part of the political terrain in which Chinese peasants negotiate their relations to the state. In this derivative system it is difficult for the state to take stock of the problems that accumulate around its reform policies. Perhaps China will be the first modern state to face an intractable legitimation crisis based on environmental decline. Alternative pathways It is a commonly held view that reform of collectively based, planned economies requires decollectivization to occur simultaneously with the promotion of market mechanisms. In fact, judging from evidence in China, the two need not be tied together. A shift from collective to household economy is not a necessary corollary to the transition from a command to a market economy (Nove 1983; Bardhan and Roemer 1993). What’s more, collective and market enterprises can function alongside one another. The evidence shows that the combination of market incentives in certain sectors and a planned and regulated economy in others can lead to a successful gradual transformation of the economy as a whole. This gradualist approach to the incorporation of market incentives into the economy allows the corresponding development of institutions necessary for market regulation. In the meantime, the planned economy provides stability during a time of immense change. It also gives producers time to adapt to the newly emerging market context by reducing risk and uncertainty. Within the local and regional heterogeneity of China’s political economy, reforms take diverse paths. Alternate pathways are emerging; for example, one can imagine that the shift toward a market orientation within a predominantly collective economy might be organized in a manner that would allow peasants to employ long-term decision making strategies in production alongside shortterm market ones (collective market economy). Such restrained, institutionalized competition within a collective market economy could reduce
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the mining of communal capital, and in fact, certain villages have experimented with arrangements of this kind. In Heilongjiang, poor peasant households have re-collectivized into small groups to spread risk and increase efficiency and power; this coping strategy resists and challenges the more general movement toward highly competitive individualized households. This kind of collective market economy may soon predominate, according to the deputy director of agriculture for the province, and is being closely watched in Beijing as a strategy to overcome some of the contradictions of the more general, hybrid system (Sun 1990). Planners and scholars will need to assess to what extent this sort of small-scale ‘reunification’ effort truly represents a voluntary collective endeavor or whether it is, in fact, an efficient system imposed by the state to extract additional surplus through collective organizations. What may be emerging is a new form of ‘micro-feudalism,’ with the local neo-gentry providing protection and supervision of production practices, while guaranteeing the delivery of product and revenues to the state. Another alternate path involves individual decision making within a planned economy with certain state guarantees left in place (individual planned economy). This path could provide adequate social welfare and stability of markets for individuals to make long-term decisions in regard to production. In fact, intervention of this sort (though short-term and reactive) has been the method most often used to deal with crises arising from the reforms. Both alternatives—and others—already exist in certain of China’s regions and localities. Thus, the nation has available a range of options to help deal with the problems at hand, all of them perhaps preferable to the sudden introduction of an unregulated market economy composed of millions of small producers. The pattern of agrarian and ecological change emerging from an array of often contradictory forces—from state policy to local resistance—has evolved towards a mosaic of mixed market and socialist forms, some sanctioned by the government sanction, some not. These forms range from individual to collective, and in recent years in Heilongjiang they have increasingly relied on government intervention in the local economy for long-term market planning and stability. All forms share a common goal of growth, but with differing emphases on less tangible but nonetheless crucial issues, such as a sense of security and shared risk. So long as China was able to distribute the benefits of the reforms to the majority of the population, while protecting those who lost out, the state’s political legitimacy in attempting the transformation was maintained. High relative growth rates have helped to bolster the state despite political problems that have emanated from the very same reforms. In the aftermath of the Tian’anmen Square incident— where much of the social tension arose out of high inflation and people’s perception of increasing corruption, nepotism, and social stratification— continuing economic growth helped the reformers within the state to maintain their position of strength. Still a number of problems pose difficult challenges to the continuing success of the reform process. China remains burdened with a large number of large state
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industrial enterprises that are losing significant amounts of money. Concerned for social stability, the state has not shown itself eager to close down some of these companies or even to reduce their drain on government coffers. The result has been continued high investment that fertilizes the growing crop of small subcontracting enterprises, but also generates unsustainably high rates of growth that strain existing infrastructure and feed inflation. Social and environmental problems attendant on the success of the reforms are extremely critical in the medium to long term. The social welfare system is crumbling in both the countryside and the cities, undermined by the declining power of collective entities and the move towards individual and household responsibility. The decline in collectives, and a corresponding lack of institutional capacity to regulate the use of resources, threatens to undo many of the economic gains of the reforms. This, then, is China’s paradox. Immensely successful economic growth, coupled with unbalanced development and internal breakdown. Because of China’s size, and its growing political and economic importance (it will probably be the largest economy in the next millennium), any Chinese problem is inevitably a world problem. NOTES 1 2 3
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Another contradiction, not discussed in this chapter, is the potential for internal divisions based on ethnicity and territoriality and fueled by nationalism and racism (Gladney 1994). Portions of this section draw from Muldavin (1996). It is questionable whether the terms ‘plan’ and ‘market’ are adequate for describing, in an analytically rigorous fashion, this complex situation. Such oppositional terminology ignores the possibility that state coordination and regulation of the economy may continue indefinitely in China, as it has in most other East Asian economies. Political ecology emphasizes the importance of political economy in the understanding of environmental degradation; it constitutes an historically informed attempt to understand the role of the state, the social relations within which land users are entwined, and resulting environmental changes. In China, it is the rural industrial complexes which now provide the greatest dynamism in the economy, while simultaneously impacting nature in unprecedented ways. We can better illuminate the rapid change taking place by conceptualizing rural industrialization as part of a regional transformation (Page and Walker 1991). As ‘flexibility’ has become the watchword of global capitalism (Sayer and Walker 1992; Scott and Storper 1986), China has shifted its state policies since 1978 towards privatization, subcontracting and deregulation in a direction that parallels global restructuring processes. Cultivated land and population were respectively 97.9 million hectares and 541.7 million in 1949, and 99.4 million hectares and 962.22 million in 1978. In 1993 population grew to 1,185 million, while cultivated land fell to 95.1 million hectares, or 0.08 ha/person. These figures are problematic given recent reports showing that official statistics underestimate actual arable land by as much as 25 percent (Smil, China Quarterly, January 1996). The result is a devolution in farming practices from large to small scale. Peasants are required to provide the state with an annual quota of grain at below-market prices in exchange for long-term use of these small parcels of land—a form of rent or
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Joshua Muldavin sharecropping with the state as owner. By 1984, 99 percent of all communes had decollectivized agriculture and implemented the reforms. This political wisdom, shaped through many dynastic transitions in millennia of history, is captured in the often-cited phrase ‘wu nong bu wen’ (without agriculture there can be no civilization) in the agricultural policy debates in China (Lin 1993). Muldavin (1992b). Sun Jia, the Deputy Director of Agriculture in Heilongjiang province, stated in interviews that he expected half the province to have adopted this reunified form of agriculture by the mid-1990s. In Heilongjiang this was called the ‘four unifieds’ (unified plowing, unified planting, unified pest control, unified harvesting) with individual management of the fields during the growing season, primarily hand hoeing to keep weeds under control. From initiation to completion there is as much as a ten-year lag before fertilizer factories reach full production. For the farm sector the combination of high growth and high inflation passes losses to household and field. As peasants find themselves squeezed in this vice, they compensate for losses by turning on their own resources—an intensification of land use which often leads to environmental decline. The Western press tended to portray the Tian’anmen Square incident as a matter of student protest. However, dissatisfaction—indeed, disaffection—was widespread in China at the time. The incident might have sparked the transformation of an essentially silent social movement (silent at least in the Western media) into a vocal coalition representing the majority of workers and peasants. However this was not the goal of the student leadership in 1989 nor was it the outcome of their ill-fated movement. Qualitative analysis (Geography Institute 1990) suggests that the environmental problems (including erosion and soil degradation, air and water pollution, forest decline and grassland desertification) which plague Zhaozhou and Bay an counties are widespread in the province. With a decline in soil cover due to intensified grazing, a process of sodic-alkalinization begins, raising the pH in the upper horizons of the soil from 7 or 8 to 10 or 11. At the higher pH levels, what is left of the grasses dies off, leaving only clumps of high-pH tolerant weeds with low nutritional value (Muldavin 1986). The physical process of degradation proceeds as follows. There is decreased grass cover on land with only slight elevation variations. Following significant precipitation (particularly in the summer rainy season), water ponds on the soil surface. Exposed to sunlight, much of the water evaporates before percolating down into the soil, drawing salts to the surface through capillary action and forming crusts of white particles. The soil porosity is reduced further by the lodging of sodium particles between clay particles, thus further restricting downward percolation of water and speeding up the process of alkalinization. The result is an expansion of barren areas with extremely high pH soils covered with a salty crust. Erosion increases, exposing even less fertile sub-horizons, further complicating rehabilitation. It is not only air quality which is affected by the widespread use of high-sulfur coal in TVPEs. Despite producing a third of China’s industrial output, TVPEs receive only 20 percent of state-supplied energy inputs for industry (FBIS 1992). The gap in supply is filled though production from largely unregulated small-scale collective and individually run coal mines–60,000 of which are scattered throughout the countryside. These small mines are responsible for widespread destruction of adjacent forests and fields. Mine tailings are a further health hazard, polluting land and water alike. In partial exchange for use of land that is under long-term contract from the state, peasants provide these days of labor. This is a form of surplus extraction by the state, usually used to improve local infrastructure.
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BIBLIOGRAPHY Aglietta, M. 1979. A Theory of Capitalist Regulation: The U.S. Experience. Translated by D.Fernbach. London: New Left Books. Bardhan, P. and J.Roemer. 1993. Market Socialism: The Current Debate. Oxford: Oxford University Press. Bello, W. 1994. Dark Victory. Oakland, CA: Food First. Bernstein, H. 1977. ‘Notes on Capital and Peasantry.’ Review of African Political Economy 10:60–73. Blaikie, P. 1985. The Political Economy of Soil Erosion in Developing Countries. London: Longman. ——and H.Brookfield. 1987. Land Degradation and Society. London: Methuen. BR. 1989. Beijing Review 32, no. 1 (May 1–7). ——1993a. Beijing Review 36, nos. 4–5 (May 3–9). ——1993b. Beijing Review 36, no. 5 (January 11–17). ——1995. Beijing Review 38, no. 5 (January 23–29). Carney, J. 1993. ‘Converting the Wetlands, Engendering the Environment: The Intersection of Gender with Agrarian Change in The Gambia.’ Economic Geography 69 (4):329–348. CAAS. 1993. Discussions by author with economists at the Chinese Academy of Agricultural Sciences. CSY. 1989, 1991, 1992, 1993, 1994. China Statistical Yearbook. Beijing: China Statistical Publishing House. Chossudovsky, M. 1986. Towards Capitalist Restoration? Chinese Socialism after Mao. New York: St. Martin’s Press. Cooper, M. 1993. Lecture at UCLA, March 28. Danaher, K. 1994. Fifty Years is Enough. Boston, MA: South End Press. Davin, D. 1988. ‘The Implication of Contract Agriculture for the Employment and Status of Chinese Peasant Women.’ In Transforming China’s Economy in the Eighties: The Rural Sector, Welfare, and Employment, edited by S.Feuchtwang, A.Hussain and T.Pairault. Boulder, CO: Westview. de Janvry, A. 1981. The Agrarian Question and Reformism in Latin American. Baltimore, MD and London: Johns Hopkins University Press. Delfs, R. 1984. ‘Agricultural Yields Rise, But the Boom Cannot Last,’ Far Eastern Economic Review 68 (December 13):66–68. Delman, J. 1989. ‘Current Peasant Discontent in China: Background and Political Implications.’ China Information 4 (2):49. Du, R. 1985. ‘Lianchan chengbaozhi he nongcun hezuo jingjide xin fazhan’ (New Developments in the Contracting System of United Production and the Cooperative Economy in the Countryside). Renmin ribao. March 7:2. Economist Intelligence Unit (EIU) 1995. Country Risk Service: China. London: EIU. Edmonds, R.L. 1994. ‘China’s Environment.’ In China Briefing, edited by William A. Joseph. Boulder, CO: Westview Press. Epstein, G., J.Graham, and J.Nembhard. (eds.) 1993. Creating a New World Economy. Philadelphia, PA: Temple University Press. Fan, C. C. 1995. ‘Of Belts and Ladders: State Policy and Uneven Regional Development in Post-Mao China,’ Annals of the Association of American Geographers 85 (3): 421–449. FBIS (Foreign Broadcast Information Service). January 31, 1992:50–52. Geography Institute, Beijing, China. 1990. Untitled documentary video shown by environmental geographers from the Institute of Geography in Beijing, at the IGU meeting in Beijing, August. Gladney, D. 1994. ‘Ethnic Identity in China: The New Politics of Difference.’ In China Briefing, edited by William A.Joseph. Boulder, CO: Westview Press. Gurley, J. 1976. Challengers to Capitalism. New York: Monthly Review Press.
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HLJSY. 1992, 1994. Heilongjiang jingji tongji nianjian (Heilongjiang Statistical Yearbook). Beijing, China: Heilongjiang Province Statistical Bureau, China State Statistical Bureau Publishing House. Hinton, W. 1990. The Great Reversal: The Privatization of China, 1978–1989. New York: Monthly Review Press. Howard, Michael (ed.) 1993. Asia’s Environmental Crisis. Boulder, CO: Westview Press. Hsu, I.C. Y. 1995. The Rise of Modern China. Oxford: Oxford University Press. Huang, P. 1990. The Peasant Family and Rural Development in the Yangzi Delta, 1350– 1988. Stanford, CA: Stanford University Press. Hussain, A. and N.Stern. 1994. ‘Economic Transition on the Other Side of the Wall: China,’ CP no. 29, The Development Economics Research Programme, London School of Economics. Knight, J. and Song Lina. 1993. ‘Workers in China’s Rural Industries’ in The Distribution of Income in China, edited by G.Keith and R.Zhao, New York: St. Martin’s Press. Lardy, N.R. 1984. ‘Consumption and Living Standards in China, 1978–83.’ China Quarterly 100:849–865. Lenssen, N. 1993. ‘All the Coal in China,’ World Watch, March—April. Liang, M. 1988. Jingji yanjiu cankao ziliao (Economic Reference Materials) 34:32–40. Lin, J. 1993. ‘Chinese Agriculture: Institutional Changes and Performance,’ manuscript presented at the Conference on Rural Transformation and Comparative Socialist Transition, Shanghai, September. Malhotra, A. and J.Studwell. 1995. ‘Revolution’s Children,’ Asia, Inc. 4(1):28–33. Mufson, S. 1995. International Herald Tribune, October 9. Muldavin, J. 1983a. 15-Year Plan for the Agricultural and Agro-Industrial Development of Zhaozhou County, Ministry of Agriculture, Beijing. ——1983b. Field notes, Heilongjiang Province, China. ——1984. Field notes, Zhaozhou county, Heilongjiang Province; return interviews. ——1986. ‘Mining the Chinese Earth,’ MA thesis, Department of Geography, University of California at Berkeley. ——1987. Field notes, Heilongjiang Province; return interviews. ——1988. Field notes, Heilongjiang Province; return interviews. ——1989a. Hesheng Village Survey (HSVS), Bayan County, Heilongjiang Province. ——1989b. Bayan County Survey I (BCSI), Bayan County, Heilongjiang Province. ——1989c. Fendou Village Survey (FDVS), Fuxiang Village Survey (FXVS), Bayan County, Heilongjiang Province. ——1989d. Field notes, Heilongjiang Province. ——1989e. Collected field notes from work in Heilongjiang (1983–9), Jilin (1984), Xinjiang (1984–5), Sichuan (1985), Anhui (1985), Yunnan (1989), Guangxi (1988), Guangdong (1987) and Henan (1989) provinces. ——1990. Field notes and interviews, Heilongjiang Province. ——1992a. ‘China’s Decade of Rural Reforms: The Impact of Agrarian Change on Sustainable Development,’ PhD Dissertation, Department of Geography, University of California at Berkeley. ——1992b. Field notes and research interviews, Henan Province. ——1992c. Notes of discussions with members of the staff at the World Bank office in Beijing, 1989, 1990, 1991, and 1992. ——1993a. Field notes and research interviews, Henan and Heilongjiang provinces. ——1993b. Discussions with William Hinton, Beijing, April and July. ——1993c. Notes on discussions with the vice-head of the World Bank office in Beijing, April. ——1994a. Bayan County Survey II (BCSII), Heilongjiang Province. ——1994b. Manuscript on production treadmills in socialist transition. ——1994c. Field notes, Henan Province. ——1994d. Collected field notes, Henan Province, 1990–4.
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——1996. ‘The Political Ecology of Agrarian Reform in China: The Case of Heilongjiang Province.’ In Liberation Ecologies: Environment, Development, Social Movements, edited by R.Peet and M.Watts. London: Routledge. Neumann, R. 1992. ‘Political Ecology of Wildlife Conservation in the Mt. Meru Area of Northeast Tanzania.’ Land Degradation and Society 3:85–98. Nove, A. 1983. The Economics of Feasible Socialism. London and Boston, MA: Allen and Unwin. Odgaard, O. 1992. Private Enterprises in Rural China: Impact on Agriculture and Social Stratification. Hants: Avebury. Page, B. and R.Walker. 1991. ‘From Settlement to Fordism: The Agro-Industrial Revolution in the American Midwest.’ Economic Geography 67:281–315. Page, B. and R.Walker. 1995. ‘Staple Lessons: Harold Innis, Agriculture and Industrial Geography.’ In Regions, Institutions and Technology: A Centennial Celebration of Harold Innis, by M.Gertler and T.Barnes. Toronto: McGill University Press. Peet, R. and M.Watts. 1993. Economic Geography 69 (3). Perelman, M. 1979. Farming for Profit in a Hungry World: Capital and the Crisis in Agriculture. Montclair: Allanheld, Osmun. RSYC 1994. Rural Statistical Yearbook of China. Beijing: China Statistical Publishing House. Riskin, C. 1987. China’s Political Economy: The Quest for Development since 1949. Oxford: Oxford University Press. Riskin, C. 1995. ‘Non-Regional Poor in China,’ paper presented at the Association of Asian Studies Annual Meetings in Washington, DC, April 3. Robinson, J. 1970. Freedom and Necessity. London: Allen & Unwin. Ross, L. 1988. Environmental Policy in China. Bloomington: Indiana University Press. Sayer, A. and R.Walker. 1992. The New Social Economy: Re-Working the Division of Labor. Oxford: Basil Blackwell. Schell, O. 1995. ‘Twilight of the Titan: China—the End of an Era.’ The Nation 61(3):92. Scott, A. and M.Storper. 1986. Production, Work, Territory: The Geographical Anatomy of Industrial Capitalism. Boston, MA: Allen and Unwin. Scott, J.C. 1985. Weapons of the Weak: Everyday Forms of Peasant Resistance. New Haven, CT and London: Yale University Press. Smil, V. 1984. The Bad Earth: Environmental Degradation in China. New York: M.E. Sharpe. Smil, V. 1993. China’s Environmental Crisis: An Inquiry into the Limits of National Development. New York: M.E.Sharpe. Stone, B. 1985. ‘The Basis for Chinese Agricultural Growth in the 1980s and 1990s: A Comment on Document No. 1, 1984.’ China Quarterly 101:114–121. Stone, B. 1988. ‘Developments in Agricultural Technology.’ China Quarterly 116: 767– 822. Sun Jia. 1990. Deputy Director of Agriculture, Heilongjiang Province, conversation with author. Swift, J. 1989. ‘Why are Rural People Vulnerable to Famine.’ IDS Bulletin 20(2):27. Unger, J. 1994. “‘Rich Man, Poor Man”: The Making of New Classes in the Countryside.’ In China’s Quiet Revolution: New Interactions Between State and Society, edited by D.Goodman and B.Hooper. New York: St. Martin’s Press. USNWR 1990. U.S. News & World Report. March 12:44. Walker, K. 1984. ‘China’s Agriculture During the Period of Readjustment, 1978–83.’ China Quarterly 100:783–812. Wang Lianzheng, 1989. Vice-Minister, Ministry of Agriculture, President, Chinese Academy of Agricultural Sciences, interview with author, April. Watson, A. 1992. ‘The Management of the Rural Economy: The Institutional Parameters.’ In Economic Reform and Social Change in China, edited by A.Watson. London: Routledge. WBWP #7. 1990. China: Managing an Agricultural Transformation–I (Volume II: Working Papers 4–8), World Bank, China Department, Agricultural Operations Division, Asia Regional Office.
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World Bank. 1994. Inflation estimates by World Bank officials in Beijing in discussions with author. Zhang Bingwu. 1993. ‘Yingjie xiandaihua tiaozhan de dangdai nongmin’ (article on a household study in Baomiancheng zhen, Changtu xian, in Liaoning province, entitled ‘Modern Peasants Facing the Challenge from Modernization’), Shehui kexue jikan 1993 (Social Science Periodical) 1:32–39, Liaoning shehui kexue yuan. Zhao, Songqiao. 1981. ‘Transforming Wilderness into Farmland.’ China Geographer 11 (special edition on agriculture). ZNTN. 1992. Zhongguo nongcun tongji nianjian. China Rural Economy Statistical Yearbook. Beijing: Beijing Statistical Publishing House, State Statistical Bureau. ZTNJ. 1991, 1992, 1993. Zhongguo tongji nianjian. A Statistical Survey of China. Beijing: Beijing Statistical Publishing House, State Statistical Bureau.
6 After collectivization Continuity and change in rural China Mark Selden
In contrast to the Soviet Union, Hungary and Bulgaria, where the Communist Party’s monopoly on power ended and new regimes have proclaimed the transition to capitalism, China’s Communist Party, like its Vietnamese counterpart, retains its monopoly on political power precisely through its capacity to reap and distribute economic and political benefits from far-reaching changes in the institutions and structures of the rural economy. China has achieved a redefinition in the relationships among households, markets and the state, and important changes in the nature and productivity of the rural economy that far exceed the scope and depth of rural transformation in the former Soviet Union, Hungary, Bulgaria and Cuba. Not only has China not experienced the social and economic disintegration of many other former socialist countries, but no other socialist or formerly socialist nation has succeeded in stimulating the rural and national economies to a comparable degree. If the state neither formulated the blueprints for change nor initiated the process, it accommodated pressures for change from below and channeled popular disaffection with anti-market collectivism in ways conducive both to high speed if uneven growth and regime continuity. In contrast to Cuba under seige, where Castro maintains his hold on power in the name of socialism while the economy is in shambles, China’s Communist Party rules a nation that has arguably experienced the world’s most dynamic growth since the mid-1970s. A range of Chinese institutional reforms and policy initiatives have stimiulated not only agricultural growth but rural industry and commerce on a scale that far exceeds that in Vietnam, where far-reaching institutional change has also occurred, and in other socialist and former socialist societies. The countryside has led China’s economic surge during much of this period. China constitutes a formidable challenge to the proposition advanced by János Kornai, and in more dramatic fashion by his Harvard colleague Jeffrey Sachs: the view that only the complete dismantling of the state-collective apparatus and their replacement by unfettered market mechanisms can overcome the limitations of the ‘shortage economy’ and provide sufficient incentives to assure sustained growth. For Kornai in the 1990s, ‘socialist reform’ is a non sequitur. Only the abolition of the system, tout court, can pave the way for high-level 125
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economic performance. If this fairly summarizes Kornai’s recent conclusions, we must then conclude that the economic achievements of what China’s leaders style a ‘socialist market economy’ and Iván Szelényi calls a ‘socialist mixed economy’ negate Kornai’s theory. To comprehend these surprising outcomes we assess briefly the consequences of land reform and collectivization in the 1950s, then turn to institutional transformations and economic performance from the 1970s to the present. Our interest lies as much in delineating areas of continuity as it does in highlighting important changes. In conclusion, we assess competing theoretical frameworks for comprehending these Chinese phenomena. In the half century since 1945 China completed two major cycles of rural transformation. The first cycle (1945–70s) featured (1) land reforms that redistributed land and other property equally among villagers, broke the power of dominant landed classes, and consolidated the position of the party within the natural village; and (2) Soviet-style collectivization (but at far lower levels of mechanization) that transferred authority of land and labor from the household and the market to large state-directed units of hundreds of acres of land that sharply restricted, but did not eliminate, household production and markets while controlling labor, mobility, accumulation, and other aspects of village life.1 In the early 1960s, the collective system stabilized with a three level order of commune, brigade and team. China’s countryside was comprised of 26,000 communes in 1961, and, following a large reduction in size, 74,000 in 1963, a figure that subsequently remained roughly constant until the abolition of communes in the early 1980s. As of 1974 there were approximately 3,000–3,500 households and 2,000 hectares of land per commune, 200–250 households and 133 hectares per brigade, and 30–40 households and 20 hectares per team, the basic unit of labor allocation and accounting from the early 1960s forward.2 Like the Soviet and East European systems, China’s collective regime was predicated on the ‘great compromise’, the allocation of approximately 5 percent of land for household cultivation; but with the exception of periods of economic breakdown such as the Great Leap famine in the early 1960s, the Chinese system was far harsher in its restriction on marketing activities than was the case in the Soviet Union and Eastern Europe. Studies of the reform of Chinese agriculture have focused on the years 1978– 82 and after when the collective order was fundamentally transformed and the communes abolished. Researchers have by and large overlooked the fact that the second cycle began in the early 1970s and has continued to the present. This cycle may be understood as consisting of two phases. The first, or conservative modernization, began in 1970 with the North China Agricultural Conference, sponsored by Zhou Enlai, marking the end of the violent phase of Cultural Revolution in the countryside and initiation of a conservative reform agenda that rested on collective foundations and that coincided with the beginnings of an export drive that has continued to the present. The results were visible in terms of expanded state investment in agriculture, particularly in well-drilling and improved irrigation and in increased production of chemical fertilizers, including those produced by plants purchased from the United States. Pro-agricultural policies continued in
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1979 with the 20 percent boost in state procurement prices for grain and other crops which, more than any other factor, greatly increased agricultural incomes for more prosperous regions and farmers in the years 1978–84.3 Poorer farmers who had little to sell also benefitted as a result of the reduction in sales quotas and increased state grain shipments to poorer areas. Only in the second phase of cycle two, from 1982, did the system of household contracts on land fully emerge together with the redistribution, lease or sale of other collectivized means of production. It is worth noting that the period of greatest gains in agricultural production, the years 1978–84, largely preceded the primary decollectivization processes and were fueled in significant ways by the state’s price hike in agricultural purchasing prices, the resurrection of markets, and increased state investment in agriculture. In the late 1970s and early 1980s households effectively pressed for relaxation of the collective regime, and with full implementation of the household contract system (baochan daohu), the household reemerged as the primary agricultural production unit. In this phase, under pressure from below, the state relaxed controls over agricultural production, prices, labor allocation and accumulation, and restored markets and diverse forms of private and mixed ownership. It is important to note, however, that particularly in the most dynamic rural regions in coastal and suburban areas, the organizational or redistributive economy, in sidelines, industry and commerce, has flourished as the rural economy diversified and the countryside became the leading sector of Chinese industrial growth. Parallel to, and facilitated by, the institutional changes of the second cycle has been a basic transformation in the nature of rural economic activity: from the primacy of grain self-sufficiency centered on involuted villages with stagnant per capita incomes throughout two decades of collective agriculture to the formation of a comprehensive agro-industrial-commercial economy spilling over from the countryside to the cities and connected to the international economy through rising exports of Chinese goods and capital infusion from abroad. Much of the contemporary Chinese and Western literature on Chinese rural development, driven by the teleology of transition to capitalism, and paying inadequate attention to the subtle mix of collective, household and market that has emerged at the heart of the political economy of China’s rural reform, poses the policy alternatives too starkly in terms of the triumph of the family farm and the market on the one hand, or the collective, the state and the plan on the other.4 THE FIRST AGRARIAN TRANSFORMATION CYCLE A brief assessment of the first agrarian transformation not only helps to clarify the range of achievements and sources of the discontents that eventually fueled the demise of the collective system but also helps to grasp areas of continuity across the two cycles and, particularly, provides a foundation for assessing the achievements of the reform agenda. With the critical exception of the Great Leap famine years, China secured subsistence for its rapidly growing population and invested a substantial surplus. Through heavy labor investment in agricultural infrastructure, particularly irrigation
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and soil improvement, and the inauguration of a green revolution based on the combination of high yield hybrid grains and expanded irrigation and chemical fertilizer use that energized agriculture in the early 1970s, China increased per capita grain output from 306 kilograms in 1957 to 319 in 1978, an annual growth rate of 2.1 percent. This was no small achievement, yet given China’s failure to limit population growth prior to the 1970s, per capita terms increase was only 0.2 percent.5 Collectivization provided (at heavy social cost) foundations for China’s industrialization by facilitating some of the world’s highest rates of accumulation (averaging nearly 30 percent for the years 1957–80) and transfer of significant portions of the rural surplus to industry and the cities. Between 1949 and 1978 the share of national income generated by industry expanded from 13 to 49 percent while agriculture dropped to 32.8 percent. The combination of assured subsistence and provision of preventive health care, enabled China to substantially raise life expectancy to nearly 70 years, levels attained by middle and upper middle income nations, by the end of the collective era in the early 1980s.6 But these considerable achievements were bought at the expense of long-term stagnation in rural per capita incomes and the virtual disappearance of cash for a significant portion of the rural population. Moreover, in the course of these decades, urban-rural differences in income, education and opportunity widened despite the low wage policy applied to state sector and urban collective industry and the educational and health gains that were shared by the countryside. Chinese villagers grew increasingly restive under the collective, finding themselves bound to land they did not own and could not leave, locked into a system that denied them control over their labor power and the surplus they produced, unable to buy or sell in the shriveled market formerly the center of rural culture, and with incomes paid largely in kind pegged at low subsistence levels. The collective system guaranteed employment and subsistence to all, yet by emphasizing grain production and foreclosing income-earning opportunities associated with sideline and industrial production, off-farm jobs and the market, it also sustained vast rural underemployment (in the range of 150 million to 300 million people), kept 120 million rural people living in chronic poverty, and policed the growing divisions between city and countryside through enforcement of the hukou system of population control. China is, of course, hardly unique in forcing villagers to bear the brunt of the costs of original accumulation and early stages of industrialization. But the tensions surrounding the combination of income stagnation and the arbitrary and far-reaching power of collective officials over farmers led, by the 1970s, to powerful pressures for change. In the early 1980s, the driving force for abolition of collective agriculture and the expanded scope of household enterprise and markets came not from party leaders in Beijing but from villagers seeking greater autonomy, mobility, and market access.7
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THE SECOND AGRARIAN TRANSFORMATION CYCLE Three institutional pillars of the first agrarian cycle changed radically in the second cycle: land ownership and use rights, labor allocation, and markets. In all three— as well as in prices, choice of technology and population mobility—power and resources shifted from the state and the collective to households. Yet precisely by reducing the direct exercise of its power, the state may have achieved other gains, both economic and political. Beginning in the late 1970s and continuing in the early 1980s with the second phase, collectives lost much of their monopoly power and farmers regained substantial control over land, labor power, and resources, including the choice of crops, labor mobility, markets, and discretionary power to consume, sell, or invest a larger share of their products and income. Important production, savings, and consumption decisions passed from the control of the collective and the state to the household and the market. The state backed away from monoorganizational approaches to production, distribution and consumption pivoting on the collectives. Having formerly suppressed rural incomes to promote accumulation and investment, the state now promoted improved living conditions through both direct resource transfers and the market. The state’s pro-farm measures included, in addition to substantial increases in purchasing prices of crops, a powerful anti-poverty program centered on chronic rural poverty counties, as well as active support for rural entrepreneurs. Income replaced grain yields as the principal yardstick touted in the media and in internal documents for gauging success. The reform agenda generated increased rural income and consumption and loosened the grip of state and collective. As profound as these changes are, China has not made a wholesale shift to private enterprise and the market. State, village and a variety of cooperative and collective institutions continue to shape rural outcomes. Among the most important limits on institutional change is the fact that agricultural land has not been transferred to private ownership. Not only does ownership of the land reside in the village but also land is periodically (if erratically) redistributed both to assure intra-village equity and to constrain the amount of land an individual household can own. The process reinforces popular recognition of the power of the state to set the guidelines defining rural economy and society. Moreover, elements of the redistributive economy remain and in some instances have even been strengthened in postcollective rural China. The most important and dynamic of these, village- and township-enterprises, building on earlier collective industries, have grown significantly following the reduction in the monopoly power of collectives. This malleable category also frequently extends in Chinese terminology to enterprises owned and operated by local government (including county or prefecture), by multiple levels of government such as township and county, by public and private funds, and even by local governments at times in alliance with foreign capital. Indeed, private enterprises often seek the cachet ‘township and village enterprises’ to secure tax and other advantages. The driving force behind expanding rural industrial and commercial activity, the fastest growing sector of the Chinese
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economy since the early 1980s, and perhaps the most distinctive feature of China’s rural development, is the township and village enterprise (TVE). Moreover, diverse forms of cooperative activity, ranging from small-scale mutual aid among neighbors and kin, to the role of village governments in providing irrigation and agricultural inputs, to the growth of local, regional and national associations providing services ranging from financing to marketing to technology transfer, activities that complement the household economy. In short, the Chinese evidence shows conclusively that under certain conditions the incentive problem, the free rider problem, and problems associated with the shortage economy can be resolved within public and public-private structures. China’s rural anti-poverty program exemplifies an expanded state role that runs counter to the view of market triumphalism found in much of the Western literature. In a significant sense, China may be said to have ‘discovered’ poverty in the mid1980s when the first government programs earmarked substantial development and welfare funds (as opposed to urging self-reliance) for mountain backwaters that were showing no more success in responding to market incentives than they had earlier to collective incentives. As the World Bank concluded, by 1992, China had lifted 170 million rural people out of absolute poverty, leaving 70 million more below the poverty line.8 PROPERTY RIGHTS AND SCALE OF AGRICULTURAL PRODUCTION Land and most other means of production that were collectivized in the first agrarian transformation have been redistributed, leased, or, in the case of property such as orchards and tractors, sold to individuals. Land rights in the second cycle reflect the legacy of the equal distribution arrangements resulting from land reform in the 1950s. A 1989 Chinese sample survey found that the average household received 9.7 plots of land totaling 0.62 hectares, figures consistent with my own data on rural Hebei in the 1990s.9 In contrast to pre-collectivization times, however, households cannot buy and sell contracted land.10 In short, rather than gaining private land ownership rights, households now possess long-term use rights to the land they till. Ownership rights are vested in villages whose officials may and sometimes do authorize periodic redistribution of land. In contrast to many parts of Eastern Europe where the late 1940s or early 1950s land reform apparently lacked legitimacy, as indicated by subsequent reversals including the return of property to former landlords in Hungary and in south Vietnam where similar phenomena are observed, there has been no significant challenge to China’s 1940s land reform. In particular, China’s former landlords, after a generation as a virtual pariah caste, dared not claim their former land and other property. The officially authorized contract period for agricultural land was set at fifteen years in 1984 and increased to thirty years in 1992, with adjustments made in some villages for changes in household size. During the contractual period, landholders have specified rights and obligations. They may legally rent out their contracted land for the duration of
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the contract but may not sell it.11 In return for land use rights, households incur financial and labor obligations. According to one informed estimate, the 1994 contractual obligations of farmers were valued at 52 billion yuan or 41 yuan per capita, including both the value of corvée labor and payments in cash and grain.12 An enduring legacy of the first land reform is the relatively equitable distribution of land that persists half a century later and has been reaffirmed in the current reform. Universal access to land provides poorer rural households with a safety net that assures subsistence for most. This does not eliminate income inequality but it limits the growth of large inequalities in wealth and power based on land ownership concentrations such as those found in India, the Philippines, Brazil, and elsewhere.13 China has imposed no limits on the size of holdings. In practice, however, egalitarian land distribution produces roughly equal microfarms in most of rural China. Nevertheless, in the 1990s, there are signs of concentration, thus far primarily with respect to cultivation rather than ownership. This takes such forms as specialized farmers cultivating most or all village land in prosperous areas where industrial and commercial jobs are readily available. In the mid-1990s, China is also promoting multinational agribusiness enterprises that provide farmers with loans, seeds, fertilizers and other inputs, specify the crop and the nutrients to be applied, and purchase and market the entire crop for export or for sale to the cities.14 Thus far, the land ownership base for the new agribusinesses appears to remain with the micro-farms contracted to households in the second land reform of the 1980s, but the potential for rural polarization in the agrarian sector and even the dispossession of poor farmers is inherent in this program. Agribusiness and some specialized farms aside, farming alone rarely brings prosperity. Subsistence conditions prevail for a majority of farm households that have no off-farm incomes. Equal land distribution assures subsistence while offfarm income, including processing, commerce and industry, hold the key to achieving prosperity. It is precisely the ability of tens of millions of rural households, notably those in the booming areas of coastal provinces to obtain off farm work, that distinguishes China’s more dynamic rural economy from that of Vietnam. ORGANIZATION OF LABOR AND PRODUCTION: FROM COLLECTIVES TO TVES The second significant change is the return of rural households as the primary locus of agricultural production and a range of other economic activities. During the first agrarian transformation, while the household lost its centrality as the primary productive unit in the countryside, it remained a consumption, repro-ductive and cultural unit. Indeed, despite persistent official pressures, it also survived as a productive unit, albeit at the margin of the collective economy with family plots providing a part of consumption and income including cash income. Consequently, once officials responded to pressures
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from below to expand the scope of the household economy and market, household-based production rapidly resumed centrality in farming and other sectors of the rural economy. The historical contrast between Russia and China is important in at least two respects. First, while the household was the locus of farming in both countries prior to collectivization, it appears that Chinese farmers were more actively involved in the market, as producers and sellers, and in securing a variety of off farm jobs essential for survival. Second, Russia’s collectivization took place two to three generations ago while collectivization in China was only a single generation prior to the agrarian transformation of the 1980s. This means that for Chinese farmers, memories of household farming and even some of the personal ties to distant markets and off-farm jobs remained alive among the older generation. These provided foundations for many of the activities that subsequently appeared. Since the late 1970s, numerous households have leased, owned and operated sideline, industrial, service, and commercial establishments, and their activities have spilled over from the countryside to the cities: from the market to handicrafts, industry and construction, rural labor and entrepreneurship have demonstrated the ability to compete effectively with the state sector. In rural China, diversification increased rapidly since the late 1970s. This began with agriculture where the greatest gains in productivity and income centered in commercial crops of all kinds whose growth had been thwarted by grain-first self-reliance strategies that frequently ignored comparative advantage and specialization during the collective era. The walls between urban and rural and between industry and agriculture have been breached as a result of the dynamic growth of rural industry, handicrafts, and trade and the explosion of temporary and permanent migration that the state had previously suppressed. In coastal and suburban regions, since the 1980s only a minority of households have depended predominantly or exclusively on agricultural incomes, these generally being the poorest. A third important change is a product of the fact that much new economic activity takes one of a number of group, corporate, or cooperative forms that extend across and include commercial agriculture, handicrafts, manufacturing, trade, and finance. A 1991 Ministry of Agriculture report states that, since the early 1980s, over 2 million village and sub-village groups—some 26 percent of former production teams—re-instituted group farming activities at the village level, accounting for machine-plowing more than 35 percent of farmland and irrigating 70 percent of irrigated areas. 15 Since the 1980s, while collectives have lost their monopoly power in agriculture, rural industry and commerce, the local state, from village through township and county levels, has continued to play important and in some localities even expanded economic roles; for example, the state continues to supply key farming inputs and, until recently, it set the purchasing price for many key commodities. At the same time, the redistributive economy has shown new vitality. Most important has been the rise of TVEs.
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TVEs, which are at the center of the debate over China’s changing economy and society, well illustrate the fruitlessness of the search for absolute determinations of the ‘socialist’ or ‘capitalist character of the emerging production relations and instead draw our attention to the distinctive hybrid nature of China’s socioeconomic formation. Do they conceal the embryonic features of capitalist enterprise? Are they simply the former collectives rechristened? Are they a new local corporatist institution that extends the state’s domain in the context of a growing market economy? Will they provide the bridge to a free market capitalism? Most striking to this observer is their hybrid character, one that places them in what Philip Huang has called the third realm and János Kornai has termed the third way.16 They occupy positions in the interstices between state and household in ways that distinguish them from the former collectives, from state owned enterprises (SOEs), and from ideal type models of free market capitalism. Yet their character is as diverse as China’s population, and it is in flux with the dynamic growth of private, household and corporate activity concealed beneath the rubric of TVEs. TVEs well illustrate the multifaceted character of the emerging Chinese political economy and are central to understanding important dimensions of the distinctive Chinese path of rural transformation and national development. Since the late 1970s, TVEs have been the most rapidly growing sector of the Chinese economy, a magnet for foreign investment, the largest source of new employment and income generation, and the cutting edge of rapidly growing exports, mounting trade surplus, and expanding foreign exchange reserves.17 The share of agriculture in China’s national income dropped from 28.1 to 21.0 percent between 1978 and 1994 despite impressive gains in agricultural output. Secondary industry, comprised of industry and construction, also declined marginally from 48.2 to 47.2 percent while tertiary industry, including commerce, transport, and services rose from from 27.6 to 31.8 percent of GDP.18 The state’s portion of that industrial capacity in the form of SOEs simultaneously declined from 76 percent to 48 percent. Moving up have been rural enterprises, accounting, by 1993, for nearly 39 percent of industrial output. About two-thirds of that is classified as TVE production.19 Having created an average of 6.5 million new jobs each year in the 1990s, China’s 24.5 million TVEs employed 28 percent of the total rural labor force. The output value of TVEs increased from 66.5 billion yuan in 1980, accounting for 35 percent of the gross value of agriculture, to 3.15 trillion yuan, 2.9 times the value of agriculture, in 1993. Between 1990 and 1994, the output value of SOEs doubled to reach 2.62 trillion yuan, but in those years for the first time the output of collectively owned enterprises (COEs), including township and village enterprise, joint urban enterprises and joint rural enterprises, surpassed that of SOEs by nearly quadrupling from 852 billion yuan to 3.14 trillion yuan (current prices). Individually owned enterprises increased even more rapidly, a sevenfold increase to reach 799 billion yuan by 1994 although this latter figure was still only a small fraction of the value of either the state or the collective sector.20 In 1993, TVEs accounted for 45 percent of China’s total exports.21 By the
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1980s, the predominantly agrarian character of China’s rural economy had shifted to an agro-industrial economy and in the more dynamic regions in the 1990s is well on its way toward an industrial-agro-export-oriented economy. Table 6.1 conveys, but imperfectly, a sense of TVE ownership and employment patterns and the direction of change over time. Absent in particular is the important relationship between foreign capital and TVEs that has spurred China’s export performance, and the hybrid nature of many TVEs. The table does indicate, however, the explosive growth of joint and private enterprises in the 1990s, showing that by 1992 these accounted for 90 percent of enterprises and 52 percent of employees, though a much smaller percentage of the output value given the large size of many of China’s SOEs.22 It reveals too the larger scale of enterprises run by the township, averaging 66.2 employees in 1992, and village, with 22.5 employees, compared with just 8.5 in partnerships and 2.5 in private enterprises. Between 1978 and 1993 the number of employees in TVEs grew from 28 million to 123 million before dropping slightly to 120 million in 1994. TVEs are among the fastest growing sector of the Chinese economy whether measured by employment, output value, profits, or exports.23 TVEs, while operating on a much smaller scale and with a fraction of the number of SOE employees per enterprise, in the 1990s have come to span the full range of Chinese industrial firms, closely mirroring the subsectoral composition of state enterprises in such diverse areas as coal, chemicals, machine building, food and textiles.24 Making sense of the TVE phenomenon requires refining and recasting concepts of ownership and management in order to capture the range and complexity of the social relations linking individuals, communities, multiple layers of the state and corporate capital in the realms of investment, labor, land, income, subsistence and much more than can ever be captured by formal title. China’s rural industries began their rapid ascent in the early 1970s at the start of the second cycle and simultaneous with the acceleration of growth of the domestic market and foreign trade. Commune and brigade enterprises grew at average annual rates of 25.7 percent with output value rising from 9.3 billion yuan in 1970 to 27.2 billion in 1976, and then further accelerated to 49.3 billion by 1978. TVEs, like many rural industries in the late collective years, and like their counterparts among small industries in Japan, Taiwan and other parts of East Asia, frequently subcontract work from larger enterprises. 25 In suburban Shanghai and Tianjin, TVEs regularly subcontract to state enterprises; in coastal Guangdong and Fujian, subcontracting is frequently to Hong Kong, Taiwan or US firms.26 From one angle, TVEs may appear to be simply a rearrangement of former collectives. Both the collective and the TVE have their roots in the village economy and they were and are subject to directives from the state. Yet differences from the former collective are fundamental. The multilayered public and private forms of ownership are one important difference. Another concerns their operations. Township and village officials typically retain the power to appoint and fire TVE
Source: Wong and Yang (1995:19)
Table 6.1 Categories of township and village enterprises in China, 1978–93
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enterprise managers. But managers generally enjoy wide powers including authority to hire and fire workers and to make many investment, production, and marketing decisions with little direct government control or supervision. Managers are nevertheless subject to dismissal and, in contrast to leading officials in SOEs, they frequently lose their jobs if business is bad or they fall afoul of local authorities. This suggests a third important difference from state sector enterprises and the former collectives. TVEs are subject to hard budget constraints as indicated by numerous bankruptcies, mergers, and takeovers since the 1980s.27 A 1990 national survey found that 31 percent of China’s troubled state enterprises ran a deficit, many of them for years on end. By comparison, 8 percent of TVEs operated with a deficit.28 Another difference from collectives concerns the workforce. The labor pool in TVEs and other contemporary rural enterprises is not restricted to residents of the locality. Workers, who were formerly guaranteed work in the collectives, can be hired and fired by TVE management and, particularly in the case of migrant workers, they enjoy little security and few benefits. In contrast to SOEs, where most workers receive a monthly wage and other benefits, and in contrast to the former collective with its basically egalitarian workpoint system of income distribution, most TVE workers, especially the unskilled, earn piece rates. In the 1990s, many practices associated with the TVEs have spread to SOEs. Most SOE workers are now hired on fixed contracts with no guarantee of renewal, and many factories have adopted piece rates or are exploring options ranging from privatization to sacking unproductive workers. TVEs nevertheless also differ in fundamentals from most capitalist enterprises. One key difference is the response of TVEs to hard budget constraints. Township and village officials running TVEs, in contrast to owners of private businesses, frequently emphasize assuring remunerative employment for a significant group of villagers.29 This redistributive character of TVEs, however, differs in significant respects from that of the former collective. One reason for this is the partial disjuncture between workers and residents. While workers receive wages, TVEs also distribute dividends or provide services to residents regardless of whether they work in the enterprise. These redistributive elements of the TVEs in more prosperous regions simultaneously create possibilities of the emergence of an underclass of migrant workers who carry out the most arduous and dangerous labor at low wages while the lion’s share of the rewards go to residents who monopolize technical and managerial positions and earn income as shareholders. The origins of TVEs and of Chinese rural industrialization lie in the collective era. Local self-reliance, emphasized in China, particularly in the 1960s and 1970s, led to decentralized industrialization (notably promotion of the five small industries including cement, coal mining and chemical fertilizer).30 Rural counties, townships, and villages across the country supplied their own raw materials, small industries, construction, and other local needs. For example, in the early 1970s many counties built and ran their own chemical fertilizer factories and smaller industries were established at brigade (village) and commune (township) levels. Consequently,
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collectives in many parts of China, had experience with organizational and technological aspects of non-agricultural production. TVEs subsequently built on these foundations. When China, in the late 1970s, opened the door to market forces, collective and state-collective enterprises quickly took advantage of the new opportunities. The origins of the cadre-entrepreneur, which has decisively shaped China’s rural industrialization, lie in the collective era. International conditions also contributed to the surge of rural industrialization in China’s coastal areas, particularly in the dynamic central south region stretching from Shanghai to Guangzhou. Substantial foreign capital flowed into this region, notably in Hong Kong and Taiwan and from Chinese in other parts of Asia, as well as from Europe, and North America. Hong Kong’s early role was critical: its capital, technology, proximity to China, financial infrastructure and global commercial reach neatly complemented China’s vast reserves of cheap labor, land and power. China’s second cycle also benefited from the US—China opening from 1970 by legitimizing foreign capital and technology flows to China and facilitating access to US and other global markets in Japan and Europe. The TVEs are the most distinctive hybrid institution to emerge in China’s countryside, a bridge between the collective past and the future, an alternative coexisting at present with both the SOEs and a growing private sector, and a powerful engine of growth, rural industrialization, and exports since the late 1970s. NEW COOPERATIVE FORMS Some innovative forms of cooperation transcend the village and local community.31 Technical services to agriculture and the countryside are provided by the state, by the community (village), and by technical associations that embody cooperative elements. In animal husbandry and cash crop production, where direct state control through collectives ended, cooperatives have been increasing. By 1988, China had some 100,000 specialized production technology associations (SPTAs) with 2.5 million members. A 1991 report put the number of associations at 120,000. By 1994 SPTAs provided 140 kinds of professional services ranging from animal breeding to fisheries to cash crops. Particularly active provinces such as Sichuan, Shandong and Heilongjiang boasted more than 10,000 associations each.32 The SPTAs are loosely structured associations with few if any controlling hierarchical structures. At the same time, they lack horizontal ties with one another and most are relatively small and weak. The initiators and most members are specialized farmers who seek the participation or the guidance of university teachers, researchers and technicians. SPTAs, in short, while open to all, tend to promote the interests of the most energetic and entrepreneurial sectors of the rural population. They provide technical assistance and facilitate information dissemination in pig breeding, chicken fanning, orange and tangerine growing, edible mushroom production and other specialties. Most leaders of the SPTAs are elected by and from the members.
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SPTAs resemble service cooperatives. One popular type of SPTA focuses on the extension of applied technologies and expertise through study groups in which members learn from one another and by organizing seminars and short-term training courses taught by professionals from the official extension system or universities. SPTAs collect small fees to finance these activities, sometimes with local government financial assistance. Another type of SPTA provides production services. Hybrid rice growers’ SPTAs help members improve rice breeding techniques and market their seeds through the seed company of the county agricultural bureau. Orange growers’ SPTAs extend services for purchasing inputs and marketing fruit. They provide non-member farmers with grafting and other technical services on a fee basis. These functions are modest compared with those provided previously by collectives or those provided by comprehensive coops elsewhere such as Japan’s Nokyo cooperative organization. They nevertheless constitute an important dimension of potential social and redistributive linkages beyond the market. To what extent have SPTAs created autonomous organizations? To what extent have they been absorbed or coopted, collective or corporatist style, by the state? While not enjoying the status of state organizations, some SPTAs invite state officials to lead their organizations or subordinate themselves to appropriate governmental departments in order to obtain official resources. Indeed, a 1991 survey found less than 7 percent of the SPTAs to be independent economic entities with members’ investment related to services provided.33 Given close formal and informal ties, it is frequently difficult to distinguish the boundaries of SPTA and the state. For all their present limitations in number, size, resources and autonomy, SPTAs constitute sprouts of a potential cooperative movement. Together with TVEs, they suggest important space for the emergence of a third realm in agriculture with the capacity to represent and strengthen the position of farmers. Their close ties with government constitute both a strength (in terms of resources and legitimation) and a danger (in terms of autonomy) from the perspective of building a thriving cooperative movement capable of representing the interests of their members and, ultimately, of the rural population. However, with membership often limited in practice to the technically advanced and prosperous, those most in need of technological, informational and financial support remain beyond their purview. This opens the possibility that a flourishing cooperative sector may exacerbate already growing intra-rural income differentials by serving the prosperous and the technically advanced while the poor and the uneducated remain without access to new technology. The demand for applied technologies has increased greatly with the diversification of the rural economy and the proliferation of small and medium size enterprises for whom technical assistance is critical. When former collective members became independent producers responsible for family farms, many lacked technical and market expertise. Demand for services from the agricultural extension system quickly mushroomed beyond the capacity of the system. SPTAs emerged as networks through which farmers could help one another to
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obtain technical, market and other information. SPTAs, TVEs and other organizational and cooperative or community-based forms reveal the multiple and sometimes contradictory economic roles of the state at the national, regional and local levels. MARKETS Another major change associated with the second cycle involves marketing and services. Rural households as well as other producers and consumers such as cooperatives and, in China, TVEs, now enter the market to buy and sell where previously the state served as their monopsony buyer of most goods. China has experienced an explosion of market activity since the 1970s. In addition to regaining substantial control over labor power, choice of crop, mobility, the right to engage in sideline and industrial activities, rural producers have also regained the right to market their products. The direct exercise of state and collective power over markets has been substantially reduced and the autonomous realm of villagers expanded. The state has not, however, abandoned the market. Working through a chain of command and a distribution network reaching down to the village and the household, the Chinese state controls the supply and price of some critical agricultural and industrial inputs as it did during the collective era. An important difference is that in some instances villagers may turn to private markets as an alternative source of inputs, usually at substantially higher prices.34 In the service sector, such as restaurants and stores, the state has been unable to compete with TVEs and private capital. The few remaining state stores found throughout the countryside largely stand empty in the midst of bustling private markets that provide variety, price, and service advantages. The state both creates and restricts markets, the latter primarily through imposition of compulsory crop sales quotas on grain, cotton and other crops at state prices. These quotas have been sharply reduced in scope but not eliminated in the 1990s. In short, the presence of the state continues to shape in varying degrees all aspects of the rural economy. CURRENT RURAL DYNAMICS: INCOME, CONSUMPTION, POVERTY, INEQUALITY The second agrarian transformation has generated both accelerated growth and higher incomes for most villagers, a combination that eluded China during the collective era, in part as a result of the state’s design to restrict consumption in order to siphon the rural surplus for investment in heavy industry and to support other state goals. However, by far the largest gains in income came in the years 1978–84 when higher state purchasing prices fueled rural incomes. Household contracts, increased labor mobility, rapid growth of TVEs and other enterprises outside the state sector, and diversification of income sources all contributed to higher incomes (including significant cash incomes) and consumption rose
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significantly if unevenly after a quarter century of income stagnation. Perhaps the most visible manifestation of rising consumption lies in the wave of rural home building that is most visible in the booming coastal regions since the late 1970s. Other gains include improved diets and a plethora of purchases of consumer durables such as television sets, bicycles, washing machines and motorcycles. These material gains follow two decades of income stagnation, and they have been accompanied by opportunities associated with autonomy and mobility. What have been the class consequences of China’s second agrarian transformation cycle? While considerable attention has rightly been paid to changing patterns of class and spatial inequality, the results have in fact been contradictory. For example, while substantial intra-village income polarization is evident, China has also made significant strides both in reducing chronic rural poverty and in bridging the large and growing urban-rural gap that was a product of the collective system. By official reckoning, the 250 million people living below the poverty line in 1978 were reduced to some 80 million by 1992.35 However, as Carl Riskin observes, all published government data confine poverty estimates to people living in regions defined as poverty zones, excluding not only the urban poor but also poor residents of more prosperous regions and a portion of the floating population that is seeking urban employment. Based on large sample surveys conducted in 1988, he estimates the rural poverty rate at approximately 12 percent, with little change in the 1990s, producing an estimate of 120 million rural people living in poverty.36 Moreover, even with China’s achievements in reducing rural poverty since the 1970s, the income gap between rich and poor rural areas has continued to grow. Economic growth, expanding markets, and rising incomes have been accompanied by many other problems. These include widening gaps in income, quality of housing, and access to health and education within communities and among regions.37 Other problems relate to official corruption, environmental destruction, and horrendous working conditions in burgeoning industries including those operated by foreign and joint enterprises. During the first agrarian transformation, particularly during collectivization, tensions centered on conflicting interests between villagers and the state, with local cadres often caught in between. The contemporary clash takes place as the interests of individuals and households compete with collective and village interests in a political economy whose borders are ill defined and rapidly changing. Again issues of cadre abuses of power and corruption drive local conflict. One important difference, however, is that the cadre monopoly on power has been broken and new opportunities are defined at least in part by mobility, money and markets. Many of the local nouveau riche are officials and their families who have used official positions and connections to acquire wealth, or built on the social capital and expertise previously monopolized by officials to take advantage of new market opportunities through their political connections. In many rural localities outside the booming coastal regions the experience has been one of
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stagnation. Frustration and anger have spilled over, at times in the form of overt and violent resistance. Villager uprisings have come in response to spiraling tax demands and to the state’s payment for grain in the form of vouchers rather than cash. Not surprisingly, rapid economic growth in the mixed economy has produced sharp conflicts whose resolution constitutes major challenges for the future of rural China. CONCLUSION Twice since the mid-1940s China experienced profound reorganization of patterns of land ownership, social relations of production, accumulation, markets, social mobility and consumption. In each of these transformations, the state played a significant role in shaping parameters of rural economy and society, but the nature of that role and of the state-society relationship has changed significantly. In the first transformation cycle, the state mobilized to channel rural class struggle in ways that dramatically expanded its reach through control of production processes, markets and mobility, initially through a land reform that broke the power of landed elites, and then through the formation and administration of large-scale collectives. In the second cycle, as in the original land reform, a major source of pressure to transform key features of the agrarian arrangements established in the first came from below. But this time it was provided by villagers discontented with the collective regime and with long-term income stagnation. In both cycles, however, we note the important position of the redistributive economy as well as the tensions and conflicts between the private and the redistributive sectors and between household and state. By Szelényi’s definitions, China in the years 1947–70 was a socialist society in formation. The Chinese Communist Party eliminated private ownership of the means of production; it led in expropriating the landed, commercial and industrial bourgeoisie and transformed the class structure; and it exercised one-party rule. Likewise, while the second cycle of transformation brought far-reaching changes, by Szelényi’s three criteria China remains a socialist country: it has not (or perhaps not yet) consciously reinstated private property as the predominant form of ownership despite having privatized substantial collective property and created a legal framework within which private property can flourish; it has not abandoned the state sector or declared it moribund but has rather sought to rejuvenate it, despite encouraging the growth of a new propertied bourgeoisie; and it has not replaced one party rule legitimated by Marxist-Leninist (Maoist) claims with multi-party rule, or, more precisely, it continues to maintain a ‘united front’ in which eight minor parties are preserved as a means of legitimating a virtual Communist Party monopoly on power. The mixed economy and society that is China today leads this author, however, to query the utility of drawing a sharp line in the sand to distinguish socialist from capitalist in the contemporary world and to prefer concepts evocative of the hybrid and distinctive character of China’s political economy and society such as the third way or the third path. China’s second cycle has resulted in far more profound
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changes in the rural economy and society than anything that occurred in Russia under the Yeltsin regime with its parliamentary structure and stated goals of navigating a transition to capitalism. Similarly, one might well argue that the penetration of international (particularly Overseas Chinese) and domestic capital into all sectors of the Chinese economy has gone far beyond anything found to date in Russia or the former Soviet Union. China’s hybrid economy and society cannot, in my view, be fruitfully categorized as ‘socialist’ or ‘capitalist’ though we can certainly find elements of each within an amalgam that is distinctively Chinese. While recognizing the growing strength of private capital and markets, we observe that cooperative, redistributive and state sector enterprises retain substantial wealth and power in China’s hybrid economy. Kornai’s categories, whatever their utility for grasping the character and demise of European state socialism, fail to illuminate the dynamic of China’s rural economy in either of its two cycles of transformation. Why has the soft budget constraint and shortage economy, however suggestive for the analysis of China’s lagging SOEs, provided little analytic power for gauging the dynamic of the TVEs, another redistributive economy? By Kornai’s definitions, no less than Szelényi’s, China must be categorized as ‘socialist’, yet in recent decades it has failed, as it has so often in the past, to conform to the economic expectations that would appear to follow from that. In particular, China’s TVEs suggest the possibility of a redistributive form capable, under certain social conditions, of presiding over dynamic, sustained growth with redistributive features. Far better, I suggest, to look beyond the labels of socialism and capitalism and seek to gauge the social and economic contradictions that have appeared as a direct consequence of China’s recent decades of high speed growth, commodification, new class formation, mounting spatial and class inequalities and environmental disruption. NOTES 1 I have used this periodization (1945–70s and 1970–present) to analyze the two primary phases of postwar regional development in East Asia and in the world system. The year 1970 brought an end to the violent phase of the Cultural Revolution and the beginning of China’s surge in trade, the opening in US—China relations, and the start of a new cycle of rural transformation associated with a conservative modernization strategy, the prelude to more far-reaching reforms of the collective structure a decade later. ‘China, Japan and the Regional Political Economy of East Asia, 1945–1995,’ in Peter Katzenstein and Takashi Shiraishi (eds.) Network Power: Japan and Asia (Ithaca, NY: Cornell University Press, 1997). 2 Jean Oi, State and Peasant in Contemporary China. The Political Economy of Village Government (Berkeley: University of California Press, 1989), p. 5; Frederick Crook, ‘The Commune System in the People’s Republic of China, 1963–1974,’ in Joint Economic Committee of Congress of the United States, China: A Reassessment of the Economy (Washington, DC: US Government Printing Office, 1975), pp. 374–375. 3 The conservative reforms in the 1970s are discussed in detail in Edward Friedman, Paul Pickowicz and Mark Selden, Revolution, Resistance and Reform in Village China (forthcoming).
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Victor Nee, ‘A Theory of Market Transition: From Redistribution to Markets in State Socialism,’ American Sociological Review 54 (1989), pp. 663–681; Victor Nee, ‘The Emergence of a Market Society: Changing Mechanisms of Stratification in China,’ American Journal of Sociology (1995); Jean Oi, ‘Fiscal Reform and the Economic Foundations of Local State Corporatism in China,’ World Politics 45, 1 (1992), pp. 99– 126; Andrew Walder, ‘Local Government as Industrial Firms: An Organizational Analysis of China’s Transitional Economy,’ American Journal of Sociology (1995); Kate Xiao Zhou, How the Farmers Changed China. Power of the People (Boulder, CO: Westview, 1996). Mark Selden, ‘Rethinking China’s Socialist Economic Development,’ Political Economy of Chinese Development (Armonk, NY: M.E.Sharpe, 1993), p. 30. Nakagane Katsuji, Chugoku keizairon. Noko kankei no seiji keizaigaku (On the Chinese Economy. Studies in the Political Economy of Agricultural-Industrial Relations) (Tokyo: Tokyo University Press, 1992), p. 27; Arthur Ashbrook, ‘China: Economic Modernization and Long-Term Performance,’ in Joint Economic Committee, Congress of the United States, China Under the Four Modernizations (US Government Printing Office: Washington, DC, 1982), p. 104; Zhongguo Tongji Nianjian 1994 (Statistical Yearbook of China 1994) (Beijing: China Statistical Publishing House, 1994), p. 33. Benedict Kerkvliet and Mark Selden, ‘Cycles of Agrarian Transformation in China and Vietnam’ (forthcoming); Kate Zhou, How the Farmers Changed China. Power of the People makes the most compelling case for change from below; cf. Daniel Kelliher, Peasant Power in China. The Era of Rural Reform 1979–1989 (New Haven, CT: Yale University Press, 1992). World Bank, China: Strategies for Reducing Poverty in the 1990s (New York: Johns Hopkins Press, 1992); ‘Poverty Reduction: the Bank Weighs In,’ China Development Briefing 1, March, 1996. In 1996 the World Bank launched a $247.5 million five year program in Southwest China ($487 million including Chinese government funds). In the 1990s, China has been the largest recipient of World Bank funds, a significant part of which have been directed toward the countryside, including but not limited to support for anti-poverty programs. Vaclav Smil, China’s Environmental Crisis. An Inquiry into the Limits of National Development (Armonk, NY: M.E.Sharpe, 1993), p. 148. In North China, as the mutual aid and cooperative movements gained momentum in the early 1950s, farmers were pressured not to sell land. Sales continued, though state pressures reduced the rate of sales in the years prior to collectivization. See Edward Friedman, Paul Pickowicz, and Mark Selden, Chinese Village, Socialist State (New Haven, CT: Yale University Press, 1991). Mark Selden and Aiguo Lu, ‘The Reform of Land Ownership and the Political Economy of Contemporary China,’ in Selden, The Political Economy of Chinese Development, 1993; Jiang Bing, ‘The Emergence of a Land Market in China. Issues in the Reform of the Planned Land Management System and the Development of a Land Market with Chinese Characteristics,’ PhD thesis, Department of Economics and Centre for Asian Studies, University of Adelaide, 1995. Nongmin Ribao (Farmer’s Daily) April 14, 1995, FBIS-CHI-95-097, May 19, 1995, p. 59. Corvée obligations vary by village and region. Ellen Judd notes that in Huaili village, Shandong, every adult male (age 18–45) was required to provide up to one month’s labor, much of it for water conservancy in return for which an additional mu of tax free land was added to the family’s land allocation. Gender and Power in Rural North China (Stanford, CA: Stanford University Press, 1994), p. 28. Jim Matson and Mark Selden, ‘Poverty and Inequality in China and India,’ Economic and Political Weekly, April 4, 1992, pp. 701–715; Amartya Sen, ‘How is China Doing?’ New York Review of Books 29, 30, December 16, 1982. Jonathan Unger, personal communication, October 16, 1995, details this practice in Hainan. Su Ch’ing-li called my attention to the surge in agribusiness enterprise in
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Shanghai and other major coastal cities where the product goes both to feed the cities and for export. 15 Paul Bowles and Xiao-yuan Dong, ‘Current Successes and Future Challenges in China’s Economic Reforms,’ New Left Review 108, 1994, pp. 49–76. These figures probably exaggerate the extent of village-organized agricultural production. Yet numerous examples attest to the resurgence of various forms of group farming at the village or sub-village level and of the role of the village in irrigation. 16 Philip Huang, “‘Public Sphere”/“Civil Society” in China? The Third Realm Between State and Society,’ Modern China 19, 2, 1993, pp. 216–240; János Kornai, ‘The Affinity Between Ownership Forms and Coordination Mechanisms.’ TVEs both are and are not state enterprises. 17 ‘Situation in China’s Economic Reform for 1995: Zhu Rongji’s Closed-door Speech at End of December 1994,’ Kaifang (Open Magazine) February, in FBIS, Chinese Affairs 32, pp. 45–6. 18 Zhongguo Tongji Nianjian 1995 (China Statistical Yearbook 1995) (Beijing: China Statistical Publishing House, 1995) p. 32. 19 China Statistical Yearbook 1993. The breakdown is as follows: 39 percent of China’s total industrial production is done by rural enterprises. That includes 25 percent by ‘collectives’ and other enterprises, nearly all of those being TVEs. The remainder consists of SOEs, private enterprises and foreign enterprises. 20 China Statistical Yearbook 1995, p. 375. 21 Wong and Yang (eds.) China’s Rural Entrepreneurs, pp. 16–17; Liu Xiao Meng, ‘Garment Factory’ in Wong, Mao, and Yang, China’s Rural Entrepreneurs, pp. 153– 175. 22 The fact that TVEs include private and joint venture enterprises has received insufficient attention from analysts stressing their statist character. Andrew Walder (1995), for example, correctly notes the important redistributive aspects of TVEs, many of them falling under government jurisdiction. His analysis does not, however, capture the surge of joint venture, private and foreign-funded enterprises that are included under the rubric of TVEs. 23 China Statistical Yearbook 1995, p. 364. 24 China Statistical Yearbook 1986; Jihua Che and Yingyi Qian, ‘Understanding China’s Township-Village Enterprises: Boundaries of the Firm, Governance, Monitoring, and Capital Market,’ paper presented to the International Conference on Property Rights of TVEs in China. Hangzhou, August 7–9, 1994. 25 Byrd and Lin 1990:14; State Statistical Bureau 1992:389–390; Friedman, Pickowicz and Selden, Revolution, Resistance and Reform in Village China (forthcoming). 26 Chih-ming Ka, Taiwan dushi xiaoxing zhizaoye di chuangye. Jingying yu shengchan zuzhi (Market, Social Networks, and the Production Organization of Smallscale Industry in Taiwan: The Garment Industries of Wufenpu) (Nangang, Taibei: Institute of Ethnology, Academia Sinica); Giovanni Arrighi, Satoshi Ikeda and Alex Irwan, ‘The Rise of East Asia: One Miracle or Many?’ in Ravi Palat (ed.) Pacific-Asia and the Future of the World-System (Westport, CT: Greenwood, 1993); Gary Gereffi, ‘International Subcontracting and Global Capitalism: Reshaping the Pacific Rim,’ in Ravi Palat (ed.) Pacific-Asia and the Future of the World-System (Westport, CT: Greenwood, 1993). 27 János Kornai, ‘The Affinity Between Ownership Forms and Coordination Mechanisms: The Common Experience of Reform in Socialist Countries,’ Journal of Economic Perspectives 4, 2, 1990, pp. 131–147; Andrew Walder, ‘Local Government as Industrial Firms.’ 28 John Wong and Mu Yang, ‘The Making of the TVE Miracle in Asia. Overview of Case Studies,’ in Wong et al. (eds.) China’s Rural Entrepreneurs. Ten Case Studies (Singapore: Times Academic Press, 1995), p. 4.
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29 This is a feature shared with state enterprises. But where state subsidies permit the latter to sustain large losses over many years, TVEs cannot. Martin Weitzman and Chenggang Xu, ‘Chinese Township and Village Enterprises as Vaguely Defined Cooperatives,’ Centre Economic Performance Discussion Paper 155, 1993, pp. 16–17; Barry Naughton, ‘Chinese Institutional Innovations and Privatization From Below,’ American Economic Review. Papers and Proceedings, 84, 2, 1994, p. 268; Jean Oi, ‘Fiscal Reform and the Economic Foundations of Local State Corporatism in China,’ p. 119; Andrew Walder, ‘Local Government as Industrial Firms.’ 30 Carl Riskin, ‘China’s Rural Industry: Self-Reliant Systems or Independent Kingdoms?’ China Quarterly 73, March 1978, pp. 77–98; Christine Wong, ‘Material Allocation and Decentralization: Impact of the Local Sector on Industrial Reform,’ in Elizabeth Perry and Christine Wong (eds.) The Political Economy of Reform in Post-Mao China (Cambridge, MA: Harvard Council on East Asian Studies, 1985), pp. 253–278. 31 This discussion of cooperation in general and specialized production and technology associations (SPTAs) in particular draws on my paper on ‘Household, Cooperative and State in the Remaking of China’s Countryside,’ in Eduard Vermeer, Frank Pieke and Woei Lien Chong (eds.) Cooperative and Collective in Rural China. Intermediate Organizations Between State and Private Interests (Armonk, NY: M.E.Sharpe, 1997). 32 Zhang Hsiaoshan, ‘Chinese Rural Cooperatives: New Areas of Activities’ (manuscript, 1992); Yao Jianfu, ‘Zhongguo nongcun feizhengfu zuzhi: Nongcun zhuanye jishu xiehui (China’s Rural NGOs: Rural Science and Technology Associations) (manuscript, 1994); Popularization Department of the Chinese Association of Sciences and Technology and the Popularization Department of the Sichuan Provincial Association of Sciences and Technology (Zhongguo Kexue Pujibu and Sichuansheng Kexue Pujibu), Nongcun zhuanye jishu xuehui de lilun yu shijian (The Theory and Practice of the Rural Specialized Technology Associations), (Chengdu: Southwest Financial and Economic University Publishing House, 1991). 33 Ibid., Popularization Department. 34 Skyrocketing prices of agricultural inputs in the 1990s have outstripped those in market prices for most agricultural commodities, placing heavy burdens on farmers. 35 China’s Agenda 21–White Paper on China’s Population, Environment and Development in the 21st Century (Beijing: China Environmental Science Press, 1994), p. 61. 36 Personal communication September 1, 1995; cf. Azizur Rahman Khan, Keith Griffin, Carl Riskin and Zhao Renwei, ‘Household Income and Its Distribution in China,’ China Quarterly 132, December 1992, pp. 1029–1061. 37 See Khan et al., ‘Household Income and Its Distribution in China’; Hy Van Luong and Jonathan Unger, ‘Wealth, Power, and Poverty in the Transition to Market Economies; The Process of Socio-Economic Differentiation in Rural China and Northern Vietnam,’ presented to the Workshop on Transforming Asian Socialism: China and Vietnam, Canberra, Australian National University, August 10–11, 1995.
BIBLIOGRAPHY Arrighi, Giovanni, Satoshi Ikeda and Alex Irwan. 1993. ‘The Rise of East Asia: One Miracle or Many?’ in Ravi Palat (ed.) Pacific-Asia and the Future of the World-System. Westport, CT: Greenwood. Ashbook, Arthur. 1982. ‘China: Economic Modernization and Long-term Performance,’ in Joint Economic Committee, Congress of the United States, China Under the Four Modernizations. Washington, DC: US Government Printing Office.
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Bing, Jiang. 1995. ‘The Emergence of a Land Market in China. Issues in the Reform of the Planned Land Management System and the Development of a Land Market with Chinese Characteristics,’ PhD thesis, Department of Economics and Centre for Asian Studies, University of Adelaide. Bowles, Paul and Xiao-yuan Dong. 1994. ‘Current Successes and Future Challenges in China’s Economic Reforms,’ New Left Review 108, pp. 49–76. Byrd, William and Lin Qingsong (eds.). 1990. China’s Rural Industry: Structure, Development and Reform. New York: Oxford University Press (for the World Bank). Che, Jihua and Yingyi Qian. 1994. ‘Understanding China’s Township-Village Enterprises: Boundaries of the Firm, Governance, Monitoring, and Capital Market,’ paper presented to the International Conference on Property Rights of TVEs in China. Hangzhou, August 7–9. China’s Agenda 21–White Paper on China’s Population, Environment and Development in the 21st Century. 1994. Beijing: China Environmental Science Press. Crook, Frederick. 1975. ‘The Commune System in the People’s Republic of China, 1963–1974,’ in Joint Economic Committee of Congress of the United States, China: A Reassessment of the Economy. Washington, DC: US Government Printing Office. Friedman, Edward, Paul Pickowicz, and Mark Selden. 1991. Chinese Village, Socialist State. New Haven: Yale University Press. ——(forthcoming). Revolution, Resistance and Reform in Village China. New Haven, CT: Yale University Press. Gereffi, Gary. 1993. ‘International Subcontracting and Global Capitalism: Reshaping the Pacific Rim,’ in Ravi Palat (ed.) Pacific-Asia and the Future of the World-System. Westport, CT: Greenwood. Huang, Philip. 1993. “‘Public Sphere”/“Civil Society” in China? The Third Realm Between State and Society,’ Modern China 19, 2, pp. 216–240. Judd, Ellen. 1994. Gender and Power in Rural North China. Stanford, CA: Stanford University Press. Ka, Chih-ming. 1995. Taiwan dushi xiaoxing zhizaoye di chuangye. Jingying yu shengchan zuzhi (Market, Social Networks, and the Production Organization of Smallscale Industry in Taiwan: The Garment Industries of Wufenpu). Nangang, Taibei: Institute of Ethnology, Academia Sinica. Kelliher, Daniel. 1992. Peasant Power in China. The Era of Rural Reform 1979–1989. New Haven, CT: Yale University Press. Kerkvliet, Benedict and Mark Selden. 1996. ‘Cycles of Agrarian Transformation in China and Vietnam’ (manuscript). Khan, Azizur Rahman, Keith Griffin, Carl Riskin, and Zhao Renwei. 1992. ‘Household Income and its Distribution in China,’ China Quarterly 132, December, pp. 1029–1061. Kornai, János. 1990. ‘The Affinity Between Ownership Forms and Coordination Mechanisms: The Common Experience of Reform in Socialist Countries,’ Journal of Economic Perspectives 4, 2, pp. 131–147. Liu, Xiao Meng. 1995. ‘Garment Factory,’ in Wong, Mao and Yang (eds.) China’s Rural Entrepreneurs, pp. 153–175. Luong, Hy Van and Jonathan Unger. 1995. ‘Wealth, Power, and Poverty in the Transition to Market Economies; The Process of Socio-Economic Differentiation in Rural China and Northern Vietnam,’ presented to the Workshop on Transforming Asian Socialism: China and Vietnam, Canberra, Australian National University, August 10–11. Matson, Jim and Mark Selden. 1992. ‘Poverty and Inequality in China and India,’ Economic and Political Weekly, April 4, pp. 701–715. Nakagane, Katsuji. 1992. Chugoku keizairon. Noko kankei no seiji keizaigaku (On the Chinese Economy. Studies in the Political Economy of Agricultural-Industrial Relations). Tokyo: Tokyo University Press.
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Naughton, Barry. 1994. ‘Chinese Institutional Innovations and Privatization From Below,’ American Economic Review. Papers and Proceedings, 84, 2. Nee, Victor. 1989. ‘A Theory of Market Transition: From Redistribution to Markets in State Socialism,’ American Sociological Review 54, pp. 663–681. ——1995. ‘The Emergence of a Market Society: Changing Mechanisms of Stratification in China,’ American Journal of Sociology 101, pp. 908–949. Oi, Jean. 1989. State and Peasant in Contemporary China. The Political Economy of Village Government. Berkeley: University of California Press. ——1992. ‘Fiscal Reform and the Economic Foundations of Local State Corporatism in China,’ World Politics 45, 1, pp. 99–126. Popularization Department of the Chinese Association of Sciences and Technology and the Popularization Department of the Sichuan Provincial Association of Sciences and Technology (Zhongguo Kexue Pujibu and Sichuansheng Kexue Pujibu). 1991. Nongcun zhuanye jishu xuehui de lilun yu shijian (The Theory and Practice of the Rural Specialized Technology Associations). Chengdu: Southwest Financial and Economic University Publishing House. ‘Poverty Reduction: the Bank Weighs In.’ 1996. China Development Briefing 1, March. Riskin, Carl. 1978. ‘China’s Rural Industry: Self-Reliant Systems or Independent Kingdoms?’ China Quarterly 73, March, pp. 77–98. Selden, Mark. 1993. ‘Rethinking China’s Socialist Economic Development,’ in his The Political Economy of Chinese Development. Armonk, NY: M.E.Sharpe. ——1997. ‘China, Japan and the Regional Political Economy of East Asia, 1945–1995,’ in Peter Katzenstein and Takashi Shiraishi (eds.) Network Power: Japan and Asia. Ithaca, NY: Cornell University Press. ——1997. ‘Household, Cooperative and State in the Remaking of China’s Countryside,’ in Eduard Vermeer, Frank Pieke and Woei Lien Chong (eds.) Cooperative and Collective in Rural China. Intermediate Organizations Between State and Private Interests. Armonk, NY: M.E.Sharpe. Selden, Mark and Aiguo Lu. 1993. ‘The Reform of Land Ownership and the Political Economy of Contemporary China,’ in Selden (ed.) The Political Economy of Chinese Development. Armonk, NY: M.E.Sharpe. Sen, Amartya. 1982. ‘How is China Doing?’ New York Review of Books 29, 30, December 16. ‘Situation in China’s Economic Reform for 1995: Zhu Rongji’s Closed-Door Speech at End of December 1994.’ 1995. Kaifang (Open Magazine) February, in FBIS, Chinese Affairs 32, pp. 45–46. Smil, Vaclav. 1993. China’s Environmental Crisis. An Inquiry into the Limits of National Development. Armonk, NY: M.E.Sharpe. Walder, Andrew. 1995. ‘Local Government as Industrial Firms: An Organizational Analysis of China’s Transitional Economy,’ American Journal of Sociology. Weitzman, Martin and Chenggang Xu. 1993. ‘Chinese Township and Village Enterprises as Vaguely Defined Cooperatives,’ Centre Economic Performance Discussion Paper 155. Wong, Christine. 1985. ‘Material Allocation and Decentralization: Impact of the Local Sector on Industrial Reform,’ in Elizabeth Perry and Christine Wong (eds.) The Political Economy of Reform in Post-Mao China. Cambridge, MA: Harvard Council on East Asian Studies, pp. 253–278. Wong, John and Mu Yang. 1995. ‘The Making of the TVE Miracle in Asia. Overview of Case Studies,’ in Wong et al. (eds.) China’s Rural Entrepreneurs. Wong, John, Rong Mao and Mu Yang (eds.) 1995. China’s Rural Entrepreneurs. Ten Case Studies. Singapore: Times Academic Press. World Bank. 1992. China: Strategies for Reducing Poverty in the 1990s. New York: Johns Hopkins Press.
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Yao, Jianfu. 1994. ‘Zhongguo nongcun feizhengfu zuzhi: Nongcun zhuanye jishu xiehui’ (China’s Rural NGOs: Rural Science and Technology Associations) (manuscript). Zhang, Hsiaoshan. 1992. ‘Chinese Rural Cooperatives: New Areas of Activities’. Manuscript. Zhongguo Tongji Nianjian 1994 (China Statistical Yearbook 1994). Beijing: China Statistical Publishing House. ——1995 (China Statistical Yearbook 1995). Beijing: China Statistical Publishing House. Zhou, Kate Xiao. 1996. How the Farmers Changed China. Power of the People. Boulder, CO: Westview.
7 Agrarian Thermidor1 State, decollectivization, and the peasant question in Vietnam Michael Watts
There can be no comprehensive and consistently radical transformation in other spheres while the key feature of the old classical structure, the Communist Party’s power, remains. (János Kornai, The Socialist System, 1992)
In comparison to other post-socialist transitional states, Vietnam has liberalized relatively quickly and, in many respects, has embarked upon a reform program that has moved faster and further than other comparable state socialist economies with a large agrarian base (for example China, Cuba or Laos). Vietnam remains, of course, rural and overwhelmingly impoverished—according to the latest World Bank report (1995:7) 51 percent of the Vietnamese population is classified as poor— lagging behind other Asian economies, and in a distant league from the Asian newly industrializing states. But in some quarters Vietnam is held as a case of strikingly successful socialist reform, and very possibly an Asian ‘tiger’ in the making (Riedel 1993; Economist Intelligence Unit (EIU) 1994). Indeed the Vietnamese leadership has openly acknowledged that some aspects of the South Korean and Taiwanese economies provide models for its curious blend of free markets and Leninism, a political economy described locally by the Communist Party as ‘socialist-oriented multi-sectoral economy driven by the state-regulated market mechanism,’ dubbed ‘Vietnamonomics’ by the Far Eastern Economic Review (FEER October 26, 1995, p. 7). Whether one interprets this hybrid economy, as ranking Politburo member Dao Duy Tung does, as a confirmation that Vietnam has ‘skipped capitalism’ (FEER October 26, 1995, p. 52) or more cynically that ‘the party plus capitalism equals socialism’ (Kolko 1995), is perhaps of less relevance than the fact that the model has produced tiger-like growth rates (Figure 7.1). Prime Minister Vo Van Kiet told the national assembly at the end of November 1995 that the economy had been growing at 9.5 percent (up from 8.8 percent) in 1994. This growth rate has been maintained in 1996 and 1997. Exports are expected to rise by 30 percent (up from 24 percent in 1994 and 15 percent in 1993). The purpose of this chapter is to account for the particular character and trajectory of Vietnam’s agrarian transition—what I shall call the Vietnamese agrarian question—in the period of reform (doi moi) and market socialism. While I shall 149
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Figure 7.1 Growth rates in Vietnam, 1979–95 Note: * Calculated on the basis of the Soviet material product system Source: International Labor Office 1994:8, Far Eastern Economic Review 1994–5
outline the general contours of Vietnamese agrarian policy in the socialist (1947– 85) and doi moi (1986-present) periods, I shall focus regionally on north Vietnam, and on field research conducted in one province (tinh) in the northern and western reaches of the Red River delta, Vinh Phu Province. There is no presumption, of course, that the Red River delta, or the Midland region in which Vinh Phu is typically located, are in any sense representative of Vietnamese agriculture in toto (the latter being, in any case, something of a statistical fiction). Rather this chapter accounts for the morphology and the dynamics of rural accumulation (and secondarily rural differentiation) in a number of northern (i.e. inland) Deltaic villages (thon) in several communes (xa) southeast of Viet Tri city insofar as they seem to embody certain tendencies within the agricultural sector as a whole. Land redistribution, peasant commercialization, off-farm income and local taxation are the central planks of the agrarian transition but, as I seek to show, each can be grasped only in regard to concrete political forces, specifically the enduring centrality of the party-state. While there is an important body of rural research now emerging based on large scale rural survey work conducted by Vietnamese scholars (see the work cited in Long 1993; Luong 1994; see also CIRAD 1995; INSA 1995; Tuan 1995) there remains a striking absence of scholarship which addresses what Luong has properly
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referred to as ‘the interplay of national reform policy and local sociocultural dynamics’ (1992a:26). Indeed, it is precisely these tensions—and sometimes the contradictions—between national, regional and local levels that are encased in the oft-quoted metaphor that rural Vietnam resembles a ‘tiger on a bicycle,’ i.e. an assertive class of farmers located atop a weak and ineffective institutional base (see Fforde 1993:13). A secondary concern in this chapter is to locate Vietnamese agrarian reform on a larger comparative canvas of decollectivization within formerly socialist agricultures. An obvious comparison in view of the timing and the shape of decollectivization is with China which affords an opportunity to reflect upon property rights, networks, markets and political power in the agrarian roads from socialism to capitalism. Three processes seem striking in the Vietnam case however. First is the fact that the reforms were incubated in the agrarian sector (beginning in the late 1970s) and without these changes, driven in large measure by the production crisis within the sector, the entire reform package would surely not have proceeded as far, and as quickly, as it has to date. In this sense, agriculture was the incubus for decollectivization, and after 1989 in the wake of a rapid and irrevocable decollectivization and a stunning collapse of the co-operative structure, agriculture stands at the thermidor of the Vietnamese return to capitalism. Second, Vietnam is a compelling refutation of Kornai’s claim that fundamental reform is not possible without the destruction of the one communist party and the centralized and authoritarian party state apparatuses. As The Economist (July 8, 1995:45) put it, By rights the Communist Party of Vietnam (CPV) ought to have fallen apart. Under its leadership, ten years ago Vietnam was up against the wall. [But] Vietnam’s one power, the Communist Party, looks unbudgeable but not unchangeable. …it has scrapped pure communism and, like China, is pursuing market Leninism; a mixture of capitalist economics and communist politics. The Vietnam case suggests, however, a greater flexibility to adapt and evolve, certainly greater than Russia or Bulgaria or Romania and at least as adaptable as most of the more successful East European regimes (Poland or Hungary). Vietnam confirms the so-called neo-liberal paradox—namely, that the transition to capitalism perhaps requires a strong and often a party state to sail through the choppy waters of property rights reform, market liberalization and global competition. And third, Vietnam is an instance of macro-economic stabilization which reverses the standard Bretton Woods package (Irwin 1995:739); the IMF-type stabilization came in the late 1980s after almost a decade in which, to employ Fforde and de Vylders (1989) felicitous phrase, institutional reforms laid the basis for making prices matter. The micro-economic crucible in which the macro-economic reforms were made possible (if not necessarily desirable) was, in fact, Vietnamese agriculture and specifically the relatively rapid creation of an egalitarian (in the north astonishingly so) peasantry of a distinctly Chayanovian sort.
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DECOLLECTIVIZATION AND THE AGRARIAN QUESTION As the millennial clock ticks toward the end of the twentieth century, there is a profound sense in which the hour of the Vietnamese peasantry has come yet again. In a curious historical irony, the revolutionary peasantry, which Truong Chinh and Vo Nguyen Giap praised in the 1930s in their classic political tract The Peasant Question and which essentially disappeared as such in the wake of the collectivization efforts of the 1950s, has re-emerged fully formed a generation later. Now the peasant occupies center stage in the theatre of doi moi reform launched by the Vietnamese government in 1986. In late 1987 the rationing of all agricultural produce except rice was ended; while the government retained some influence over pricing by selling inputs for rice at a fixed barter rate via the cooperatives, subsequently reforms in 1988 allowed farmers to decide which inputs and services they purchased from local government (EIU 1994:43). Restrictions of inter-provincial grain trade was lifted and prices doubled in real terms in 1988–9. In fact, without the radical changes in ownership, price and market relations that began to surface formally in 1981 in the form of household product contracting (khoan san pham) in agriculture, the impressive degree of openness’ much praised by the World Bank (1993:4) would not have been possible. Sustained growth rates and relatively low inflation since 1989—GDP in Vietnam during 1993 grew by 8 percent (exports by 20 percent) (The Economist, January 7, 1995:27)—were built on the back of a largely agrarian, and by the early 1990s an essentially peasant, economy accounting for one-third of GDP and three-quarters of employment. Notwithstanding the persistence of rural poverty (51 percent of the population resides below the UN poverty line) and sharp regional inequalities (per capita income in the Red River delta is only half of that in the Mekong), the results of a wide ranging agrarian reform have been, according to Ljunggren (1994:19), ‘spectacular’. Prime Minister Vo Van Kiet’s central objective, to ‘unfetter the productive forces’ (Vietnam 1993) was, in other words, built around the recreation of an aggressively commercial and relatively autonomous peasantry which had successfully converted a 1.1 million ton rice deficit in 1980 into 1.4 million tons of rice exports nine years later (Far Eastern Economic Review, May 10, 1990:32; see also Table 7.1).2 Vietnamese rice output reached new records of 23.5 million tons in 1994, and 25.5 million tons in 1995, of which perhaps 300,000 tons was smuggled illegally into China (Rice Paper 1996). By 1996 2.5 million tons of rice had been exported. Furthermore, as Fforde (1993:52) and others have pointed out, this dynamism within the agrarian sector occurred in spite of the long-standing state priorities granted to industrialization and urbanization. What sort of agrarian transition—what sort of agrarian question—is underway in Vietnam in the mid-1990s? In his classic text on the nineteenth-century rural economy in Europe, Karl Kautsky posed the agrarian question with admirable clarity: ‘whether and how is capital seizing hold of agriculture, revolutionizing it, making old forms of production and property untenable and creating the necessity for new ones’ (1899:12). Kautsky was of course largely concerned with Prussian modernization of German agriculture,
Sources: UNDP (1990); Rice Paper (1996) Note: Food production is in ‘paddy-equivalent terms.’ For practical purposes, 90 percent consists of paddy itself. The Asian Development Bank source used for 1990–2 gives paddy production only; topping up was done based on coefficients for previous years.
Table 7.1 Food production in Vietnam, 1976–92
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and more specifically with the consequences of the world grain market on agrarian structure. His anomalous findings that a deepening of market relations had underwritten a growth of a middle peasantry rather than a class polarization fueled by economies of scale in land-based production suggested both the capacity of small farmers to maintain their competitive edge through self-exploitation and their simultaneous subordination to large capital through ostensibly new forms of finance, credit and institutional integration. Kautsky was not simply concerned with the scale of production, but also with rural social structure and more generally with the politics of transition. Kautsky sought out those aspects of agriculture—agriculture’s exceptionalism one might say—which sufficiently distinguished it from industrial manufacturing to suggest different tendencies and trajectories under capitalism. Kautsky was of course addressing the growing commercialization of an estate and peasant-based agriculture long embedded in commodity relations and wage labor. But the collapse of the former Soviet Union and more generally the post-1989 reintegration of the socialist bloc into the world market have bathed Kautsky’s agrarian question in a somewhat different light. How was socialist agriculture in its myriad of forms—state farms and centralized marketing institutions, peasant cooperatives, collective enterprises, private plots—to be subject to privatization, decollectivization and the introduction of new forms of property rights? How was capital seizing hold of socialist forms of production and property and creating new ones? Posed in this way, the agrarian question is framed by the particular structures of socialist economy—and the diverse forms of socialist agriculture—that evolved in the post-revolutionary period: agrarian reform from below versus collectivization from above, or state farms versus Maoist collectives. Hence in the 1960s, Hungary and China represented two rather contrary modalities of socialist agriculture in which the forms of production, the role of the market, and the significance of the household economy were sharply dissimilar. Not only was the starting point of the transition to market agriculture substantially different in these two cases, but also the post-collective trajectory of each has diverged markedly. Selden (1993:209) refers to a ‘European model’ characterized by land restitution and compensation to pre-revolutionary owners, rapid privatization of land ownership and marketing rights, and the conversion of collectives into corporations and decentralized family farms. In Szelényi’s account of Hungary, this model of transition produces the reappearance of pre-socialist families and enterprises, the so-called ‘re-embourgeoisement’ of Hungarian agriculture (1988). China conversely represents a case of gradualism in embracing private ownership and the market economy—in contradistinction to the ‘big bang’ or ‘shock therapy’ approach of Eastern Europe—and a more complex evolution of property rights and commodity relations which by the 1990s came to resemble a two-tier ownership system.3 In 1992, 45 percent of the total income of China’s rural economy was generated by collective and cooperative organizations (Bowles and Dong 1994:65). These discussions of agrarian decollectivization, which in orthodox neo-liberal
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thinking rest on the presumption that private ownership and free prices are necessary preconditions for productivity enhancement, typically turn on four key processes: 1 Property rights reform: the clarification and reassignment of a panoply of ownership rights between a varied constituency of actors whether they are ‘government jurisdictions, agencies, public or private corporations, households or individuals’ (Walder 1994:53). 2 Privatization: a subset of property reform referring to the reallocation of rights from the public and state sphere to private firms and enterprises, and to ‘legal and administrative reforms. …designed to provide guarantees of the rights of firms against state manipulation or abrogation of such rights’ (Walder 1994:53). 3 Price and fiscal reform: sweeping liberalization of prices removed from virtually all state controls and fiscal reform to consolidate stabilization, i.e. the reduction or removal of budgetary subsidies (the soft budget constraint) and a restructuring of the public sector. 4 Pace and timing of liberalization: the distinction between gradualism (reform cautiously implemented and often without a coordinated overall plan), typically seen as a function of the ideological commitment of Communist parties or of unbridgeable splits between conservative and pragmatic reformers (see Sachs and Woo 1993) and the ‘big bang’ approach most closely associated with Eastern Europe, simultaneously involving radical price liberalization, devaluation to unify the exchange market, and sharply tightened credit markets, i.e. radical stabilization. Each of the four broad characteristics is usually attached to a broader model of transition. In Burawoy’s (1994) imaginative typology, models tend to privilege either the weight of the past (the pre-existing political order) or the virtues of capitalism (‘capitalism by design’ as Burawoy calls it). Hence the totalitarian approach emphasizes the absolutist nature of the party state and its precipitous collapse into liminality, confusion and anarchy, while the society centered model points to the incompleteness of party control which leaves a residual civil society within socialism. In the two capitalist models, the neoclassical variety sees the shock therapy as a necessary catalyst to smash the old order and create a space which is ‘naturally’ occupied by new market institutions, and the evolutionary model locates stable external institutions for dynamic capitalism and privileges careful, piecemeal social engineering to create the institutional preconditions of the market. All of these analytics are relatively silent on the question of agrarian trajectories—that is to say the social relations of production and accumulation appearing in recently decollectivized agriculture—which was the heart of Kautsky’s analysis. Both Kautsky (and later Lenin) highlighted the heterogeneity of ways in which capitalism takes hold of agriculture, and both pointed to the various paths by which such transitions might be affected. For example, the conversion of semi-feudal estates into capitalist enterprises (the so-called Junker path) contrasted with the more ‘revolutionary’ American road in which a
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commercially oriented and socially differentiated family farm sector (so-called simple commodity producers) provided the propulsive energy within a capitalist agriculture. Of course the recent departures from collective agriculture are hardly comparable to the intensification of commodity relations associated with the long arch of capitalist growth in nineteenth-century Europe. Rather, the starting point for the analysis of the agrarian question in formerly socialist states is the legacy of the revolutionary period, the abruptness of its collapse, and the key role of the party state—for which there is obviously no historical parallel in the cases described by Kautsky and Lenin—in engineering the socialist transition to a market economy. Indeed, it is precisely the role of the party-state which strikes to the heart of both the debates over the likelihood of successful decollectivization, and the distinctiveness of the agrarian question in circumstances of socialist market transition. In this sense, the ‘success’ of the Chinese case and the ‘failure’ of Russia turn less on the relative merits of gradualism versus the radical break (shock therapy), as on the necessity and capacity of the partystate to shape the transition through the decentralization of property rights, the promotion of competition and the construction of ‘socialist markets’, (Shirk 1993; Burawoy 1994; Walder 1994; Oi 1998). It is against this backdrop of the particularities of socialist legacies and models of transition, the distinctive role of the party state, and the classical agrarian question debates that the Vietnamese case can, in my view, be productively located. REINVENTING VIETNAMESE SOCIALISM Perhaps the most compelling illustration of Vietnam’s New Times is the recent removal of Ho Chi Minhs portrait from the roof of the State Bank in Hanoi for ‘structural reasons’, a loss which coincides with the disappearance of statues from parks and other public places because ‘prostitutes and drug addicts were leaning on them’ (Greenfield 1994:203). These changes in political symbolism are not of course the result of popular protest or crowds celebrating the collapse of Communist regimes, but nevertheless the refashioning of the culture of Vietnamese socialism marks a watershed of sorts in which ‘the ruling class is consolidating itself in a new social order’ (ibid.: 203). Systematic undermining of a sclerotic Vietnamese system of bureaucratic centralism—a Soviet-style central planning system—was certainly assisted by the ascendance of Mikhail Gorbachev (and its prelude in the cessation of Soviet and Chinese aid between 1979 and 1980). But it was driven primarily by development in Vietnam itself (Porter 1993:151). In particular it was the onset of worsening budget deficits, high inflation and the crisis of productivity within agriculture and industry which prompted and sustained the reformist initiatives begun in the late 1970s. Revisionist scholarship on the pre-unification period in North Vietnam has contributed to a more refined understanding of the timing and genesis of the market transition in Vietnam. On the one hand, there is the question of the extent to which a Soviet-type political economy was ever fully instituted (Kerkvliet 1993, 1995); or put differently, what transpired in the name of collectivization did not necessarily
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approximate the models of the central planners or indeed have the practical, moral or ideological consequences envisioned by the cadres and the nomenklatura (see Lampland 1995). In the North, which underwent a relatively successful collectivization after 1959, the period up to 1975 was as much a war economy as a mature bureaucratic centralism. Fforde (1989) and Beresford (1990) have further emphasized both the resistance to, and the uneven performance of, collectivization in the North, while Arkadie (1993:439) is right to note that in contrast to the industrial sector where large scale industrial enterprise became a dominant mode (though with much less central planning control than the Soviet case) effective control was never established over rural production throughout the country, even before the reform process started. On the other hand, the sporadic and uneven process of collectivization in the South after 1975 proved to be an unmitigated disaster, a crisis reflected in a sharp drop in rice output, peasant footdragging and the mass slaughtering of buffaloes in the Mekong where the collectivization drive was met with fierce resistance. While officials claimed that collectivization goals had been achieved in the South by the early 1980s, in practice they had given up (Quang Truong 1987). It is precisely the incompleteness of and the resistance to the collectivization project between 1960 and 1980—pressure from below as Kerkvliet (1993) sees it—which undergirds the changes of the late 1970s and subsequently the more radical opening initiated by the dot moi reforms in 1986. In the period between 1976 and 1980, the economy grew at barely 2 percent and none of the state industrial or agricultural targets were achieved (Andreff 1993:518). The year 1978 proved to be a crisis year because production in the rice sector fell sharply—compelling 1.4 million tons of grain imports—while simultaneously the government inflicted a ‘procurement crisis’ on itself (White 1985). In August 1979 the Sixth Plenum decided to soften the system of directive planning through the contract system in agriculture (the devolution of production decisions and some land rights to peasant households)4 and the so-called ‘fence breaking system’ among state owned enterprises (i.e. the allocation of selfaccounting and self-financing autonomy reminiscent of the Soviet khozrastchet form of enterprise management—Andreff 1993:518). These reforms were, in form and timing, comparable in many respects to the post-Mao new responsibility system in China but they failed to stabilize the economy except in agriculture. Economic growth accelerated after 1981, but the economy was marred by recession and massive inflation in 1985. Once more it was a grave fiscal crisis that precipitated the second, and more radical, phase of reform initiated by the Eighth Plenum in June 1985, what was to become the dot moi (renovation) reforms. It was in December 1986 that the Sixth Party Congress formally launched doi moi, marking in many respects a more profound shift from a ‘subsidized centrally administered state economy’ to what was referred to, somewhat ambiguously, as a ‘multi-sector economy.’ 5 Led by reformists such as Nguyen Van Linh with substantial experience in the south, the reformist wing of the Party gained further
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credibility from the nascent reforms of Gorbachev. However, fiscal and banking reform, the reduction of consumer price subsidies and the recognition and guarantee of private industry (including the lifting of all limitations on its ability to hire labor) in 1988 all proved to be inadequate to the task. Monetary reform squeezed the liquidity of state run enterprises which could be sustained only by large government deficit spending. Hyperinflation followed and in 1989 Vietnam adopted the sort of radical doi moi surgery that had been the norm in Eastern Europe: During 1985–1988, Vietnam implemented a gradual reform strategy that failed to address serious macro-economic imbalances. The program failed: inflation accelerated while growth and trade performance remained unchanged… In 1989 Vietnam enacted a Eastern-Europe style ‘big bang’ including price liberalization, a 450 percent devaluation to unify the exchange market and sharply tightened credit policy. The collective farms were returned to family farms with long term leases. Growth accelerated, inflation ended, agricultural productivity soared and small, non-state enterprises proliferated. (Sachs and Woo 1993:2) Whether one agrees with Sachs and Woo’s diagnosis (a modified evolutionary model of transition), it is incontestable that the growth performance in Vietnam since 1989 has been quite impressive. Initially the surge in output—at a time when Vietnam was still receiving substantial assistance from the Soviet Union— was substantial, GDP grew at 8 percent per year and the performance of all sectors has been solid. Agricultural output grew sharply and rice production— already stimulated by the 1981 reforms—was further enhanced by price liberalization and property right reforms. Average growth rates in agriculture (value-added) in 1984–8, and 1988–92 were 2.5 percent and 3.9 percent, comparable to Thailand, Taiwan and the Punjab (Mellor 1993:16–17). The growth of rural incomes—on an admittedly low base—was sufficient to have spillover effects in construction and services; average per capita income of rural households increased by almost 30 percent between 1989 and 1992 (Tuan 1995:142) while the proportion of households under the poverty line fell from 25.3 to 12.1 percent over the same period according to Vietnamese government statistics. In spite of the collapse of the Soviet Union and the reduction in foreign savings, the recession of the early 1990s proved to be mild—GDP grew by 5.1 percent in 1990 and 6.0 percent in 1992—and by 1992 the growth rate was in excess of 8 percent. By this time, industry had come to play a leading role (World Bank 1993). Since 1989 exports have been growing at an average annual rate of over 30 percent, and in 1992 rice production hit a historic high. According to The Economist (June 4, 1994:34; January 7, 1995:27), GDP growth in 1993 was 8 percent, and exports boomed by 20 percent; in 1994 both of these figures were exceeded. By 1993, the private sector accounted for two-thirds of GDP. In sum, the post-1989 doi moi reforms—however one assesses their shock quality—had placed Vietnam ahead of most reformers in Eastern Europe and Russia (Figure 7.2). Vietnam remains, of course, a poor country: 70 million people, a population density (900
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Figure 7.2 GDP growth in Vietnam and Eastern Europe, 1986–96 Note: * East European countries in transition Source: Reproduced with adaptations from The Economist 1995:13
persons per square km) higher than China, a land per capita ratio similar to Bangladesh, and a GNP per capita of less than US$200.00 per year. But the robustness of the reform period is impressive, not least because it was achieved during a trade embargo and without substantial foreign assistance. The role of the party during dot moi has been complex and contradictory. On the one hand, the economy was under central government control than say the former Soviet Union and to this degree has been capable of of greater political flexibility. On the other, economic liberalization was both a cause and effect of political opening, and underwrote the gradual emergence of what has been called a ‘nascent’ civil society outside of the control of the party state (see Thayer 1992).6 As Fforde and Porter put it, the party is simply no longer sure of what the correct ideological or institutional line should be: Assertions of the absolute superiority of the socialist sectors. …have been replaced by the use of a language of constraint. …the 1992 Constitution asserts the right of all Vietnamese citizens to carry out legal business; the June 1993 Plenum…asserts the positive role to be played by farmers’ own organizations; workers are given the right to strike even if they do not belong to an approved trade union. (Fforde and Porter 1994:16–17)
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In addition to the important, if occasionally ambiguous, changes inscribed in the 1992 Constitution, the Vietnamese government unashamedly claimed in its 1993 presentation to the donors’ conference in Hanoi that ‘bureaucratic centralized mechanism based on subsidies is not appropriate’ and that ‘a market oriented economy is best.’ Of course, in a one party Communist state, the CPV has been singularly concerned with mass organizations under the umbrella of the Vietnam Fatherland Front and their compatibility with the prevailing vision of a normative socialist order, a view largely incompatible with a fully developed sense of civil society. But it is also true that people no longer organize their lives solely with respect to the party and mass organizations, and to this extent Pike (1994:78) is surely correct in concluding that ‘the top leadership is committed—or resigned—to moving Vietnam from a hard to a soft authoritarian system, more or less following the pattern of South Korea and Taiwan.’ However, the growth of new farmer associations and networks—similar in some respects to the new economic associations described by Chang (1993) for China—the reform debates within the party, or the growth of the so-called umbrella system in which new networks of political and economic power emerged outside of the party state during the 1980s (Pillot 1995), should not imply a simple unilinear, ineluctable political decentralization or the attenuation of central power. Indeed, the Party central committee has responded to the obvious proliferation of state corruption and inefficiency in the reform period with a fierce internal critique (Men 1995) and new efforts at centralization and ‘strengthening of management by the state’ (Reuters November 11, 1995).7 In late 1995 the National Assembly centralized a number of state agencies into three ‘mega ministries’ which included two new state enterprises which virtually monopolize rice production, distribution and export. THE AGRARIAN QUESTION AND RURAL DECOLLECTIVIZATION IN VIETNAM, 1975–95: A TALE OF TWO DELTAS Prior to the unification of Vietnam in 1975, the division between the north and the south of the country corresponded to regionally distinctive patterns of agrarian political economy that had been partly shaped during the colonial period. Land in the Tonkin delta was the most minutely divided in all of Indochina. According to colonial data collected in the 1930s, 90 percent of all landholders held less than 1.8 hectares, and an estimated 36 percent of rural households were landless. Colonial rule had certainly stimulated the process of social differentiation—Murray (1980:414) refers to increasing contrasts in landed wealth and the emergence of huge landholdings—but in the densely populated Red River delta and the coastal lowlands (unlike Cochinchina), agrarian class structure remained dominated by fragmented holdings, small-scale petty commodity production and households increasingly compelled to sell wage labor in order to survive. Colonial policies deliberately attempted to preserve some aspects of the traditional moral economy of rural communities as ‘one means of ensuring the survival of the migrant labor system’ (ibid: 8) which was central to the agro-mineral concessions in the South.
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Ironically, it was precisely the pre-capitalist traditions of the North—most especially collective worship of tutelary deities, village endogamy, and the institution of communal land—which nurtured values ‘conducive to the growth of nationalism. …collectivism. … and to an hierarchical organizational framework’ (Luong 1992a:22S-9).8 Conversely, in Cochinchina, and in the Mekong delta in particular, the process of frontier occupation from the fifteenth century had produced a quite different settlement pattern and an average landholding substantially in excess of the north’s. French conquest intensified the rate at which rice lands were brought under cultivation in the Mekong—two-thirds of Cochinchina’s rice lands were opened as newly reclaimed lands after 1880–but more critically it was the presence of metropolitan capital in conjunction and a colonial administration anxious to promote export-oriented rice production which facilitated the concentration of rice lands under the control of large landlords. Landholding concentration, precipitated by credit policy to landlords and a Draconian colonial tax policy, was accompanied by exploitative forms of tenancy and serious pauperization through land dispossession. By the 1930s Pierre Gourou estimated that 2.5 percent of the rural households owned 45 percent of the total rice area under cultivation and presided over thousands of sharecroppers and tenants.9 Twenty years later, 79 percent of the rural households in Cochinchina were landless. The trajectory of agrarian change in Cochinchina, in other words, turned on the role of merchant’s capital linking export-oriented rice growing regions to the world market through landlords relying upon ‘labor squeezing practices’ (Murray 1980:449), processes which were ultimately hemmed in by the closing of the land frontier (by the 1930s) and the definite limits on the quantity of rent which landlords could extract. This pattern of uneven regional development of Vietnam—the Red River (Tonkin) approximating a sort of ‘American road’ involving the disintegration of owner occupancy and petty commodity production within the context of a long standing and robust precapitalist tradition, and the Mekong (Cochinchina) representing an ‘English road’ through the rapid dissolution of non-capitalist relations and the emergence of an export-oriented landlord class reproduced through tenancy and sharecropping relations—provides a legacy of enormous historical and contemporary significance. 10 It proved to be relevant not only to the success of the revolutionary communist movement in the North but also, as we shall see, to the character of post-socialist reforms during the 1980s and 1990s. When the Democratic Republic of Vietnam (DRV) came to power in 1945, land poor and landless peasants represented roughly 60 percent of the Tonkin population and controlled 10 percent of the land (conversely, 2.5 percent of wealthy rural households controlled 24 percent of the cultivated area). This rural social structure was, of course, shattered by the land reform and subsequent collectivization implemented after 1954 by the DRV. Households were classified in terms of landholding size and the degree of exploitation (usury, rental and so on); in the first instance landlords were required to reimburse sharecroppers for
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the difference between actual and government—determined rents (Luong 1992a: 188; Kerkvliet 1993). Subsequently, rich and ‘brutal’ landlords were publicly denounced by local peasant associations and land confiscated, appropriated, coercively purchased and redistributed to landless, poor and middle peasants. If Luong’s (1992a:192) reconstructions of a community in Vinh Phu Province are at all illustrative, during the 1954 reform average landholding of landless, poor and middle peasants increased by 1400 percent, 250 percent and 45 percent respectively. In 1958, the DRV launched the cooperative program aimed at resolving the peasant differentiation problem and in a relatively short period of time the collectivism principle gained ascendancy through control of non-land assets, credit and output markets. Labor deployment was, at face value, quite simple; cooperatives were divided into work brigades which performed all production tasks (Long 1993:166) and workpoints (based on duration not quality or skill) were allocated. At harvest after the deductions of taxes, production costs and welfare expenses, members received shares in proportion to work points. By 1960 there were 414,000 cooperatives (hop tac xa) in the North containing 2.4 million families accounting for 85 percent of the total farm population and 76 percent of the cultivated area.11 In hindsight, this early period in fact proved to be, in spite of the technical problems of assessing labor performance, the golden age of collectivization: the cultivated area increased by almost 50 percent and worker productivity doubled (Tong Cue Thong Ke cited in Long 1993:167; Kerkvliet 1993). Subsequently, the US invasion compelled the unification of hamlet cooperatives into ‘higher level’ multi-village cooperatives, an aggregation which demanded new divisions of labor in which specialized units (based on a system of three contracts—ba khoan) existed side by side with the older basic production brigades.12 By 1975 the average size of the North Vietnamese cooperative was approximately 100 acres and contained roughly 220 families (Lam 1993:153). However, efforts to capture economies of scale through aggregation resolved few of the seemingly intractable problems associated with loose workpoint standards, conflicts over payment in kind versus cash, and the fact that brigades rather than individuals were tied to final products, all of which contributed to a dramatic decrease in production after 1966 (see Fforde 1989; Kerkvliet 1993). By the late 1960s and early 1970s living standards had stagnated, communal property had deteriorated, administrative burdens within the communes became ever more onerous, and individual production (linked in some cases to deliberate experimentations and refashionings of the cooperative system) accounted for larger proportions of cooperative land and household income (perhaps 13 percent and 60 percent respectively: Quang Truong 1987:91; Kerkvliet 1993:11). Agrarian structure in the South, and the Mekong delta in particular, represents a marked contrast of course. During the Diem period, 40 percent of the land in south central region was rented out by landlords, and in the Mekong 6300 landlords (0.25 percent of the rural population) owned 45 percent of the rice land; 6 million tenants cultivated two-thirds of the land (Porter 1993:59). Southern agrarian structure was radically reshaped after unification in 1975, but in the wake of the
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defeat of the French at Dien Bien Phu, the Delta region was restructured by two agrarian land laws in 1956 and 1970. Neither of these reforms can be understood outside of the circumference of the DRV agrarian reform in the North and the growing presence of Viet Cong forces throughout the South. The first, Government Ordinance no. 57, limited paddy ownership to a maximum of 100 hectares (the surplus being sold to the government and redistributed to former tenants who could acquire up to 5 hectares), and a cadastral survey limited rents to 25 percent of the expected crop to be paid in kind (see Hickey 1964:46). In the case of Khanh Hau village (studied by Hendry 1964:33–9), the impact of the reform was to increase the proportion of households holding less than 2 hectares from 46.2 percent to 62.1 percent and to reduce the size of the two-plus hectare landholders from 53.8 percent to 37.9 percent. The Saigon government also carried out a far-reaching land reform in 1970 during which 1 million hectares of rice land was distributed to 858,000 households over a two year period (Luong 1992b:115). In Khanh Hau village, for example, a landowner was limited to five hectares of patrimony fields and fifteen hectares of rice land if already under direct cultivation (Luong 1994:89). After the reform (and prior to the redistribution of land in 1977 following unification), 6.3 percent of households were classified as landlord/rich, 63 percent as middle peasants and 19.8 percent were poor or landless (the corresponding figures for Long An Province as a whole were 4 percent, 63.5 percent and 31.8 percent respectively). While land inequalities remained more pronounced than in the North (prior to 1954), the two southern reforms had nonetheless reshaped the agrarian structure of the Mekong, reducing the landless class by half and substantially reducing the concentration of land in the hands of very large landowners. During the Vietnam conflict the Delta was obviously transformed by war, US intervention and by the introduction of new rice technologies. According to Porter (1993:60), ‘wartime labor shortages, loss of buffaloes, reduced crop areas and the introduction of new rice varieties and cheap [food aid]…caused…South Vietnamese farmers to become dependent on expensive agricultural inputs and machinery to grow rice’. On the eve of unification, agrarian differentiation in the South seemed to resemble Lenin’s description of capitalism in late-nineteenthcentury Russia, resting less on land—the reforms having undercut the colonial pattern—than on the ownership of farm machinery and on commercial and mercantile capital. In theory the distinctive regional agrarian structures were to be irrevocably obliterated in 1975 with the historic victory of the DRV which brought within a collectivized northern economy suffering from land scarcity, a fragile local ecology and declining productivity, the vast agricultural potential of the Mekong river delta. In practice the picture is much more complex. In the North, the collectivization process had been far from smooth and took place in the context of the Indochina War and US bombing and in the absence of a systematic effort to industrialize (Selden 1993:217). Luong’s account of an area in which the party had been active and could pull upon substantial poor peasant sympathy reveals how cooperative formation proceeded ‘fairly smoothly,’ yet even here 15 percent of households withdrew at various points in the process (1994:86). Fforde, Vickerman, Beresford
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and others have argued that collectivization was never fully implemented and have highlighted its economic failures encapsulated in rice yields that did not reach the historic high of 1958 until the early 1970s.13 Per capita grain production has only recently reached the 1959 figure in the Red River delta; indeed, North Vietnam remained import dependent for rice throughout the war years. In the context of war and popular mobilization, and the unquestionable energies unleashed by collectivization, some of these failures should be carefully located in relation to the stringencies and rigidities imposed by the war economy. But it is also clear that by the early 1970s the collective system was in crisis: The division of labor in Vietnamese cooperatives was, therefore an artificial one which, combined with the workpoints system, actually helped to stifle productivity increases. It encouraged peasants to concentrate. …on subsistence…[which was] reinforced by macroeconomic policies. (Beresford 1990:479–80) Matters were compounded after 1974 as efforts to consolidate and expand the cooperatives—the average acreage and numbers of households at least doubled between 1975 and 1980—were implemented with devastating consequences. As wartime rhetoric lost its appeal after 1975 and a new system of management introduced between 1974 and 1978 made matters worse by recentralizing management under state control, more and more households turned to their own ‘five percent plots’ which contributed to the steady decline in yield per labor point. A study in 1977 of 21 District cooperatives revealed that families took in between 178 to 323 kilos of paddy per crop less than in the 1970–4 period; another survey in 1979 in the Red River delta showed that increasing cooperative size was correlated with lower productivity and lower income (Long 1993:171–2). In the North rice output fell by 2.1 percent per annum (Beresford 1990:470), which in conjunction with low state procurement prices, high taxes, and efforts by peasants to evade taxation through falsifying yields, manufactured a crisis of sufficient gravity to push the party toward the reforms of 1981. In practice, however, the system had been reconfigured from within (by farmers) and from without (by some local cadres) by the late 1960s; the rise of socalled ‘sneaky contracts’ (khoan chui) in which households were contracted for particular tasks for a share of earnings suggests, in a sense, that the first phase of Vietnamese collectivization was in its death throes before the fall of Saigon. The situation in the South after unification proved to be quite different. In November 1975, the DRV agreed upon a gradualist approach to collectivization in all sectors of the southern economy. In agriculture peasants were to join laborexchange teams and low level cooperatives which would be subsequently upgraded to higher level collectives. In its Second Plenum in 1977, the Communist Party hastened the pace of collectivization and by 1978 rice land was, in theory, fully collectivized (in Khanh Hau for example thirty-five solidarity teams were converted into seventeen cooperative teams during 1978: Luong 1994:89). Unlike the northern collectivization drive during the 1950s however there were no landlord
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denunciations, arrests or executions, and villagers were permitted to retain nonland means of production that could be contracted to cooperative teams (which had become during the war years the primary form of social and economic differentiation within the peasantry). But the effort to integrate a highly marketized and relatively mechanized free peasantry into a collective division of labor proved to be impossible. Peasants, particularly in the Mekong and the southeast, proved to be ornery and recalcitrant; farmers refused to engage in collective labor and devoted increasing time and energy to private gardens and fishponds. Rice yields in the South fell by 25 percent between 1976 and 1980, and rice yields in the Mekong languished at 2.25 tons per hectare in spite of huge increases in fertilizer availability (Tran 1991). Real agricultural output per capita and output per investment dong fell by 1.5 percent and 5.7 percent per annum between 1976 and 1979.14 The proportion of families in cooperatives in the South stood at 25 percent in the late 1970s (compared to 65 percent for the entire country) and by 1980 at least 8514 of the 12,246 cooperative teams in the southern third of Vietnam had collapsed altogether (Lam 1993:115). A compulsory collectivization drive began in 1981 but there was no real increase in peasant families joining between 1981 and 1983. The ratio of peasant families joining cooperatives in 1985 was 3.8 percent in the Mekong (a rise from 2 percent for the previous year) compared to 28.5 percent for the South as a whole (Tran 1991:12–13). A survey of eighty rural areas in southern Vietnam in 1981 revealed nothing like a collectivized agriculture but an agrarian structure not radically dissimilar from the post-1970 reform period. One-quarter of all households were effectively landless, 56 percent were middle peasants who owned 60 percent of the land, 12 percent were upper middle peasants controlling 27 percent of the land who regularly rented out equipment and hired in labor, and 2 percent of the households were rural capitalists (!) who owned 7 percent of the land and more than half of all agricultural machinery and livestock (Tran Quoc Khai cited in Porter 1993:60). While collectivization was in other words in crisis in general, the state confronted (despite compulsory collectivization in the South and new management systems in the North) two very different agrarian universes. Driven by a domestic production crisis and a two-front war with Kampuchea and China (to say nothing of the US trade embargo), the Vietnamese government was compelled to make concessions to agricultural producers which, following the new responsibility system in China, took the form of the household contract system (Selden 1993; Lam 1993). Anxious to improve collective performance, the Sixth Plenum in August 1979 (Resolution no. 6) ordered that distribution according to labor replace distribution by quota. While the reform was incapable of resolving all problems—particularly those associated with subsidies for veterans—it initiated, or perhaps more properly provided a space for, local experimentation which generated the socalled new-contract that was formally ratified in 1981. Cooperative officials still assigned tasks to collective units, families and so on, labor arrangements remained essentially the same, and the power of the cadres went unchallenged. What the contract system conferred, however, was direct payments to
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households—in effect groups of laborers—on the basis of specific yields on specific plots of land contracted to them (Long 1993:174). In other words, households, through two to five year contracts which stabilized the production quota, took responsibility for key production tasks (transplanting, tending, harvesting) while the cooperative maintained its role in plowing and irrigation. Collective land was allocated to households on the basis of their adult workforce and each family earned workpoints (as before), but now households could retain the entire surplus of the crop above the cooperative quota while being directly responsible for all deficits. The contracts placed compulsory quotas on households but did not provide for either security of land tenure or make provisions for private marketing. In essence, the reformed collectives were slowly producing sharecroppers, the institution that had drawn so much criticism in the Ho Chi Minh’s attack on landlording and kulak exploitation during the 1950s. This innovation replaced the system by which peasants were allocated to specialized teams and accumulated workpoints which entitled them to a harvest share less taxes, obligations and welfare contributions. As a consequence, output increased sharply (from 11.6 million tons in 1975 to 18.4 million tons in 1986); if Luong’s data from Vinh Phu are at all representative, rice output increased by 20 percent over three years, incomes doubled, and rice yields reached 4.2 tons per hectare (Luong 1992a:208–9). In the Mekong delta where only 5.9 percent of rural households were members of cooperatives in 1988, contracting was not implemented until 1983 and naturally had a rather different impact.15 Indeed, the reforms of 1981—and the more radical reforms in 1988 known as Resolution no. 10 in which the full contract (khoan trang) leased paddyfields to households without any responsibility to the cooperative—were obviously directed mainly to the collectivized northern and central provinces. Local and provincial authorities in the South had already confronted peasant opposition to collectivization, and political demonstrations had been made in favor of land restitution. In Khanh Hau in An Long Province, for example, within several years of the reforms the provincial government returned to the former owners of rice land most of what they had directly cultivated during the mid-1970s prior to collectivization (Luong 1994:102). Former landlords were restituted (often to the tune of 9 hectares) and as a consequence about 400 village households became landless though each was offered about 1.5 hectares of land in a recently reclaimed region call the Plain of Reeds. In short, southern communities saw the rapid dissolution of a compromised and weakened collective system and the emergence of an aggressively commercialized peasantry which in some cases reconstituted pre-revolutionary landholding patterns (i.e. the ‘re-embourgeoisement’ described by Szelényi for Hungary but in this case re-emerging after less than a decade!). Insofar as the 1970 reforms represented the baseline for any restitution, the privatization of land, which had proceeded much more quickly in the South because it was never fully collectivized, had not (at least by the early 1980s) produced a pattern of marked landholding inequality replicating the late colonial period. In the Mekong it appears that about 90 percent of households held less
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than 1 hectare and rarely did more than 1 percent of peasants hold in excess of two hectares (Luong 1994:117). If the 1981 reforms produced short-term output increases in the North, they were, as Long (1993:176) properly notes, ‘one time effects’ and as a consequence incentive problems returned to haunt the cooperative system. Furthermore, one of the major innovations—the ability to retain surpluses over and above quota—was undercut by the demands of local cadres. Porter’s comment (1993:135) that local exactions often accounted for a staggering 60–70 percent of total grain (85 percent in some northern villages) explains why surplus retention was so trivial (rarely more than 20 percent), why 60 percent of cooperative members’ total income derived from the ‘five percent plots,’ and not least why a survey of a cooperative in Thai Binh Province in 1985 revealed that almost two-thirds of households suffered from severe food shortage (Long 1993:176). The reformist initiatives of the early 1980s were, not surprisingly, deepened and extended in 1988 with Resolution no. 10 which, like the Chinese contracting system, offered fifteen year contracts (named contract 10 or khoan muoi) to all households with target yields and tax obligations fixed for the first five years (Selden 1993:239). 16 The share of the crop appropriated by households accordingly doubled (from 20 percent in 1981 to 40 percent in 1988) since contractors who exceeded the contracted yield could retain the entire surplus. In addition, the long-term leases on land also nominally included inheritance and transfer rights, for the first time privatized some collective assets such as buffaloes which were sold to co-op members, and private marketing was officially sanctioned.17 Resolution no. 10 maintained state ownership of land but private use rights granted by the state were also recognized (rights which could be recorded on a cadastral survey and evidenced by a certificate of use). Land rights conferred to households—which at a stroke substantially undermined the existing cooperatives and in effect created a full-blown peasantry—were not leases from the state but were granted subject to a variety of controls, regulations and taxes. These rights could not be fully transferred or alienated, and hence not pledged as collateral (World Bank 1993:27). By 1992, however, 6 million out of 7 million hectares of cropland were farmed under direct household use rights (either leased from state farms, allocated by collectives or dissolved state farms, or in the case of the South as restituted land claims). While the 1988 law did not permit formal transfers or inheritance, the growing commercialization of a peasant economy underwrote a number of de facto sales and rentals. In order to regularize (and tax) these transactions and to further the marketization process, a major revision of the 1988 law was introduced in 1992, and formalized in July 1993 as the Land Law. While land ‘belongs to the people,’ land use rights can now be leased, sold or transferred and inherited and mortgaged.18 Land allocation was granted for twenty years for annual crops and fifty years for perennial croplands.19
Figure 7.3 Vinh Phu Province, Vietnam
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LAND AND LABOR IN VINH PHU: A CASE STUDY Many of these general trends are vividly encapsulated in a case study in Vinh Lac District (Vinh Phu Province) conducted in 1994 (Figure 7.3). Table 7.2 assembles some aggregate data on production trends in Vinh Lac between 1990 and 1993 (i.e. after the second phase of radical reforms in 1988 and 1989) and reveals quite impressive growth rates.20 Total rice output, total cereal production and the value of agricultural production increased respectively by 30 percent, 33 percent and 37 percent over a three year period. Cropping intensity stood at 2.28 by 1993. A somewhat clearer and fuller picture emerges from Table 7.3, a statistical summary of one of the villages in Vinh Lac District in which research was conducted.21 Dai Dông is a village of nearly 8000 (1631 households) located within the commercial Table 7.2 Land, population, and production in Vinh Lac District, 1990–3
Source: Vinh Lac District C Government Statistics 1990–3
Table 7.3 Dai Dông village statistics, 1993*
Source: Vinh Lac District, Statistics Office, 1993 Note: * Total number of households increased from 1385 in 1990 to 1631 in 1993.
Table 7.3 continued
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sphere of Viet Tri city, on a major road linking the provincial capital with Hanoi, and in close proximity to a number of flourishing market towns. A picture of an increasingly prosperous and dynamic rural economy appears with great clarity, suggesting a quite radical unfettering of the social relations of production and as a consequence a number of key loci of agrarian change. The intensification of land-based production is contained in the growth of cropping intensity from 2.5 in 1990 to 3.0 in 1993, and a high degree of market integration (the proportions of farm, livestock and off-farm output that are sold are respectively 35 percent, 61 percent and 86 percent, all of which have grown by 10–40 percent over three years). Village GDP has increased by 87 percent since 1990;22 its composition (35 percent tilled, 35 percent livestock, 30 percent off-farm) reflects a gradual diminution of the role of agriculture (by 4–5 percent) and an 8 percent increase in the share of off-farm production. While the official statistics are incomplete, all sources of income (agrarian, livestock, off-farm) have probably doubled in four years, and average household income is currently 6 million dong, a 196 percent increase over 1990.23 Whatever one makes of the income estimates, it is incontestable that the output of most major crops and livestock has grown by a minimum of 50 percent since 1990, and the prosperity of the village is rendered clearly in the proliferation of brick houses, a vibrant market, and investments in all manner of private enterprises.24 A deepening and widening of market relations, an intensification and diversification of land-based activities at the household level (in which soy and vegetables seem to be prominent), a steady growth of the livestock sector, and off-farm income (trade, services) as the major source of local economic growth define the coordinates of Dai Dông’s post-reform economy. In light of the land scarcity and high population densities in the Delta and in Vinh Lac District, the questions of land access and social distribution of landed property, and the extent to which land provides the basis for some measure of cereal self-sufficiency and economic security for village household, assume a singular importance. Due to the equitable privatization of the agricultural cooperatives beginning in 1991, however, Vinh Lac District does not as yet suffer from the debilitating economic consequences of high population densities coupled with a high degree of landlessness and rural poverty typically associated with for example Java, Bangladesh and parts of India. In most of our study villages, land distribution began in April 1992 and was completed by October 1993; in Dai Dong village, there was a second land distribution which allocated surplus, and for the most part poorer quality land on the basis of competitive bids.25 The majority of commune land was, however, distributed through twenty year usufructory rights on the basis of household demography: each person received 1.6 sao (1 sao is about 0.4 acres), and a half measure was granted to every person over and above the state-mandated limit of two children. In practice this meant that each household obtained a number of geographically dispersed plots—it is not unusual to have twelve or thirteen per family with the most distant parcel 1.5 kilometers from the village—the quality of which should reflect the village pattern.26
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The 1993 Land Law formalized in Dai Dông, as elsewhere, the transfer, inheritance and sale of land use rights that had been broached in the 1988 Resolution no. 10, and subsequently in the 1992 Constitution. There is evidence to suggest that even in Dai Dông—and certainly in the southern communes—land transactions of various sorts had continued with varying degrees of secrecy after 1980 and, since 1986, were increasingly above ground. But the final assignation of land rights—a move which in effect not only allocated private land rights but also shifted cooperative functions to private enterprises and the People’s Committees—seems to have been effected with little malfeasance and with an impressive accountability. Oversight of the land management functions of the state lies with the General Department of Land Management, but these functions (recording of rights, land classification, issue of land certificates) and the land allocation itself are performed through branches of the local government (Departments of Land Management) in conjunction with People’s Committees and the cooperative. As the World Bank (1993:28) points out, this system produces a high degree of local autonomy, flexibility and an air of ad hoc local practice. Land allocation has as a consequence been extremely varied in form and character throughout Vietnam; 27 land titles apparently exist and have been distributed to 2 percent of households but none were in evidence in Dai Dông, but the evidence from the North suggests that the process was remarkably free of corruption. The World Bank claims that there have been over 200,000 disputes over title—over half were in the Mekong Delta—but a survey in Ha Bac Province (Huong 1994) confirms the Dai Dông experience, namely that disputes over land were almost non-existent (0.3 percent of peasants complained of land disputes in Ha Bac). Kerkvliet (1995:74–5) has pointed out that land disputes in the North often take the form of inter-village boundary disputes—a 1990 report documented 6000 nation-wide—rather than household or individual conflicts over restitution or the allocation process (as seems to have been the case in much of the South). Overall, however, it is clear that the accountability of the land distribution process emerges from the strength of the People’s Committees in the northern communes and the collectivist sentiment of local government cadres who were ambivalent about the potential side effects of treating land as a commercial commodity. The consequence of what appears to be an effective and well implemented land redistribution is the creation of a relatively equitable landholding peasantry based on a modified Chayanovian (household demographic composition) principle. To give some sense of land distribution, a 15 percent random sample of households was taken from the tax records of Dai Dông village. The average household landholding is 6 sao (2170 square meters) and the average household size is 4.75 persons. Only 11 percent of households possess more than 10 sao (the largest holding in the village appears to be about 20 sao) and 19 percent have less than 3 sao. The 5 percent of households that have roughly 1 sao of land are all single person families (some of which are old and infirm). The average landholding per active worker is 3.1 sao (roughly 1000 square meters).28
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The Dai Dông research conveys a picture of quite striking (if fragmented) equality—though it needs to be said that the principles of land distribution benefited those who paid no heed to the state family planning policy!—and of average landholdings capable of producing 2100 kg of rice equivalents per year.29 The gini coefficients for Dai Dông are roughly 0.18 comparable to the astonishingly low coefficients for agricultural households computed by Tuan (1995:147) for three Vinh Phu villages (0.14, 0.13 and 0.17).30 The Land Law of 1993 has recreated a Red River delta that in one sense looks back to Gourou’s model of Tonkin; parcelized, fragmented landholdings dominated by a densely settled, relatively commercialized peasantry with a tenacity for access to and control over paddy. What fifty years and a decollectivization produced however was a much more equal landholding distribution than 1936, a population density four times higher and a modal per capita landholding of 0.05 ha in 1993 compared with 0.2 ha per capita a half-century earlier. Notwithstanding these differences, landholdings at present seem capable of providing even the poorest with a modicum of economic security and a sort of subsistence safety net. It appears that there is no landless class to speak of—although the question of whether and how land might be transferred to the next generation of post-cooperative peasant farmers in Vinh Lac will be of immense significance in terms of the possible fragmentation and diminution of family landholdings.31 The distribution of land use rights has not precipitated in other words the beginnings of rapid land accumulation as such (or for that matter dispossession through collateralized land). In both Vinh Son, Dai Dông and Tho Thang there is a brisk market in land ‘rental’ (in effect the purchase of long-term use rights). Land is rarely rented for less than five to ten years and the renter typically pays 30,000–50,000 dong per sao per year and the taxes appropriate to the quality of land rented. On balance, the rental market seems relatively sluggish and at this point is not a source of social or economic differentiation in either land holding or income for several reasons. First, plots of land available for rent are small in area and appear on the local market quite irregularly, and many households are in any case reluctant to forgo their own subsistence rice production unless compelled to do so. Second, in view of the relative ease with which land can be taxed (in contradistinction to livestock which is exempt and industry and trade which are difficult, if not impossible, to monitor and assess) and the greater profitability of other non-farm sectors, land is not necessarily seen as a source of accumulation. Indeed it was noted by several farmers in the course of interviews that the daily return to self-cultivation of rice was roughly 2000 dong per day whereas the prevailing peak wage rate for transplanting and watering was 8000–10,000 dong per day. And third, land is attractive for those limited number of families for whom some agricultural output may be significant for the production of livestock feedstuffs (soy, maize and rice) as part of an expanding off-farm enterprise. For all these reasons the land question seems characterized by a relative equality in holdings and, at this point at least, landholding transactions, while certainly increasing, remain sluggish and are not seen as either a profitable investment or as a source of speculation.
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Nonetheless, it is clear that the government is sensitive to the question of the genesis of land concentration—there is a statutory limit of 2 hectares in the North and 4 hectares in the South, though this is widely understood to be rarely enforced—and Vietnamese government policy, fully aware of the experience of China with regard to land speculation in Guandong and elsewhere, holds up the cases of Taiwan and South Korea as potential models of smallholder based agrarian development which Vietnam seeks to replicate. In addition, the very fact of widely held land in most communes has had the effect of stimulating the growth and development of a local wage labor market for two clear reasons. First, the 20 percent of households with three or fewer persons (and whose producer-consumer ratios accord with the demographic structure of young families) typically need to hire labor at key periods during the labor intensive periods of rice production to complement their domestic labor force. A Vinh Son household, for example, consisting of a married couple in their mid-twenties and their two young daughters, needed to employ ten to fifteen worker days per cropping season in order to cultivate their 5.3 sao of land. Other survey research in the Red River shows that a majority of households are both buying and selling labor and this must be understood in relation to the labor demands of paddy cultivation (even on smallholdings) for households that are immature in Chayanovian terms (i.e. a high consumer—producer ratio due to the presence of young children) and to the need for off-farm income among those households for whom Lilliputian riceholdings are incapable of reproducing the household economy. Second, the possibilities for commercial development in the non-farm sector—especially in trade, industry and pig and fish production— draw family labor away from agricultural pursuits even in relatively large (and prosperous) families, creating a need for hired farm labor. The Dai Dông cooperative chairman is a case in point. Though he presides over an eleven person household economy, the labor exactions of his commercial fish and pig production and his local shop demand that he hire 100 worker days of hired labor to maintain his family agricultural economy. The fact that all households have access to land, coupled with the necessity to maintain land based production for commercial households actively engaged in off-farm production, means that the Vietnamese reforms have contributed to and stimulated the development of a labor market alongside a robust peasant economy. AGRARIAN TRANSITIONS What began in the late 1970s and early 1980s as an effort to reform but bolster and partially recollectivize a sick cooperative system had, fifteen years later, converted Vietnam into a nation of family farms linked through kin, long-term usufructory rights over land, and the market. The number of various forms of collectives fell from 26,073 in 1989 to 7413 in 1992, and those that remained were Ptemkin villages, so circumscribed in form and function that they did not warrant the term cooperative. A survey in 1992, prior to the 1993 Land Law, estimated that 80–90 percent of rural income in Vietnam was derived from the
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‘household economy’ (Ljunggren 1994:19). In the same year, labor and capital had become increasingly commoditized, and it was commonplace throughout the country for farmers to be able to quote daily and piece wage rates for a panoply of productive tasks and services. A survey in Ha Bach Province in 1993 revealed that only 1.7 percent of peasants sold produce to the state, the remainder was fully privatized; in the same survey, 26 percent of local households hired workers and 68 percent of households polled said they had worked as hired laborers (Huong 1994:71).32 The contraction of the cooperative sphere was, if not complete, very close to it. In many cases the role of the cooperative institutions had simply evaporated and former co-op buildings crumbled under the weight of their obsolescence. Between 1988 and 1991, the number of low level cooperatives shrank by 60 percent and the number of cadres by half. A 1990 survey established that 5 percent had successfully shifted to new service functions but the remainder were ‘confused and disorganized’ (EIU 1994:42). In the South, 80 percent of the low level co-operatives had ceased to function (ibid.). In some of the northern communities land for communal use is still set aside either for use by the needy or for annual bid (Kerkvliet 1993:22), but even this longstanding tradition is weakening. In the South, Luong (1994:105) noted that by the early 1990s in Khanh Hau village near Ho Chi Ming city, which had been ‘partially’ collectivized in 1975, there was no communal rice land whatsoever, even less in fact than in the pre-revolutionary period. The overall impacts of the reforms on both output and income seem unequivocally positive. A 26 percent increase in paddy production between 1987 and 1989 converted Vietnam from a 750,000 ton grain deficit in 1986 to the world’s third largest exporter in 1992. Estimates of regional food balances reveal that exports have been driven by huge marketable surpluses from the Mekong Delta and modest surpluses (except in 1991) from the Red River. Four regions— the northern mountains, north central/central coastal, central highlands and the ‘northeast’ of the south—have had persistent and non-decreasing deficits, and the north is probably (for the first time in several decades) self-sufficient in staple foods (World Bank 1993:127).33 The exact income effects are not readily discerned but suggest marked regional differences (Figure 7.4). In 1989 the average national net monthly income per capita (constant dong) was 21,428. The corresponding figures for the regions are: Northern Highlands 18,789, Red River 19,203, Central Highlands 21,104, and Mekong 27,285 (Long 1993:185). These differences are clearly rooted in some measure in land availability and average landholdings.34 Compared to the Red River delta household, the Mekong delta household owned over four times more cultivated land and six times more paddy land growing two crops per year (Long 1993:184) (Table 7.4). A 1990 Survey in the Red River delta determined that an average household held less than one-third of an acre of land consisting of seven to seventeen highly fragmented and geographically dispersed plots; in contrast Mekong holdings were 1.5 hectares and typically unfragmented. The market opportunities in agriculture accordingly conferred substantial advantages upon Mekong peasants who owned larger areas, possessed on average greater quantities of domestic adult labor (3.4 persons versus 2.1 in
Figure 7.4 Regional differences in GDP in Vietnam, 1993 Source: Reproduced with adaptations from The Economist 1995
Source: Tuan (1995, 1997)
Table 7.4 Evolution of agrarian systems in the Mekong and Red River deltas, 1930–90
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the Red River), were less bound by the rigidities of collectivization, and not least who saw their per capita income at least double between 1989 and 1990 (see Tuan 1995, 1997).35 VIETNAMESE DECOLLECTIVIZATION THROUGH A CHINESE LENS: SOME COMPARATIVE SPECULATIONS In the Third World, the degree to which a successful decollectivization depends on a significant political liberalization does not appear great. (Pryor 1992:287) Does Vietnam’s ‘successful’ renovation have anything at all to do with gradualism, flexibility, or the pacing and timing of macroeconomic ‘shock therapy’ after a period of initial micro-economic reform? According to Sachs and Woo (1993), Vietnam’s record rests on the fact that its economic structure (‘a peasant agricultural society’) is much more felicitous to reform than an urban, ‘over-industrialized’ socialism of the Soviet or East European sort. It possesses, in short, Gerschenkron’s (1962) advantages of backwardness. These properties have permitted communes— in general less hampered by subsidies and soft budget constraints than heavy industry—to be dismantled and to ‘spur enormous flows of workers out of subsistence into new sectors of the economy’ (pp. 4–5). Sachs and Woo are centrally concerned with an account of the ‘success’ of China, but in so doing they raise the intriguing question of whether China and Vietnam are comparable forms of postsocialist transition. Both China and Vietnam were largely agrarian economies in 1978, in which agriculture accounted for roughly 70–5 percent of employment, and collective agriculture (distinct from state enterprises, urban collectives and the private sector) was the dominant type of productive organization. Each country had similar sorts of pre-revolutionary agrarian structure. In China 10 percent of the landlords and rich peasantry accounted for 56 percent of the land, while 68 percent of the rural poor owned 14 percent of the land area; in Vietnam between 60 and 70 percent of landowners owned just 12 percent of the cultivated area. China and Vietnam initiated a first phase of land reform in the 1940s and 1950s– a sort of land-to-the-tiller program—in which similar amounts of land per capita were redistributed (0.39 acres per capita in China, 0.25 acres per capita in Vietnam), followed by a second phase of higher order collectivization (China rapidly after 1956, Vietnam more tardily in the 1960s) orchestrated by ‘mobilizational authoritarian states’ (Kerkvliet 1995:66). Vietnam has no equivalent of the Great Leap Forward but the exigencies of war provided a certain legitimacy for the Vietnamese collectivization drive and for the subsequent enlargement of the cooperatives. The tripartite productive structure— commune, brigade and team—required, in China and Vietnam alike, the maintenance of a private plot sector, the tight regulation of markets, and coercive local regulation through party and state apparatuses. As Kerkvliet and Selden (1995:6) note, the collective production system was more shallowly rooted in Vietnam and, in contrast
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to China, its productivity was radically compromised by the 1970s. China increased per capita grain output between 1957 and 1978 by 2.1 percent per annum; in Vietnam, conversely, rice productivity was much lower than China and per capita grain production fell steadily from the early 1960s up to 1980. Similarly the third phase of decollectivization also suggest intriguing temporal and institutional parallels. Reforms in China initiated after Mao’s death referred to as the household responsibility system are in many respects identical to the Vietnamese ‘contract 100’ of 1979. Land was gradually privatized in the sense that households were granted various forms of usufructory rights over plots, producing in both cases a quite strikingly equal land distribution (the gini for land in China is roughly 0.54 and for Vietnam 0.30); in both cases landlessness is around 4–5 percent (McKinley 1995; World Bank 1995). This reformist move seems to have been driven both from below and from above. Rapid acceleration in agricultural output, especially of grain, occurred in China between 1979 and 1984 (grain output increased by a third between 1980 and 1984, and rural incomes by 11 percent per annum between 1978 and 1981) largely as a result of a 40 percent increase in state procurement prices coupled with large increases in the application of fertilizer. Vietnamese rice productivity lags behind China but the rural and agrarian growth rates of the late 1980s are comparable.36 Jean Oi (1998) and others have shown, agricultural incomes in China have fallen since 1985, largely because of the continued role of state manipulation of prices and the profitability squeeze imposed by the inflation of input costs. But the confluences between the reformist phases are striking nonetheless. Vietnam and China seem in short to have adopted decollectivization strategies which involve four common attributes: the creation of a relatively egalitarian peasantry with some form of private property rights, a complex hybrid of new forms of state and market regulation, a ‘Bukharinist’ trajectory in which a substantial degree of local state intervention steered the reform process, and the transfer of the burden of absorbing and supporting the enormous rural surplus labor onto individual peasant families for whom the state is not directly responsible (Chang 1993:444). In a curious way peasantization entailed a continuity between the collectivist and reform periods: family farming can be seen as the same type of non-modernized or nonrationalized economies in which work and morality…are inextricably intertwined and in which the balance between production and consumption rules over any reified efficiency criteria such as productivity or profit. (Chang 1993:439) But it is here that the Vietnamese and Chinese roads part company. The increase in grain output after 1981 in Vietnam has been similar to that of China but the speed and pace of decollectivization has proceeded much further. Land is now almost fully privatized, state marketing has been abolished and the cooperative structure has in large measure been liquidated.37 This has unleashed the energies of some 10 million Vietnamese farming households which has lent to the rural sector a visible
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dynamism (as indeed did the creation of 200 peasant contractors in China in 1980). But rural dynamism in China has been sustained since the mid-1980s not by agriculture—which remains in significant measure collective (Bowles and Dong 1994)—but by so-called sidelines and especially by rural township enterprises (TVEs) (Oi 1998). Building upon a prior Maoist tradition of rural industrialization, the Chinese model drew labor from agriculture and from the collectives into nonfarm activity without attempting a radical introduction of private property and market liberalization. China has in this sense a two-tiered property system consisting of private plots and the preservation of (and in some cases the reconstitution of) village collectives which have a key role in managing land contracts and service provisions. In a 1990 survey, village collectives in China accounted for 35 percent of plowing, 75 percent of irrigation; 62 percent provided more than a third of inputs and on average owned 44 percent of non-land capital assets. In 1992, roughly half of total rural income still came from collective sources (Bowles and Dong 1994:65). Distributive corporatism associated with the hybrid privatization from below—the genesis of township and village enterprises currently employing close to 100 million workers—provides continued investment funds for the continuity of the collective operations at the local level. By 1988 TVE industry accounted for 23 percent of rural employment, and over 50 percent of rural output. In the China case, then, it is the maintenance of a two-tiered system coupled with rural industrialization by township enterprises in which the local state is a residual claimant with an incentive to maximize local economic growth rather than bargain with the center for more resources, which contrasts so sharply with Vietnam. Incomplete collectivization in Vietnam—the north-south divide—ensured that collective institutions were in many cases less robust in large parts of Vietnam, and hence the possibility of a two-tiered system, had an effort been made to replicate the Chinese experience, would have been unlikely. In the North at least, I have argued that it was precisely the strength of the collectives and People’s Committees which ensured the equity and accountability of a radical land distribution and privatization, a strength which is, pace China, legislating its own extinction. The continued centrality of the party in China, in spite of the ‘quiet revolution from within’ that Walder (1995) describes in the erosion of enforced discipline within the centralized party apparatus, has ensured a much stronger hand in maintaining this cooperative and collective set of institutions, some of which are distinctly new if not hybrid. As a consequence, to return to Sachs and Woo, the agrarian and rural trajectories in China and Vietnam by the early 1990s have important structural similarities and contrasts. Furthermore, these differences cannot be accounted for by their identical starting points, i.e. their ‘peasant’ character. Vietnamese agrarian structure in some respects quite similar to other parts of southeast Asia and to the land-to-the-tiller programs of Taiwan and South Korea in the 1950s. Conversely, the Chinese case is a hybrid, two-tiered system in which household and collective are articulated in complex ways with dynamic circuits of rural industrial accumulation. What seems to be key in both cases is, in a strange way, a partial confirmation of Kornai; not so much that reform cannot happen without the abolition of the party (this is
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demonstrably wrong) but rather that the party is fundamental in shaping (engineering perhaps) the agrarian question broadly understood. In this sense Verdery (1996) is perhaps right to talk of a transition from socialism to ‘feudalism,’ understood as the parcelization of sovereignty. In China it is the new sovereignty associated with distributive corporatism and in Vietnam through socio-economic differentiation and local despotisms. This parcelization is naturally happening in different ways with different consequences in Vietnam and China but it alerts us to the complex and differentiated ways in which politics and economics—rather than some undifferentiated capitalism—are being decomposed, reconstituted and refigured in the postsocialist order. ACKNOWLEDGMENTS The fieldwork on which this chapter is based was conducted between August 6 and August 20, 1994. The author is particularly grateful to the assistance provided by CRES in Hanoi, and the local government officials in Vinh Phu Province, Vinh Lac district, and Dai Dong village. Translation and other critical advice was provided by Dr Pham Van Phe, Thi Hien Duong, Thi Minh Nguyen, Van Suyen Nguyen, Thang Giang Vo and Ms Nguyen Hoai Thu. Gillian Hart, Regina Abrami, Caroline Beaulieu, Jeff Romm and Terry Rambo also provided important insights and commentary. Hy Van Luong provided especially critical and helpful comments on an early draft. Harmony Goldberg and James McCarthy provided research assistance. I also benefitted from the discussion from Cuban, Russian, Bulgarian, Hungarian and Chinese scholars at a Conference on Decollectivization held in Havanna in June 1995. I should like to acknowledge the support of the MacArthur Foundation, Programme on International Peace and Co-operation, in the conduct and support of this research. Comments by Ivan Szelényi, Carmen Diana Deere and Mark Selden have been especially helpful. I am, however, solely responsible for the content of this chapter. The fieldwork was conducted with a small interdisciplinary team of University of Hanoi and University of California, Berkeley faculty and students in Vinh Lac district. It is necessarily partial and incomplete. NOTES 1 Thermidor: n. month of the French revolution calendar beginning July 19…a moderate counter revolutionary stage following an extremist stage of a revolution and usually characterized through the medium of a dictatorship by an emphasis on the restoration of order, a relaxation of tensions, and some return to patterns of life held to be normal,’ as defined in 1986 Webster’s Third New International Dictionary. Springfield: MerriamWebster Inc., p. 2373. 2 Ninety percent of the 1989 rice exports came from the Mekong delta, but the densely settled Red River provinces became self-sufficient in rice for the first time in twenty years. 3 According to Bowles and Dong (1994:65), due to their economic potential ‘village collectives have in fact been on a steady increase in China since the early 1980s. More
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than 2.05 million villages. …and sub-villages. …reestablished collective organizations’ (emphasis added). In 1979, one year after the Chinese reforms, the Vietnamese agrarian reforms were intended to be ‘inner-systemic’, that is to say they limited material incentives for peasants using market type measures to enhance local autonomy and responsibility. In 1981 the Party explicitly sanctioned the contract system in which households received land on multi-year contracts for which they were made responsible for significant labor input. Price reform was coupled with the retention of surplus above the cooperative quota by participating households. According to Andreff (1993:521), 1986 reforms represented a ‘second revolution’— the first being in the summer of 1985 when new wage, price and banking policies were introduced—in which the struggles within the Party were won by the reformers who recognized explicitly the failure of the Vietnamese model, reduced internal trade barriers, granted rights to enterprises and local authorities to contract with foreign markets and further dismantled (in 1987) the central planning mechanisms in state run industry (thereby further encouraging private initiatives). Good accounts of the political content of doi moi appear in Porter (1993), Pike (1992, 1994), Tonnesson (1992), and Marr (1994). For a good discussion of the rise of corruption and double dealing see Far Eastern Economic Review (October 26, 1995:52) and Kerkvliet’s (1995:78–79) discussion of popular responses to corruption and malfeasance by local cadres in the countryside (especially around land and tax questions). During the colonial period the percentage of communal land in total cultivated acreage was roughly 25 percent compared to 3 percent in Cochinchina (Luong 1992a:229). According to Gourou (1936/1955), 34 percent of all landholding households owned less than 1 hectare of rice land and held roughly 12.5 percent of the total rice area. While there is some variability in the surveys conducted on land distribution issues during the 1930s, there is a general consensus that large landholdings and tenancy predominated and small-scale owner occupancy was relatively insignificant in sharp contrast to the north. Murray (1980:8–9) is very convincing on these different regional dynamics which he identifies as a northern labor reserve (persistent but increasingly fragmented landholdings necessitating migrant labor as a prerequisite for household reproduction) and a southern ‘vast cultivable region for rice export production’ (9). According to Selden (1993:221), 74 percent of the cooperatives in 1960 were ‘low cooperatives’ but by 1969 90 percent were ‘high level co-ops’ accounting for 84 percent of cultivated land. This development from elementary forms of cooperation based on mutual and small scale cooperation to fully collectivized cooperatives working on a labor point system was shaped profoundly by the Chinese experience of course. Product contracts prescribed a brigade to deliver a quantity and quality of grain from an assigned land area of specific fertility; production cost contracts provided seed, fertilizers and fuel to grow certain quantities of food; and piece-work contracts fixed work days for specific tasks (Long 1993:167–168). Fforde (1989) has shown how collective property was in any case ‘privatized’ through negotiations between cooperative leadership and local households. In this sense the history of experimentation with the Maoist model of collectivization long predated the 1981 reforms (at least to the 1960s) since the degree of autonomy of the cooperatives from the State permitted Party figures and cadres to work the system to their own advantage. The implications of resistance to collectivization in the South were profoundly devastating for state procurements which fell from 2 million tons in 1976 to 1.4 million tons in 1979. According to Beresford (1990:473), the most serious falls occurred in the Mekong river delta (on the order of 60 percent).
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Michael Watts Furthermore, in Mekong half of the cooperatives were located in the relatively poor Province of Tien Giang where 40 percent of the households were members. In the most aggressively commercial rice provinces, co-op membership was barely 2 percent. The process by which Resolution no. 10 was instituted—like the subsequent Land Law in 1993—was extremely varied. In some cases the collective maintained responsibility for tractor plowing, irrigation, pesticide application and so on. In other instances, some of these services were privatized (though irrigation has been for the most part a nonprivate service on which taxes are paid either to the cooperative, local government or both). Luong (1992a:212–213) describes how contracted land in Vinh Phu was classified by fertility and was distributed to different sorts of household contractors (poor, average and good), only the better contractors being permitted to bid for high fertility land. Poor quality land conversely was distributed to each household on the basis of the number of consumers. By 1989, 95 percent of all cooperatives in northern and central provinces had implemented Resolution no. 10. As a consequence of the reforms the number of cooperative personnel fell by 40 percent between 1988 and 1990 in the North. Article 3:2 of the Land Law says that ‘any household or individual shall be entitled to exchange, assign, rent, inherit and put the right of land use in the pledge toward the land allocated by the state.’ The annual crop leases were extended to ninety-nine years in 1994. While the Land Law extends to state farms and to forest lands, the privatization of the former has proceded very slowly (see Barker 1994). It is clear that throughout the province food output and productivity were increasing throughout the 1980s. Per capita food production of staples foods in Vinh Phu increased from 218 kg of rice equivalents in 1986 to 239 in 1989. Other villages studied in the district were Vinh Son, To Thang, and Te Lo. Even taking into consideration the high inflation rates, particularly in 1991, the total value of village GDP close to doubled in real terms between 1990 and 1993. Inflation in the period 1990–93 has been quite high, somewhere between 14 and 20 percent, and it is unclear from the village data whether income figures have employed real or nominal prices in their calculation. Calculations by John Gallup (unpublished) suggest that real GDP per capita in two Vinh Lac villages (Dai Dông and Te Lo) increased respectively by 18 percent and 12 percent annually between 1990 and 1993. These figures are comparable with the INS A (1995) study of Thanh Liem district in Nam Ha Province in the Red River delta. Dao and Dao’s excellent study (1995:146) in Hai Hung Province near Hanoi shows that net revenue in two villages increased by 80 percent between 1988 and 1993; the growth sectors, like Dai Dông, were off-farm incomes and gardening, and secondarily livestock. Paddy land per capita fell by roughly 1.5 percent in Hai Hung and increased very slightly in Dai Dông. This seems to have been an unusual case: 220 sao of commune land were broken up into nineteen lots. The largest lot taken was 50 sao. In all of these cases the usufruct is ten years in duration and in addition to the ‘purchase price’ carries a tax loading of 700 kg per sao per year. There are five levels of cultivable land according to village cadres in contrast to the stipulation in the 1983 tax law. However, most villages in our study area have only levels I–III of cultivable land. The quantity of high quality land for example will vary from village to village (Dai Dông has a greater proportion of level I land than Vinh Thinh) and is determined on the basis of village position, soil quality, micro-climate, access to water and location within the district. The land classification not only reflects the agricultural potential of the land (rice yields for example are highest in level I) but also determines the agricultural tax loading (see below). Level I land, for example, will carry a tax load of approximately 12 kg per sao per cropping season.
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Beaulieu (1993) describes a lottery system and various (illegal) ad hoc rearrangements after the allocation of land in Quoc Tuan commune. As she puts it, ‘This process varies from commune to commune. Basically the total amount of agricultural land. …is divided by the number of eligible peasants. Different communes exclude different people. …in Quoc Tuan the whole process would require many pages of explanation’ (1993:8). 28 My preliminary estimates of the landholding gini coefficients in Dai Dông is 0.1. 29 According to Long (1993) the rural gini coefficient in the Red River delta is 0.11 (compared with 0.26 in Taiwan, 0.42 in Indonesia, and 0.40 in Bangladesh). 30 These coefficients were for a sample of agricultural hsoueholds only; the gini coefficients for household income rise to 0.30 if all households are included within the region (Tuan 1995:143). 31 When Gourou conducted his study he estimated a landless population of 36 percent; in Dai Dông the figure is probably no more than 3 percent. According to the World Bank (1995) the degree of landless nationally among all rural households is roughly 4 percent. 32 In the World Bank survey (1995:168), 32.6 percent of rural households hired labor; the figures for the Red River and Mekong were 14.5 percent and 70 percent respectively. For wealthier households, the proportion hiring labor was 30 percent and 85 percent respectively. 33 Long (1993:179) paints a more variegated picture of output increases, noting that the largest increases occurred in areas in which overall production was already high and that even in the Mekong some provinces have registered decreases since 1989. 34 Cultivated land per household is graduated from North to South: the average is 2643 sq meters in the northern highlands, 3231 in the Red River, 3678 in the Panhandle delta, 5468 in the Central Region and 13,814 in the Mekong (Department of Agriculture cited in Long 1993:187). 35 The percentage of households with annual income above 800,000 in the Red River in 1990 was 2 percent, compared to 16 percent in Mekong. 36 In 1991 Vietnamese rice yields were 3.1 tons per hectare compared with 5.7 tons per hectare in China. Average chemical fertilizer use in Vietnam was only one-third (60 kg per cropped ha) of the China level. 37 In China ownership rights in land are vested in vilages but private ownership rights are very much restricted (McKinley 1995:15). In Vietnam the ninety-nine year leases introduced as an extension of the Land Law has de facto produced a land market in which authority is not vested in villages or communes but in district and provincial government.
BIBLIOGRAPHY Andreff, W. 1993. ‘The Double Transition from Underdevelopment and from Socialism in Vietnam.’ Journal of Contemporary Asia 23 (4):515–531. Arkadie, B.van. 1993. ‘Mapping the Renewal Process: The Case of Vietnam.’ Public Administration and Development 13:433–451. Barker, Randolph (ed.). 1994. Agricultural Policy Analysis for Transition to a Market Oriented Economy in Viet Nam. Rome: Food and Agriculture Organization. Beaulieu, C. 1993. Whose Land Is It Anyway? Hanover: Institute of Current World Affairs. Beresford, M. 1990. ‘Vietnam: Socialist Agriculture in Transition.’ Journal of Contemporary Asia 20 (4):466–485. Beresford, M. and Bruce McFarlane. 1995. ‘Regional Inequality in Vietnam and China.’ Journal of Contemporary Asia 25 (1):51–72. Bowles, P. and Xiao-yuan Dong. 1994. ‘Current Successes and Future Challenges in China’s Economic Reform.’ New Left Review 208:49–77.
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Burawoy, M. 1994. ‘Industrial Involution: The Dynamics of a Transition to a Market Economy in Russia.’ Paper presented to the SSRC Workshop on Rational Choice Theory and Post Soviet Studies, Harriman Institute, New York, December 9. Chang, K. 1992. ‘China’s Rural Reform.’ Economy and Society 21 (4):430–452. ——1993. ‘The Peasant Family in the Transition from Maoist to Lewisian Rural Industrialization.’ Journal of Development Studies 29 (2):220–244. CIRAD. 1995. Durabilité du développement agricole au nord Vietnam (The Durability of Agricultural Development in North Vietnam). Hanoi: Maison d’Edition de 1’Agriculture. Cue, N. et al. 1990. Ecology and Agroecosystems in Vinh Phu Province. Honolulu: EastWest Center. Dao The Tuan. 1994. ‘The Agrarian Transition Process in Vietnam as Institutional Change.’ Paper delivered to the Agrarian Question Conference in Wageningen, May. ——1995. ‘The Peasant Household Economy and Social Change.’ In Vietnam’s Rural Transformation, edited by B.Kerkvliet and D.Porter. Boulder, CO: Westview. ——1997. ‘The Agrarian Transition in Vietnam.’ In The ‘Market Panacea.’ London: Intermediate Technology Group Publications. ——and Dao The Ann. 1995. ‘Situation de l’économie familiale paysanne a Nam Thanh’, in L’Agriculture du Delta du Fleuve Rouge, edited by INSA. Hanoi: Maison d’Edition de l’Agriculture. Dinh, Q. 1993. ‘Vietnam’s Policy Reforms and its Future.’ Journal of Contemporary Asia 23 (4):532–553. Economist Intelligence Unit (EIU). 1994. Indochina: Country Profile. London: EIU. Elliot, D. 1993. ‘Dilemmas of Reform in Vietnam.’ In Reinventing Vietnamese Socialism: Doi Moi in Comparative Perspective, edited by W.Turley and M.Selden. Boulder, CO: Westview. Fforde, A. 1989. The Agrarian Question in North Vietnam 1974–1979. New York: M.Sharpe. ——1993. Vietnam: Economic Commentary and Analysis. Canberra: ADUKI. ——and D.Porter. 1994. ‘Public Goods, the State and Civil Society and Development Assistance in Vietnam.’ Paper presented to the Doi Moi, the State and Civil Society Conference, Canberra, Australia, November 10–11. ——and S.de Vylder. 1989. Vietnam: An Economy in Transition. Stockholm: SIDA. Gerschenkron, A. 1962. The History of Economic Backwardness. Cambridge, MA: Harvard University Press. Gourou, P. 1936. Les Pay sans du delta tonkinois (Peasants of the Tonkin Delta). Paris: Ecole franchise d’Extreme-Orient (reprinted 1955, Human Relations Area Files, Yale University). Greenfield, G. 1994. ‘The Development of Capitalism in Vietnam.’ Socialist Register 30:202– 234. Hart, G. 1998. Interstitial Spaces. Berkeley: University of California Press. Hendry, J. 1964. The Small World of Khanh Hau. Chicago: Aldine. Hickey, G. 1964. A Village in Vietnam. New Haven, CT: Yale University Press. Hunt, David. 1995. ‘Prefigurations of the Vietnamese Revolution.’ In Articulating Hidden Histories, edited by Jane Schneider and Rayna Rapp. Berkeley: University of California Press. Huong, T. 1994. Effect of Broadening Democracy in the Transition to Market Reform in the Countryside. Ho Chi Minh City: National Political Institute. INSA (Institut National Des Sciences Agronomiques). 1995. L’Agriculture du Delta du Fleuve Rouge (The Agriculture of the Red River Delta). Hanoi: Maison d’Edition de 1’Agriculture. Irwin, George. 1995. ‘Vietnam: Assessing the Achievements of Doi Moi.’ Journal of Development Studies 31 (5):725–750. Joiner, C. 1990. ‘The Vietnam Communist Party Strives to Remain the Only Force.’ Asia Survey 30:1053–1065. Kautsky, K. 1899/1906. La Question agraire (The Agrarian Question). Paris: Maspero.
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Kerkvliet, Ben. 1993. State-Village Relations in Vietnam. Working Paper. Centre for Southeast Asian Studies, Monash University, Clayton, Australia. ——1995. ‘Rural Society and State Relations.’ In Vietnam’s Rural Transformation, edited by B.Kerkvliet and D.Porter. Boulder, CO: Westview. ——and M.Selden. 1995. ‘Cycles of Agrarian Transformation in China and Vietnam.’ Unpublished manuscript. State University of New York, Binghamton. Kolko, Gabriel. 1995. ‘Vietnam since 1975.’ Journal of Contemporary Asia 25 (1): Kornai, J. 1992. The Socialist System: The Political Economy of Communism. Princeton, NJ: Princeton University Press. Lam, C. 1993. ‘Doi Moi in Vietnamese Agriculture.’ In Reinventing Vietnamese Socialism: Doi Moi in Comparative Perspective, edited by W.Turley and M.Selden. Boulder, CO: Westview. Lampland, Martha. 1995. The Object of Labor. Chicago: University of Chicago Press. Leipziger, D. 1992. Awakening the Market. World Bank Discussion Paper 157. Washington, DC: The World Bank. Lipworth, G. and Spitaller, C. 1993. Vietnam Stabilization and Reform 1986–1992. IMF Working Paper. Washington, DC: International Monetary Fund. Ljunggren, B. 1994. ‘Beyond Reform: On the Dynamics between Economic and Political Change in Vietnam.’ Paper presented to Doi Moi, the State and Civil Society Conference, Canberra, Australia, November 10–11. Long, N. 1993. ‘Reform and Rural Development.’ In Reinventing Vietnamese Socialism: Doi Moi in Comparative Perspective, edited by W.Turley and M.Selden. Boulder, CO: Westview. Luong, Hy van. 1992a. Revolution in the Village: Tradition and Transformation in North Vietnam. Honolulu: University of Hawaii Press. ——1992b. ‘Local Community and Economic Reform: A Microscopic Perspective from Two Northern Villages.’ In The Challenges of Vietnam, edited by N.Jameison et al. Honolulu and Fairfax: East-West Center and George Mason University. ——1994. ‘The Marxist State and the Dialogic Restructuration of Culture in Rural Vietnam.’ In Indochina: Social and Cultural Change, edited by D.Elliot et al. Monograph Series 7, Keck Center for International and Strategic Studies. Claremont: Claremont McKenna College. McKinley, Terry. 1995. The Distribution of Wealth in Rural China. Boulder, CO: Westview. Marr, D. 1994. ‘The Vietnamese Communist Party and Civil Society.’ Paper delivered to the Doi Moi, State and Civil Society Conference, Canberra, Australia, November 10–11. Mellor, John, 1993. An Agriculture-led Strategy for the Economic Transformation of Vietnam. Rome: Food and Agriculture Organization. Men, N.T. 1995. ‘Vietnamese Agriculture in a Centrally Planned Economy and in the Transition to a Market Economy.’ Working Paper Series 197. The Hague: Institute of Social Studies. Murray, C. 1980. The Development of Capitalism in Colonial Indochina (1870–1940). Berkeley: University of California Press. Oi, J. 1998. Rural China Takes Off. Berkeley: University of California Press. Pike, D. 1992. ‘Vietnam in 1991: A Turning Point.’ Asian Survey 32:1. ——1994. ‘Vietnam in 1993: Uncertainty Closes In.’ Asian Survey 34:1. Pillot, D. 1995. ‘La Fin des cooperatives,’ Les Cahiers d’Outre Mer 48:107–129. Pingali, P. and V.Xuan. 1992. ‘Vietnam: Decollectivization and Rice Productivity Growth.’ Economic Development and Cultural Change 16:697–718. Porter, G. 1993. Vietnam: The Politics of Bureaucratic Socialism. Ithaca, NY: Cornell University Press. Porter, D. 1995. ‘Economic Liberalization, Marginality and the Local State.’ In Vietnam’s Rural Transformation, edited by B.Kerkvliet and D.Porter. Boulder, CO: Westview. Pryor, F. 1991. ‘Third World Decollectivization.’ Problems of Communism 12:97–108. ——1992. The Red and the Green. Princeton, NJ: Princeton University Press.
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Quang Truong. 1987. ‘Agricultural Collectivization and Rural Development in Vietnam’, PhD dissertation, Free University of Amsterdam. Quy, C. 1994. Personal interview (Chairman, Vietnam Integrated Rural Development Program). Berkeley, November 29. Rice Paper. 1996. Electronic newsletter, Mekong Foundation:
[email protected]. Riedel, J. 1993. ‘Vietnam: On the Trail of the Tigers.’ World Economy 16 (4):401–422. Sachs, J. and M.Woo. 1993. ‘Structural Factors in the Economic Reforms of China, Eastern Europe and the Former Soviet Union.’ Paper presented to the Economic Policy Panel, Brussels, Belgium, October 22–23. Selden, M. 1993. ‘Agrarian Development Strategies in China and Vietnam.’ In Reinventing Vietnamese Socialism: Doi Moi in Comparative Perspective, edited by W. Turley and M.Selden. Boulder, CO: Westview. Shirk, S. 1993. The Political Logic of Economic Reform. Berkeley: University of California Press. Szelényi, I. 1988. Socialist Entrepreneurs: Embourgeoisement in Rural Hungary. Madison, WI: University of Wisconsin Press. Thayer, A.C. 1992. ‘Political Reform in Vietnam.’ In The Development of Civil Society in Communist Systems, edited by R.Miller. Sydney: Allen and Unwin. Tonnesson, S. 1992. Democracy in Vietnam. Report 16. Copenhagen: NIAS. Tran, D. 1991. Socialist Economic Development and the Prospects for Economic Reform in Vietnam. Working Paper 2. East-West Centre, University of Hawaii. Truong Chinh and Vo Nguyen Giap. 1937/38 [1974]. The Peasant Question (trans. C. White), Asian Studies Data Paper 94. Ithaca, NY: Cornell University. Turley, W. and M.Selden (eds.). 1993. Reinventing Vietnamese Socialism: Doi Moi in Comparative Perspective. Boulder, CO: Westview. UNDP. 1990. Report on the Economy of Vietnam. Hanoi: United Nations Development Program. Verdery, K. 1996. What was Socialism, and What Comes Next?’ Princeton: Princeton University Press. Vietnam. 1992. Constitution of the Socialist Republic of Vietnam. Hanoi: Government Press. ——1993. ‘Vietnam: A Development Perspective.’ Prepared for the Donor Conference, Hanoi, Vietnam. Walder, A. 1994. ‘Corporate Organization and Local Property Rights in China.’ In Changing Political Economies, edited by V.Milor. Boulder, CO: Westview. ——1994a. ‘The Varieties of Public Enterprise in China: An Institutional Analysis.’ Unpublished paper. Department of Sociology, Harvard University. Walder, Andrew (ed.). 1995. The Waning of the Communist State. Stanford, CA: Stanford University Press. White, C. 1985. ‘Agricultural Planning, Pricing Policy and Cooperatives in Vietnam.’ World Development 13:97–114. World Bank. 1993. Vietnam: Transition to the Market. Washington, DC: World Bank. ——1995. Viet Nam: Poverty Assessment and Strategy. Washington, DC: World Bank.
Part II Revolutions The collapse and restructuring of agrarian systems during the post-communist crisis of transformation
8 The treadmill of socialist reforms and the failures of post-communist ‘revolutions’ in Russian agriculture Is there an alternative? Sergei Nickolsky
In this chapter I analyze the process of economic transformation in Russia since the mid-1980s, relying on the theoretical framework proposed by János Kornai and presented in Chapter 1. According to Kornai, reforms of socialist economies must address such issues as decentralization, overcoming accelerated growth, price reform, property reform, and democratization, and unless socialist nations succeed in addressing all these issues, their efforts to institute reform are likely to end in failure. This approach enables us to make cross-national comparisons and judge a country’s progress and the outcomes of reform. It would be unwise, however, to use this approach exclusively, for reform issues or problems Kornai identified cannot be ordered into some universal sequence. The progress of each individual country as it tries to implement certain reforms in a particular sequence will vary depending on its history, population, and other factors. For instance, this chapter hypothesizes that while in Eastern Europe land ownership was indeed a crucial problem to be solved, this was not the case in Russia. I will argue that in Russia the first problem that must be addressed is the question of social justice rather than land ownership. Soviet agriculture was and is eminently inefficient. This inefficiency however was primarily caused by the Soviet obsession with industrialization which led to reallocation of resources from agriculture to industrial development, ultimately exploiting the peasantry and the countryside. Overcoming what Kornai called ‘accelerated growth,’ creating a fairer, more equitable allocation of resources between industry and agriculture, city and countryside, would go far toward resolving the problems of inefficiency and inequity. The Russian peasantry has too long been abused and exploited. No reform scenario has a chance to succeed or to receive the support of the peasantry unless the peasant sees that the plan does address the problem of social justice. Reforms implemented forcefully by the government without the approval of the peasantry can only destroy agriculture and set the country back to subsistence production. The great Russian economist Nikolai Kondratiev wrote in 1917 that first, rational reform has to be pragmatic and proceed step-by-step; second, it must improve productivity; and third, it must guarantee social justice, which means that peasants 191
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should be persuaded that reforms will assure a decent living standard for all members of the rural community.1 Judged according to these criteria, reforms implemented between 1991 and 1995 were not rational. They were imposed on the countryside, many of their components existed on paper and were never actually implemented, and those measures which became effective merely disrupted existing institutions and thus resulted in a decline toward subsistence economy. Evaluating this situation inside Kornai’s framework, one concludes that reform efforts failed because the Russian government during the past few years focused its efforts exclusively on the reform of ownership without solving first the inequity in prices between agriculture and other sectors of the economy and without solving the problem of harmonious growth, thus without eliminating the unequal distribution of resources between industry and agriculture. To foreshadow the conclusions of this chapter: in my view, the sequence of reform measures most appropriate under Russian conditions would begin with prices and harmonization of growth. After this is achieved, a gradual, relatively slow, step-by-step movement toward private ownership is imaginable. Democratization and decentralization can come only last. As such a reform progresses, the role of the state will eventually change. In the first phase—as a country establishes equitable prices and reallocates resources—a strong government is needed. During the phase of property reform, the role of government can be somewhat reduced, and the third phase assumes a rather weak state. These conclusions derive from an analysis of the current conditions of Russian agriculture and an assessment of possible options for the nation’s future development. WAS REFORM NECESSARY? THE POLITICAL ECONOMY OF RUSSIAN AGRICULTURE, 1985–90 Condition of agriculture before 1985 and reform attempts by Khrushchev and Brezhnev In Soviet literature the concept of the ‘agricultural complex’ was frequently employed. This phrase referred to the whole agrarian system, which included agriculture and forestry, its infrastructure, food processing, and distribution. Those sectors of the industry which produced resources or equipment for agriculture were also regarded as parts of the agricultural complex. This agricultural complex produced about a third of the nation’s GNP before 1991; about a third of the workforce was engaged in agriculture and in industries related to agriculture. Throughout the whole Soviet epoch, agriculture constituted a major branch of the economy. Despite the extraordinary importance of the agricultural complex for the whole Soviet economy, agriculture was largely neglected and mismanaged during most of the Soviet epoch. Collectivization proved disadvantageous to agriculture in at least two ways. First, the purpose of collectivization was to rechannel resources
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from agriculture to industry, to support what Kornai calls the strategy of accelerated growth. Second, collectivization as it was carried out during the early 1930s produced a poorly organized form of agriculture. Firm sizes were too large, food processing was inadequate, the system of distribution of food was inefficient. As a result, agricultural production stagnated between 1930 and the early 1950s; this situation was aggravated by distribution problems and ultimately resulted in chronic urban food shortages. Not until Khrushchev ascended to power in 1953 were these problems recognized by the Soviet leadership. Khrushchev tried to address the organizational problems of agrarian production. Almost immediately in 1953 he implemented some degree of agricultural management decentralization, decreasing decision-making power at the level of the kolkhoz (collective farm). He allowed peasants to cultivate private plots, and he expanded peasant markets. During the late 1950s and early 1960s, he also initiated an expansion of agricultural production into new areas; new virgin lands were opened up for agrarian production in Khazakhstan and West Siberia. Khrushchev’s reforms tended in the right direction and produced results: food supplies in cities improved substantially. His reforms, however, were not sufficiently radical. In terms of organizational matters, Khrushchev went a long way towards decentralization, but failed to address the problem of ownership relations. Problematic relationships between producer and land, producer and means of production, remained unresolved. Furthermore, under Khrushchev the strategy of encouraging extensive and accelerated growth continued. The imbalance between industry and agriculture persisted; agriculture continued to subsidize industrial development, and Khrushchev tried to increase agrarian production not by channeling more resources into agrarian production, but by extensively expanding the amount of land under cultivation. Like his predecessor, Brezhnev was sensitive to the political problems food shortages represented, and he attempted to address the issue, but his approach was rather different from Khrushchev’s. In one respect he went beyond Khrushchev, since he tried to deal with the imbalance between industry and agriculture. During the Brezhnev era, agriculture did receive investments proportionate to its role in the national economy. In another respect, however, Brezhnev’s approach retreated from progressive advances implemented by Khrushchev, for Khrushchev was a decentralizer who increased the autonomy of peasant producers, while Brezhnev was a recentralizer and a bureaucrat. Instead of continuing the organizational reforms Khrushchev had begun, Brezhnev tried to solve the Soviet agrarian problem by throwing money at it. Between 1965 and 1985 for instance about 28 percent of all investments were allocated to the agricultural complex.2 Ironically the more resources he channeled into agriculture, the more bureaucratic structure he required and established to manage these resources. As a result, the size of kolkhozes grew, and investments in agriculture created an organizational structure that imitated industry’s. The increased investment inflow created large scale, industrial-type complexes. These investments had results; agricultural production and productivity substantially increased. But this increase had a very high cost. Most of the new
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investment was oriented towards technology and the production of equipment and development of technology. The number of tractors and combines produced greatly increased and industrial-type buildings were erected at a fast rate to house the new means of production and its technology. This expansion also coincided with the rapid increase in the use of chemical fertilizers and pesticides. In other words, this strategy was highly capital intensive and not particularly friendly towards the environment. Growth was achieved at prohibitive financial and environmental costs—this was unsustainable growth indeed. The Brezhnev regime’s neglect of agricultural production’s organizational problems had negative consequences as well, for the enormous investments being managed by bureaucrats created an agricultural system prone to imbalances. One important indicator is that food consumption did not increase as rapidly as food production. According to some estimates, as much as 40 percent of all food produced was wasted; it never reached the consumers. (For faster growth of food production than consumption, compare Tables 8.1 and 8.2.) Conditions of agriculture 1985–90 and Gorbachev’s reform attempts In terms of investments and growth of production, improvements of productivity during the Gorbachev years were extensions of progress initiated during the Brezhnev era. The amount of investment in maintaining constant prices during Table 8.1 Russian agricultural production by selected crop (million tons), 1981–943
Table 8.2 Russian per capita food consumption by selected item (kilograms), 1985–94
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4
Table 8.3 Investment in Russian agriculture, 1981–93 (in 1991 prices)
Gorbachev’s years even increased (Table 8.3); there was substantial growth in the production of major crops. A change in investment policy was instituted under Gorbachev, however, as the government directed a substantial proportion of investments into the food processing industry, for Gorbachev was committed to trying to solve the persistent problems that hampered food distribution and resulted in food shortages. Unlike Brezhnev, Gorbachev appreciated that money alone would not solve the problems of Russian agriculture—organizational reform was also needed. In this respect he returned in certain ways to the reform spirit of the Khrushchev era. Gorbachev was particularly aware of the regional diversity of Russian agriculture and the impossibility of managing it from a central headquarters; thus decentralization of the system of decision making was granted high priority as part of his reform agenda. Gorbachev also supported the maintenance of private plots by kolkhoz peasants. In this respect he even moved beyond Khrushchev, who after initial support of private plot farming succumbed to bureaucratic pressure, so that by the early 1960s he began to discourage production on individual plots— especially commodity production. In terms of decentralization and support for private plots, Gorbachev pursued rather coherent policies. On the whole, then, the 1985–90 epoch was an era of great promise. Gorbachev combined the strength of the policies of Khrushchev and Brezhnev; he pursued a policy of decentralization and encouraged more autonomy for the agricultural firms and peasants, and he also still had resources to spend in the agrarian sector. He continued the harmonization efforts of the Brezhnev era. The Gorbachev reform policies suffered from major shortcomings, however. The fundamental weakness of his policy was that he did not confront the problem of ownership; in fact, until the very end of his rule he did not even realize that property reform in agriculture would eventually be necessary. This shortcoming in his reform scenario was not accidental. His major ambition was to keep conservatives and pragmatists working together—a task finally impossible to accomplish. Thus until the bitter end, for instance, he retained Ligachev on his team and in command of agrarian policy. The main aim of the conservatives like Ligachev was to maintain communist ownership relations intact. Fearful of losing the support of this faction, Gorbachev never really asked the question whether communist property rights are sustainable, not even intellectually. He remained faithful to the ideal of communism, and he left property relations unreformed.
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During 1985–90 few efforts were made to resolve the price problem either. Agrarian prices remained low, which meant there were no sufficient incentives for collective farms and farmers to produce. Gorbachev’s neglect of this aspect of reform may again have been the consequence of his unwillingness to bite the bullet and alienate the urban population—in particular the urban working class—with higher food prices. The implications for agricultural production, however, were negative. AGRARIAN RESTRUCTURING AFTER 1991 AND YELTSIN’S AGRICULTURAL REFORMS With the fall of Gorbachev, Yeltsin became responsible for guiding Russia’s agricultural reforms. Yeltsin has shown himself to be committed to radical reform and certainly cannot be accused of being insufficiently radical. Furthermore, unlike his predecessors, Yeltsin has indeed focused on changing property relations. Still, the results of his policies have been devastating. Since 1991, Russian agriculture has experienced a crisis of declining production, productivity, and employment which has been deeper—though not as costly in human life—than the crisis created by Stalinist collectivization. Why? The main hypothesis of this chapter is that Yeltsin’s radicalism has been misdirected. First, this leader has sequenced his reform measures incorrectly. Rather than starting with decentralization and channeling resources into agriculture, he tries to start the process with changes in property rights, assuming that ownership reform will automatically solve all other problems. A further hypothesis of this chapter is that Yeltsin and his economic advisers try to implement the wrong sort of property reform; they have simply attempted to borrow the Western institution of private property and to create ‘capitalism by design.’ In conclusion, this chapter will argue that ownership reform is indeed vitally important, but it must come at a somewhat later stage, and it has to pass through a process of trial-and-error, of experimentation, in order to discover what may be a new form of ownership appropriate to the Russian rural conditions. One must acknowledge that Yeltsin has been operating under very difficult circumstances. Implementation of reform in Russia after 1991 was not an easy task. Reform legislation passed by Yeltsin’s government since 1992 will be discussed, followed by a discussion of case studies and peasant movements, which highlight the many problems encountered by those who have attempted to implement agricultural reforms. I conclude this section by offering a description of the current state of agriculture in Russia. Break in reform: why reform in Russia was particularly difficult to implement During the whole history of the Soviet Union, Soviet agriculture has faced even more severe problems than agriculture in East European socialist countries. There are a number of reasons for this.
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First, socialist economies typically use agriculture to subsidize economic growth. The Soviet Union has been unique, however, in its concentration on military development, so that from the very beginning agriculture was treated as a major resource to build up the military might of the Soviet World Empire. Second, the size and diversity of the Soviet agrarian system aggravated the difficulties encountered by bureaucrats and policy makers attempting to manage this centrally planned economy. Because the agrarian sector in the Soviet Union was huge, characterized by widely varying geographical, climatic, and other conditions, the task of centrally planning such a sector was particularly difficult. Third, since 1917 there have been too many changes in the agrarian policies of Russia and the Soviet Union, namely Stolypin’s reforms of 1906,5 were followed by War Communism (1918–21),6 by the New Economic Policy (1921– 9),7 forced collectivization (1929–35),8 Khrushchev’s reform, Brezhnev’s antireforms, Gorbachev’s reform attempts, and the current wave of agrarian restructuring. The aims, tasks, and methods of these policies were highly contradictory. Fourth, while on the whole there has been too much unpredictability and fluctuation in Russian agrarian policies, there have been too few reforms implemented in one area where change would have been desirable, namely, in ownership relations. Because property rights were frozen with collectivization for a half a century, for too long it was impossible to determine who the real owners of the land and agricultural means of production might be. Finally, in Russia ideology played a greater role than in China or in Eastern Europe. The Russian population is better educated than the Chinese, and therefore ideology is more important for them. While in Eastern Europe communism was superimposed on societies by Soviet military force, in Russia communist ideology was more deeply rooted. Therefore, in Russia successful reform required more effort to revise and redefine ideology than elsewhere. This may be one of the reasons for Gorbachev’s failures. He did not go far enough in creating a new ideology. He remained too much within the framework of ‘reforming socialism’ and therefore lost potential support from among those who could have been won over by a more radical ideological break with the past. He lost the potential support of pragmatists even within the party due to his relative ideological conservativism. In these ways, the situation of Russia as it attempts to reform agriculture is distinctive. There is one common problem that all post-socialist economies face, however, and in this respect, Russia is in the same boat with Eastern Europe. All post-socialist economies have been hampered by resource-poor environments as they have attempted to institute major restructurings which ideally require substantial resources. When Gorbachev tried his reforms, the conditions in this respect were somewhat better. Reasonably good financial and technical resources were available to him, and agricultural enterprises had assets they could rely on to support them during the meager few years of restructuring. Unfortunately,
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these resources were exhausted and wasted by Gorbachev’s unsuccessful reform attempts. There were also organizational resources available until the early 1990s; pragmatic agricultural experts could be found in agricultural firms, and even in government and the party, there were research establishments which could have facilitated reform in earlier times. Gorbachev was unable to exploit these organizational resources because he kept making too many concessions to the conservatives in order to maintain the unity of the party. These conservatives managed to marginalize the pragmatists and block the reform process. As a result, by 1991 not much remained from these organizational resources, and much of what did survive was destroyed, a loss which makes formulation and implementation of reforms all the more difficult. Reform legislation of Russian governments under Yeltsin’s presidency One of the first legislative measures of the newly formed Russian government in 1991 was to pass a presidential decree aimed at a radical transformation of property rights in the Russian agrarian system. On December 27, 1991, just a few days after the dissolution of the Soviet Union, the presidential decree called ‘Procedures for the Reorganization of Kholhozes and Sovhozes’ was announced. This decree ordered that a reorganization of all agricultural organizations, kolkhozes and sovhozes, had to take place during the year 1992. It made the local authorities responsible for insuring that members of the former collectives would be allowed to start their individual farms expeditiously. In order to facilitate this action, all state and collective farms were expected to be transformed in a matter of twelve month into joint-stock companies, limited liability companies, or other similar private business enterprises. The decree guaranteed the rights of individuals to purchase, sell, or mortgage land without any restrictions. Those who tried to circumvent these rights were threatened with criminal prosecution. The December 27, 1991 decree was indeed a radical departure from earlier legal or constitutional regulations of land ownership and agricultural businesses. The Russian Constitution during Soviet times prohibited private ownership of land and made a critical distinction between collective and state farms (though in practice, the two forms were not all that different from each other). As recently as April 25, 1991, during the last month of the existence of Soviet power, a decision by the Supreme Soviet did allow private ownership of land, but sustained the legality of kolkhozes and sovhozes, which were later condemned to extinction. The transformation of ownership rights was much slower, though, than the authors of the December 27, 1991 decree had anticipated.9 The transformation of kolkhozes and sovhozes was not completed in a year. During early 1993, daily newspapers published articles by respected economists who complained about the slow pace of the reform and accused kolkhoz and sovhoz directors of obstruction.10 By the end of 1993, 93 percent of the enterprises re-registered themselves, but
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only 59 percent formally became joint-stock companies; 34 percent registered again as kolkhozes or sovhozes. On October 27, 1993, in order to put the reform back on track, a new presidential decree was announced: ‘Regulation of Land Relations and Development of Agrarian Reform in Russia.’11 This decree reconfirmed the unrestricted right to individual land ownership, though it allowed individuals not only to join joint-stock companies, but also to form cooperatives with or without foreign capital investment. The decree did allow individuals to unite their land shares into common property. This decree made an effort to create mechanisms through which the transfer of former state or collective property ownership to individuals would be accomplished. One probable reason for the ineffectiveness of the December 27, 1991 decree might have been that it did not spell out how the transferal of ownership was supposed to happen. The October 27, 1993 decree addressed this vital question and proposed a solution. The key institution of this property transfer was the so-called ‘certificate.’ All property (both land and means of production) owned by a former state or collective enterprise was now ordered to be distributed among its members or workers. People with longer service records or higher incomes were to receive certificates of proportionally higher value. Ownership of such certificates, however, did not entitle the individuals to any identifiable pieces of land or equipment—it granted only title to a certain percentage of the monetary value of the assets of the formerly collective enterprise. While the October 27, 1993 decree made an effort to be specific concerning property right transfer mechanisms, actual transfer of ownership was rendered extremely difficult due to the absence of a land market. Without a market for the land, it was difficult to establish a value for land. This is incidentally a problem Russian agriculture has been struggling with for a very long time. Already in 1861, after emancipation, at a time when reformers were committed to sell portions of the landlords’ property to the newly emancipated peasants, it turned out there was no objective way to determine what the price of land should be.12 The same dilemma paralyzed reform more than a hundred years later. Therefore the October 27, 1993 decree was soon amended by another presidential decree on ‘State Land-cadastre,’ which sets up at government expense an organization of specialists to evaluate each piece of agricultural land in Russia so that its price may be determined. The Yeltsin administration was rather disappointed with the slow implementation of their second decree. In February 1995 a report was prepared by the Research Center on Economic Policy, operating at the President’s Office under the direction of P.Filippov.13 The report claimed that ‘many peasants stood up for divided small farms, but they encountered opposition from directors of kolkhozes and sovhozes who do not want to lose their power.’ The report also warned the government about the dangers of the ‘populist slogans of the Agrarian and Communist Parties.’ The report urged the government to take ‘preventive measures’ against the Agrarian and Communist parties.
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Indeed in July 1995, Parliament passed a new law, which was supported by the Communists and the Agrarians. The Communists, headed by Zhyuganov, still maintain the necessity of land nationalization, but in this piece of legislation they compromised with the Agrarians, headed by Lapshin, who prefer to leave land ownership in the hands of the cooperatives. The new law constitutes a retreat from the October 27, 1993 presidential decree. The aim of the July 1995 law is to retain ownership of land and means of production within collective enterprises and to prevent, or at least curb, the development of private farms, be they individual or agribusiness enterprises. The Liberals, led by Gaidar, opposed the new law, but they failed to muster more than a quarter of the votes and so lost out on this issue. Yeltsin in this matter supported Gaidar and opposed the July 1995 law. The political deadlock thus continues. Yeltsin’s decrees and the measures of his opposition are all centered around the issue of ownership. All of Yeltsin’s decrees aim at the creation of private ownership modeled on the North American and West European types, but little or no effort is being made to address the other issues and difficulties confronting the Russian agrarian system. Again, the problem with current reforms is excessive emphasis on property reform. Leaders have invested too much faith in the proposition that the simple replication of the Western system of private ownership will automatically solve all other problems, and for this reason, no real effort is being made to deal with other dimensions of the post-socialist agrarian dilemma, such as decentralization, shortage of resources in agriculture, and the problem of prices. All Russian reform attempts so far have failed because they were all—in different ways—incomplete and/or sequenced inappropriately. Table 8.4 summarizes schematically, from this point of view, reform attempts and their shortcomings since Khrushchev. Case studies of implementations Belaya Kolp, Shakhovskoy district, Moscow oblast: the ‘Shakhovskoy way’ I carried out an investigation in a sovhoz located in Belaya Kolp to monitor the social effects of the implementation of post-1991 agrarian reforms.
Table 8.4 Unevenness of reform measures in different epochs of Soviet/Russian history
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My impression was that ordinary people were first surprised by the December 27, 1991 decree, but eventually they concluded that it would not affect them in any significant way. The leaders of the sovhoz, on the other hand, responded quite differently. Having immediately understood the opportunities that ‘privatization’ represented for them, they had begun a process of spontaneous privatization. As a first step, they sold themselves the most valuable equipment of the sovhoz: cars, shops, instruments of production. As a next step, they began to purchase dairies, other agricultural buildings, and land as well. With members of their families and friends they then formed small cooperatives. Meanwhile the sovhoz reduced its production substantially; production now measures a third less of what it used to be. The sovhoz leadership managed to maintain the financial stability of the sovhoz by borrowing heavily from banks after resources previously redistributed by the government dried up. The sovhoz management therefore followed a dual strategy: to create efficient small private firms on the side, but retain its position in the collective, where it could unload liabilities on publicly owned banks and, in the worst case scenario, create a situation that would eventually require those same banks and their owner—probably some government agency—to bail out the exploited sovhoz. Peasants could not benefit from these opportunities for spontaneous privatization. Their best bet was to try to cultivate the limited land at their disposal. Many were able to cultivate 25–30 sotkas of land (1 sotka=0.01 hectare), which was just enough on which to keep a couple of cows and pigs and grow sufficient potatoes and vegetables to feed themselves and their urban relatives. As a result, a subsistence economy took root and spread. The growth of these tiny subsistence farms, however, could not compensate for the decline of production which resulted from the disintegration of the large estates. Finally a substantial proportion of the population of Belaya Kolp, probably as much as 20–25 percent of the former employees of the sovhoz, was made up of workers unable or unwilling to join any of these new forms of agrarian production. Excluded from the process of spontaneous privatization, these people could not run their mini-private farms, and so they were—and are—doomed to become the future lumpenproletarians of the village. Balakhninskii and Gorodetski districts, Nizhegorodskaya Oblast: the Nizhegorodskii experience The events I am reporting here took place between November 1993 and March 1994. During this time period, I spent altogether seven days with several of my colleagues in this area, monitoring a major experiment in privatization that was advancing under the guidance of IMF, supervised by V.Ya.Uzon himself. This experiment was of such importance that even the prime minister, V.S. Chernomyrdin, visited one of the auctions where land and property shares were being auctioned off in accordance with IMF guidelines. The idea was to create a model in Nizhegorod to show how privatization could be accomplished through auctioning communal assets in exchange for certificates.
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I followed particularly closely the process of privatization in one agricultural enterprise called ‘Pravdinskoe.’ In this firm, after long deliberation, all members and pensioners became owners of an equal amount of land certificates (5.96 hectares) and unequal amounts of property certificates. After this was achieved, those participants who were most alert tried to advance two different procedures for the implementation of actual privatization. Neither one of these procedures was ideal, and neither one resulted in an equitable distribution of property among all the former members of the firm. First, some subdivision heads of the former collective enterprise tried to persuade the members not to sell their property certificates, but to leave them with the subdivisions. In this way, the former management of the collective would have been able to retain power and control. But this plan did not quite work. Just before the auction, a farmer who had left the sovhoz about a year earlier purchased, with the help of his brother, certificates from some sixty-seven pensioners. While the subdivision heads offered modest rents in exchange for their use of land and equipment, this farmer spent more than 60 million rubles to purchase the certificates, and in this way he became owner of 366 hectares of land, twelve tractors, and other equipment. One subdivision head also broke rank and decided to lease land directly from peasants. This man was the head of a machine repair unit, which had been left without work since the virtual dissolution of the sovhoz. Faced with unemployment, the subdivision head promised his former workers to provide them with potato if they allowed him to use their land. Many agreed, and in this way he also gained access to some 350 hectares of land. As a result, before the auction could take place already some 700 hectares from the original 3000 hectares were ‘privatized’ in various ways. The auction itself was messy. One peasant bought a trailer, but it turned out to be lacking wheels. Another bought the roof of a garage, but the garage was nowhere to be found. The final outcome was that management purchased most of the valuable assets, and peasants were left frustrated. My two case studies demonstrate that privatization, regardless of whether it is conducted spontaneously or through an apparently competitive auction, leads to one result. Like the ‘enclosure movement’ in early modern Britain, privatization is a mechanism that effectively separates direct producers from the means of production. The beneficiaries turn out to be those who were previously in charge of agriculture or who appreciated the opportunities for amassing property and jumped on board early. The rise and fall of family farming in contemporary Russia The Russian authorities followed a dual strategy: they tried to destroy the large collective farms, and they attempted at the same time to establish market-oriented family farms. Below I review the social struggles that complicate the establishment of contemporary family farms.
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Though in certain regions before 1990 local authorities initiated the process granting land to the people for the purpose of agricultural production, after 1990 the transferal of agricultural land to the people proceeded on a massive scale. (The Orlovskaya oblast is one rather successful example of early experiments with family farms.) In January 1991 some farmers established an Association of Individual Farms and Agricultural Cooperatives of Russia. There were 4400 farms in the country at the time. In December 1991 the Supreme Soviet issued two laws: ‘Regarding the Land Reform’ and ‘Regarding Peasant’s [Farmer’s] Enterprise.’ Just one month later, the Russian government decided to allocate special funds to support family farmers. I distinguish three stages in the process of the development of family farms in Russia from the late 1980s to the first half of the 1990s. During the first stage—from the end of the 1980s until 1991—there were few family farms, but those that did exist received substantial support from the government. During the second stage—from 1992 until the middle of 1993—the number of family farms grew rapidly, but peasants began to lose hope that they would receive sufficient governmental support. During the third stage—from the middle of 1993 until the present—peasants became disillusioned, and the government began to curtail family farms. During the first quarter of 1994, for instance, the number of family farms declined in absolute terms for the first time since the fall of communism. During the first four years of post-communism, until October 1, 1994, the number of farms increased up to 285,000, and individual farmers owned or rented 5 percent of the agricultural land in the country. In 1993, farmers produced on these lands 2 percent of the nation’s gross agricultural output, including 5.2 percent of the gross grain harvest. Statistically, the average family farm owned a little more than two head of cattle and approximately one cow—on average, 0.7 cow. It also contained, on average, one pig and five sheep. While family farms thus expanded slightly during these years, the collective farms rapidly decayed: in 1993 the collective farmers reared a third of the number of cattle, pigs, and sheep they had raised previously and produced a gross output 40 percent lower than the output of 1990. According to the data of the State Committee for Statistics in 1993, 20 percent of Russia’s agricultural land was not cultivated at all. And this is not surprising. Farmers on average owned five tractors, two plows, and two seeding machines for ten households. Typically speculators had bought up most of the equipment originally owned by the collectives, often at specially low prices offered to them by government officials. In Belgorodskaya oblast, I visited the farm of one such speculator, who owned only one hectare of land but had six brand-new T-54 tractors. Conditions for beef and dairy farmers were particularly difficult. In 1993, only one in fifteen cattle farmers had appropriate stables for cattle raising. More than half of the stock-breeding farms in the country have no water-supply; one third have no electricity; almost none have access to paved roads. In one of the Vologodskaya oblasts, for instance, in the beginning of 1994 there were 10,614
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registered farms. In order to serve these farms appropriately, 1385 kilometers of roads and 660 kilometers of electric-power transmission lines should be built. Given the current level of investment capital provided for this oblast by the government, it would take sixty years to build those facilities. And this region may be quite typical. Under these circumstances, it is not surprising that family farms could only produce 0.7 percent of the meat and 0.5 percent of the milk in the country. While the government insisted that it wished to replace the ‘semi-feudal’ kolkhozes and sovhozes with family farms, family farmers did not receive sufficient credit from the government to start production. The government did promise loans with low interest rates, but the Yeltsin-Gaidar policy of ‘financial stabilization’ at any price, which was initiated in the beginning of 1992, left the farmers without resources. Towards the end of 1993 and the beginning of 1994, the government—emphasizing the need to control inflation—stopped paying for agricultural goods it had purchased from farmers and in this way ruined many of them. The majority of new family farmers thus have felt cheated. The radical reformers have blamed the ex-communist opposition, and insisted that the decay of family farming happened as a result of their interference, despite the good will and best efforts of the government. It is not obvious which governmental actions are indeed responsible for the disintegration of Russian agriculture: ‘sabotage’ by the Old Guard, or mindless reforms instituted by the new elite. The right question to ask is this: who can better cope with the challenges of these times, the new family farmer or the kolkhoz member? The evidence at our disposal seems to indicate that those who operate within the old framework may be better served. We can look, for instance, at the Orlovskaya oblast, one of Russia’s most stable agrarian regions. The first farms in Orlovskaya oblast were established in a rather unusual way, at least judged by Russian standards. The first farming families rented land (semeinaya arenda) within the large enterprises. The initiator of this experiment was the former First Secretary of the CPSU regional Committee (Obkom) and present head of regional Administration, Doctor of Economics E.S.Stroyev. Under this system the peasant family rented land and cattle from the large enterprise for a period of three to five years, and during this time it operated on its own. Under this system, non-economic and economic methods of coercion, so frequently applied in the kolkhozes and sovhozes, lost their significance. The families that now rented their farms were rather different from families that operated only with a family contract (podryad). The renter families, unlike the contract families, had their own bank accounts, and their aim was eventually to buy the means of production rented from collective farms. In time, renter families also began to purchase the land. In the first stage of this process, family farmers could purchase the land only from the District Redistributive Fund—thus from an organization which did not have the resources to cultivate the land—but not from collective farms.
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It turned out that this arrangement worked better economically and psychologically than a simple, abrupt ‘exit’ from collective farms, which was met with resistance and misgivings. Initially the government offered substantial financial support to such individual farmers, and this gave hope to many people. By the end of 1991, however, the policy unexpectedly changed and suddenly the government’s stated aim was to increase quickly the number of private farm owners who were strictly self-reliant, that is, not bound to the collectives. What were the social consequences of this rather sudden change? First, easier access to the land brought families to farming who did not have much experience with agriculture and who were certainly not much interested in the sustainable development of agriculture. They believed that starting a farm would provide them with the opportunity to purchase land, sometimes in large quantities, and that this land would eventually become a major source of private wealth and a vehicle for exploiting the labor of others. The government tried, with little success, to enlist into farming a substantial number of former military men. After a nationwide campaign to accomplish this policy, only 0.72 percent of the country’s farms had been acquired by former military men. Still a great number of people were attracted by these programs into agriculture, many of whom had never lived in the countryside before and thus had little special training or practical experience in agriculture. Some of the newly created farms existed only on paper, not in reality. However, this situation did not worry the new farmers very much, for they were primarily interested in being able to maintain their hold on the purchased land without cultivating it. They thought about the land only as a form of capital-investment. Some of the new family farmers were recruited from among former kolkhoz managers who understood that the political and economic situation was changing irreversibly. These managers realized that their government was committed to moving toward capitalism at any price. These kolkhoz managers therefore distributed the best land to their relatives, who now registered as individual farmers. Some of these new farmers began to produce on the land, while others used it only as investment. In 1994, however, these enterprising new family farmers were forced to confront the inevitable result of their avid land acquisitions: namely the shortage of agricultural land available for purchase. Initially family farmers received land from special local organizations called District Redistributive Funds. Land not cultivated by the collective farms was allocated to individual families. This reserve of land was exhausted very quickly, however, for most members of collective farms did not choose to leave the collective and start up their own private enterprises. Relatively little land was thus available for distribution to individual families, and as a result the average size of a registered individual farm was only forty-two hectares as of January 1, 1994. Most farms remained small: 64 percent of farms had less than twenty hectares of land. Under these circumstances such farms could be only marginally profitable, if they became profitable at all.
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In retrospect, the attempt to divorce individual farms completely from the large collective farms appears to have been a grave mistake, based on the false assumption that private property would automatically solve all the problems of agrarian production. It is easy to increase the number of family farmers, but it is difficult to figure out how they shall operate. Many of the new family farmers found themselves locked into a subsistence economy; they were pressed to earn supplemental cash incomes from entrepreneurial activities outside agriculture, such as selling commodities like cigarettes. Those radicals who created the so-called farmers’ movement, including the president of the Association of Peasant Farms and Cooperatives of Russia, Professor of Economics V.F.Bashmachnikov, and the journalist Yu.D.Chernichenko, did not have very clear proposals for the future to present at the Fifth Congress of the Association in February 1994. They proposed to increase the farmers’ share of land by leasing and selling the land-shares of members of large collective farms, a transferal process that is just beginning. On the whole, family farming in Russia remains rather marginal. Most of the land is cultivated by large estates run by former kolkhoz managers or their associates. The condition of Russian agriculture, 1995 So far, we see that the results of the agricultural reforms of 1991–5 are underwhelming to say the least. Coincident with these reforms, agricultural production has declined rapidly, and the agrarian system is now in the process of disintegration. So far there are no signs to indicate that this decline will bottom out and Russian agriculture might turn around. After witnessing four years of experimentation, concerned scholars and policy makers must now acknowledge the likelihood that economic liberalism is directly responsible for this deep crisis in Russian agriculture and that the reform models it offers may not be adequate or appropriate for Russian social, economic, and cultural conditions. One important result of the 1991–5 reforms of Russian agriculture was that the peasant, after a long period of dependence on the state, became free to own land privately and sell the produce harvested from that land. This transformation certainly had its advantages, since peasants could now try to act as independent producers, without state interference or control, but it also had negative consequences. Peasants were ‘freed’ from significant resources as well; cut loose from dependence on the state, they had to act without government help. Initially a number of peasants believed that the decree of December 27, 1991 was merely another piece of paper reform legislation that would have few real consequences. By 1992–3 however, after they had received their land-share certificates, peasants came to realize that this time the change was real, that the government had indeed divorced itself from the agrarian system, and now they, the individual producers, would have to rely on themselves to survive. The withdrawal of the state from agriculture is economically problematic, however. This process is guided by nineteenth-century liberal ideas, which
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acknowledge no role for government in the process of production. It is doubtful whether this aging thesis will stand up to critical scrutiny or practical tests if it is to be adopted as a guide for the future of Russian agriculture. Sustained agrarian growth may need government support; withdraw all support, and agriculture becomes threatened with destruction. This process of destruction is evident in the changes of industrial input (means of production) and agricultural output (food) prices in Russia since 1991. During 1991–5, the difference between industrial and agricultural prices increased 4.3 times in favor of industry.14 The gap between energy prices and food prices grew even faster; gasoline prices, for instance, increased seven times faster than food prices. In 1995, the incomes of industrial workers were twice the incomes of peasants—this income gap between workers and peasants was much smaller before 1991. Agricultural production declined substantially between 1991 and 1994 (see Table 8.1 for production figures of selected crops in this period). It must be acknowledged that this decline is less precipitous than the decline of industrial production over the same time period, which measured around 50 percent. There is however little hope for stabilization of agricultural production, while there is some hope that industrial production in Russia will become stabilized. The relatively ‘modest’ agricultural decline since 1990 can be attributed to the fact that agriculture had good resources around 1991, with proper equipment and land in good condition. By 1995, agriculture had exhausted these resources, however, which means that a continuing and accelerating drop in future agricultural production cannot be excluded as a possibility. One indication of the exhaustion of resources is the decreasing use of chemical fertilizers and other chemicals (see Table 8.5). In 1995, Russian farmers used only a fifth the amount of chemical fertilizers they had employed in 1991. As a result of declining domestic production and productivity, Russia’s dependence on imported food has increased substantially. In 1995, 35 percent of all foodstuffs sold in Russia were imported from abroad. In fact the government’s fiscal plan for 1996 anticipated that in that year already 40 percent of the nation’s food would be imported. Though Russian agricultural exports are also substantial (and in fact greater than its imports), the country primarily imports food, while it exports mostly chemicals and mineral products (Table 8.6). Table 8.5 Use of natural and chemical fertilizers in Russia, 1986–94 (in thousand tons)
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Table 8.6 Russian exports and imports of agricultural products and fertilizers, 1991–4 (million $)
When the government pulled out of agriculture, farmers lost not only financial support, but also managerial support. One reason for the agrarian crisis may be related to the high degrees of uncertainty and unpredictability agrarian producers now confront. Prior to 1991, there was a system of government management in place that extended from the level of ministries down to local organizations; this system was dismantled, but was not replaced with anything. As a consequence, specialists abandoned the agrarian sector. Lacking experts, it will be difficult to implement well-designed future reforms. The ongoing property reforms, spurred by the government’s insistence on developing a market for land, exacerbate the uncertainties of agricultural producers. Farmers no longer know which government agencies they must deal with, and they are also uncertain what ownership relations will be in the foreseeable future. AN ALTERNATIVE SCENARIO OF REFORM So far in this chapter I have tried to offer an objective description and analysis of the economic conditions and reform attempts in Russia. In the process, I have criticized various reform attempts, in particular the reform strategies of the current government. I therefore feel obliged to offer an alternative model, a model that, in my view, could facilitate the transformation of Russian agrarian system which is in serious need of reform. Let me begin by outlining some of the immediate tasks an alternative model of reform should undertake. If I were asked to design such an alternative reform strategy, first I would recommend taking stock of all means of production, equipment, land, animals, all production organizations and labor sources. After such an evaluation was completed, it might become clear that some land ought to be taken out of cultivation, since our agricultural organizations lack the resources to keep it in production. We also might conclude that certain government organizations which regulate agrarian production should be eliminated, since they are not necessary; this would be especially true in regions where the government’s bureaucratic structures persist despite the fact
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that they are no longer effective or viable. In such districts, a far-reaching reduction of the bureaucracy would be justified. One main goal of such an evaluation would be to identify where and how the country’s many viable large, middle-sized and small, cooperative, private or public enterprises exist. The state should develop clear polices to designate which of these productive organizations it wants to support. I operate with the assumption that, given the current conditions of Russian agriculture, there is a need for a relatively strong state with substantial resources to subsidize agriculture. Strong historic evidence suggests it will be impossible to get Russian agriculture moving without substantial, initial government subsidies (and also some degree of protectionism). As I pointed out earlier, during the long decades of communism, agriculture was under-funded and generally mismanaged. It is not reasonable now to demand that Russian peasants suddenly compete in the ‘free market’ against Dutch, Danish, or American farmers, who start with far superior conditions (and incidentally do receive government subsidies). Rational allocation of these subsidies will require that we develop an inventory of the agricultural enterprises which would constitute good investments for such subsidies, enterprises capable of eventually developing into independent concerns. Thus, I am not advocating the indefinite perpetuation of the state socialist redistributive economy, which has in the past systematically subsidized the least productive firms and transferred resources from profitable to nonprofitable sectors of the economy. On the contrary, I recommend a system in which the most viable organizations of production receive government support and only for a limited period of time. Furthermore the nature of subsidies could and should be different from what it used to be under communism. In a socialist redistributive economy, budgetary resources were allocated directly; a new policy of subsidies would use more indirect methods, such as a credit system and the like. In order for such a system to be operative, the landholding system must be stabilized. For firms to manage sustainable growth, they need predictable and stable ownership relations. What these ownership relations will look like is difficult to predict. Property rights appropriate for Russian economic, historical, and cultural conditions will have to evolve gradually through a process of trialand-error. It may not be premature, however, to suggest that these forms of ownership are likely to be rather diverse, ranging from different types of cooperatives through various forms of public or communal ownership to private property. It follows that it may be inappropriate for the government to treat preferentially one or another type of property; it would be more rational if government policy remained neutral relative to forms of ownership. If in the process of searching for appropriate forms of ownership, one system of ownership proves to be inefficient under hard budget constraints, those firms would go bankrupt anyway, and their land would be auctioned off and transferred to owners who operated on the land more efficiently. The model I describe here does assume that the government will play an active role in the whole credit system. Unlike the liberals who believe that private banks can do
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this job the most effectively, I believe that government in cooperation with private capital operations or, indeed, the government on its own, must be involved in financing the agrarian system. At least for the time being this strategy is necessary in order to create a predictable, stable economic environment. Peasants are accustomed to dealing with the government; they trust the state is here to stay. They do not have the same experiences with the new, mushrooming private banks, which in Russia are heavily involved in land-market operations. Yet according to liberal reform policy, these very banks are solely responsible for managing the financing of the agrarian sector. Furthermore, for the time being, some degree of price regulation may be unavoidable. A good example might be fuel prices. As indicated before, gasoline prices increased seven times faster than food prices in the period 1991–5. This kind of expense kills agriculture. Thus, if the country wishes to sustain agriculture, it has no alternative but to regulate, at least temporarily, the price-gap between industrial inputs and agricultural products. A number of economic strategists have assumed that establishing a ‘free market’ would swiftly and automatically correct the relationship between agricultural producers, the food-processing industry, and consumers. This assumption proved to be false. The institutions that create linkages between these actors have to be created; they do not simply emerge from the market. If the state does not take an active role in establishing these institutions, the mafia will take advantage of the opportunity and provide this function—as indeed it does in Russia today. The communist legacy also created an agrarian production system in which crops are not necessarily grown on land to which they are best suited. Across Russia, it is common to discover that crop selection has not been well matched to natural conditions; these mismatches are the results of past interference by central planning boards that determined which crops ought to be planted where. This problem cannot be easily solved simply by deregulation and free market forces. Funds are needed to regenerate the natural environment, and this sort of responsible repair work, again, requires active policy development and implementation and also subsidies from the government. In Russia today a sizable migrant population resides in the countryside, typically made up of ethnic Russians who have left cities located in republics which were part of the Soviet Union before its dissolution. Some 25 million ethnic Russians were living outside Russia, in other republics, at the time of the dissolution of the Soviet Union, and since the collapse, many have felt themselves victimized by anti-Russian policies in the newly independent nations. Most of these ethnic Russian immigrants who have fled oppressive situations in the republics are settling in villages, because in cities they can find neither jobs nor housing for themselves and their families. This population is large; so far about 2 million Russians have migrated from other republics into Russia, but according to some estimates several more millions are likely to come. The task of accommodating this population cannot be left to the vagaries of free market
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forces. Government policy and funds are needed to settle these migrants productively in the countryside. The type of reform scenario I outline here assumes that the government’s methods for developing and instituting reform will undergo thoughtful revision. Over the past decades and in Russia today, agrarian reform has been and is managed from the top-down; in this system, the requisite specialists are mainly technocrats. The type of reform I would recommend would be organized more from the bottomup, and would employ as advisors more humanistic intellectuals, sociologists, historians, and ethnographers sensitive to the historical and cultural realities of the Russian countryside. My model proposes an alternative sequencing of reform measures, different from any used so far by any of the policy strategists in Russia. The model I am presenting here would start with price reform and harmonization under a substantial degree of government control. After problems in this stage are adequately resolved, one could move towards property reform, but not by importing and implementing known property forms from the West, but by experimenting to discover which combination of ownership forms and property rights are the most suitable to the Russian conditions. As property reform progresses, the government’s role could be gradually reduced. The last step in the reform process is decentralization and democratization. NOTES 1 (On Higher Productivity of the Peasant Economy). Petersburg, 1917, p. 22. 2 3
4 5 6 7
CCCP (Statistical Yearbook of USSR), 1986. , (Economic Indicators of the Development of Agroindustrial Complexes in Russia) Minselkhoznrod RF, Moscow, 1994 and 1995. (Russian Statistical Yearbook). , 1994, pp. 343, 352, 354, 355. Moscow: See , Moscow, 1991. CCCP, 1917–1922, Moscow, 1990. CCCP, 1923–1927, Moscow, 1991.
8 1931–
1933.
, 1992 and 1993. See also
Moscow, 1989. The text of this decree was prepared by A.S.Kopylov, T.A.Gur’eva, Yu. M. Zakharov, V.N.Novikov, Yu.M.Pekhterev, E.V.Serova, A.I.Suslov, V.S. Shamanin, V.V.Alakoz, V.F.Spiridonov, V.Ya.Uzun, M.G.Ratgauz, N.G. Tarasov and A.F.Serkov. 10 See for instance the article, ‘The Last Month,’ by V.Ya Uzun, Izvestiya, January 9
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13, 1993, and another article by V.F.Bashmachnikov in Izvestiya, January 21, 1993. 11 According to the newspaper Nesavisimaya Gazeta, the text of the decree was written by B.A.Maiorov, A.A.Kalinin, and A.A.Lazarevsky, who closely followed the instructions they received from the Research Center of the Office of the President, headed by P.Filippov. E.Gaidar himself put the finishing touches on the text of the decree. 12. 13 14
This is Report 27871, entitled The Need to Divide Urgently Joint Stock Companies and Kholkhozes into Small Collective Peasant Enterprises and Limited Liability Companies.’ It was released on February 8, 1995. Data by Goskomstat.
BIBLIOGRAPHY (The Alternative of Bukharin). Moscow, 1990. (Debates about the Land in the State Duma). Moscow, 1995. (Documents by Eyewitnesses. From the History of the Village on the Eve and During Collectivization). Moscow: Political Literature Publishers, 1989. CCCP (Statistical Yearbook of the USSR). 1986. (Land Tenure and Relationship to Land in Russia). Moscow, 1995. (On Higher Productivity of the Peasant Economy). Petersburg, 1917. CCCP. 1917–1922. ( C o o p e r a t iv e a n d Ko l k h o z M ove m e n t i n t h e U S S R , 1 9 1 7 – 1922. Documents and Materials). Moscow: Nauka Publishers, 1990. CCCP, 1923–1927 (Cooperative and Kolkhoz Movement in the USSR, 1923–1927). Moscow: Nauka Publishers, 1991. (The Power and the Land. A Chronicle about how the Bureaucracy was Strengthened in the Countryside after the October Revolution). Moscow, 1990. 1993 r; 1994 r. Moscow, 1994, 1995. (Thoughts about the Land). Moscow, 1985. (Russian Statistical Yearbook). Moscow, 1994. (Agricultural Practice: The Contradictions of Perestoika). Moscow, 1989. 1930 – BECHa 1931 (Special Migrants in Siberia, 1930–Spring 1931). Novosibirsk: Nauka Publishers, 1992. 1 9 3 3 (Special Migrants in Siberia, Spring of 1931–Beginning of 1933). Novosibirsk: Nauka Publishers, 1993.
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( Collected Speeches of P.A.Stolypin at the State Duma, 1906–1911). Moscow, 1991. (The Man and the Land). Moscow, 1988. (The Great Stranger. Peasants in the Contemporary World). Moscow: 1992. 1919–1921 (Peasant Uprising in the Tambovski Gubernia in 1919–1921). 1994.
9 The price of privatization The post-communist transformational crisis of the Hungarian agrarian system István Harcsa, Imre Kovách, and Iván Szelényi
In this chapter we report on the process and social implications of decollectivization of Hungarian agriculture. This is a curious, contradictory process in more ways than one. While post-communist transformations in certain Eastern European nations and Russia have been accompanied by rhetoric that is frequently revolutionary, ironically, the actual restructuring that has been accomplished in these countries appears to be far less radical than that which has taken place in China or Vietnam, the two countries which claim to remain socialist and claim to be committed to gradualist change (see Chapters 6 and 7). As in Russia and Bulgaria (see Chapter 3 on post-communist Bulgaria), Hungary has tended to retain the type of business organization which characterized its agriculture before the fall of communism. After six to seven years, the predominant form of agrarian organization is still the fairly large firm, the ‘latifundium,’ which relies primarily on wage labor. The second paradox is that while China and Vietnam transformed agrarian property relations radically, production in these countries took off, and both countries experienced the fastest growth rates in the history of agriculture. Hungary—again much like Bulgaria and Russia—while it apparently changed so little, paid a heavy price for those relatively minor alterations: production dropped sharply. These three Eastern European countries experienced their worst agricultural crises since the Great Depression. Finally, to return to the themes elaborated in Chapter 1, judged according to the recommendations of the theorist, János Kornai, the post-communist countries did everything right, initiating reform in all five dimensions simultaneously. Still the results were dismal. Why? We will argue that in order to understand these divergent patterns of post-communist development, we have to study the unique constellations of class forces and class capacities in the various nations. In China and in Vietnam, the success of agrarian reforms can be attributed to the fact that bureaucracies in those countries made concessions to agrarian producers. In Hungary, on the other hand, the post-communist transformation constituted a victory for the technocraticmanagerial elites, particularly the managers of large agrarian firms. From their perspective, the post-1989 changes 214
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have been rational, for their interests have been well served. While thus far they have not succeeded in establishing themselves as a new landholding ‘aristocracy,’ so that critics who have dubbed them the ‘green barons’ are not quite justified, they have managed to attain substantial autonomy both from central authorities and from the producers. They can now discipline producers with the instruments of the market, and the market has freed them from the control of redistributors. From their perspective, the drop in agricultural production is ‘creative destruction’; it lays the foundations for a new type of capitalist agribusiness which it happens they are likely to control, even if they do not own it. It remains to be seen whether they will also succeed in securing ownership rights. If they do, East European capitalism will grow to resemble the Latin American capitalism; if they do not, Eastern Europe may produce a new version of managerial capitalism unlike any yet seen in the world. COLLAPSE OF HUNGARIAN AGRICULTURE AFTER 1989: THE EVIDENCE After a decade of recession and following the collapse of state socialism, many hoped to see in Hungary a fast regeneration of agriculture accompanied by accelerated integration into the world market and the European community. But the early 1990s did not lift Hungarian agriculture out of the long period of slow growth; instead they have sunk it into a painful crisis of transformation which, while devastating the entire economy, has been particularly damaging to agriculture. Throughout the final decade of state socialism, agriculture grew slowly and nearly stagnated. Since 1989, it has begun to collapse. If the gross agricultural production were measured at 100 in 1988, it would have decreased in 1990 to 90; in 1991 to 84; and in 1992 to 66. The year 1993 was particularly devastating: at that time, agricultural production reached only half the level of the last pretransformation year.1 The decline in production was unfortunately matched in vegetable and fruit production and in animal husbandry, where the value of output also declined from 100 in 1988 to 65 in 1992. In 1988, for instance, there were 8.7 million pigs, but this number fell to 5.7 million. The corresponding figures for cattle dropped from 1.7 million to 1.1 million. Such evidence makes it clear that decollectivization caused even more harm to Hungarian agriculture than collectivization did. The decline of production can be attributed primarily to the shrinking of the domestic market. Exports of food kept increasing, despite the disintegration of the COMECON market, and began to fall only in 1993. In 1991, exports increased by 14 percent compared to the previous year, and exports slightly increased in 1992 as well. On the other hand, the domestic market collapsed, mainly as a result of the rapid decline of real incomes. Meat consumption, for instance, declined by more than 20 percent in 1992 compared to 1988. The profitability of production also deteriorated. While over the past few years the annual inflation rate hovered at around 30 percent, the price of food products increased only by an annual 20–30 percent, generating a 10 percent gap in the profit margin.
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Confronted with falling profits, shrinking markets, and declining production, agricultural producers retreated from investments. The decline in use of fertilizers has been particularly striking. The amount of fertilizers used during 1981–5 had declined by 85 percent by 1991, and it has kept falling ever since. The level of fertilizer use in Hungary in 1991 equaled the level in Mongolia during 1975. Understandably, the replacement and upgrading of machinery has also declined. If the sale of agricultural machines in 1985 were set at 100, by 1992 sales fell to 25. More and more land remained uncultivated. While in 1988, virtually all arable land was under cultivation, by 1992 and 1993 about 10 percent (or 500,000–600,000 hectares) lay dormant. Employment fell even more sharply. In 1989 agriculture offered full-time employment to almost 1 million people, yet by 1992 this number was down to 650,000, and it fell to 430,00 by 1993.2 In terms of productivity, agriculture lost decades of progress during the early 1990s. While during the 1980s cooperatives produced about five tons of wheat per hectare, their production has declined to approximately three tons as of 1993. This regression is partly due to drought, but even more to an erosion in production technology available to agriculture. Despite the unprecedented crisis outlined by statistics of this kind, agriculture remains heavily taxed. Traditionally agriculture has been exploited as a major source of revenue for the state budget, an important source of funds for repaying the international debt. In 1988, for instance, agriculture paid 43 billion HUF more into the state budget than it received in subsidies. Curiously enough, the degree of taxation has continued to increase as agriculture in Hungary disintegrates; in 1992 agriculture paid 110 billion HUF more than it received, and in 1993 this ‘tax’ reached 130 billion HUF. Curiously enough, the degree of taxation has continued to increase as agriculture in Hungary has deteriorated. CAUSES OF THE AGRARIAN CRISIS OF TRANSFORMATION The causes of this agrarian crisis are manifold. Undoubtedly the contradictions that accumulated during the state socialist period (described in Chapter 2) are partially responsible for the current collapse. The Hungarian agricultural miracle was built on sand. It was too capital intensive, insufficiently responsive to the problems of the environment, and it created an inflexible structure which functioned poorly in a post-Fordist world. Hungarian agriculture needed restructuring. It needed new systems of property rights, incentives, and vertical integration, and it needed to have distribution of large and small firms reorganized to establish a better equilibrium. Despite all these problems, at least in Hungary the agrarian sector could have carried on for a long time with slow growth. Slow growth was the outcome of socialist economic organization. The collapse of the sector was triggered by the challenges that resulted from post-communist economic and political transformations and the government’s responses to those challenges. Furthermore, the crisis of transformation in agriculture was part of a larger general financial crisis characterized by the collapse of domestic markets due to declining real incomes. This situation was aggravated by trends in the international
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economy, particularly the loss of the former COMECON markets and the European Community’s reluctance to open its markets to East European agricultural products (Symes 1992). Our task now, however, is to try and identify those specific institutional and policy changes unique to post-communism and show how these changes contributed to the agrarian crisis. Two sets of interrelated institutional and policy reforms require attention: the transformation of property relations (privatization and reprivatization) and economic liberalization (virtual elimination of price and export subsidies and deregulation of agricultural imports). We will attempt to elucidate the damages caused by these measures; we will not finally judge to what extent the resulting destruction has been ‘creative’—beneficial in creating the foundations for future growth—in the Schumpeterian sense of the term. Relative to this question, we simply say that only marks of destruction are visible now. Looking across Hungary, we see only the ashes and cannot yet detect fertile locations where stabilization or future growth might take root. Changes in property rights, reprivatization and privatization As they formulated their agrarian policies, post-communist regimes made decisions which may well have contributed to the collapse of agrarian production. Some of these policy decisions were implemented by virtually all post-communist governments, while others were unique to the Hungarian Nationalist-Christian ruling coalition (Kovách 1994c; Swain 1993). All post-communist regimes have been committed to full-scale privatization as well as to the dismantling of systems that dictated public ownership of capital assets. And all these countries have discovered, unfortunately, that reprivatization efforts create a number of problems, problems which have affected the agrarian sector with particular vengeance. The new intellectual discourse that determined privatization would benefit post-communist economies generally developed around 1988–9. Advocates usually spoke of radical and full-scale privatization, and they claimed that this sort of action was necessary—though not sufficient—to insure the economic modernization of the national economy as a whole and the agrarian sector in particular (T.Kovács 1993). The neo-liberals3 of 1989 seem to have developed a faith in privatization which was analogous to the faith socialist reformers invested in the nationalization of property during the late 1940s. According to the dominant East European ideology of 1989, if one finds identifiable owners for property (meaning private proprietors), and one adopts appropriate monetary measures (control inflation, balance the budget, control the amount of money in circulation, and set appropriate exchange rates), then economic growth will inevitably follow. Guided by the terms of this discourse, policy makers dismissed even successful forms of public ventures, such as the Hungarian cooperatives, as defunct kolkhozes. Most neo-liberals in the region did not particularly yearn for the reinstitution of a pre-war propertied class, yet their policies did tend towards the creation of
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a new propertied bourgeoisie, and this development was attended by a problem. It proved to be difficult, if not impossible, to implement widespread privatization without establishing some mechanism to compensate those who had lost property during the communist epoch. The term ‘reprivatization’ referred specifically to such an act of restitution or compensation for property loss during the communist epoch. ‘Restitution’ describes policies dictating that property which had been nationalized, confiscated, or appropriated by the communist government was now to be ‘returned’ to its original owners or the descendants of those owners. In the case of ‘compensation,’ former property owners did not get their property back, but instead received partial financial compensation for the losses they had suffered. Though reprivatization was a fairly efficient means for discovering and recompensing ‘identifiable owners,’ neo-liberals were often uncomfortable with such practices. They were concerned that the legal complications resulting from reprivatization (difficulties in identifying the legal owners; inheritance disputes among descendants of former proprietors; problems created by the changing value of former property, etc.) would delay the nation’s progress toward full-scale privatization, a reform the neo-liberals initially hoped to be able to implement almost immediately. Many also expressed concern that reprivatization, while distributing property to private proprietors, might not transfer capital assets to the ‘right people’ and therefore could damage existing organizations of production. Businesses might be too small; the new proprietors might not choose to operate those capital assets for business purposes, but might instead channel them simply into consumption. Yet despite these complications, reprivatization as a policy attracted widespread support. It was not surprising that the usually conservative, National-Christian parties backed reprivatization, for they were trying to appeal to the old propertied classes as a potential constituency. However even in countries where neo-liberal hegemony ruled, some reprivatization was implemented just for the purpose of establishing legitimacy. Most countries—for instance Bulgaria, the former Czechoslovakia, Romania, and East Germany—went virtually all the way in their reprivatization programs (Kovách 1994c), and encountered difficulties in the process. As Meurs reports in Chapter 3, reprivatization faced severe problems in Bulgaria, and what’s more, the effort seemed to have produced few results, for it did not lead to any particular upsurge in family farming. Similarly, in the Czech Republic, very few of the former owners were actually allocated land, and as a result the policy did not alter fundamentally the organization of agrarian production. Policies in the Czech Republic and Bulgaria were fundamentally different from those in Hungary. In Hungary and Poland, the restitution of lost property became the subject of intense political controversy. Focusing on questions concerning land and agricultural property in Hungary, the Small Holders Party, which shifted towards the extreme political Right rapidly during the 1990 parliamentary electoral campaign, was most notable for its attempts to exploit the issue of reprivatization. Appealing to its rural social base, the Small Holders Party called for a total restitution of pre-1949 landholding rights, but it made no forceful demands for the restitution
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of property other than land. At last, no organized political force emerged to demand restitution of other types of property in Hungary. The Hungarian Democratic Forum (HDF), which won the 1990 elections, was rather cautious concerning the issue of reprivatization. The agrarian experts of the HDF, like agrarian experts of the liberal parties, were concerned that reprivatization of land would lead to the establishment of too many agricultural firms of suboptimal size. They preferred the maintenance of cooperatives or the transformation of cooperatives into large-scale capitalist enterprises over the creation of small-scale family farms. However, the HDF failed to win an absolute majority and was forced to form a coalition with the Small Holders, who shifted even further towards the political Right after the election. Bending under political pressures, the new center Right, Nationalist-Christian governing coalition began to make concessions to the Small Holders. No consensus was reached on this issue in Parliament, a situation that contrasts with parliamentary patterns in Germany or Czechoslovakia, where reprivatization was approved by political consensus. The contentions and preferences of the agrarian cooperative interests were not well articulated in Parliament either. As a result, a half-hearted reprivatization law was passed that essentially determined property would not be returned to the former owners or their descendants, but those who had lost property would receive some compensation. This Hungarian law granted compensation to a significant proportion of the population that was already living in cities. Some new owners used their property for consumption rather than as a source of investment or as an instrument of production. The political deadlock within the governing coalition and also between the coalition and its opposition created a great deal of instability and unpredictability in agrarian property relations. One important reason for the collapse of agrarian production in Hungary can be attributed to the government’s reprivatization policy and to the insecurity of ownership resulting from the obscure and confusing implementation of that policy. While reprivatization might have been inevitable in an economic system guided by strategists who aimed to glorify private property and who believed that the country’s major tool for economic growth and prosperity ought to be the creation of private ownership, it did not prove fruitful. In all post-communist countries, reprivatization in agriculture resulted in a transfer of resources from agricultural production to consumption, a shift predicted by experts. In Hungary, where reprivatization of land was carried out in the midst of intense political infighting, the policy issue aggravated an already powerful sense of insecurity among agrarian producers and certainly aggravated the agrarian crisis. Privatization contributed to the crisis of transformation too. In the first four to five years of their tenure, East European post-communist governments and their attendant theorists have typically identified privatization as a central national goal and committed themselves to eliminating the public sector in the sphere of production altogether. The dominant ideology has assumed that the public sector should disappear, and this message has been well understood by those in charge of public firms. The managers of public firms have routinely
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transferred resources out of the public sector into private or semi-private subsidiaries. Even profitable and productive firms suffered from this dangerous process, which accelerated the destruction of the public sector. Bled of their resources and pressed into debt by canny managers, public firms lost their productive assets without receiving any kind of reciprocal investments, and now they are decaying fast both in terms of technology and human capital. The same can be said about the agricultural sector. The government defined producers’ cooperatives as socialist institutions that ought to be dismantled. Not only were co-ops forced to offer almost half of their land for sale to those private owners who were being compensated for lost land, but also a substantial proportion of their remaining landed property and all of their other capital assets were privatized. Whatever assets were not taken by reprivatization are now gone thanks to privatization. Management, including middle management, sensed that the political and ideological winds were against them, so they ‘jumped the boat’: they began to ‘rescue’ public assets into subsidiaries, which were now legally ‘private.’ Below, we discuss in some detail techniques employed by those who dismantled the co-ops through limited liability corporations (LTDs). The motives prompting this form of ‘rescue’ are ambiguous and may vary depending upon the actors involved. Some co-op managers have claimed that they have been attempting to defend collective interests against the privatization strategy by playing along with the game; if they want to get loans, if they want to make investments secure, they must transfer assets into some organization which can be legally designated ‘private.’ Critics of these co-op managers—sometimes called ‘green barons’—accuse them of hypocrisy and argue that their real motives are not to protect, but to acquire, not to defend the collective, but to transfer and transform public property into private wealth. No matter what the motives are, the result of privatization is the same for both the national economy and the agrarian sector: an accelerated destruction of the public, or collective, sector which was not compensated by sufficiently dynamic growth in the private sector. Elimination of agricultural subsidies and protection against foreign production Economic policy in the entire post-communist world is guided by monetarism. No post-communist government has an industrial policy as such. Nor does any postcommunist government have a strategy which nurtures, supports, or at least temporarily protects branches of the economy. As a result, it is not surprising that all post-communist East European governments sharply reduced or completely eliminated agricultural subsidies, stopped export support, and allowed prices of agricultural inputs, especially prices of energy, to escalate.4 Agricultural policy makers in Poland and Hungary played the ‘free market game,’ seemingly oblivious to the fact that none of their competitors in Western Europe or North America followed the rules of such a game. The price of gasoline was increased some three-fold in the first three years
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of post-communism, and yet Hungarian farmers were expected to compete with American and Canadian farmers who paid just one-third the Hungarian price for energy and also receive a wide variety of subsidies. Hungarian agriculture was badly hit by the credit crunch. The government not only ceased to guarantee credit for agricultural firms but also, by refusing or neglecting to give mortgages, made the sale of land practically impossible. Without credits, not only were cooperatives prevented from pursuing investments, but also their simple survival was threatened. Their cash-flow had dried up, they did not have the resources to purchase seeds and could not afford to store the harvest and wait for better market prices. Without access to mortgage funds, these potential new entrepreneurs who were supposed to pay cash for land found it nearly impossible to start new agricultural businesses. All these measures greatly affected the less efficient cooperatives; indeed, only the most effective cooperatives survived. Co-op managers generally prefer to remain bosses in large-scale enterprises rather than become private owners and operators of smaller ventures. A co-op president who can run a firm with 10,000 hectares prefers to do this rather than to own a family farm with 50– 100 acres. Most managers of cooperatives in Hungary perceived the disintegration of cooperatives as a process forced on them from above. Many of them claim they were not motivated to ‘rescue’ resources into LTDs by personal preference, but that this strategy was forced on them by government policies which, by cutting subsidies and withholding loans, made most cooperative ventures untenable. CHANGES IN AGRARIAN PROPERTY RELATIONS Both the changes of legal ownership rights (with the exception of state farms) and the transformation of organizational forms were, by and large, complete by the summer of 1994. No major further readjustments are expected. Below we discuss the legal means of reprivatization and privatization, and the property relations and organizational forms which developed in Hungary by 1994 and continue to this day. Strategies and techniques of privatization State farms In 1989, there were 136 state farms, which occupied and cultivated about 10–12 percent of the arable land, or about 1 million hectares. The objective of the Nationalist-Christian center-Right government was to privatize approximately 100 state farms by allowing their employees to purchase them. An alternative would be to sell them to foreign investors, but for the time being, foreign ownership of agricultural land is illegal, hence any privatization plan that would retain firms as foreign-owned agribusinesses is not viable. According to the government’s proposals, the remaining 20 state farms would function as ‘model farms’ where
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workers might experiment with new crops and new technologies; these model farms would also serve as training centers for agricultural cadres. Most of these state-owned farms are not profitable and thus could not be expected to support employees who become property owners. For this reason, and because these farms would be used as centers of experimentation, innovation, and education, it seems justified to retain them in public ownership. Indeed, state experimental and educational farms have a long tradition in Hungary dating back long before socialism. Agricultural cooperatives In 1989 there were 1246 agricultural cooperatives in Hungary. During the first years of post-communism up to 1993, some of the excessively large co-ops were segmented into smaller units. As a result, the number of cooperatives even slightly increased for a short period of time, but the land under their cultivation declined steadily; by 1993 it was already 30 percent less than in 1989. Decollectivization gained speed in 1993. 5 As a result in 1994 there were only some 437 cooperatives left. The number of their employees also rapidly declined: while in 1988 cooperatives employed almost 1 million people, this total fell sharply to some 250,000 by March 1993 and to just over 100,000 in 1994. It is important to note, however, that half of the 1 million cooperative employees registered in 1988 were not working directly in agriculture—they were active in industrial and commercial side branches which, after 1989, gradually became independent enterprises, usually private businesses. Calculated simply, the real decline of the co-op agricultural population was from 500,000 in 1989 to just over 100,000 in 1994. Interestingly this massive reduction in jobs cannot be fully detected in the unemployment statistics. In mid-1993, the number of agricultural workers unemployed measured 80,000. The remainder had either retired, found employment elsewhere, or simply failed to register themselves as unemployed. (Women and Gypsies frequently fail to register for unemployment.) The privatization of cooperatives began in mid-1992. This is a rather complex process, involving two mechanisms: it might be accomplished by compensation vouchers (kárpotlási jegy) and/or by property-share certificates (üzletrész arány). Compensation vouchers (kárpotlási jegy) Compensation vouchers are supposed to serve the purposes of reprivatization, to recompense and therefore deal justice to those who were ‘victims of communism,’ that is, those who lost property as the result of communism. Compensation vouchers reflect the value of the lost property. This value is calculated in Gold Crowns (aranykorona). During the mid-eighteenth-century reign of Maria Theresia in Hungary, all land was evaluated in terms of its productivity and its value set in Gold Crowns, so that, for instance, poor quality land might be worth four to five Gold Crowns per acre, while particularly fertile land might be
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worth up to twenty Gold Crowns. The Gold Crown value of land was reassessed a number of times, most recently during the early twentieth century. Under the compensation voucher system, those who lost land were compensated for its Gold Crown value. A Gold Crown was valued to be worth 1000 HUF. Since Hungarian reprivatization was a system of compensation and not restitution, no property was given back; instead, former owners received vouchers expressing the value of land lost. The assessed value of one’s land was repaid at varying rates. For land worth 200,000 HUF, former owners received full compensation. For land valued at over 200,000 HUF, owners received only partial compensation; thus, for land valued between 200,000 and 1 million HUF they got 50 percent of the property value, while for very large properties they received only 10 or sometimes even as little as 1 percent of the value of the lost property (T.Kovács 1993). Compensation vouchers were distributed to those, who either lost land due to nationalization, or brought land into a cooperative and in the process lost title to the property. If individuals received only nominal compensation for land, then they were entitled to receive the difference between the real market value of the land and the nominal compensation they received. Certain people who did not receive compensation vouchers could claim land owned by the cooperatives under this same system. Individuals entitled to make such claims included those who either joined the co-op as members without land or joined the co-op as employees without land. Members received property-share certificates worth thirty Gold Crowns, while employees were entitled to propertyshare certificates worth twenty Gold Crowns. Altogether, almost 2 million families were entitled to receive compensation vouchers or property-share certificates on the above grounds. Land at the disposal of cooperatives was divided into different categories. (Cooperatives controlled about 5 million hectares in 1989.) About 1.5 million hectares were bound by property titles in the name of former owners, and these owners could claim this land without any restrictions. In a way, allowing land title holders to take their land out of the cooperatives was the first act of reprivatization, and as it happens, this action was initially approved by the last communist government, for a law to this effect was passed under the prime ministership of Németh in 1989. This law was meant to counteract a 1960 statute on cooperatives which declared that the property of cooperatives must remain undivided; thus those who joined the co-op could never claim their land back. Eventually most of the land titles were also transferred officially to the co-ops, but, basically out of negligence, titles to approximately 1.5 million hectares were never transferred. To facilitate the spread of private farming, the Németh government determined that title holders would now be entitled to leave the co-op with their land, but in 1989 there were very few farmers interested in pursuing this option. At any rate, according to the 1989 revision of the law of cooperatives, if property titles had been left unchanged, former owners were entitled to take land out, sell land, or lease it. There were some restrictions, though, circumscribing their property rights. No one
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was entitled to ask for the same land back, but only to receive land that matched one’s former property in quality and size. Nearly 2 million hectares had to be reserved for those who received compensation vouchers or had property-share certificates, and 1.5 million hectares was supposed to remain co-op property. The compensation vouchers could be used to purchase land when the nearly 2 million hectares of co-op reserve land came up for auction. Each auction was organized and run by the Land Reform Committee of the Local Government (Földrendezö Bizottság), which designated which part of the land would be offered for sale (K.Kovács et al. 1994). In order to participate as a buyer at such an auction, an individual needed to be a local resident and an employee of the co-op and also needed to have a compensation voucher. During the auction, those qualified to bid had the right to agree to distribute the land among themselves; these small, cooperative cadres of bidders could purchase land for only 500 HUF per one Gold Crown, or half of the nominal value of the compensation voucher. If buyers could not reach such an agreement, then the auction started at 1000 HUF per one Gold Crown. Downward bidding was permitted, but the lowest limit was 500 HUF per Gold Crown. No systematic data describing the land auctions are available, but to the best of our knowledge in about 70 percent of the cases people who qualified to place a bid agreed to the 500 HUF value, which meant that no actual auction took place. The highest price received for a Gold Crown at auction was 250,000 HUF. The first auctions were held on August 15, 1992. By January 1994, some 340,000 claimants had received land for 27.5 million Gold Crowns.6 The government gambled with the compensation vouchers. The 2 million hectares of land put aside for auctioning would not be sufficient to satisfy the full number of land requests if land were sold for its nominal value. The government assumed that compensation vouchers would sell for half or less of their nominal price, and this proved to be a realistic expectation. In fact, compensation vouchers— which are marketable on the stock exchange—often sold for below 40 percent of their nominal value. Property-share certificates (üzletrész arány) This is a voucher generally intended to privatize property other than agricultural land—moveable assets and real estate—within the cooperatives. The total value of assets held in co-ops in 1989 was about 260 billion HUF. This represented about 15 percent of all national wealth. In US dollars, Hungary’s national wealth was estimated in 1989 to be worth $20 billion-25 billion, of which $2.6 billion was in the agrarian sector. These assets were distributed among various claimants in the following proportions: • current members and employees of the co-ops received about 40 percent of all assets
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• retired members also received 40 percent of the assets • former members or their inheritors received 20 percent of the assets. According to the law, privatization of these cooperative assets would begin in April 1992, at which time all claimants would have three months to declare their intention to leave to co-op and request pieces of property. The Board of the Cooperatives determined the manner which this 260 billion HUF worth of property would be distributed among claimants. The board used different criteria to decide the amount of property to which each claimant was entitled. The number of years a person had worked in the co-op, that person’s income, and the size of land the person originally brought into the co-op were all criteria taken into account during this process. By the end of May 1993 about 10 percent of co-op property had been privatized this way. Parliament eventually extended the deadline for people who wished to make claims for public property, since this first privatization drive was only moderately successful. Still, according to expert estimates, by 1993 about 10 billion HUF worth of capital (almost half of the property claimed) had been withdrawn from agriculture. This happened because a large proportion of the assets was claimed by urban residents, who sold their shares for cash to purchase consumer goods. Ultimately, therefore, the privatization of agriculture served the purposes of conspicuous consumption rather than agricultural development. So far, it has contributed very little to the accumulation of productive assets. The emergent new property relations Soon after 1990, the Hungarian Nationalist-Christian regime announced policies aimed at privatization. Although in principle the government tried to promote family farming and reduce the collective sector, there is little evidence to show that this transformation progressed during the first three years. Then, early in 1993, the new law regulating the transformation of agricultural cooperatives passed Parliament and soon key changes began to take place in the agrarian sector. The crucial change in Hungarian agrarian relations began at this time, in the spring of 1993. The single most important measure of the new law was to eliminate the obligation of cooperatives to offer employment to all co-op members (K.Kovács et al. 1994). As a result, employment in agricultural cooperatives dropped dramatically overnight. While in 1991, 752,000 people were still active in the agrarian sector, this number dropped to 600,000 by 1992, and dropped again to 258,000 in 1993 and to 100,000 by 1994. In 1993, the economically active population in agriculture included about 120,000 selfemployed workers and 310,000 other agricultural employees—workers and owners of LTDs—so total employment was 430,000.7 As co-op employment declined, privatization at last began to take hold, causing a broad transformation of firm sizes and types of economic organizations. Below we discuss a number of the changes originally sparked by the legislation of 1993.
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CHANGES IN THE INSTITUTIONS OF AGRICULTURAL PRODUCTION Privatization of land By 1994, about 30 percent of the land formerly cultivated by cooperatives was now in the hands of individual farmers and recently formed LTDs. If one adds to this the land already in the private sector prior to 1989, it seems reasonable to conclude that in 1994 at least 35 percent of all agricultural land in Hungary— about 2 million hectares—was under cultivation by individual farmers or LTDs. (Oros 1996). We are somewhat reluctant to categorize and identify these organizations, especially LTDs, as either specifically private, public, or collective. These labels today are the subject of intense political controversy. Since privatization is the official ideology, the nation’s ministries and even statistical bodies are pressured to present data showing the rapid increase of privatization. Managers of organizations also have a vested interest in claiming that by now their enterprises have become ‘private.’ As a result, privatization is often a legal fiction, which may not effect in any significant way the real functioning of a particular organization. For instance, one might state that a public organization was ‘privatized’ because it was transformed into a joint-stock holding company, and yet most, if not all, of the stock of such a company might well be owned by public banks or other public companies in a complex system of cross-ownership. The management could remain the same, the firm could function the same way, but now it would be called ‘private’ simply to qualify for better loan conditions or tax credits. It is extremely difficult to assess, therefore, exactly what sort of a financial entity an agricultural LTD might be. Are these LTDs indeed private firms formed by small groups of individuals to expropriate collective property as private property, or are they only vehicles to rescue cooperatives by isolating debts apart from resources and thus securing the organization’s capital assets against bankruptcy?8 LTDs can serve both functions, and only a close empirical analysis of a given organization can reveal if it is a vehicle of effective privatization or a means to outsmart the ideologically motivated policy drive against the collective sector. It is extremely important in Eastern Europe—where during the past half-century property was the subject of intense political and ideological struggles—to distinguish with great clarity actual social property relations and legal titles. This is true for the socialist epoch as well. Whenever the reigning ideology and ideological policies have switched the attendant changes in legal ownership have been sharper and clearer than transformations of social property relations. This has been particularly true in agriculture. During the 1945 land reform, land belonging to the latifundia was distributed among poorer peasants (only to be collectivized later). As Juhász (1973) suggests, cooperatives in fact often functioned with greater ease if they were formed on the property of the former latifundia by peasants who had been laborers on that very land, since for them the tasks would
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be familiar. Occasionally even the former managers of the private latifundia became the presidents or chief agricultural engineers of the new ‘socialist’ co-ops; one has reason to doubt that such people would run the new socialist operations much differently than they had the old estates. In their actual operation, judged according to the daily experiences of the workers, these ‘socialist cooperatives’ were not all that distinguishable from the old latifundia; hence socialist critics called these operations ‘semi-feudal latifundia.’ The transformation was set in motion. The character and structure of agriculture in Hungary began to change. Statistics for 1994 offer a profile of the situation at that time:9 Cooperatives: 437 Firms (state farms, forestries, etc): 36 LTDs: over 2000 Private farms: 120,000 Family plots: about 1,300,000 One of the most important changes in Hungarian agriculture was the emergence of LTDs. In 1988, for instance, there were only sixty-four such organizations, but within six years, their number had risen to well over two thousand. These LTDs have played a crucial role in the transformation of agricultural relations in postcommunist Hungary. Typically they are rather small organizations; in 1994, about half of them had ten or fewer employees, and only a few of the remaining thousand employed more than twenty people. LTDs were typically formed by the mid-level management of the cooperatives (K.Kovács et al. 1994). Top managers (presidents, vice-presidents, chief accountants, agricultural engineers) usually followed a different trajectory. Many of the top managers (at least a third of them) retired, while others moved into private business. Very early in the game, as early as 1988 or 1989, it was the top management that took over the highly profitable industrial subsidiary operations of the cooperatives. These industrial subsidiaries, managed by individuals who had held the highest level jobs in the agricultural co-ops, were the first to be transformed into LTDs. Fewer top managers (probably only about 10 percent of them) succeeded in accumulating enough land–40–60 acres, owned or leased—to start profitable private farms. After 1989, mid-level management also began to abandon the co-ops (Swain et al. 1994). There were a number of reasons prompting this group of managers to flee the operative cooperatives and create LTDs. First, cooperatives were not limited responsibility organizations, which meant risks in co-ops were much higher than in LTDs. By creating an LTD, one could rescue capital resources out of a co-op and leave the debt behind, in the collective enterprise. One of the earliest types of LTD, for instance, were small enterprises owned typically by members of middle management or their relatives that leased or purchased the co-op’s equipment. Equipment, tractors, combines, and other machinery could be sold or leased at low prices, and in this process, the buyer (or lessor) remained free of the cooperative
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operation’s accumulated debts. The same technique was used in the purchase of livestock. Entire pig or cattle farms were leased or sold inexpensively to LTDs. Second, middle management liked LTDs because they were not required to offer employment to co-op members. Also they were not required to stand for election in order to manage an LTD (where they had been in the co-op), and co-op members had no say in the LTDs managerial decisions. Lastly, government policy since 1990 has preferred private business. Co-ops, especially producers’ co-ops, are regarded as ‘socialist’ and discriminated against on ideological grounds. The Hungarian government from 1990 to 1994 was most ideologically committed to the encouragement and establishment of individual family farms, yet it could hardly question the ‘private’ qualities of LTDs. Thus LTDs were in a much better position to receive state subsidized loans or other benefits than the co-ops. LTDs usually do not own land; instead they tend to be specialized for production tasks which require no land or relatively little arable land. A number of LTDs are involved in food processing, for example; in addition, they serve as tractor stations and service stations. They specialize in intensive vegetable production and also in intensive cattle and/or pig farming. A case study of agrarian transformation: Bajna We will illustrate the transformation of property relations and agrarian organizations through a case study of a village in western Hungary: Bajna. Bajna is a village of 2000 inhabitants located some 60 kilometers west of Budapest, favorably situated near major industrial centers. During the state socialist period there was one wellfunctioning cooperative in Bajna. A main reason for its success was the efficiency of its industrial subsidiaries: it operated four or five successful industrial operations. Changes in this cooperative started early. In 1988–9, all of its industrial subsidiaries separated from the central operation and were transformed into LTDs. The Bajna Co-op itself broke up into three organizations: Glac Co-op, Epöl Coop, and Bajna TESZOLG. Glac Co-op Glac Co-op is primarily an industrial co-op, which operates a polishing factory formerly owned by Bajna Co-op. Glac Co-op retained ownership of the polishing factory and claimed ownership of only some thirty hectares of land. Soon after Glac Co-op was formed, it created Glac LTD. Glac LTD leased the polishing factory from Glac Co-op. As an LTD, it qualified for loans available only to private firms, and it did indeed obtain loans and modernize production. Leasing of the firm from the co-op was advantageous to the co-op managers, for if anything would go wrong, Glac Co-op would not be held liable for Glac LTD’s debt or failure. Glac LTD could go bankrupt easily since it leases most of its assets from the co-op and actually owns very little of its own. This cooperative arrangement between Glac Co-op and Glac LTD has proved to be a canny, functioning
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adaptation to new post-communist conditions. (This is a good example of what Stark (1996) calls ‘recombinant property.’) Epöl Co-op Bajna Co-op included the territory of a small village, Epöl, which ultimately chose to branch off and start operations of its own. Epöl formed its own co-op, hiring as manager one of the leaders of the Komárom state farm, a man who had lost his job because he tried to keep the Komárom State Farm out of privatization. Now as the new president of Epöl Co-op, he transformed the operation into a joint-stock holding company, justifying his move to the membership by arguing that this would allow members easier access to credit (which was, indeed, true since as a joint-stock holding company, it was considered a private firm and therefore qualified for loans). However, the real beneficiaries of the transformation were not co-op members, but, predictably, management. While in the co-op all members have one vote, in the joint-stock holding company the number of votes a person wields depends on the number of shares he or she owns. Since individuals in managerial positions received more shares, they were able to secure their control over managerial decisions. Bajna TESZOLG The group of people least interested in entrepreneurial ventures, including both management and workers, remained in this co-op which is rather traditional and continues doing business in much the old way. LTDs in Banja Looking over this brief description of offshoots that grew from the old Bajna Coop after 1989, we see that the LTDs in Bajna and elsewhere are probably the most interesting transitory forms. While in legal terms they are private companies, in reality they are interesting extensions of the socialist co-ops. Usually LTDs are created by four to six people who often own relatively few assets of their own (to start an LTD, one must deposit only 1 million HUF, an amount approximately equal to a manager’s annual income). Most of the capital assets, or means of production, are leased from the original cooperative. As was the case in Bajna, often the formation of an LTD is justified as a move that serves the collective interest: entrepreneurs claim that the LTD will enable the larger group of co-op members to obtain credit and maintain jobs. But why are LTDs formed by small groups of individuals? Are these really functioning mini-co-ops which pretend to be private firms? Occasionally this may be the case, but more commonly the formation of an LTD allows the coop to sink into bankruptcy and thereby converts formerly public property into private wealth for the LTDs creators. LTDs are formed by groups of individuals for a variety of reasons. One motive prompting individuals to cooperate with
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each other in creating LTDs has to do with coalition building. In a Hungarian village—where social control is quite tight and egalitarian values strong—no single individual could get away with attempting to sever and claim the most or one of the most profitable ventures from the co-op in order to amass private income and leave the co-op burdened with its troubled production profiles. Instead one must build coalitions to reach the same objective. For example, let us say the manager of a cattle farm which is still profitable decides to form an LTD to produce milk and meat. This manager will need the co-op president (or someone else from the top leadership) as a partner in the LTD, since the manager wants to lease the stables and cattle stock from the co-op. Thus a person with the authority to make such a decision must be invited to become involved in the new venture. The two of them will also need someone to keep the books; they are likely to invite the chief accountant of the co-op to join them, and they may also bring along the legal counselor. It is likely that these four individuals will have enough ‘cultural capital’ to convince co-op members that the formation of a new LTD would be in their best interests. Let us call this new LTD the ‘Milky Way.’ The Milky Way now receives loans, which the co-op, already deeply in debt, would not be able to secure. Moreover, the accountant will show that the co-op has benefited from the new arrangement because it was losing money on the cattle farm, but it now collects rent from the LTD and, in addition, the ‘Milky Way LTD’ employs half a dozen co-op members. (The chief accountant may forget to mention that the cattle farm was unprofitable because twenty-five people worked in it, so turning it into a rentmaking venture has meant the loss of jobs.) The point is that in order to form an LTD, potential entrepreneurs need to form a coalition which can secure the necessary leases, etc. It is best if members of this coalition come to the project with different sorts of expertise in order for the LTD’s new management to function well. Also, the coalition must be able to legitimate its actions to the co-op membership. The LTDs represent new coalitions of actors whose innovative entrepreneurial ventures have introduced a new social element into the ongoing process of agrarian class struggles, which began by empowering Hungary’s peasants, but may well conclude by impoverishing them. With the creation of LTDs, the socialist and post-communist agrarian class struggle entered its fourth stage. The very first stage began following the land reforms and consequent formation of the first cooperatives in the late 1940s. During this time, the most successful actors of the Hungarian countryside were people of poor peasant background (Márkus 1980). These peasants formed the first cooperatives, and they were the key players in local government and party organizations. The second stage began with a second wave of collectivization in 1960. After some hesitation, the regime decided to try to bring middle peasants into the newly formed cooperatives, and frequently these former middle peasants took over co-op management (Orbán 1972; Donath 1977). By the early 1970s, the third stage had begun. Soon after the collectivization, a major effort ensued to train a new generation of agricultural engineers. Though many of these individuals
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were recruited from middle-peasant families, when they began to enter the workforce they often found themselves on a collision course with middlepeasant co-op leadership, and after an intense struggle, they eventually forced many of these middle-peasant managers out and took their places as co-op presidents and chief agricultural engineers (Juhász 1983). Now, with the formation of LTDs, we may be witnessing the beginning of a fourth stage. The coalitions required to institute a successful LTD usually need the agricultural technocracy, but they must also maintain contact with influential people and experts whose fields extend beyond the agricultural intelligentsia. Both to establish legitimacy and to draw on the diversity of skills necessary to run an LTD, these coalitions require alliances between agricultural technocrats and highly skilled workers and technicians. Social implications The single most dramatic change which took place within a few months in early 1993 was a reduction in the agricultural population by some 40 percent, accompanied by a dramatic redistribution of wealth in rural Hungary. Basically those who were pushed out of the agrarian sector—about a third of the rural population—lost not only their jobs, but also their property. This third of the population forms the core of new rural poverty (Répássy and Symes 1993; Symes 1993; Hann 1993). The rapid decline of employment in co-ops and in the agrarian sector, coinciding with that population’s extensive loss of property, resulted when at last the agricultural population became convinced that this time the government meant business and intended to privatize all cooperatives. The ‘naming’ of land in co-ops had already taken place during 1992, but at that point most co-op members decided not to take the land represented by the titles transferred to their names. In 1992, the general expectation was that the co-ops would survive the privatization drive. The poorer, older, less qualified members of co-ops, especially, could not see how they would be able to start their own farms with the couple of acres they received as compensation for decades of work in the co-op. But after the ‘naming’ of co-op land, a deadline was set: all newly propertied members who wished to take their land out of the collective farm had to accomplish that action by the end of 1992 or lose their rights to the land. When the new cooperative law was passed in 1993 and the disintegration of coops began, this deadline was already past (K.Kovács et al. 1994). The co-op management, now freed from their obligation to offer employment, was in the position to lay off almost half of the membership. Legally of course the land remained in the name of the new owners, but they could gain no access to it. This same population was badly hit, in addition, by the elimination of the institution of the ‘family plot.’ According to the new co-op law, the co-ops were no longer required or even allowed to offer the usual one acre family plot to members of the cooperative. These one acre plots had been vitally important for the survival of the rural population during the times of collectivization (in fact it was important for the
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functioning of the Junker type estates in this European region for centuries). Thus, in a short time, a great portion of Hungary’s peasant population was dispossessed of its land by legislation, a scenario that recalls the ‘enclosure movement’ and its dire results. About half the co-op membership lost its access to land at the same time that the members lost agricultural employment—in a real sense then, they were pushed off the land. The 1992–3 turn in Hungarian agriculture is a major step in the direction of separating producers from the means of production. It initiates the creation of a real rural proletariat dependent upon competitive labor markets for jobs and on markets for their subsistence. The reduction of employment in the co-ops was, of course, justified in the name of economic rationalization. Employment in co-ops was excessively high, resulting in low productivity, and generally cooperatives could only operate so long as the state redistributed resources to agriculture and to the co-op sector. This was partially accomplished by the state’s policy of allowing industrial subsidiaries to operate within the co-ops, thus redistributing industrial income to subsidize agricultural over-employment. By 1993, however, this redistributive system had been, if not eliminated, at least sharply reduced. The resources created by the reorganization were transferred to the local governments to be used as welfare funds. This entire process may not result in many gains for the government budget; instead, it may simply represent a reallocation of resources. One might argue that this reallocation of resources was necessary and rational, as it transformed economic redistribution into welfare redistribution, and this was exactly the kind of reform many people—including the authors of this chapter—had been advocating for a long time. The process does seem to offer local governments an active role in the functioning of local economics, and there is some evidence that local governments will come to play an increasingly important role in rural development. While in Hungary ‘local state corporatism’ may not be an adequate term to describe the system at work (at least not yet), 10 local governments do occasionally help generate economic growth in their communities. Over the last few years there has been some shift in perceptions of post-communist local governments and their optimum function. Around 1990, the dominant ideal was the ‘caring local government,’ which eventually shifted towards the ‘entrepreneurial local government.’ This shift resulted partly out of necessity, since when in 1990 the opposition won local government elections, the central government responded by trying to starve them to death. Without proper resources, they could not act in any particularly ‘caring’ way. In order to try to fulfill their missions, they had little choice but to try out entrepreneurial ventures. But necessity was not the only spur to this transformation; some basic post-communist structural and institutional changes also facilitated the evolution of ‘local state corporatism’ or the ‘entrepreneurial local government.’ First, as mentioned above, the government’s decision to halt economic redistribution consequently increased the welfare tasks and the budgets of local governments. Second, in smaller or middle-sized villages
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during the state socialist epoch, the most powerful player was the co-op. Now, with the destruction of cooperatives, the power clearly shifted towards the local government. Third, a new emphasis on infrastructural development provided numerous opportunities for local government. Through the system of grants and competitions, the most dynamic change during the first years of post-communism was in infrastructural development of waterworks, telephone communications, and drainage systems. Local governments can now write grant proposals and receive substantial funds which may lay the foundations for local economic development. Furthermore, some local governments have taken the lead in job creation programs. Let us take the example of Ásványráró,11 a village of 2,000 inhabitants in western Hungary located on the river Danube near the Slovak and Austrian border. In Ásványráró the local government converted a building on the main street— which is local government property—into an industrial building. An industrial LTD (an embroidery factory) was created to operate some business ventures there. The local government itself became a member of the LTD and leased the building to the LTD. In this way, the local government generates income, creates employment, and shields itself against liability in case the new industrial LTD goes bankrupt, for the LTD’s major capital asset—its building—remains the government’s property and is only leased by the LTD. Such arrangements begin to resemble what Jean Oi and Nan Lin describe in Chinese villages as ‘local state corporatism’ (Oi 1992; Nan Lin 1995). The local state is entrepreneur, owner, and broker at the same time. The shift of power from the cooperative to the local government can be reported from our other case study, Bajna, as well. In Bajna, co-op members tended to perceive the co-op leadership as composed of outsiders, people who had not been born in the village. After 1989, the local government staged its struggle against the cooperative as if it were struggling against outsiders. In addition to exploiting the local political situation, it also exploited its improved structural position. While during the last two decades of state socialism most local development was generated by the cooperative, now under new conditions the local government took the leading role in development, particularly infrastructural development. The construction of a waterworks and the introduction of heating and cooking gas into households were major new developments implemented by the local government. In these cases, the local government generated the necessary funds and selected the local subcontractors who carried out the construction work. The local government used these opportunities to establish its own network, creating loyal clients and relying on kinship networks. By now the local government was able to block the co-op successfully. When, for instance, the co-op wanted to build a gasoline station, the local government, owner of the proposed site for the gas station, refused to lease it to the co-op. The Bajna local government also played a crucial role in the process of privatization. For example, the president of the privatization committee of the cooperative itself was one of the cousins of the mayor. The land commission, which regulated the reprivatization process, was created in a corporatist way:
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the co-op and local government each delegated an equal number of members, and other participants were elected by the village community to represent different interests. Both Ásványráró and Bajna demonstrate that a major shift in the distribution of power is underway in rural Hungary, at least in those communities where no powerful new private businessmen have appeared, but where the local government is busy fermenting economic and social development. The major source of the local government’s power is the dislocation of financial resources from economic redistribution to welfare redistribution, from agricultural cooperatives or other subsidized rural firms to local government budgets. There is, however, a clear trend indicating that local governments will not choose to restrict their work to welfare functions, but will undertake active roles in job creation and in economic development generally. In some cases this may be restricted simply to infrastructural development, or the local government may enter as partner and co-owner with private individuals or other corporate players in economic ventures. While it is premature to overgeneralize about the future activities of Hungary’s local governments, we propose that during postcommunism different developmental models may be expected to compete with each other. In the case of one such possible model of development, which we will call ‘decentralized redistribution,’ or ‘local state corporatism,’ following Walder (1995), the local government plays a notably active role. ‘Local state corporatism’ may constitute only a brief, intermediate stage which lasts until a functioning system of private business is created. We can think of local communities in Hungary during the mid-1990s where strong business exists and where ‘business owns the local government.’ In Ásványráró and Bajna the situation appears to be balanced differently; although local governments in these towns may not own business, no business success is likely without the intervention and participation of the local government. Once a ‘local state corporatist’ structure has been created in conditions like those we have described, it is far from obvious that it will dissolve as soon as proper capitalist conditions develop. The extensive transformation described above, which replaced a system of economic redistribution with welfare redistribution, has resulted in problems for two reasons. First, this was real shock-therapy. The reduction of employment was dramatic, and it took place within a few months. It seems likely that a more gradual reduction of employment, stretching over a few years rather than a few months, would have caused far less pain. The sudden reduction of employment is likely to affect certain population groups particularly hard. (We do not have data on the social effects of the reduction of agrarian employment.) It is certain that older people, women, and Gypsies have been particularly affected. Second, while the transformation of economic redistribution into welfare redistribution may, in certain respects, rationalize the economic system, it has generated high levels of inflation—inflation is still around 20 percent in Hungary. Inflation is likely to complicate the tasks of welfare distributors and devalue the incomes of welfare recipients. With economic redistribution,
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enterprise management was in a better position to sustain the real value of the resources they received and generated. As the new rural poverty develops, these managers are the least likely to be able to fight back the effects of inflation. It is surprising one does not see more of the effects of massive impoverishment in rural Hungary. We suspect this is true because individuals have found ways to cope, in the short term, with the difficult new conditions. Many people who lost their jobs were elderly and have now taken retirement, but they often work in the businesses of their children, or they may be supported by their families. Certain temporary measures help these people ease the pain caused by this major redistribution of wealth and property in rural Hungary. Probably a number of these people sold their ‘compensation vouchers’ for cash, since there was a secondary market for the vouchers, and funds from those sales will allow them to survive for a year or two. Certain unemployed farm workers have received ‘political compensation’ as well. Older men, for instance, received substantial compensation for spending time either in prisoner-of-war camps during the Second World War or in jail or concentration camps during the socialist era. In the long run, however, it is clear that rural society during the post-communist epoch has suffered and is now becoming increasingly polarized. Some at the very top (especially former management, reborn as new LTD entrepreneurs and co-op managers) are likely to do very well, while those at the bottom, more than 30 percent of the population, former rank-and-file co-op members, are likely to experience greater poverty. Individual private farming remains to this day rather marginal. The number of agrarian family enterprises is about the same as it was in the mid-1980s: around 1.4 million. These are very small ‘firms,’ each of which usually cultivates only an acre of land or less. Even among operators of those firms categorized as ‘large producers’ by current Hungarian standards (those 36,000 farmers whose gross agricultural income in 1992 was 500,000 HUF or more), only 46 percent practiced farming as their main occupation (Harcsa 1994). On the whole, family agricultural production in the mid-1990s strongly resembles family production during the 1980s; this is not full-time family farming of the sort known in Western Europe or North America, but is instead a part-time activity, either just a survival strategy or a way to supplement wages and salaries. CONCLUSION In the sixth year of post-communism, the general structure of Hungarian agriculture in 1995 essentially resembled the structure of a decade previously, in the mid1980s, despite the many policy reforms, some of them radical, which have been implemented in that time. Two-thirds of the land is still cultivated by wage labourers working on large farms and about one-third cultivated by family work organizations. Most family farms are tiny; even the ‘large’ ones are, in actuality, small. The number of full-time family farms is negligible and their contribution to agrarian production is marginal.
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The most important change to have developed in the period 1989–95 has been the emergence of LTDs. At least for now, LTDs are driving the most dynamic sector of the economy; this happens to be the sector in which entrepreneurs earn reasonably high incomes. These LTDs are hybrid forms, intermediate between socialist co-ops and capitalist agribusinesses. They are operated usually by former co-op managers, who rarely own much or any of the land. Their ownership of capital assets is modest but focused, for they concentrate on owning the strategically important means of production. They own tractors, combines, trucks, just enough so that they control and even monopolize cultivation of the land, which means that peasant landowners have little alternative but to lease their property to the LTDs for very low rents. This is certainly an agrarian system which resembles the Hungarian system during the state socialist period, characterized by large estates which were cultivated by wage laborers, much more than it resembles operations in the Austrian, German, or French countryside, where firm sizes are smaller and the cultivators are family farmers. While it is true that private property and market forces have gained importance in Hungary, the country’s agricultural system seems to be located somewhere between typical Western European agricultural operations and the kinds of operations we used to know in socialist Eastern Europe. It is a mixed economy (Harcsa 1994), based on complex new property relations. The Hungarian case of post-communist transformation offers support to Kornai’s thesis at least partially. After 1989, Hungary implemented a comprehensive reform plan, moving ahead simultaneously in all the dimensions Kornai identified. It moved with particular force to integrate the market, eliminate public property, and eliminate one-party rule; as a result, a new socio-economic system emerged. So far, however, this new socio-economic system has not generated improved economic performance. On the contrary, Hungary’s agrarian community has experienced a deeper crisis than during the Great Depression or at the time of collectivization. By 1995 it appeared the worst might be over; there are indications of some growth with greatly improved levels of productivity. Yet it remains to be seen whether the post-communist agrarian crisis of transformation will prove to have been in some ways creative—a painful but necessary ‘creative destruction’ which laid the foundation for a dynamic capitalist agricultural system capable of integrating effectively into the world’s economy— or whether it will prove to have been a great mistake, a harsh, coercive process that has dragged Hungarian agriculture backward to the place where it used to be before socialism—on the semi-periphery of the world’s economy—or even worse, downward into the economic situation of a Third World country. The ultimate destination of Hungary’s agricultural system and its society will be powerfully affected by the skills of its political elites, but it will be primarily determined by the outcome of broader social struggles. If Hungarian society allows itself to become polarized into two unequal camps, a small, privileged, landholding minority and a massive, dispossessed, impoverished proletariat and subproletariat, then it is likely the nation will drift into the semi-periphery of the
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world’s economy, at best. Hungary’s future will be determined by the outcome of social struggles still ahead of us. APPENDIX Tables 9.1 to 9.6 present agricultural statistics for the Hungarian economy between 1950 and 1995. Table 9.1 Role of agriculture in the Hungarian economy (%), 1960–96
* 1991-töl az új TEÁOR szerint (Tevékenységek egységes ágazati osztályozási rendszere) ** Élelmiszeriparral együtt
* of them 136 state farms
Table 9.2 Number of agricultural production organizations (at the end of each calendar year) in Hungary, 1950–96
Price of privatization: Hungarian agriculture Table 9.3 Yield of major crops (kilograms by hectares) in Hungary, 1950–96
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Table 9.4 Indicators of production in animal husbandry in Hungary, 1950–96
Table 9.5 Selective indicators of the mechanization of agricultural cooperatives in Hungary, 1950–96
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Table 9.6 Number of employees in Hungarian agricultural cooperatives, 1975–96
NOTES 1 Statisztikai Havi Közlemények (Statistical Monthly), January, 1994. See also Imre Kovách, ‘A mezögazdasági átalakulás foglalkoztatási hatásai’ (The Effects of Agrarian Transformation on Employment), in Munkaeröpiaci helyzetjelentés. A munkaeröpiac keresletét és kinálatát alakitó folyamatok (Report on the Labor Market. The Processes which Regulate the Supply and Demand on the Labor Market) (Budapest: Figyelö Kiadó, 1994b); Imre Kovách, ‘A mezögazdasági privatizáció társadalmi hatásai’ (Social Consequences of Agrarian Privatization), in Magyarország átalakulóban (Budapest: Népjóléti Minisztérium, 1994a). 2 Source: KSH Munkaerömérlegek (Labor Force Statistics of the Hungarian Statistical Office). 3 Usually, in Eastern Europe simply the term ‘liberal’ is used, but this can be rather confusing for the Anglo-Saxon reader. In late communist and post-communist Eastern Europe, this term refers to the entire political package, which in the United States and to some extent in Great Britain is called ‘neo-liberal’ or even ‘neo-conservative.’ For the East European context we therefore use the term ‘neo-liberal’ to describe the ideologues who in Eastern Europe regard themselves as just liberals. These neo-liberals believe in free markets, individual choice and responsibility, and private enterprise. They are against the state, even against the welfare state, income redistribution, and they would usually object to New Deal-type industrial or employment policies, defining such policies as examples of ‘illiberal interventionism.’ 4 Post-communist agrarian policies are not very coherent though. Under pressure, governments implement some protective measures, but in general and in comparison with Western Europe these governments not only speak, but also act, in a manner that could be called ‘neo-liberal.’ 5 Source: Statisztikai Havi Közlemények (Monthly Statistical Bulletin), Hungarian Statistical Office. See also Imre Kovách, ‘A mezögazdasági átalakulás foglalkoztatási hatásai,’ op. cit. 6 See Imre Kovách, ‘A mezögazdasági privatizáció társadalmi hatásai’ (Social Consequences of Agrarian Privatization), in Magyarország átalakulóban (Hungary in Transition) (Budapest: Népjóléti Minisztérium, 1994a), p. 125. 7 Source: KSH Munkaerömérleg, 1991. See also Imre Kovách, ‘A mezögazdasági átalakulás foglalkoztatási hatásai,’ op. cit. 8 David Stark (1996) suggested that ‘privatization’ is a technique by which liabilities are unloaded onto the state budget, while assets are transformed into private wealth. The result is not private property as we know it from the West, but a new form of ownership,
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what he calls ‘recombinant property,’ an unusual mixture of individual property and institutional cross-ownership. Source: Statisztikai Havi Közlemények. This term is used by Walder, Jean Oi, and Nan Lin. In their terminology, ‘local state corporatism’ means that the crucial change in the economic system points in the direction of decentralization of redistribution rather than towards marketization. Economic tasks previously performed by central state authorities are now delegated to local governments, which interact in a corporatist way with other local elites. See Walder (1994). We are grateful to Gabriella Farkas who collected the data in Ásványráró.
BIBLIOGRAPHY Central Statistical Office. 1990, 1991, 1992, 1993, 1994, 1995, various years. Munkaerömérleg (Labor Force Statistics). Budapest: CSO. ——1990, 1991, 1992, 1993, 1994, 1995, various months. Statisztikai Havi Közlemények (Statistical Monthly). Budapest: CSO. Donáth, Ferenc. 1977. Reform és forradalom (Reform and Revolution). Budapest: Akadémiai Kiadó. Hann, C.M. 1993. ‘From Production to Property. Decollectivization and the Family—Land Relationship in Contemporary Hungary.’ Man 28 (2):299–320. Harcsa, István. 1991a. ‘Privatization and Reprivatization in Hungarian Agriculture.’ Acta Oeconomica 49 (3–4):331–348. ——1991b. ‘A polgárosodás lehetöségei a mezögazdasági kistermelésben’ (Prospects of Entrepreneurship in Small Scale Agrarian Production). Agrartörténeti Szemle 1–36. ——1993. ‘Small Scale Farming, Informal Cooperation and the Household Economy in Hungary.’ Sociologia Ruralis 33 (1):105–108. ——1994. Paraszti gazdaságok, mezögazdasági vállalkozók (Peasant Economies, Agrarian Entrepreneurs). Budapest: Központi Statisztikai Hivatal. Juhász, Pál. 1973. ‘A mezögazdaság fejlödésében megjelenö tehetetlenségröl’ (Continuity in Agrarian Development). Budapest: Közgazdasági és Jogi Könyvkiadó, Szövetkezeti Kutató Intézet, Közlemények 93. ——1983. ‘Az agrárértelmiség szerepe és a mezögazdasági szövetkezetek’ (The Role of Agrarian Intellectuals and the Agricultural Cooperatives). Medvetánc (1):191–213. Kovách, Imre. 1991. ‘Rediscovering Small-Scale Enterprise in Rural Hungary.’ In Rural Enterprise. Shifting Perspectives on Small-Scale Production, edited by S.Whatmore, P.Lowe, and T.Mardsen. London: David Fulton Publishers. ——1994a. ‘A mezögazdasági privatizáció társadalmi hatásai’ (Social Consequences of Privatization in Agriculture). In Magyarország átalakulóban (Hungary in Transition). Budapest: Népjóléti Minisztérium. ——1994b. ‘A mezögazdasági átalakulás foglalkoztatási hatásai’ (The Effects of Agrarian Transformation on Employment). In Munkaeröpiaci helyzetjelentés. A munkaeröpiac keresletét és kinálatát alakitó folyamatok (Report on Labor Markets. The Processes which Regulate the Supply and Demand on Labor Markets). Budapest: Figyelö Kiadó. ——1994c. ‘Privatization and Family Farms in Central and Eastern Europe.’ Sociologia Ruralis 34 (4):369–382. Kovács, Katalin, Zsuzsanna Bihari, and Mónika Váradi. 1994. ‘Restructuring Hungarian Agriculture.’ In Proceedings of the 15th European Congress of Rural Sociology. Kovács, Teréz. 1993. ‘Reclaiming Nationalized Land in Hungary.’ Sociologia Ruralis 33 (1):96–99. Lin, Nan. 1995. ‘Local Market Socialism: Local Corporatism in Action in Rural China.’ Theory and Society 24 (3):301–54. Márkus, István. 1980. ‘Ismeretlen föszereplö: a szegényparasztság’ (The Unknown Hero of History: The Poor Peasantry). Valóság 23 (4):13–39.
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Oi, Jean. 1992. ‘Fiscal Reform and the Economic Foundation of Local State Corporatism in China.’ World Politics 45:99–126. Orbán, Sándor. 1972. Két agrárforradalom Magyarországon (Two Agrarian Revolutions in Hungary). Budapest: Akadémiai Kiadó. Oros, Iván. 1996. ‘Land in Hungarian Agriculture.’ In Hungarian-Polish Countryside, edited by K.Gorlack, I.Kovách, and P.Starosta. Wydawnictwo Universitety Lódzkiego. Répássy, Helga and D.Symes. 1993. ‘Perspectives on Agrarian Reforms in East-Central Europe.’ Sociologia Ruralis 33 (1):81–91. Stark, David. 1996. ‘Recombinant Property in East European Capitalism.’ American Journal of Sociology 101 (4):993–1027. Swain, Nigel. 1993. ‘Transition from Collective to Family Farming in Postsocialist Central Europe—a Victory of Politics over Sociology.’ East European Countryside 17–29. ——Mihaly Andor, and Tibor Kuczi. 1994. The Privatization of Hungarian Collective Farms.’ In East European Countryside (1):69–80. Symes, D. 1992. ‘Agriculture, the State and Rural Society in Europe: Trends and Issues.’ Sociologia Ruralis 32 (2–3):193–208. ——1993. ‘Agrarian Reform and the Restructuring of Rural Society in Hungary.’ Unpublished manuscript. Szelényi, Iván. 1988. Socialist Entrepreneurs. Madison: University of Wisconsin Press. Walder, Andrew. 1994. ‘Corporate Organizations and Local State Property Rights.’ In Changing Political Economies: Privatization in Post-Communist and Reforming Communist States, edited by Vedat Milor. Boulder, CO: Lynne Reiner. ——1995. ‘Local Governments as Industrial Firms.’ American Journal of Sociology 101: 263–301.
10 Writing a new song Path dependency and state policy in reforming Bulgarian agriculture Robert Begg and Mieke Meurs
At the end of 1994, after five years of reform effort, many of the outlines of Bulgarian agriculture remained unchanged from November 1989, when Communist Party leader Todor Zhivkov was ousted. As of May 1994, only 14 percent of agricultural land had been distributed with titles to new private owners (Ministry of Agriculture 1994a), and the majority of agricultural land continued to be farmed in large collective farms, which posted declining yields and output. Agricultural recovery is of particular importance to the success of Bulgaria’s political economic reform, however, due to the central role agriculture plays in the Bulgarian economy. The slow pace of change can be understood in terms of the particular history of Bulgarian agriculture, as well as the overall problems of reforming and rebuilding the Bulgarian economy. One of the few nations to re-elect the Communist Party in its first free elections, Bulgaria lags behind other East European nations in many aspects of economic restructuring (Wyzan 1993). By early 1994, only one major state firm had been privatized by the national Privatization Agency, and a number of laws essential to the functioning of a market economy (including a bankruptcy law) remained to be passed. Those laws which have been passed suffer from inadequate implementation. This slow pace of reform has undermined the recovery of the agricultural sector in a number of ways. At the same time, however, many elements of the reform program which have been implemented have also worked against agricultural recovery. Thus Bulgarian economic reforms have apparently gone both ‘too fast’ and ‘too slowly’ for the agricultural sector, squeezing productivity and economic viability from both sides. Nonetheless, those dependent on the agricultural sector for survival have found a wide range of local solutions to their problems and gone on producing in the face of extremely difficult conditions. These local solutions have helped to prevent even greater declines in agriculture. With some improvements in the policy environment, they may even provide the basis for a viable agricultural sector. In this chapter, we try to tell this story of Bulgarian agricultural change. Extensive data help paint the picture, but data available for Bulgaria are seldom as consistent, 245
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accurate, timely, and complete as one would like (Mikhova and Pickles 1994; Wyzan 1993). In addition, behind every chart and cipher is an intricate and evolving web in which individuals, national and international institutions, local and regional governments, and ethnic and ideological communities of interest act and react. Anecdotal and case study information are used at times to attempt to capture these dynamics. The story will be told through the following general outline. 1 A number of cultural and historical aspects of Bulgarian agriculture mitigate against a rapid and complete transition to individual capitalist farming. 2 The particular land restitution and privatization laws chosen, while understandable in terms of Bulgarian politics and ideology, complicated the emergence of viable new forms of agricultural organization. 3 Local accommodation to these laws has varied greatly. Farmers and village leaders have, in general, responded creatively, though not always successfully, to chaotic and debilitating conditions. At times this has meant an outright defiance of government policy. 4 The performance of the agricultural sector is crucial to the overall recovery and development of the Bulgarian economy. 5 A combination of rising relative prices for inputs, loss of markets, legal uncertainty, short time horizons and monopoly power in the markets for agricultural inputs and products have contributed to a continued decline in agricultural performance. Although some of the decline may be transitional, longer-term damage to the productive base is also reflected in the decline. 6 The future of Bulgarian agriculture is uncertain. It is clear that in the future production will be organized in a variety of forms, and that the eventual completion of the land restitution will play only a minor role in agricultural recovery. Changes in certain government policies may hasten recovery, but local forces and dynamics appear more likely to determine the future shape of agriculture than any government policy. Although of interest in itself, the transformation of Bulgarian agriculture is also exciting for the light it may shine on a dozen issues in social science. The changes can be framed with metaphors of structure and agency, locality and causality, transformation of civil society, local knowledge, post-modern diversity, and market adjustment. Each perspective would illuminate these events in a different hue. We will allude to these only in passing and in conclusion. Our more humble task here is to tell the six-part story outlined above. CULTURAL AND HISTORICAL ASPECTS OF BULGARIAN AGRICULTURE The Bulgarian landscape on which capitalism and democracy are being slowly written is not a tabula rasa. Rural Bulgaria retains vestiges of social structures and institutions that have roots stretching back at least to the Ottoman Empire (1396–
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1878), including land fragmentation, collectivism, and communal labor. These antecedents were greatly altered during the fifty years of collectivization and command economy, but they were often incorporated into the new system, rather than being eradicated. The transformed versions, inculcated into the fabric of Bulgarian rural society, have important implications for the current transformation. Land fragmentation Fragmentation of land can be traced to the end of Ottoman Empire. As Ottoman control eroded in 1858, property rights were extended to Bulgarians for the first time since the occupation in the late 1300s. Two decades later, when the majority of the Turkish population withdrew, land ownership by Bulgarians expanded further (Wyzan and Sjoberg 1992). At the same time, inheritance rights in land were extended to all children. As the traditional system of extended family holdings (zadruga) declined in the face of increasing commercialization of agriculture, family lands were quickly subdivided (Sanders 1949).1 Over generations, land was further divided so that, by 1934, the average land holding was 6.8 hectares, divided into 11 scattered parcels; 84 percent of land-holders fanned fewer than 10 hectares (Dobreva and Meurs 1992). This fragmentation contributed to poverty and underdevelopment in the agricultural sector. In 1934 there were only 1523 tractor-plow combinations and 96 motorized plows (Dobreva and Meurs 1992). Most villagers continued to use a traditional wooden or steel plow. Familialism and collective labor Anthropologist Irwin Sanders describes collective labor at the time of Ottoman rule: ‘The Turks did recognize the traditional form of village government,…and let the heads of zadrugas, or large joint families, run village affairs to their liking.’ In the zadruga, ‘work was done in common, and whatever one earned outside was turned over to the domakin (male head of household) for the common treasury’ (1949:65). Although the zadruga had faded as an institution by the time Sanders traveled to Dragalevsky (a village then a few miles from the capital city of Sofia) in 1934, Bulgarian village life was still dominated by the family and collective labor. ‘Economic life is centered around the family…family members grow or make for themselves most of the things they need, they depend only to a minor degree upon stores, factories, and other commercial agencies’ (Sanders 1949:144). Private property and ownership were firmly established, but some land remained under the collective management of the village and a great deal of labor was still performed collectively. Sanders describes haying in the meadows of Dragalevsky: The captains, appointed by the mayor to control the activities of the people from the respective neighborhoods, stirred up the spirit of competition, and the
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stacks grew higher and higher. At length all the cut hay had been piled …The towering stacks stood motionless, symbolic of that co-operation which is the heart of communal life everywhere. (Sanders 1949:59) But for the enthusiasm of the workers, this scene might well have been that of a collective farm brigade in 1984. As the zadruga faded, the state replaced local family heads in guiding individual agricultural producers. From 1903 through 1944, the state channeled investment funds into agriculture through the Bulgarian Agricultural Bank and the Bulgarian Central Cooperative Bank. These banks, in turn, loaned the funds to local credit cooperatives, while at the same time guiding the lending policy of these cooperatives. Total debts of rural credit cooperatives to the Central Cooperative Bank averaged 644 million leva (enough to purchase average 6 ha holdings for 5300 households in 1933) over the period 1931–44. In addition, after the early 1930s, the state exercised a monopoly on the purchase of wheat and rye, setting prices and controlling marketing in both domestic and export markets. This monopoly was extended to cotton, rose oil, tobacco, and other products in the mid-1930s (Stoyanova 1993; Logio 1936:190). Communism and the collectivization of agriculture The structure of Bulgarian agriculture changed radically with the ascendance of the Bulgarian Communist Party (BCP) to state power on September 9, 1948. Almost all private and municipal land (over 96 percent of total arable land) was consolidated into state and collective farms (TKZS), approximately one farm to a village. Agriculture was mechanized, with the number of mechanized plows and combines increasing to 36,000 and 12,000, respectively, by 1965 (Central Statistical Office (CSO) various years). Large numbers of workers were no longer necessary in the agricultural sector and migrated to the city, to work in the emerging heavy industrial sector. The village-level TKZS were gradually consolidated and incorporated into central planning. By the mid-1970s, a structure of very large-scale, statecontrolled farms (averaging 2400 ha in 1976) was established, on which production was highly mechanized and specialized. This basic structure persisted through 1989 with two caveats. Farm size was reduced somewhat in the 1980s, as management was returned to the level of the old, village-level TKZS in many places, and disinvestment in agriculture from the mid-1970s onward reduced both the quantity and quality available machinery (see Chapter 8 in this volume; see also CSO, various years). Alongside this new form of mechanized collective production, the tradition of small-scale, low input, individual agriculture also persisted. TKZS members were allowed plots of less than 0.5 hectares and a few animals under the system of lichno pomoshtno stopanstvo (LPS—personal self-sufficiency production). Output from these plots grew from 19 percent of agricultural output in 1962 to 44 percent
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of livestock and 25 percent of vegetables in 1989 (Dobreva and Meurs 1992). This ‘personal’ agriculture was very much articulated with the TKZS, however, which provided seed, chemical inputs, and machinery to family plots, and purchased final products if these exceeded families’ needs. After 1982, the accord and arenda systems extended quasi-private agriculture in Bulgaria. Under these systems, the TKZS would contract with its own workers (and later with individual citizens) to produce some part of the year’s planned production. By 1989, 62 percent of grain, 80 percent of vegetables, 70 percent of meat, and 72 percent of milk was produced under these systems. Importantly, many of these accord began to reconstitute family-based agriculture: in 1989 16 percent of accords were signed with family groups and 34 percent with individuals, presumably aided by family members (Killian 1991). The contract groups had developed considerable autonomy in organizing their labor by 1989, but they remained heavily dependent on the state for inputs, services and a market. The brief history described here highlights a number of legacies which may complicate the transition to private, market-oriented agriculture. Collective labor and familialism have characterized rural life and production for centuries, with the state replacing zadruga leaders as pater familias even prior to state socialism. The TKZS and the rural Communist Party organizations, currently targeted for reform, are rooted in this long tradition. At the same time, the individual entrepreneurial initiative, commercial orientation, and risk-taking expected to foster market-based adjustment are not central to the agricultural tradition. Even the individual production which existed under collectivization depended heavily on the assistance from the TKZS, and hence the state. In addition, the extreme pattern of fragmented land ownership of the 1940s, which is the basis for the planned restitution of agricultural land (see pp. 250–3), will slow the formation of economical private farms. A final legacy complicating the transformation of agriculture is the position of the Turkish ethnic minority. The members of the Turkish population who remained in Bulgaria after 1878 tended to be those with the fewest resources. Many of these families have remained active in agriculture into the current period, especially in the tobacco-growing regions of the Silistra-DoubridgeRazgrad-Shumen quadrangle and of Haskovo and the Rodophe mountains. These families suffered greatly during the 1980s, when the BCP enacted a number of discriminatory measures against the Turkish population, including laws requiring ethnic Turks to take Bulgarian names. Subsequent measures repressing Islamic ritual and custom culminated in the expulsion in May and June 1989 of 300,000 Turks (Todorova 1993). These policies depopulated the economically important tobacco-growing regions, causing annual output of tobacco to fall from an average of 126 thousand tons from 1982 to 1987, to 77 thousand tons in 1989 (Table 10.1). Over half the émigrés have since returned, but the situation remains difficult, with tobacco producers making up a particularly politically and economically unstable element of the agricultural population.
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Table 10.1 Output of selected crops (thousand tons) in Bulgaria, 1985–93
Note:* Break in series
LAND RESTITUTION AND PRIVATIZATION LAWS Politics and policy It is unlikely that any agricultural policy could have assured a seamless transformation of agriculture. But the shifting collection of agricultural policies have been shaped more by political considerations than by any productive or economic rationale. In June 1990, the Grand National Assembly was elected to carry out fundamental legal reforms. The Bulgarian Socialist Party (BSP, the reformed BCP) won a plurality of the popular vote: 47 percent, against 36 percent for their main rival, the opposition coalition Union of Democratic Forces (UDF). This gave the BSP 211 of 400 seats in the Assembly, resulting in a severely divided legislative body. The divisions slowed the work, but in February 1991, after more than a year of legislative limbo in agriculture, the Farm Land Act was finally passed. The Land Act was of particular importance to the BSP because the party’s influence in rural areas was tied to the power of the TKZS in structuring economic, social, and political life. In the words of Julius Pavloff, a UDF Member of Parliament: ‘In the rural areas the Communist Party had complete control. Jobs, flats, cars, foreign travel all depended on the signature of the cooperative director. People were used to this’ (Pavloff 1992). The 1991 version of the Land Act bore the marks of these BSP interests, and the party’s attempt to retain its position in rural areas. Thus, while the Land Act was a major reform, providing for the return of land to its previous (1944) owners or their descendants, the 1991 law also retained a number of limits on private property. A 1946 law limiting holdings to 30 ha (20 ha in regions of intensive production) remained in effect. Equivalent land could be given in place of original holdings where this was necessary to consolidate fragmented plots. Ownership could not be transferred for three years, and then land could be sold only to neighbors, relatives, leaseholders or the state. Foreigners or firms with foreign partners were prohibited to purchase land, and agricultural land could not be used for non-agricultural purposes.
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The law provided for the appointment, by the District Council, of Municipal Land Councils.2 These councils would hear claims cases. Those who would not inherit land (and this group included 14–20 percent of agricultural workers) could purchase unclaimed or municipal land from Municipal Land Councils at prices to be determined by the Council of Ministers, if land was available. The Land Act applied only to the land held by the TKZS. Machinery and other property remained under the collective farms’ control, and the future of each TKZS was to be determined by its General Assembly. Under the Law on Cooperatives passed in August of 1991, a number of TKZS were eligible to register as ‘new’ cooperatives, retaining the assets of the TKZS and paying rent and dividends to those TKZS members who chose to remain members and eventually incorporate their restituted land. Clearly, this law left open the possibility that the existing farm structure would not be fundamentally changed. In some places, many of those receiving restituted land might withdraw it from the TKZS and cause the farm to dissolve. But it was also possible that recipients of land, faced with the prospect of farming a tiny plot with little appropriate machinery and limited experience with independent, commercial fanning, might prefer to rent the land back to the TKZS, to be farmed as part of a larger unit. With the TKZS controlling existing farm machinery, and the local Land Councils having the right to ‘consolidate’ holdings, it was also possible to pressure households to leave their land in the TKZS. By late 1991, however, political winds were beginning to change, and with them, the Land Act. Frustrated by what they saw as inordinate BSP influence on new laws, a group of UDF members walked out of the Grand National Assembly in protest. This reformist wave was carried into the parliamentary elections of October 1991, in which the UDF won 34.5 percent of the popular vote and a plurality (110 of 240) of the parliamentary seats. While representing increased support for more radical reform, this was hardly a mandate and left Parliament again badly divided. Of the dozens of smaller parties contending for seats, only the Movement for Rights and Freedom (MRF), loosely representing the Turkish minority, broke the 4 percent threshold necessary to secure parliamentary representation.3 The MRF held the balance of seats (24) necessary to give the UDF a ruling majority, and a coalition government was formed under Prime Minister Philip Dimitrov. The country remained politically divided, however, with clear BSP dominance in rural municipalities (Begg 1993). The BSP also retained support in rural areas bordering on cities and towns, a fact which the scale of the data obscures. The MRF influence was also localized: outside of Sofia, the only concentrations were in the tobacco regions along the Greek-Turkish border and in the northeast. In March 1992, the new government passed a number of important amendments to the Land Act. The limitations on owned plot size, the three-year prohibition on sale, and the prohibition on non-agricultural use were all removed. Firms with minority (up to 49 percent) foreign ownership would be permitted to own land. In addition, the law stipulated that land must be returned in its real boundaries, not as a share of a consolidated or new cooperative holding.
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More importantly, the law attempted to remove the possibility of direct transformation of the old TKZS into new, legal production units. It thus required that the TKZS and all ‘new’ cooperatives be legally wrapped up and all assets be liquidated. The district governments were to appoint Liquidation Committees for that purpose, and the TKZS were to be turned over to the local Committee, which would manage them during the liquidation. TKZS members would receive shares of the proceeds from the liquidation based on both the assets contributed by their families during collectivization and their own length of service (if there were any proceeds after the settlement of outstanding debts). New agricultural cooperatives could be formed under the law, but only on the basis of voluntary agreement among titled landholders (Kouzhouharova and Dobreva 1993). This new version of the Land Act clearly dealt a severe blow to the BSP and the existing farm structures. In addition to effectively outlawing direct transformation of the TKZS into membership-based cooperatives, it facilitated the transfer of control of farm machinery from powerful (usually Communist) village figures to UDF-appointed officials, and rescinded the power of local Land Councils to consolidate plots. The UDF hoped to force the emergence of individual, smallholder agriculture, more in line with their Hayekian vision of the new capitalist economy. The legal changes also greatly complicated the reform process, however. Restituting the millions of tiny plots in their real (and often contested) boundaries proved to be a logistical nightmare. In fact, only about 12 percent of land is likely to be restituted in this way, since construction, the planting of perennials, and other changes have fundamentally changed the structure of farm land. The complicated task of finding equivalent land for claimants had barely begun in late 1993 (Creed 1994). In addition to being logistically complicated, restitution promised to create an initial ownership structure even more fragmented than the prewar structure. According to the National Land Council, over 90 percent of claims were for plots of under 1 ha (168 hours, October 18, 1992:7). Even this estimate understates the likely degree of fragmentation, since claims were made in one name, and later divided by the heirs. A third complication arises from the strategy for liquidating farm assets. Complex farm installations such as grain drying machinery, storage sheds, and large-scale tractors and combines cannot be easily dispersed among, and efficiently employed by, the expected smallholding population. In fact, many installations were simply abandoned, leaving eerie scars on the landscape. In addition, the expectation of rapid, piecemeal liquidation created a very short time horizon for farm managers. Since they could not expect to reap the benefits of maintenance or to receive high sales prices for the disintegrated liquidated capital, managers presided over severe deterioration of farm infrastructure and perennial stocks. Finally, the imposition of the UDF-supported law on BSP areas resulted in a feeling that the reforms were being imposed on the rural population by outside, urban forces. As one village woman expressed this feeling: ‘First the communists
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made us give up our land, and now the UDF is making us take it back. It’s like getting slapped on both sides of your face’ (Creed 1994). This situation is exacerbated by the fact that many farm workers, especially technicians, Turks, Gypsies, and other former landless peasants are not eligible to claim land, as their families did not contribute land and no surplus land is available in their area. On the Bourgas TKZS, for example, only 40 percent of employees could claim land (Yarnal and Begg 1993). This feeling has created a substantial amount of resistance to the reform, as will be seen in the examples below. Certain legal aspects of the reform did proceed quite smoothly. By June of 1992, the TKZS legally no longer existed, having been transformed into liquidation commission farms. By August, over 1,705,000 applications for restitution had been filed with local land councils (Dinkov 1993). But other important aspects of the transformation have remained deeply mired in complications. Actual restitution and liquidation of farm assets have gone slowly. According to the Ministry of Agriculture, by June 1994, plans had been accepted for restitution of approximately 46 percent of agricultural land. Owners of only 14 percent of land had received titles, however (Ministry of Agriculture 1994a: 3). Much more land had been distributed to claimants for temporary use, but usually small amounts. Without titles, farmers of this land could neither legally register in new cooperatives nor obtain bank credit. By December 1993, only 2.5 percent of the TKZS had liquidated their assets, so machinery remained concentrated on the liquidation commission farms (Current Economic Business, December 1993:30). This inability to quickly resolve questions of ownership and control in agriculture discredited the UDF (Dimitrov) government, while rapid decollectivization caused massive economic and political upheavals in the tobacco regions, discrediting the coalition partner—the MRF. Both problems contributed to a 1992 political crisis which brought down the government. The new government led by centrist Luiben Berov (a scholar of the Bulgarian agricultural economy) took a softer line on agricultural reform, amending the Land Act and Cooperative Law slightly to facilitate the formation of new cooperatives, and a declaring a moratorium on the liquidation of TKZS livestock herds (Creed 1994). The changes reflected a new official acceptance of cooperative farming, and an increased willingness to allow rural dwellers to find their own means of restructuring. LOCAL ACCOMMODATION TO THE LAWS The implementation of the land reform legislation has varied greatly with local conditions and structures of power. Even in the days of the monolithic Communist Party, a great deal of accommodation occurred between central dictates and local and regional structures. As journalist Misha Glenny put it: Time and again the fabled omnipotence of East European states proved incapable of imposing its will on local populations’ (1993:3). These local power structures are perhaps more powerful in Bulgaria than elsewhere in Eastern Europe. Glenny links their power to Bulgaria’s pre-war traditions:
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Whereas other Eastern European countries were moving away from the semifeudal structures bequeathed by the inter-war period, Bulgaria retained much of its feudal tradition. The most important consequence of this was the development of a system of patronage, which was administered by the regional barons of the party. Bulgaria was divided into a number of fiefdoms, where regional party secretaries would sit atop a large, corrupt network from which everybody derived some benefit. Those who would opt out for reasons of principal suffered material loss. …Nowhere in the communist world was the power of the regional party organization so sacrosanct as it was in Bulgaria. (Glenny 1993:169) Members of this body have recently transformed to various degrees. Currently, as voting patterns have suggested, the local and regional power structures remain dominated by members the BSP. Even in the few rural areas where the UDF has replaced the BSP in elected positions, members of the old power structures remain at the heart of village politics and institutions. But while still powerful individuals, the current outlook of the old guard varies from hardline communist, to technocratic, to entrepreneurial (Begg 1993). What they share is intense pressure from many of the local population to fulfill their traditional role in maintaining production and economic security. In many places, this power structure was responsible for the limited impact of the UDF attack on the collective farming. Local resistance and local politics simply froze the process. In other places, legislation effectively neutralized local power structures and the old farms were broken up. A brief review of four cases will give an idea of the range of dynamics. In Kameno (Bourgas region), a grain growing region near the Black Sea, a former Communist mayor was appointed director of the Liquidation Commission. He embraced capitalism and revealed extraordinary entrepreneurial abilities, but also remained committed to large-scale collective production. He turned a profit on the old TKZS cum liquidation commission farm, and the farm began attracting new members from adjoining farms in various states of liquidation. His approach was never one of outright defiance to the liquidation order, simply one of heeldragging, of keeping the farm going until it became possible to restructure as a cooperative (Begg, field notes 1993). Similar maneuvering occurred in Malorad (Vratsa region). Like Bourgas, Vratsa is a grain-growing region where, faced with a choice between taking back small plots and leaving the land under mechanized, large-scale production, many people support the large-scale farm. Here too, the ex-TKZS president served as farm manager for the Liquidation Commission. Unwilling to sit by while the large, well-equipped farm was liquidated (and his job lost), the TKZS president cut a deal. He arranged for members of the former TKZS to use their liquidation coupons to buy back the farm’s assets as a group. Many of the former members also agreed to leave the land they received for temporary use under the management of the farm and to eventually incorporate their land into the new co-operative. Less
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entrepreneurial than his Kameno colleague, however, this manager appears to face more difficulty in adjusting to the new economic conditions and finding new markets for his products. These arrangements would seem to violate the 1992 laws, since new cooperatives could not legally be formed until the members’ land had been distributed in its real boundaries (it had not been in July 1993), and without legal status, the new cooperative could not collect coupons and buy farm assets. But, as least in Malorad, the new cooperative was registered, and the Liquidation Commission agreed to the deal. These cases exemplify one of the biggest stories of the reform: successful local resistance to the legislative assault to destroy many of the collective farms. In contrast to these cases, Gerald Creed (1994) reports a somewhat more successful attack on collective farming in the village of Zamfirovo (Mikhailovgrad region). In this village, the Liquidation Commission was packed with UDF supporters. The TKZS was a mixed grain and livestock operation, and one of the first acts of the Liquidation Commission was to liquidate the breeding stock of the sheep herd, which the villagers relied upon to reproduce their own stocks. The liquidation continued until, by the summer of 1993, no sheep remained. Villagers who had hoped to establish a new cooperative (over 500 of the village’s 700 households) saw the liquidation as destroying the resource base for doing so. This perception was reinforced by the fact that, unlike in Malorad, in Zamfirovo members received no coupons for the value of the liquidated assets. Instead, proceeds were used to cover farm debts. Without coupons, most villagers lacked a means of buying back ‘their’ assets. Former TKZS members will eventually get coupons for the value of remaining wealth (buildings, for example), and those joining the new cooperative, registered in October 1992 (before the distribution of land titles), are likely to pool these to buy a share of the assets. The reduced sum will have to be shared, however, with the 200 or so ex-TKZS members who are planning to begin farming individually. The tobacco growing regions in the valleys of the Strange and Rhodope mountains, where much of the Turkish population is concentrated, experienced an unusually rapid and complete dissolution of the TKZS. Much of the area is hilly and remote, making it impossible to really consolidate fields under the TKZS and relatively uncomplicated to restitute them. For many families, the result was simply a change in their subcontracting arrangement, however. With little farming beyond tobacco, most households simply shifted from working for the TKZS, to working (their own land) under contract to the tobacco-purchasing agency, which took over supplying the inputs. Nonetheless, many farm workers, including technicians, workers whose families originated in other regions, and workers from previously landless families, were displaced. Combined with the collapse of rural industry in this region, enough unemployment was created (25–90 percent depending on the locale), to contribute to the political backlash against the UDF-MRF government in October 1992.
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As this last case illustrates, geography combined with local political structures to influence the course of agricultural restructuring. Overall, substantial amounts of decollectivization occurred in the regions of Sofia (the capital), Plovdiv (a dark soil plains region near Sofia, famous for its vegetable production), Lovetch (a semi-mountainous region emphasizing livestock and fruit and vegetable production), and Haskovo (a mountainous tobacco region), whereas little occurred in the grains-oriented plains of northern Bulgaria (Kopeva and Mishev 1993:40). This dynamic is also reflected in Table 10.3 (p. 258). Even where decollectivization proceeded rapidly, however, many of the new private farmers remain quite dependent on state firms and Liquidation Commissions for production support. PERFORMANCE OF THE AGRICULTURAL SECTOR During the 41 years of state socialism, agriculture’s share of net material product fell from 59 percent in 1948 (World Bank 1991) to 11 percent in 1989 (National Statistics Institute (NSI) 1993b). Nonetheless, agriculture remains a central part of the Bulgarian economy. Over the past decades, agriculture has contributed importantly to financing imports necessary for industrial growth. Agriculture accounted for 16 percent of exports in 1989. More importantly, agriculture accounted for nearly 27 percent of exports to non-socialist countries. The hard currency imports financed by these exports were mainly composed of (57 percent) fuel, metals, and industrial goods needed to keep the rest of the economy running (CSO, various years; Vienna Institute Database 1994). Overall, the decline of the Bulgarian economy since 1989 has been precipitous. Net material product fell to 54 percent of its 1989 level by the end of 1993. Total employment fell by 46 percent by mid-1993 and exports collapsed, falling to 19 percent of their 1989 level by 1993 (Table 10.2). Within this overall decline, agriculture has fared slightly better than industry. Industrial output fell to 53 percent of its 1989 level by the end of 1993, while agricultural output fell to 84 percent of its 1989 levels (Table 10.2). While the change to dollar valuation makes it difficult to compare export performance before and after 1989, agriculture’s share of exports rose from 16 percent in 1989 to an average of 24 percent 1991–3. Although Table 10.2 suggests employment has fallen more rapidly in agriculture than in industry, these numbers disguise the fact that in industry many ‘employed’ workers sit idle and are not paid, while in agriculture many working on newly privatized land are counted as unemployed. The collapse of Bulgarian industry has significantly increased the traditional importance of agriculture in the Bulgarian economy. In 1992, agriculture contributed 20 percent of Bulgarian net material product, up from 11 percent in 1989, and 21 percent of the value of Bulgarian exports, up from 16 percent (NSI 1993b; see also Table 10.2). In 1993, tobacco alone comprised 6.9 percent of all Bulgarian exports and 32 percent of agricultural exports (168 Hours, October 17, 1993). Plans for the economic future of Bulgaria uniformly place agriculture at the center of economic growth strategies (e.g. World Bank 1991;
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Table 10.2 Economic decline in Bulgaria, 1989–93
Sources: Employment Observatory, December 1993:33; PlanEcon Report, August 14, 1992:17, October 12, 1993:29, July 18, 1994:39–40. Vienna Institute Database. Note: * Values and branch breakdown not strictly comparable with pre-1991 due to overvaluation of ruble trade and change in commmodity classification codes.
Rahn 1990), as Bulgarian agricultural products are seen as relatively competitive on world markets. The agricultural sector is therefore expected to continue to provide the hard currency earnings needed to update the industrial capital stock, while at the same time, through restitution, providing employment to some displaced industrial workers. CONTINUED DECLINE IN AGRICULTURAL PERFORMANCE Despite the high expectations for agricultural growth, the relative health of the agricultural sector seen in the second section is due mainly to the near-total collapse of the industrial sector. Agricultural production has itself declined substantially (Table 10.2). Total agricultural production fell by almost 18 percent in real terms from 1989 to 1993 (PlanEcon Report, July 18, 1994:20). The decline was mainly led by a decline in livestock production, which declined to 69 percent of its 1989 level, while horticulture production in 1992 remained at 96 percent of the 1989 level (NSI 1993b: 64). Table 10.1 provided output figures for selected crops, chosen to represent the different sectors of Bulgarian agriculture. Wheat and barley represent the important grain sector. Sunflowers, tobacco, and sugar-beets are Bulgaria’s most important industrial crops. Grapes and tomatoes represent the fruit and vegetable sector. These sectors differ in a number of ways, including the extent to which they were dominated by the state sector prior to 1989, the speed with which they have attracted individual farmers, the importance of economies of scale in production, and eventual viability in the face of international competition. Although one would expect that the reform would affect these sectors differently, all products have suffered significant declines in output since 1989. In all cases, the decline is linked to a substantial drop in yields.
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In 1989, grain covered 60 percent of all land under cultivation; 13 percent of this was in the LPS sector (NSI 1992), but LPS grain was mainly cultivated collectively by the TKZS with large-scale machinery, and the output distributed to households for livestock feed. As can be seen in Table 10.3, this sector continued to be dominated by state (liquidation commission) farms in 1993, with individual farmers producing 16 percent of wheat and 20 percent of barley. Further, much of the ‘private’ grain is likely still produced with assistance from the local liquidation commission farm. For example, private farmers who took land for temporary use from the Bourgas and Kameno (Bourgas Region) farms in 1992 and 1993 to grow grain used inputs and machine services supplied by the liquidation commission farm and sold the grain back to the farm (Yarnal and Begg 1993). This sector is therefore likely to be strongly affected by the performance of liquidation commission farms. Despite the limited organizational disruption of this sector to date, production of wheat fell by 31 percent from 1989 to 1993. Production of barley fell 39 percent (Table 10.1). The big drop in production is related to large declines in yields. Wheat yields fell 40 percent and barley yields in 1993 fell almost 33 percent below 1989 levels (NSI, various years; NSI 1994; Ministry of Agriculture 1994b).4 Industrial crops were traditionally grown by the state; almost none of this land (1 percent) was in the LPS sector in 1989 (NSI 1992). The pace of decollectivization of industrial crops has been very uneven. In 1993, only 8 percent of sunflowers and less than 1 percent of sugar-beet was produced on private plots. In tobacco, however, decollectivization has proceeded rapidly (as noted above): 88 percent of tobacco was produced privately. Much of this individual tobacco production is still closely linked to state processing firms, however, which guide private production much the same way as they did under the old accord system. Table 10.3 Output on personal or private plots in Bulgaria (%), 1989–93
Sources: NSI (1992:70), NSI (1993b:130, 132); Current Economic Business October 1993
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Among industrial crops, the largely collectivized sugar-beet production has fallen off most precipitously, 88 percent between 1989 and 1993. Declines in both area planted and yields contributed to this fall. Sunflowers, also still largely collectivized, have fared slightly better. Output levels have remained steady in spite of a 52 percent decline in yield, as planted area nearly doubled by 1993. In the heavily privatized tobacco sector, output fell dramatically, as both yields and planted area fell (Table 10.1, NSI, various years; NSI 1994; Ministry of Agriculture 1994b). Vegetables account for only 4.2 percent of area under crops, with vineyards and orchards making up an additional 7.6 percent. The LPS sector was traditionally an important producer of vegetables, accounting for 47 percent of vegetable land in 1989, and 10 percent of land planted in fruit (NSI 1992). Privatization proceeded rapidly in this sector. By 1993, 83 percent of tomatoes and 49 percent of grapes were produced on private plots (Table 10.3). Some private vegetable production also continued to be closely linked to the state farms, however. Pickle cucumber production on the Bourgas farm was entirely organized through an accord-type arrangement, in which former TKZS members and urban workers used inputs and services provided by the liquidation commission farm. Since they have a stronger history of private cultivation and decollectivized quite quickly, the vegetable and fruit sectors should have been less subject to the disruptions of decollectivization than other crops. Nonetheless, tomato output declined by 64 percent from 1989 to 1993, following substantial declines in both yields (38 percent) and acreage planted (41 percent). Grape production, related to the important export of wines, has also declined steadily (24 percent 1989–93), as both yields and acreage fell (Table 10.1; NSI, various years; NSI 1994; Ministry of Agriculture 1994b). Livestock production was also based heavily (44 percent of production) in the LPS sector before 1989 (NSI 1992). The speed at which livestock production has shifted to individual producers varies greatly by branch, with cattle and sheep production shifting most quickly, and poultry and pig production shifting more slowly (Table 10.3). This unevenness reflects the slow pace of privatization of the large and heavily indebted pig and poultry complexes.5 Unlike the mixed livestock and grain farms, which commonly raised cattle and sheep, and which decollectivized livestock holdings quite rapidly, the pig and poultry complexes are identified as firms, not farms, and are to be privatized as complete units under the Privatization Law. Despite these differences, significant increases in private livestock production occurred in all areas. The relatively extensively privatized livestock sector has suffered even more rapid declines than horticulture (NSI 1993b:64). This is due largely to a drop in the livestock population. The cattle population has fallen 39 percent since 1989, pigs 35 percent, sheep 44 percent, and poultry 52 percent (NSI 1992:72; NSI 1993b:135). Substantial additional declines can be expected as the indebted state poultry and pig complexes are liquidated. The breadth of the agricultural decline suggests that poor agricultural performance cannot be understood simply in terms of the disrupted organization
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of large state farms or slow pace of restitution. In addition, a number of economic factors related to the economic transition, including rising relative input prices, loss of markets, and continued monopoly power in agricultural markets have hurt agricultural producers. In some cases, government policy has exacerbated these problems. We will examine these factors in turn. Factors in decline: rising relative input prices While input prices were heavily subsidized under central planning, output prices were also held down to subsidize consumers (and industrial wages). The price of wheat, for example, was $35 a ton in Bulgaria in 1989, but $150 a ton on the world market. Overall, the World Bank estimates a net tax on agriculture of 25–35 percent in the 1980s (World Bank 1991). With the end of central planning, this effective tax was eliminated. Little relief resulted for the agricultural sector, however, as in 1991 input prices rose 400–800 percent, while output prices only doubled (Cochrane et al. 1993). Fertilizer and pesticide prices adjusted rapidly (although not completely) toward world market prices, in part because of their high import content and in part because of the power of local monopolies (discussed below). Prices for many agricultural products adjusted more slowly, partly due to the sudden loss of traditional markets and partly due to government policies described below. By the end of 1992, output prices for most agricultural goods had increased 5–10 times, while input prices had increased 6–25 times (Ministry of Agriculture 1993a:27). This change in relative prices clearly underlies the decline in yields (and output) seen above. In response to the profit squeeze, average national use of pesticides and chemical fertilizers fell 62 percent and 74 percent respectively from 1989 to 1992 (CSO, various years: NSI, various years). On the Kameno farm (Bourgas), while land planted increased, nitrogen fertilizer was applied to 200 fewer hectares in 1993 than in 1991, at 78 percent of the concentration, but nearly four times the cost. Despite the decline in input use, materials costs for grain climbed from 46 percent of total costs in 1990 to 75 percent in 1992 (Begg 1993). Prices for fuel used in applying chemical inputs also rose rapidly, increasing by 1155 percent by 1992 (Ministry of Agriculture 1993a:27), while subsidized machine services to private farmers were discontinued. Less weeding and soil preparation is being done as a result, and human labor is substituted for machinery on many plots (Meurs, field notes 1993). Many private farmers interviewed in 1993 and 1994, used no fertilizer at all, citing the cost and temporary tenancy as reasons (Meurs, field notes 1993, 1994). The data may slightly exaggerate the problem of declining fertilization, since organic material can substitute for commercial nitrogen to some extent. In addition, some chemical inputs were overapplied under central planning and have built up in the soils. A more detailed analysis of fertilizer and pesticide use on a crop specific basis would be necessary before reliable impact assessments could be made. Casual observation suggests, however, that the
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large drop in fertilizers and pesticides has contributed significantly to the decline in output. Touring Bulgarian fields during the summers of 1992–4 revealed a profusion of broad-leaf weeds in fields of all kinds, as well as thinly covered fields of small, poorly developed plants. Water prices have also risen rapidly (8–15 times), in response to near-drought conditions in 1992–3 and reductions in government subsidies. In 1994, the drought worsened so severely that the capital city of Sofia was on strict water rationing from mid-November into 1995. This situation is sure to drive water prices much higher, if indeed any water can be had at all. Rising input prices are also reflected in the declining livestock population. As feed prices rose from 283 leva per ton in 1990 to 1177 leva per ton in 1991 and 1783 leva in 1992 (Ministry of Agriculture, 1993a:27), purchasing prices of livestock increased more slowly. Cattle prices, for example, only doubled from 1990 to 1991, rising another 66 percent by 1992. Sheep prices increased more slowly, while pork and poultry prices increase somewhat faster, but still failed to keep pace with rising feed prices (Ministry of Agriculture 1993c:28). Both TKZS and individual households liquidated livestock, resulting in herd declines described above. High nominal interest rates have prevented borrowing to cover rising input costs. From a preferential interest rate for agriculture of 2.5 percent in 1990 (the central bank rate was 4.5 percent), nominal interest rates rose to 54 percent in late 1991 and early 1992, then fell slightly to an average of 49 percent over the first six months of 1993 (PlanEcon Report October 12, 1993:25). While real interest rates are slightly negative, the high nominal rates, combined with short-term lending practices, are a particular problem for agriculture, because of the long lag between planting and harvest, and because of the heavy debt burden the sector carried over from before 1989 on which farms are required to make payments. Some debt forgiveness has been extended to the agricultural sector. In 1990, 2.2 billion leva of TKZS debt was liquidated. In 1992 and 1993, 500 million leva and 2 billion leva (respectively) was allocated from the government budget to retire agricultural debt (Cochrane et al. 1993). Nonetheless, in April 1993, the agricultural sector owed over 6 billion leva on short-term loans, and another 400 million leva on long-term credit (a total of approximately 95 million USD at a 1993 exchange rate of 65 leva/dollar) (Davidova 1993:167). In April 1993, preferential interest rates for agriculture were introduced to assure spring planting. Under this policy, farm and tobacco loans were to be subsidized 66 percent by the government (168 Hours November 14, 1993:7). Few subsidized loans were extended, however, as banks failed to apply the new regulations and the state failed to refund the interest owned to the banks which did make loans (Zagorska 1994:6). Of the total potential subsidized credit of about 5 billion leva, only 1 billion leva were used (Davidova 1993:174). Instead, farms reduced inputs and area planted.
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Factors in decline: legal uncertainty The legal uncertainty caused by the slow pace of restitution has also contributed to falling yields. As noted above, farmers using land allocated free for temporary use have little incentive to maintain soil fertility. In addition, uncertainties regarding ownership and the prevalence of temporary land use arrangements have contributed to the deterioration of capital stocks. Irrigation systems on ex-TKZS land, in which neither current managers nor potential land recipients have a clear future stake, have fallen into disrepair or been abandoned to looters. On the Zamfirovo farm (Mikhailovgrad), 600 ha were irrigated in 1985. By 1993, no land was irrigated, as the Liquidation Committee had failed to maintain the irrigation system (Creed 1994). Nationally, only 3 million decares were irrigated during 1993, compared to the 1990 capacity of 1.3 million ha (168 Hours May 16, 1993, October 24, 1993). Clearly, rising water prices have contributed to declining irrigation, but field interviews suggest that unclear ownership and short time horizons have also reduced irrigation by contributing to rapid deterioration of infrastructure (Meurs, field notes 1993, 1994). Another victim of ongoing uncertainty has been perennial plantings. Large quantities of fruit were grown for export, especially cherries and apples. The restitution of these trees is complicated by the requirement that owners pay for the ‘improvements’ to their land, and production is complicated by the dependence of many of these orchards on irrigation. Over the summers of 1993 and 1994, miles of roadway were lined with dying fruit trees which, without owners, had been abandoned to the forces of nature. This legacy of abandoned and deteriorating capital stock, mined agricultural land, and a general process of disinvestment and capital flight from agriculture may continue to slow the agricultural recovery long after the restitution process and price adjustments have been completed. Factors in decline: markets The slow upward adjustment in agricultural prices and corresponding profit squeeze in agriculture is linked to the decline in both foreign and domestic markets. Over the past decades, Bulgaria’s exports were concentrated in the CMEA countries. In 1989, 75 percent of Bulgarian exports went to this block (Table 10.4). The generalized economic collapse across the former CMEA thus had a disastrous impact on Bulgaria’s export markets, with exports to this region falling 1.5 percent in 1991, 26 percent in 1992, and 21 percent in the first half of 1993 (PlanEcon Report October 12, 1993:27, August 14, 1992:7). New markets have been slow to develop. The share of Bulgarian exports going to the European Union (EU) rose from 5 percent in 1990 to slightly under 30 percent in 1992 and 1993 (Table 10.4) (exports to the European Free Trade Area (EFTA) and the US remained approximately unchanged at 3 percent each), but growth of agricultural exports to these markets is limited by quotas. Total EU quotas for fresh and canned tomatoes, for example, were 7.1 thousand tons for
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Table 10.4 Bulgarian exports by selected trading partners, 1985–93
Sources: NSI (1993b:151–152); Current Economic Business October 1993:59–61; PlanEcon Report My 18, 1994:36
1993, under 2 percent of total production (Ministry of Agriculture 1993b: 25). Non-tariff barriers, such as high sanitary standards for imported products, also limit Bulgarian access to markets. Still, small tariff concessions have been extended on some of the quota products, covering over 60 percent of Bulgarian exports to the EU, including meat, cheese, eggs, wheat and some fresh and preserved fruit and vegetables (Davidova and Sukova-Tosheva 1993:22–7). Export restrictions by the Bulgarian government have added to the impact of declining markets and limited the upward adjustment of food prices. From 1989 to February 1990, due to domestic food shortages, there were explicit export bans on certain foodstuffs, including meat, fodder grain, and wheat (Cochrane et al. 1993). From June of 1991 through at least September 1994, a combination of quotas, export taxes, and export bans were used to limit exports of wheat and feed grains. While in some periods high domestic prices for grains reduced the impact of this legislation, in other periods it severely reduced the price of grain (Davidova 1993:177; Meekhof et al. 1993:31). Adjustments in domestic markets have also exerted downward pressure on food prices. From 1990 to 1992, real incomes in Bulgaria fell by about two-thirds (Buckwell et al. 1993:115, 129). As a result, demand for food products fell to an average of 53 percent of 1989 levels in 1992, and 65 percent of 1989 levels in 1993 (PlanEcon Report October 12, 1993:20, July 18, 1994:25). Consumption patterns also changed, as consumers substituted bread for the more expensive meat and dairy products. By the fourth quarter of 1992, meat consumption had fallen to 83 percent of 1989 levels, and milk consumption to 68 percent (Buckwell et. al. 1993:122). The government has tried to protect the weak domestic market somewhat, by retaining certain tariff barriers. Gueorgiev and Bashikarov (1993) estimated the effective rate of protection in 1992 ranged from 51 percent of value added for the food, tobacco, and beverage industry in 1992 to 4 percent for grain. Import quotas also remain in place for tobacco, bananas, ice-cream, and, from November to May, tomatoes and cucumbers. This protection appears to have been somewhat effective, at least through 1992. Imports of wheat rose in 1991 slightly above the 1989 level, but fell to well under 1 percent of the 1989 level in 1992. Fruit and vegetable
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imports fell significantly across the board (Ministry of Agriculture 1993a:30, 1993b:23–31). Direct government support for agriculture has fallen significantly, however. Price supports and other subsidies fell 86 percent in real terms from 1990 to 1992 (Ivanova 1993:105), hurting especially the livestock sector which had received the bulk of the subsidies under central planning. A limited number of supports were continued, however, as a result of demands from farmers. For example, in April of 1992 when farmers refused to sell wheat at $47 a ton, the government allocated funds for a price support of $17 a ton. Also in 1992, 400 million was spent on price supports for meat and milk, and to support preferential credit. In 1993, price supports for wheat were continued. Still, research suggests that these were inadequate to offset government price and export controls. Net transfers to agriculture were negative over the period 1990–2, with farm income being transferred instead to the state budget (Ivanova 1993:103, 109). Factors in decline: monopoly power in agricultural markets An additional factor behind the price squeeze in agriculture is the slow pace of demonopolization and privatization in the agro-industrial sector. Although Bulgaria quickly privatized small-scale property such as restaurants and shops, with 57 percent of these privatized by June 1993 (Wyzan 1993), large-scale privatization has been slow. The agro-industrial sector has been no exception. Large firms are to be privatized by the national Privatization Agency, while the almost 500 smaller food processing firms and all agricultural service enterprises (including the Machine Tractor Stations which owned the majority of the agricultural machinery), are to be privatized by the Ministry of Agriculture. As of the end of 1993, neither entity had made any progress. One flour mill and one fodder production unit had been privatized. The pre-reform industrial structure was based on a system of specialization in which each branch was dominated by one large conglomerate. The Law on Competition, passed in 1991, attempted to reduce the power of these large state firms by mandating their breakup. Over the summer of 1991, 100 large companies were broken into about 800 firms (Country Report January 1991:33). In many cases, however, firms have retained regional monopolies. Plans for privatization involve the sale of these monopolies as a unit and are unlikely to affect market structure. As a result, the markets for agricultural inputs and services, storage and processing continue to be dominated by local monopolies and monopsonies. These firms distort prices, contributing to the rapid rise in input prices and low purchasing prices for output. Flour mills are one example of the latter problem. Under the old regime, flour was purchased by the single government entity, Zerno (Grain). The purchasing monopoly was broken into 74 autonomous regional units in 1992, but this did little to reduce market power. In the Bourgas region, the new system leaves a single flour mill, aptly called The Great Flour Mill. In theory farmers and cooperatives are free to deal with
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anyone, but under the export restrictions The Great Flour Mill was an effective monopoly. Even without the restriction of exports, most farmers had little real choice as to when to sell their grain. Most lack access to storage facilities, the majority of which still belong to Zerno. Tobacco growers suffer from similar problems. Bulgartabak, the national monopoly under central planning, was divided into 22 subsidiary companies. Demonopolization of is a misnomer, however. Tobacco prices are still fixed centrally by Bulgartabac, and farmers still depend on the local subsidiary for inputs. In some branches of the agricultural processing sector, increased competition has emerged more quickly. In the fruit and vegetable sector, for example, many of the (newly autonomous) state firms operate with antiquated equipment and have large debts to commercial banks, making this sector a relatively easy target for new entrants. Greek and Turkish buyers in particular currently offer strong competition for input supplies, and established Bulgarian firms have gone so far as to make unauthorized planting loans to several liquidation commission farms to guarantee a supply of inputs. In some areas, dairy and meat processing also have a significant number of new entrants. Sometimes, however, the competition has not been enough to keep prices up. Tomatoes and other crops rotted in the fields in the summer of 1992, as prices fell below the level which would have made harvesting worthwhile. The economic factors and government policies outlined here hurt both the decollectivizing state sector and the fledgling private sector. The empirical evidence outlined in Table 10.4 suggests that sectors dominated by private production have fared no better than the state sector in the face of this price squeeze, with output and yields falling across the board. While a careful econometric study would permit us the assign some weights the factors contributing to the declining agricultural performance and disinvestment in agriculture, it should be clear from the above discussion that they form a complex web of interwoven economic and political problems—a web which resists simple solutions. UNCERTAIN FUTURE OF BULGARIAN AGRICULTURE Given the current chaotic conditions in the agricultural sector, predictions about the eventual results of the transformation process are difficult. Nonetheless, a few things are already clear. First, it is clear that despite the policy of restituting land in its real boundaries and liquidating the TKZS, production cooperatives will be a important part of Bulgarian agriculture for the foreseeable future. In a 1992 survey, 46 percent of Bulgarian farmers expected to put their land into a cooperative (Meurs and Spreeuw 1993). By December 1993, 1292 private agricultural cooperatives had been legally registered (Economic Business Report September 1993, December 1993). The 729 cooperatives registered as of July had 207,800 members, and incorporated 71,740 ha of land—41 percent of privately worked land (Dinkov 1993:5).
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Many of these new cooperatives resemble the ones in Kameno and Malorad (see pp. 253–6); they include the majority of land and assets belonging to the old collective farm and are still under the management of the TKZS staff. Others, like one visited in the Plovdiv region, consist of two or three farmers who essentially farm privately, but share a tractor and help each other out on labor intensive projects (Meurs, field notes 1993). Given the strong tradition of collective land use, the small size of holdings, and the weakly developed markets for agricultural inputs and products, cooperatives appear a rational choice for households (Meurs and Spreeuw 1997). The attempt of the Dimitrov government to create a pure sector of small, independent farmers clearly failed. Instead, the short-term prognosis for the organization of Bulgarian agriculture is one of mixed forms, with private farmers emerging and coexisting with larger cooperative farms. As seen in Table 10.3, private farming is likely to emerge more quickly in some sectors (vegetables) than in others (grain), with households enlarging their holdings through leasing (few Bulgarians are yet willing to sell their land) to begin commercial farming (Yarnal and Begg 1993). In a few cases, as in tobacco, contract farming may emerge, and in some geographical regions (mountainous and semi-mountainous) than others (plains). As the Kameno cooperative illustrates, private farming is also likely to continue to be linked in various ways to the larger, better connected and better equipped cooperatives. The sooner these various forms of production are able to clarify their legal status, the more existing infrastructure and capital is likely to be preserved for future use. Very small-scale private farming, much akin to LPS production, will continue to be ubiquitous given the strong tradition of self-provisioning. Some households receiving more land than needed for this purpose will rent the remainder to new cooperatives. It is clear that an eventual completion of the restitution process will not turn the agricultural sector into the hoped-for engine of economic growth. The majority of the causes of the decline in agriculture are unrelated to property form or the process of restitution: loss of markets, price and export controls, high interest rates and input prices, and monopoly power in the agricultural markets. Government policy can address some of these issues and improve the possibilities of agricultural recovery. The acceptance of local solutions to restitution, including the restitution of land in collectively owned blocks, should make it easier for agricultural producers to find quick, locally appropriate solutions to the use of existing capital stock, land, and labor. This will reduce uncertainty and encourage lengthening time horizons. An additional boost to agricultural production could be provided by addressing the problem of market power faced by many agricultural producers. Privatization of existing firms alone will not ensure competition. And existing anti-trust laws, which prohibit the control of more than 35 percent of a market by a single firm, provide little remedy when no potential competitors exist. The government could, however, carefully monitor the (in many cases open) price-fixing at the national level, and promote entry into the agro-industrial sector by offering tax breaks and
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other incentives to potential entrants. Given the continued political distortions, manipulations and uncertainty, commercial banks cannot be depended upon to support viable new entrants. The problem of building demand for agricultural products is more difficult. The domestic and regional recessions are likely to be prolonged. A political commitment to balanced trade will be needed if the EU and EFTA are to contribute significant new markets, and such a commitment is highly uncertain given the EU’s current excess supply of agricultural goods. The Middle East, a traditional trading partner, is more likely to provide an expanding market for agricultural production over time. Export restrictions have seriously exacerbated the problem of markets, however. Agriculture cannot serve as the engine of growth until it has itself recovered, and taxing agriculture to support the rest of the economy now risks undermining long run growth. The development of domestic markets for agricultural products will depend on a general economic recovery, as well as the government’s ability to negotiate some continued protection for fledgling local producers and processors. It is clear that, in the process of market adjustment and decollectivization, damage is being done to the agricultural base which will affect the sector’s recovery over the long term. Valuable herds of breeding livestock were liquidated. Even if a reduction in livestock production turns out to be economically justified, the damage to essential breeding stock will take years to repair. The rapid deterioration of other assets, including thousands of hectares of perennial plantings and irrigation systems are similar examples of destruction of the agricultural base. Soil damage is also a significant problem. Erosion was already severe prior to the transformation, affecting up to 80 percent of agricultural land. Soil condition is now being exacerbated by a short run mining of nutrients from the soils. Some of this deterioration should be reduced as the process of restitution and liquidation comes to an end. In a number of cases, however, the assets being eroded have the nature of public goods, which are unlikely to be adequately protected by markets alone. Irrigation infrastructure in areas of private agriculture may fall into this category, as may wind breaks, and even soil quality. In these cases, government regulation of resource and asset management will be a requisite for protecting the agricultural base. While the government policies outlined here may help to promote agricultural recovery, the evidence surveyed suggests that it is at the local level that appropriate and acceptable forms of restructuring are being defined. In general, the local population has responded creatively and rationally to a difficult situation and has defied central government policies where these were felt to be at odds with local structures and resources. In the long process of developing new behaviors and institutions, government policy can set the context for local initiatives. In so doing, it may influence their success and even attempt to control the most extreme violations of its programs and principles. But recent experience suggests that it will not be able to control the actual process of evolution.
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NOTES 1 2 3 4 5
The zadruga was a Slavic, patriarchal system of joint farming, in which all property was owned in common by extended families and labor was performed collectively. Bulgaria is divided into nine okrugs (districts). The okrugs are subdivided into obshtina (municipalities). Parties purporting to represent the interests of one or more ethnic groups are formally illegal. The Movement for Rights and Freedoms therefore defines itself more broadly, while most of its constituency is in the Turkish ethnic minority. The 1989 data reflect yields in the state sector only. As of the end of 1993, seven livestock firms had gone on the block and no bids had been received.
BIBLIOGRAPHY Begg, Robert. 1993. ‘Political Influences on the Decollectivization of Bulgarian Agriculture.’ Paper presented at the Association of American Geographers Annual Meeting, Atlanta. Buckwell, Alan, Junior Davis, Kelvin Balcombe, and Sofia Davidova. 1993. ‘Food Consumption During Economic Transformation in Bulgaria.’ Sofia: Ministry of Agriculture, PHARE Economic Analysis Unit. Cochrane, Nancy, R.B.Koopman, J.M.Lamb, M.R.Lundell, M.deSouze, and D. Sremac. 1993. ‘Agricultural Policies and Performance in Central and Eastern Europe, 1989–1992.’ USDA Economic Research Service, Foreign Agricultural Economic Report 247. Washington, DC: USDA. Country Report: Romania, Bulgaria, Albania. 1991. London: Economist Intelligence Unit. Creed, Gerald. 1994. ‘An Old Song in a New Voice: Decollectivization in Bulgaria.’ In East-Central European Communities: The Struggle for Balance in Turbulent Times, edited by David Kideckel. Boulder, CO: Westview. CSO (Central Statistical Office). 1988 and various years. Statistical Yearbook of the People’s Republic of Bulgaria. Sofia. Current Economic Business. 1991, 1992. Sofia: National Statistics Institute. Davidova, Sofia. 1993. ‘Agricultural Policy and Trade Development: Review 1992–1993.’ Sofia: Ministry of Agriculture, PHARE Program Economic Analysis Unit. ——and Anriana Sukova-Tosheva. 1993. ‘Trade and Welfare Implications of the European Agreement Between Bulgaria and the EC on Agriculture.’ Sofia: Ministry of Agriculture, PHARE Program Economic Analysis Unit. Dinkov, Dimiter Georgiev. 1993. ‘Progress in the Agrarian Reform to August 8, 1993.’ Mimeo, Ministry of Agriculture, Sofia. Dobreva, Stanka and Mieke Meurs. 1992. ‘Clients, Prols, and Entrepreneurs: State Policy and Private Agriculture Under Central Planning.’ Working Paper 93–25. Washington, DC: American University Department of Economics. Employment Observatory. Various dates. Commission of the European Community, Directorate for Employment, Industrial Relations and Social Affairs, Brussels. Glenny, Misha. 1993. The Rebirth of History. Harmonds worth: Penguin. Gueorgiev, Nikolay and Georgi Bashikarov. 1993. ‘Foreign Trade and Foreign Trade Policy in Bulgaria, 1991–1992.’ Typescript, Center for Democracy, Sofia. Ivanova, Nedka. 1993. ‘Measuring the Effects of Government Transfers From Agriculture in Bulgaria: Calculation of Producer Subsidy Equivalents.’ Sofia: Ministry of Agriculture, PHARE Program Agricultural Analysis Unit. Killian, Mia. 1991. ‘The Accord Form of Organization in Agriculture.’ PhD dissertation. University of Sofia.
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Kopeva, Diana and Plamen Mishev. 1993. ‘Regional Differences in the Pace of Land Reform and Their Influence on Product Mix.’ Sofia: Ministry of Agriculture, PHARE Program Agricultural Analysis Unit. Kouzhouharova, Veska and Stanka Dobreva. 1993. ‘The Transition in Bulgarian Agriculture: Restoration of Private Property and Reorganization of Production.’ Paper presented at the Second Annual Conference on Collectivization and its Alternatives, Shanghai Academy of Sciences, August. Logio, George. 1936. Bulgaria: Past and Present. Manchester: Sherratt and Hughes. Meurs, Mieke and Darren Spreeuw. 1997. ‘Rational Peasants in Eastern European: Household Decisions About Organizational Form During the Agrarian Transition.’ Working Paper 92–17, Washington, DC: American University Department of Economics. Meekhof, Ronald, Ivan Penov, and Andrew Schmitz. 1993. ‘Transition in the Bulgarian Grain Sector.’ Unpublished manuscript. Sofia. Mikhova, Dimitrina and John Pickles. 1994. ‘Environmental Data and Social Change in Bulgaria: Problems and Prospects of Data Availability and Future Research.’ Professional Geographer 46 (2):229–236. Ministry of Agriculture. 1993a. Informatsionen Buletin: Zerneni Kulturi (Information Bulletin: Grain Crops) Sofia, April. Ministry of Agriculture. 1993b. Informatsionen Buletin: Grozde, Plodove, i Zelenchutsi (Information Bulletin: Grapes, Fruit and Vegetables). Sofia, April. Ministry of Agriculture. 1993c. Analiz na Sustoyanieto i Tendensiite v Sektor Zhivotnovudstvo (1) (Analysis of the Conditions and Trends in the Livestock Sector). Sofia. Ministry of Agriculture. 1993d. Analiz na Sustoyanieto i Tendensiite v Sektor Zerneni Kulturi (2) (Analysis of the Conditions and Trends in Grain Crops). Sofia. Ministry of Agriculture. 1993e. Analiz na Sustoyanieto i Tendensiite v Sektor Plodove i Zelenchutsi (2) (Analysis of the Conditions and Trends in Fruit and Vegetables). Sofia. Ministry of Agriculture. 1994a. ‘Progress of the Land Reform in Bulgaria, as of June 10, 1994.’ Memo. Sofia. Ministry of Agriculture. 1994b. Analiz na Sustoyanieto i Tendensiite v Sektor Zhiotno-vudstvo (2) (Analysis of the Conditions and Trends in the Livestock Sector). Sofia. NSI (National Statistics Institute). 1992 and 1993a. Statistical Reference Book of Bulgaria. Sofia. NSI. 1993b. Statisticheski Spravochnik (Statistical). Sofia. NSI. 1994. Ploshti, Dobivi i Proizvodstvo ot Vsichiki Kulturi, Rekolta 1993 Godina (Area, Yields, and Productivity in All Crops, Harvest 1993). Sofia. NSI. Various years. Statistical Yearbook of the Republic of Bulgaria. Sofia. 168 Hours. Various dates. Sofia: Bulgarian Business News. Pavloff, Julien. 1992. Chairman, Christian Democratic Alliance. Interview. PlanEcon Report. Various dates. Washington, DC: PlanEcon, Inc. Rahn, Richard. 1990. Report to the Bulgarian Economic Growth and Transition Project, Washington, DC: National Chamber Foundation. Sanders, Irwin. 1949. Balkan Village. Lexington: University of Kentucky Press. Stoyanova, Rositsa. 1993. ‘State Policy Toward Agricultural Cooperatives in Bulgarian From the End of the 19th Century to 1944.’ Unpublished manuscript. Sofia. Todorova, Maria. 1993. ‘Improbably Maverick or Typical Conformist? Seven Thoughts on the New Bulgaria.’ In Eastern Europea in Revolution, edited by Ivo Banac. Ithaca, NY: Cornell University Press. USDA (US Department of Agriculture). 1991. World Agricultural Trends and Indicators: 1970–1988. Washington, DC: USDA. Vienna Institute Database. 1994. Wirtschafts und Sozialwissenschaftliches Rechenzentrum. Vienna. World Bank. 1991. Bulgaria: Crisis and Transition to a Market Economy Vols I, II. Washington, DC: World Bank. Wyzan, M. 1993. ‘Economic Transformation and Regional Inequality in Bulgaria: In Search
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of a Meaningful Unit of Analysis.’ Paper presented at the American Association for the Advancement of Slavic Studies. Honolulu, Hawaii, November 19–22. Wyzan, Michael and Orjan Sjoberg. 1992. ‘Agricultural Privatization in Bulgaria and Albania: Legal Foundations and Prospects.’ Working Paper 61, Stockholm Institute of Soviet and East European Economics, Sweden. Yarnal, Brent and Robert Begg. 1993. ‘Environmental Change and the Decollectivization of Agriculture: Three Bulgarian Cases.’ Working Paper. West Virginia University. Zagorska, Maria. 1994. ‘Issues Concerning the Crediting of Agriculture and the Related Activities in Bulgaria.’ Sofia: Ministry of Agriculture, PHARE Economic Analysis Unit.
Index
agrarian reform see reform, agricultural America see United States Andreff, W. 183n animal husbandry 28, 30, 31, 34, 137, 215, 240 Arkadie, B. 157 Arrighi, G. 144n Ashbrook, A. 143n Austria 16, 236 autonomy 128 Bangladesh 159, 172, 185n Bashmachnikov, V.F. 206, 211n Bauer, T. 33 Beaulieu, C. 184n Begg, R. 245 Belgium 21 Bengelsdorf, C. 89n Berend, I. 41n Beresford, M. 157, 164, 183n Bibó, I. 25 bourgeoisie; propertied 141 Bowles, P. 144n, 182n Boyd, M. 46, 48, 52, 59n Brazil 131 Brezhnev, L. 193–197 budget constraints 7, 38, 49, 50, 55, 136, 142, 155, 179, 209 Bulgaria 5–10, 12–14, 22, 43–61, 125, 151, 214, 217, 218, 245–267; agrarian reform 49–59, 250–267; agro-industrial complex (APKs) 45–19; decline in agricultural production 256–265 Bulgarian Communist Party (BCP) 43–45, 49, 51, 59, 248–252, 254 Burawoy, Michael 155 Byrd 144n Canada 21
Cameroon 94 capital 2, 5, 7, 13, 37, 40, 92, 94, 95, 97, 108, 112, 127, 129, 134, 137, 139, 142, 152, 154, 163, 176, 225, 252, 266; investment 14, 25, 27, 37, 76, 112, 113, 114, 199, 203, 205; stock 49, 53, 59, 257, 262 capitalism xiv, 3, 15, 16, 65, 127, 133, 142, 149, 151, 154, 155, 163, 182, 106, 215, 246, 254 Castro, F. 65, 67, 72, 125 centralization 2, 6, 43, 45, 48, 49, 52, 53, 65, 160 Chang, K. 160 Che, J. 144n Chernichenko, Y.D. 206 Chernomyrdin, V.S. 201 China xiii, xiv, 2–5, 8–11, 14, 15, 23, 32, 33, 56, 58, 62, 64, 87, 88, 92–148, 197, 214; agrarian reform 99–119, 127–142; decollectivization 5, 102; pollution 111–113, 140; town-village enterprises (TVEs) 101, 111, 113, 114 130, 132–139, 142; and Vietnam 149, 151, 154, 156, 159, 160, 165, 167, 175, 179–182, 185n; Zhaozhou and Bayan counties 107–114 Chinh, Truong 152 Chong, W. 145n class 5, 6, 13, 15, 88, 142, 154, 156; capacities 1, 6, 7, 8, 23, 214;class structure 1, 100, 141; struggles 22, 24, 27, 141, 230 collectives xiii, 23, 24, 97, 98, 99, 110, 111, 114, 119, 127, 128, 129, 133–138, 141, 154, 167, 175, 181, 195, 198–200, 202–206, 220, 225, 235, 243, 247, 248, 254, 255 see also cooperatives
271
272
Index
collectivism xiii, 11, 14, 16, 125, 161, 162, 246 collectivization xiii, xiv, xv, 1, 2, 4, 6, 13, 21, 24–32, 34, 36, 43, 44, 58, 63, 67, 125, 126, 128, 132, 140, 152, 154, 156, 157, 161–166, 179, 181, 192, 193, 196, 197, 215, 226, 230, 232, 236, 247, 249, 252, 259 commune 87, 98, 99, 100, 126, 150, 162, 172, 173, 175, 179 Communism xiii, xiv, 13, 151, 195, 197, 208, 209, 222 Communist Party of Vietnam (CPV) 151, 160, 164 cooperatives 4, 11, 14, 15, 24–36, 38, 39, 45, 62–66, 71, 72, 76–82, 86, 88, 129, 130, 137–139, 152, 154, 162, 164–167, 172, 175, 176, 179, 199, 201, 219–228, 230, 231, 233, 234, 241, 242, 251–255, 264–266 Creed, G. 55, 58, 59, 255 crisis xv, 106, 118, 156, 157, 164, 196, 253; agricultural 15, 206, 207, 214, 216, 219; ecological xiv; economic xiii, xiv, 12, 62, 63, 64, 81, 86, 88, 92, 151, 165;of transformation xiv, 1, 4, 12, 21, 236 Crook, F. 142n Cuba xiv, 9–11, 14–15, 62–91, 125, 149; agrarian reforms 68–75; cooperativization of state farms 75–79 Cultural Revolution 99, 100, 126, 142n Czechoslovakia 218, 219 Dao, T.A. 184n Dao, T.T. 184n Darvas, J. 25 de Vylders, S. 151 decentralization 6, 8, 9, 11, 22, 28, 33, 38, 43, 44, 49, 50, 54, 55, 56, 57, 64, 67, 68, 71, 75, 86, 96, 100, 111, 156, 160, 191–193, 195, 200, 211 decollectivization 5, 10, 11, 12, 22, 93, 101, 102, 109–111, 117, 127, 151, 152, 154, 156, 160, 174, 179, 180, 193, 253, 256, 258, 259, 267; Hungary 214–237 Deere, C. xiii, xiv, 2, 4, 11, 62, 74, 89n Deng, X. 100, 101, 113 Denmark 21 disinvestment 53, 248, 262, 265 Djankov, S. 43 Donáth, F. 40n, 41n Dong, X. 144n, 182n Durkheim, E. 39
ecology xiv, xv, 15, 31, 37, 39, 80, 163, 194;in China 92, 94, 100–101, 107, 108–112, 114, 117, 118, 119n, 140 elite 5, 22, 23, 26, 32, 54, 93, 100, 141; bureaucratic 15;communist 12; political 33, 236;technocratic 5, 6, 13, 15 employment 15, 128, 134, 136, 152, 196, 216, 225, 228, 231–234, 256, 257 entrepreneurs 7, 8, 13, 30, 37, 100, 129, 132, 137, 221, 229, 230, 233, 235, 236 environment xiv, 33, 37, 39, 92, 94, 96, 101, 105, 107–111, 114, 117, 119, 140, 142, 194, 216 equality xiii, 174;income 139 see also inequality Erdei, F. 25, 40n export 21, 37, 38, 43, 45, 46, 49, 54, 55, 56, 58, 62, 63, 66, 92, 93, 95, 127, 131, 133, 134, 137, 149, 158, 160, 161, 176, 207, 208, 215, 220, 237, 248, 256, 257, 262, 263, 265 family farms 2, 7, 8, 10, 13, 15, 16, 28–31, 55, 127, 131, 156, 158, 180, 202–206, 218, 219, 225, 235–238, 247; family plot 28–31, 33, 34, 35, 44, 52, 102, 227, 231, 238 see also self-sufficiency plots farmer’s market 11 fertilizers 29, 37, 39, 47, 55, 58, 68, 70, 75, 80, 82, 102, 103, 108, 109, 113, 119, 126, 128, 131, 136, 165, 180, 194, 207, 216, 260, 261 see also pesticides feudal 25, 99, 118, 182, 254 see also semi-feudal Fforde, A. 151, 152, 157, 159, 163–164, 183n Figueroa, V. 90n Filippov, P. 199, 211n food: consumption 32, 37, 54, 62, 194, 263;processing 36, 66, 67, 192, 193, 195, 210, 228, 264;production xiv, 2, 10, 11, 12, 32, 36, 53, 56, 62, 66, 72, 74, 98, 153, 176, 178, 194;supply 23, 68, 72, 78, 82 see also shortages France 16, 21, 236 Friedman, E. 143n, 144n Gaidar 200, 204, 211n Gallup, J. 184n Gereffi, G. 144n Germany 16, 154, 219, 236;East Germany 218
Index Gerschenkron, A. 179 Giap, Vo Nguyen 152 Glenny, M. 253 Gonzales, E. 89n Gorbachev, M. 22, 156, 158, 194–198 Gourou, P. 161, 174, 183n, 185n government, local 129, 173, 232, 233, 234 Green Revolution 24, 31, 33, 34, 37, 128 Griffin, K. 145n growth 3, 4, 6, 8, 10, 11, 15, 16, 21, 31, 33, 36, 38, 39, 46, 49, 51, 54, 63, 81, 88, 93, 107, 114, 116, 125, 133, 134, 137, 139, 142, 149, 150, 158, 159, 191, 194, 214, 216, 217, 220;agricultural xiii, 43, 45, 48, 53, 125, 132, 172, 195, 206, 257;economic xiv, 45, 92, 95, 118, 119, 140, 141, 157, 172, 181, 196, 217, 219, 232, 266;extensive/intensive 43, 52;harmonization of 14, 22, 192, 200;industrial 44, 48, 59, 127, 256; population 93, 98, 101, 128, 169 Harcsa, I. 21, 214 Hinton,W. 109, 112 Hong Kong 95, 134, 137 household plots see family plots Hu, Y. 101 Huang, P. xiii, xiv, 133, 144n Hungary xiv, 3, 6–10, 12–15, 21–42, 49, 56, 125, 130, 151, 154, 166, 214–237; economic recession 34–40;green revolution 31, 37;limited liability corporations (LTDs) 220–231, 233, 235, 236;property relations 6;success of agrarian reform 22–34, 221–237 Ikeda, S. 144n Illyés, G. 25 import 37, 45, 46, 54, 56, 58, 62, 63, 66, 67, 68, 93, 96, 164, 207, 208, 256, 263, 264 incentives 2, 23, 29, 33, 36, 40, 43, 44, 49, 50, 53, 54, 57, 58, 59, 62, 63, 65, 67, 69, 72, 75, 82, 83, 86, 87, 95, 99, 101, 114, 117, 130, 167, 195, 216, 267 India 131, 172 Indonesia 185n industry 2, 92, 133, 158, 192, 193, 256, 257; heavy industry 2, 8, 139, 179; industrialization 22, 32, 45, 93, 98, 101, 128, 152, 181, 191; industrial production 12, 24 inequality 15, 65, 67, 83, 85, 86, 92–93, 95, 131, 140, 142, 152, 163, 166, 191
273
infrastructure 67, 95, 99, 100, 109, 112, 113, 114, 119, 127, 137, 192, 233, 234, 252, 262, 266, 267 investment 44, 50, 51, 53–58, 95, 106, 114, 129, 174, 194; in agriculture 7, 27, 34, 35, 38, 49, 57, 63, 67, 106, 107, 109, 112, 113, 125, 126, 127, 133, 193, 195, 209, 221, 248 Ireland 21 Irwan, A. 144n Japan 134, 137, 142n Java 172 Jiang, Z. 95 Judd, E. 143n Juhász, P. 6, 30, 226 Ka, C. 144n Kádár regime 22, 23, 26, 39 Katsuji, N. 143n Katzenstein, P. 142n Kautsky, K. 152, 154, 155, 156 Kelliher, D. 143n Kerkvliet, B. 143n, 157, 173, 179, 183n Kerry, F. 89n Khan, A.R. 145n Kiet, Vo Van 149, 152 kolkhoz 11, 14, 27, 32, 36, 193, 195, 198, 199, 204–206, 217 Kondratiev, N. 191 Korea (South) 149, 160, 175, 181 Kornai, J. 1–4, 8, 11, 12, 14, 16, 22, 43, 44, 53, 125, 126, 133, 142, 144n, 151, 181, 191, 192, 214, 236; The Socialist System 1–3, 149 Kovách, I. 21, 214, 242n Krushchev, N. 193, 195, 197, 200 Lage, C. 89n land reform see property reform Laos 149 Lapshin 199 latifundia 7, 8, 13, 14, 16, 23, 24, 25, 28–31, 34, 36, 214, 226, 227 Lenin V. 155, 156, 163 liberalization 43, 49, 54, 58, 59, 155, 158, 159, 179, 181, 217 Ligachev 195 Lin 144n Lin, J. 101, 112 Lin, N. 233, 243n Ljunggren, B. 152 Long, N. 150, 167, 185n LPS see self-sufficiency plots
274
Index
Lu, A. 143n Luong, H. 145n, 150, 151, 162, 163, 166, 176, 184n machinery 34, 35, 43, 45, 51, 76, 88, 99, 111, 163, 165, 215, 227, 248, 249, 251, 252, 257, 260 management 24, 33, 34, 39, 43, 54, 57, 65, 67, 68, 71, 78, 80, 134, 136, 164, 207, 226–231, 235, 248, 266 managers 8, 22, 32, 33, 35, 36, 39, 51, 55, 56, 59, 136, 220, 221, 227, 230, 252, 255, 262 Mao, R. 144n Maoism 2, 99, 154, 179, 180, 181, 183n markets xiv, 5, 14, 16, 22, 23, 27, 30, 34, 37, 38, 62, 63, 65, 66, 81, 92, 96, 114, 128, 139, 141, 142, 154–156, 172, 176, 210, 215, 217, 220, 236, 245, 246, 260, 263, 264, 266, 267; black market 82–85;capital 40;domestic 13, 16, 21, 24, 32, 108, 117, 118, 129, 133; international 13, 21, 24, 32, 105;labor 40, 175, 232;land 199 Marr, D. 183n Marxism 88 Matson, J. 143n Meng, L. 144n Meurs, M. xiii, xiv, xv, 2, 4–7, 12, 22, 43, 218, 245 Mexico 94 migrant workers 181 Mongolia 110, 216 Muldavin, J. xv, 2–5, 10, 15, 92, 119n, 120n Murray, C. 160, 183n Nagy, I. 26 Naughton, B. 145n Nee, V. 143n Németh, L. 25, 223 Netherlands 21 Nguyen, V.L. 157 Nickolsky, S. xv, 2, 3, 7, 22, 191 Oi, J. 142n, 143n, 180, 233, 243n Palat, R. 144n party 13, 56;Communist Party 25, 199; multi-party system 141;one party state 3, 5, 16, 141, 151, 236 path dependence 12, 14, 63, 86, 245 peasant market 66, 67, 83 peasants 7, 14, 22–28, 34, 36, 45, 63, 65,
66, 67, 71, 81, 82, 83, 86, 87, 226, 230, 232, 236, 253;China 93–100, 105–111, 113, 114, 116–119n;middle 25, 26, 27, 31, 35, 162, 163, 165, 230, 231; poor 25, 97, 99, 116, 162, 163, 165, 226, 230; rich 26, 27, 31, 35, 97, 110; Russia 191, 195, 196, 199, 201–204, 206, 207, 209;Vietnam 149–182 Pérez, N. 89n, 90n Perry, E. 145n pesticides 55, 58, 68, 70, 194, 260, 261 Petö, I. 29, 41n Philippines 131 Pickowicz, P. 143n, 144n Pieke, F. 145n Pike, D. 160, 183n planning 28, 48, 54, 56, 86, 93, 156, 157, 197, 248, 260, 264, 265 Poland 49, 151, 218, 220 Porter, G. 163, 167, 183n post-communist xiv, 1, 4, 5, 10,12–16, 216, 219–221, 223, 229, 230, 232–236 see also post-socialist post-socialist 92, 161, 182, 197, 200 poverty xiii, 32, 93, 128–130, 140, 149, 158, 172, 232, 235, 247 see also rural poverty prices 2, 23, 27, 54, 55, 57, 58, 62, 78, 84, 85, 96, 106, 127, 139, 192, 194–196, 199, 200, 206, 209, 215, 221, 251, 260, 261–264, 266; disequilibrium 3;reform 9, 14, 22, 33, 50, 51, 95, 155, 191, 210 privatization 7, 13–14, 23, 92, 93, 100, 116, 136, 154, 155, 166, 172, 181, 200–202 Bulgaria 2, 46, 250–253, 259, 264, 266; Hungary 214–237 productivity xiv, 2, 164, 191, 194, 207, 232, 236, 245 profit 33, 37, 63, 67, 71, 72, 80, 81, 106; profitability 38 proletariat;rural 25, 36, 65 see also workers property; hybrid 4; reform 9, 10, 15, 29, 40, 125, 126, 131, 141, 151, 154, 161, 191, 192, 195, 196, 200, 207, 210; relations 2–6, 15, 23, 33 see also cooperative Qian, Y. 144n reform xiii, 10, 11, 14, 15, 23–25, 27, 33, 39, 44, 49, 53, 55, 57–59, 62–64, 67, 75, 86–88, 92, 94, 95, 97, 99–102, 106,
Index 114, 149, 151, 158, 169, 175, 176, 182, 191–193, 197, 198, 208, 232, 252, 255; agricultural 59, 126, 163, 195, 196, 206, 253; economic 1, 3–7, 22, 23, 179, 245; political 3, 5, 9, 10, 16, 23; technocratic 6, 7 Renwei, Z. 145n Riskin, C. 140, 145n Romania 49, 151, 218 rural;communities 37;economy xiv, 116, 131–134, 138, 139, 141, 142, 152, 154, 172;development 127, 130, 180; industrialization 32, 136, 137, 181; industry 131–134, 255;population 24, 30, 32, 98, 128, 137, 138, 178, 231, 252; poverty xiii, 129, 130, 140, 149, 152, 158, 172, 231, 235 Russia xiii, xiv, 2, 7–10, 12–14, 22, 92, 97, 100, 125, 130, 132, 142, 191–211, 214;and Vietnam 151, 154, 156, 158, 163, 179 see also USSR Sachs, J. 125, 157, 158, 179, 181 Sanders, I. 247 Second Economy 7, 23, 39, 40 Selden, M. xv, 3, 4, 5, 10, 125, 143n, 144n, 154, 179, 183n self-management 54–56 self-provisioning 71, 72, 73, 75, 78, 79, 81, 83, 87, 266 self-sufficiency plots (LPS) 44, 45, 46, 52, 53, 55, 58 semi-feudal 28, 155, 204, 227, 254 Sen, A. 144n Sexto, L. 90n Shanin, T. xiii, xiv sharecropping 29, 36, 64, 161, 166 Shirashi, T. 142n shock therapy 13, 94, 154–156, 179, 234 shortages 1, 2, 13, 85, 95, 200, 205; economy of 125, 130, 142;food 21, 33, 79, 82, 83, 84, 167, 193, 195, 263; labor 80, 81, 87, 163; Smil, V. 143n Socialism xiii, xiv, 12, 14, 31, 39, 63, 65, 88, 125, 142, 149, 151, 155, 156, 179, 182, 197, 215, 222, 233, 249 sovhozes 198–204 Soviet Union see USSR Stark, D. 12, 229, 242n state farm 4, 11, 25, 26, 62–73, 75, 78, 79, 80, 82, 86, 87, 99, 154, 167, 198–204, 221, 222, 238, 260 see also sovhozes
275
Stolypin 197 Stroyev, E.S. 204 subsidies 2, 7, 63, 93, 105, 106, 107, 179, 208–210, 216, 220, 221, 264 Sun, J. 120n sustainable growth xiv, 7, 209 Szabó, D. 25 Szakács, S. 29, 41n Szelényi, I. xiv, 1, 21, 126, 141, 142, 154, 166, 214 Taiwan 15, 134, 137, 149, 158, 160, 175, 181, 185n tax 23, 54, 57, 112, 113, 114, 129, 141, 161, 164, 167, 174, 216, 260; taxation 83, 150; tax rate 84 Thailand 158 Theresia, M. 222 Third Way 24, 133, 142 Third World xiv, 96, 99, 179 Tonnesson, S. 183n Torres, C. 90n Tung, Dao Duy 149 unemployment 12, 65, 202, 222, 235, 255 Unger, J. 144n, 145n United States 21, 32, 39, 85, 126, 134, 137, 142n, 155, 161–163, 165 USSR (Soviet Union) 11, 12, 59n, 62, 63, 68, 89n, 116, 125, 126, 142, 154, 156–159, 179, 191–211 Uzun, Y.Ya. 201, 211n Verdery, K. 182 Veres, P. 25 Vermeer, E. 145n Vickerman 164 Vietnam xiii, xiv, 3, 5, 8–10, 14, 15, 23, 125, 130, 131, 149–182, 214; agrarian reform 149–182; black market 82–85; Vinh Phu 169–175 wages 7, 32, 39, 51, 54, 56, 57, 70, 72, 85, 136, 174, 176, 235, 260; agricultural 56, 69; industrial 7, 56 Walder, A. 143n, 144n, 145n, 181, 234, 243n Watts, M. xiv, xv, 3, 4, 10, 149 Weitzman, M. 145n Western Europe 16 Wong, C. 145n Wong, J. 144n, 145n Woo, M. 158, 179, 181 workers 7, 22, 23, 26, 32, 43, 50, 51, 52,
276
Index
56, 57, 59, 64, 65, 68–73, 75–78, 86, 87, 88, 106, 107, 116, 136, 159, 176, 207, 222, 225, 227, 229, 248, 249, 251, 253, 255 World Bank 107, 130, 143n, 149, 152, 173, 185n, 260 Xu, C. 145n Yang, M. 144n, 145n
Yao, J. 145n Yeltsin, B. 142, 196, 198–200, 204 zadruga 247–249, 268 Zhang, H. 145n Zhao, Z. 101 Zhivkov, T. 245 Zhou, E. 126 Zhou, K.Xiao 143n Zhyuganov 200
