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1.6. An "era of great promises" - FARMER COOPERATIVES VERSUS COLLECTIVE FARMS American Studies on Ukrainian Problems Vitaly V. Zinovchuk

After Stalin the agriculture of the Soviet Ukraine persisted in being developed in accordance with the rules of a command economy, and as could be expected, the commander's role was significant. That is the reason to associate each new stage in the formation of an organizational structure in agriculture with the person responsible at that time for the decision making process. Following a short struggle for power, Nikita Khrushchev became the new Soviet leader. His personal contribution in the disclosure of Stalin's personality cult was widely recognized as historical. He also did much for the elimination of the consequences of Stalinism in different spheres of social life.

However, his performance of this outstanding mission was very contradictory. As for agrarian sphere, on one hand, due to his rural background and his better understanding of rural people and agricultural problems he initiated many positive changes which increased agriculture productivity considerably, stopped the practice of requisitioning agricultural products, destroyed the atmosphere of Stalinist fear and coercion, and made rural life more optimistic. For the first time, the principle decisions were made after informal and democratic discussions, with wide use of agrarian experts. That was the first attempt to speak about the real economic problems openly. But on the other hand, Khrushchev was not able to rid himself of stereotyped thinking caused by predomination of communist ideology. He retained as inviolable the fundamentals of the collective farm system created by Stalin. Even in his celebrated secret speech to the Twentieth Congress of the Communist Party in 1956 he noted as a positive (in his understanding), Stalin's creation of a centrally controlled economy and inveighing against so called right opposition in agriculture:

"The Bukharinites1 led actually towards the restoration of capitalism and capitulation to the world bourgeoisie.. We,would'not now have a powerful heavy industry, we would not have the kolkhozes,we would findourselves disarmed and weak in capitalist encirclement" [Khrushchev, p.172].

The first step of the new leadership that was actually effective, concerned the introduction of incentives for increasing productivity of individual peasants' economies. The moderate monetary tax on subsidiary plots was introduced, giving some advantages for families who had privately owned animals. The basis of taxation was now the size of the land area, not the output of the plots [Wadekin, p.246]. It made reasonable for peasants to raise the output of family plots and enlarge a number of private livestock for their own consumption and for sale. Immediately product surpluses appeared and became available for a market.

The next important innovation was connected with the agricultural product procurement system. Problems consisted in the fact that procurement prices paid by the state for collective farms were very low. For instance, prices for grain were established as early as 1929, livestock prices were doubled from 1929 to 1940 but remained unchanged from 1940, and only in the case of technical crops was there an exception where the prices were increased after the war. Meantime the retail and wholesale prices (at which collective farms also bought many of their industrial inputs) rose many fold [ Bornstein, p.119]. For example, in 1940 in order to earn enough to purchase a five-ton-truck, a collective farm in Ukraine had to sell 99 tons of wheat, in 1948 - 124 tons, and in 1949 -238 tons [Medvedev Roy 1989, p.68]. During the war the retail prices for food were frozen but then they grew gradually as well. The higher state procurement prices stimulated collective farms to develop and expand production. For the first time, due to administrative increase of procurement prices the system of collective farming got a progress in productivity. For instance, In Ukraine according to the Soviet sources of information during the period 1950-1960 production of grains increased 7%, milk 106%, meat 73%, wool 132%, eggs 106% [Soviet Ukraine, pp.298,302]. Practice of increasing state prices became constant (Figure 6).

The increase of state procurement prices did not yet cause the spiraling inflation: retail prices were still high enough, therefore the government didn't have to subsidize them except for meat. But Khrushchev had awakened the "sleeping beast" of the future inflation. Now after increasing procurement prices the government inevitably will have to undertake other interventions to prevent new economic problems (Figure 7). Thus, the roots of the inflation problems at the end of 1980s and beginning of 1990s came from the era of Khrushchev's ruling.

Productivity increases of agriculture gave a certitude for Khrushchev to undertaken actions, and his experiments became bigger and more risky. For example, the Virgin Land Program (development of sparsely populated plains in Northern Kazakhstan) which was usually presented as a great achievement of the Communist Party, in fact cost Ukraine the loss of 80,000 experienced agricultural workers and specialist (many of them settled there permanently), tractors, grain harvesters, other machinery, and reduced access to delivery of inputs [Subtelny, p.504]. Also investments in agriculture and resultant intensification would take a long time in coming [Stebelsky, p.113]. The results of the Virgin Land Campaign didn't correspond to the expectations, but it was not popular as a topic for official discussion even when the tremendous ecological damage of new cultivated lands was broadly recognized.

Indexes of state procurement prices, selected years 1952-1966(1952 = 100%).

Figure 6. Indexes of state procurement prices, selected years 1952-1966(1952 = 100%).

Data from: Bornstein, Morris. 1970. "Soviet Price Theory and Policy". The Soviet Economy: A Book of Readings. Edited by Morris Bornstein and
Daniel R. Fusfeld. 3d Ed. Homewood, Illinois: Richard D. Irwin, Inc., p. 120.

A marked but not a principle change in organization of agriculture was connected with the abolishment of MTS (Machine-Tractor Stations), in 1958-1959- As mentioned above, they were established in the period of collectivization because new-formed collective farms were too poor to have their own machinery and make any technical services. To organize and to own this business was an exclusive monopoly of the state. Besides they represented an additional channel of the state control for collective farms' activities. The MTS' services were estimated in roubles but were paid in agricultural products. Increase of procurement prices in the 1950s led to the decrease of actual payments for MTS. The state did not receive the proper return for investments and salaries of MTS employees. The government decision was to merge MTS with collective farms and to force collective farm to buy MTS' machinery. Officially it was proclaimed as "further development of the collective farms independence". But unfortunately it was only half true. Collective farms had to pay not only for machinery but also for storage, fuel and fuel capacities, other facilities, and high salaries for technical staff of MTS. Meanwhile, during the period there was also an appreciable increase of prices for new machinery and spare parts, i.e.

100-120% for spare parts [Karcz, p.232]. Many skilled workers and specialists were not agreeable becoming members of collective farms, which was quite understandable. They preferred finding jobs in the cities. MTS abolishing affected the financial possibilities of collective farms. A great majority of them lost the ability to buy new machinery and to repair those already purchased. It was one of reasons for the forthcoming crises in the beginning of 1960s.

With the weakening dictatorial methods, the problem of peasant labor motivation in collective farms seemed to have arisen. There was a clear tendency towards decreasing participation in public sector of agricultural production. Collective farmers were still associated with the trudodni (labor-days) payments. As in previous years they were paid once per year after fulfillment of all obligations to the state. The system was very unpopular because of the shortage of any payment during the year/„particularly in cash. In Ukraine, the problem was slower solving (Table 7).

Table 7. Index of cash distribution per labor-day
in selected Soviet Republics (1950 = 100 %)

Index of cash distribution per labor-day

Source: Nove, Alec. 1963. "Incentives for Peasants and Administrators". Soviet Agricultural and Peasants Affairs. Edited by Roy D. Laird. Slavic Studies Series 1. Lawrece, Kansas: University of Kansas Press, p. 55.

Collective farms were permitted to introduce monthly advances. With the increasing procurement prices collective farms acquired increased capacity to pay cash in advance. Gradually, the product share in payments was replaced by cash. But the efficiency of these changes was questionable. The decrease of product payments did not compensate with the development of trade network in countryside. Peasants had to visit cities more often for the purpose of buying food, first of all bread, butter, and meat products like sausage. It destabilized the food situation and increased the shortage of consumer goods in urban areas. Advance payments also did not solve the problem of level of payments: salaries of industrial and other state employees were considerably higherГРог example, in 1962-1964, workers' wage would have required additional payment to them of 750 million roubles as well as the distribution of 6.4-7.5 tons more grain for earnings of Ukrainian collective farmers to reach the level of state farms [Volin 1970, р.41б].

A surprising metamorphosis occurred regarding the official viewpoint on the role of individual economy of the peasant family. Without a doubt, it was connected with Khrushchev's position. Being a patient supporter of private sector and even effectively promoting its development in his first days in the office he nevertheless initiated an attack on the individual economy in his further political career. Of course, there were some reasons for that. Naturally, collective farmers preferred to work on their family plots rather than on collective fields. Productivity of the plots and privately owned animals were undoubtedly higher. Collective farmers compensated for the insufficient level of trudodni payments by selling products at private markets. The share of "half-of-private" agriculture in consumer basket of city fellows was becoming more essential, especially for vegetables, potatoes, fruits and meat. But it was not in collective farming's favor.

Khrushchev, as an unshakable believer in socialist agriculture, couldn't accept the appearance of an alternative. That's why administrative pressure, a consistent instrument of command system, was again called into action. The size of plot and number of animals one family could own were restricted by centralized order. Peasants were forced to sell their animals to collective farms. Results came very soon: private market supplies were reduced, and a level of prices constantly rose [Wadekin, p.303]. Collective farms could not manage the increased herds because of shortage of feed and grazing land. They became more dependent on state fodder and other feed supply. The forced measures against private sector did not result in a corresponding increase in collective farmers labor productivity in public production.

Since Ukraine was the primary agricultural producer among Soviet Republics, Khrushchev's organizational undertakings frequently started there or he used the experience of Ukraine to implant his programs in other parts of the U.S.S.R. One of the best examples is the forced implantation of unacceptable crops. Corn, or the so called "Queen of the fields", hardly cultivated even in some regions of Ukraine [Yasny 1963, p.230], was introduced up to the northern part of Soviet Union. The same was done with sugar beets, Chinese millet, melons, pumpkins, grape, etcs Like Stalin> he was an enthusiastic supporter of Lysenko's theory that plants could inherit acquired characteristics. This pseudoscientific theory as a variant of "communist oriented" biology caused dissidence in Soviet science (in broader scale than biology and agriculture) and political pursuits of many outstanding scientists. Khrushchev tried to make an active intervention in the system of crop rotation. Under his pressure the share of the fallow in arable lands was decreased to 2.6% in Ukraine [Anderson, p.257], while in North Dakota, with similar natural conditions and agricultural specialization, fallow land consisted of 26% [jasny 1963, p.219]. This "innovation" resulted in serious damage for soil productivity and the natural environment. The top soil of millions of hectares were blown away (irfdirect meaning) from the Virgin Lands.

Khrushchev also spent much time and energy on different territorial, branch, and personnel reorganizations. Generally, the majority of them were either not successful or a complete failure. As a rule, his reorganizations irritated people, often high quality experts, who suffered because of not enough thought over decisions initiated by Khrushchev personally. But Khrushchev never touched the foundation of Soviet agrarian problems - the organizational structure of agriculture. All his reorganizations were only new combinations of existing structural elements. As for collective farms he continued the Stalin's play in "cooperative democracy". The economic essence of the collective farming was inviolable. Khrushchev went so far in his unrealistic projects like "to overtake and surpass America" and unsuccessful reorganizations that only the Pleunum of Central Committee of Communist Party in October 1964-succeeded in stopping him insisting on his retirement. Of course, there were additional reasons for the dismissal besides agriculture. But failures in agrarian .sphere seriouslysaggravated his other faults.

The new Soviet leader, Leonid Brezhnev, started his ruling with high-proclaimed economic reform carried out under guidance of the USSR Prime Minister Alexey Kosygin. The idea of the reform could be shortly expressed as the usage of economic interests at different levels (branches, enterprises and individuals) to increase output, and efficiency of production. Reformers tried to improve the system of planning, to introduce a more flexible mechanism of incentives, to extend autonomy of enterprises and decentralize decision making process [Adam, p.52]. The proposed program actually looked comprehensive and more economically founded (in the extent that could be given by command system) than proposed before. It appealed to such unusual and new sounding economic notions as profit, bonus, pricing, financing, etc. These changes were to cover all branches of national economy, and agriculture development was one of the key subjects of this reform.

The first action initiated by new leaders and energeticly undertaken already during the month following Khrushchev's removal was directed to the correction of his errors and excesses in attitude to family subsidiary economies (in his time Khrushchev started with the same). By special decree, many restrictions ofvindividual-subsidiary farms were weakened or even repealed. It was also recommended to collective farms to restore family plots to their former size and to reinstate the number of privately-owned livestock which had been subjected to unwarranted reduction under Khrushchev. The maximum size of a family plot in Ukraine was increased from 0.15 to 0.40 ha (0.37-0.99 acres). The Ukrainian Government proposed to increased the size of plot up to 0.60 ha but the proposal at that time wasn't adopted by the central Government [Wadekin, p.326]. In 1977, the minimum size was increased to 0.5 ha. Members of collective farms were provided pasture and feed for their livestock. Another positive impact for the development of subsidiary economy was the appreciable increase of earnings paid in kind labor in public production. The individual sector of Ukrainian agricultural began again to have an important role in food supply of urban population. Gradually, the share of the private sector reached 33% of total agricultural output with only 3% of the land. Private plots contributed about 40% of collective farmers' income [Schoeder, p.178].

In March 1965, a new comprehensive program of agriculture development was adopted by Pleunum of the Central Committee of Communist Party. It was one of the most important programs in the history of Soviet collective farming. It defined the agrarian policy for almost twenty years. New features of the decision making process at the highest were:

1. Since 1965, development of agriculture was recognized as one of the painful problems of the Soviet economic policy. Governmental efforts, including considerable investments, now were directed not only for economic development of agricultural production but also to social development of countryside. The official attitude towards people of agrarian labor became accentuated respectful. The government sincerely strived to equalize the rights and living standards of rural population in order to reverse the declining prestige of living in a village and working in agriculture1. Peasants were at last given passports, thus correcting one more of Stalin's injustices.

2. Individual pressure of the first person in making important decisions for agriculture was replaced by collective responsibility of Politbureau (the highest Communist Party Board). Decisions of Politbureau usually were built on the results of preliminary discussion with broad engaging research and designing organizations. Special attention was paid to the scientific design of the decision, but the procedure of its introduction was connected with unlimited accumulation of bureaucratic features.

3. The economic aspects of the decisions of new leadership increased the demand for specialists in economics. Since of the end of 1960s more attention was paid to economic education and economic science. Many new faculties and departments of economics were created in both educational and research institutions. The number of certificated economists directed to work in collective farms and other agricultural organization increased constantly. They played an important role as organizers of production. This made them in due course indispensable experts in collective farm management. Of course, the role of communist ideology was still significant. The thinking of these experts was mainly oriented to command economy. However, the new generation of economists were becoming more capable of critical analysis, understanding importance of individual economic incentives, and more professional management.

One of the major attempts to restructure agriculture undertaken after March 1965 concerned reforming payments for labor in collective farms. The system of trudodni (labor-days) payments still restricted growth of living standards in villages, which was considerably lower than in urban areas. It became urgent, necessary from the government's point of view, to equalize the situation. Hence, the guaranteed wage (like for state employees) was introduced for members of collective farms. New economic conditions provided them with a minimum monthly salary. The emphasis was changed from barter to cash distribution of wealth. It favored the growth of financial income of rural population, and was undoubtedly important for social development of villages. But at the same time, the tie between their rewards for labor and final (harvesting) results of production was effectively broken. This tie was direct; under old circumstances of labor-days system use. Guaranteed cash wages collective farms required advance financing before the receipts of marketed 'products became available» Many collective farms began to apply to the state bank for credits which they were not able to repay. The debt load of the collective farms grew rather quickly. The stimulant role of the distribution relations was weakened.

In spite of numerous and tremendous government efforts, the problem of finding effective incentives for collective farms members in public sector of production was not solved. The problem persists to this day. The proposed forms of linkage between individual interests and final results of collective activity very often looked clumsy, tangled, and incomprehensive to those for whom it was originally designed. The stimulus was insufficient again. So the universal system of economic incentives to increase production and raise efficiency was not found, and may not be possible for command economy. The increase of average level of wages led to collective farms' debts, and finally to inflation.

Guaranteed payments for labor and the introduction of pensions in collective farms made the difference between them and state farms less visible. The policy of bringing these two forms of agricultural enterprises together was already started under Khrushchev but his followers succeeded in promoting it more effectively. Collective farms seemed to be more similar to state farms (i.e. the allocation of state regulation used for the state sector of national economy in collective farms), and gradual transfer of responsibility for production and business results from the state itself to the state farms. Before, the state could compensate for the failures of any state farm by redistribution of profits from other state farms. In addition, state farms were also regularly granted centralized investments. Collective farms were fully responsible for their expenses. That's why state procurement prices were a little higher for them. At the end of 1960s, the government decided to use the collective farms' procurement prices in state farms, and by this means to present an opportunity for higher profits.-This measure was directed to increase of state farms' autonomy but at the same time deprived them of some the privileges they enjoyed before. The former practice of collective farms paying higher prices for some inputs than state farms had been abolished [Clarke, p.426].

Thus, both kinds of farms had the same prices for both inputs and outputs, similar type of management, more or less the same degree of autonomy and responsibility for the financial results, and the same dependence on state regulations.

The financial instability of agricultural enterprises also perturbed the government very much. The solution to the problem was to periodically increase state procurement prices. This governmental intervention helped both collective and state farms improve the situation provisionally and provide an increase of individual incomes to their members. One of the consequences was an accelerated inflation cycle (Figure 7). As could be expected, these actions by the state did not bring stability for collective farming or improvement of the food situation. To avoid the increase of retail prices, the government had to expand food subsidies. Also, the import of agricultural products, particularly grain occurred on a scale hitherto unknown.

Exports of cheap oil and domestic sale of alcohol at prices astronomically higher than production costs made the problem of state budget not very urgent. The government was still able to provide agricultural programs with incredible investments in construction, equipment, chemicalization, land improvement, price supports, and salary incentives. During 1965-85 Ukrainian agriculture received a substantial increase in investments.

The logic of the such investment behavior can be observed in the Figure 8. According to the law of diminishing returns [Samuelson & Nordhaus, p.33] correlation between investments and productivity is not linear. This relationship was not given serious consideration by Soviet planners. The solution of agricultural productivity problem was to be achieved on the basis of increasing investments. So, assuming a linear productivity function and an initial level of investments (A) and correspondent rate of efficiency RE one could suggest that the desired level of productivity (P) could be achieved under the higher level of investments (A). This was the impetus for forcing an aggressive investment policy. But already at the lever of investments В and new, lower rate of efficiency RE2 it became obvious that to achieve the goal was practically impossible. Further increase of investments (Bt) was urgently needed. Thus, the error was in forcing new investments, rather than eliminating factors restricting the efficiency of investments already made. Of course, such investment policy could not be long-lived because of the assets limitation. Already in middle of 1980s the level of investments was sharply decreased. Enterprises were to find investments in production themselves. The state did not have the capability to continue the investment programs on the same scale.

Generous investments in agriculture were connected with a changing attitude towards farm size and specialization. Understanding the need to evolve agriculture and still follow the marxist dogma of large scale production, the government initiated and strongly supported the practice of concentration production and increasing specialization in the 1970s. The creation of very large farms was the main aim for the moment. In order

The logic of forcing investments.

Figure 8. The logic of forcing investments.

to emphasize the wished for fundamental changes, new terminology was introduced such as "agro-industrial enterprise", "interfarm cooperation", "agro-industrial integration", "agro-industrial complex".

As usual, when changes are motivated by command rather than economic interests based on the freedom of choice, the promotion of the new campaign led to unexpected results. This time, natural environment and rural life was negatively impacted more than real changes in productivity. The huge size of new farms made-,them too cumbersome for management and daily control which was needed by the nature of collective agriculture. For instance, in the Northern Ukraine (Polissia.or Woodland) where the average size of field 30-50 ha (approximately 80-120 acres), there were created a number of collective farms with 10,000-12,000 ha (approximately 25,000-30,000 acres). Transportation and communication problems of such type of enterprises were beyond any effective control. In order to correct this error the division of these farms into smaller ones was undertaken several times even up to 1990s. As for the elimination of ecological damage the occurred situation was and still is more problematic particularly connected with high concentration of livestock. In the social line, the problem of "perspective" and "non-perspective" villages was raised. This means that because of increasing size of collective farms the central settlements were given more social privileges like shops, schools, child care, medical service, and road and house constructing, etc. The population of highly specialized farms was disadvantaged because the disappearance of certain agricultural products was not replaced by development of rural trade [Stebelsky, p.120].

A special impulse was also given by the government to development of the interfarm (inter-collective-farm) cooperation and agro-industrial integration. Both of them were a special phenomenon of command economy. It seems reasonable to support the processes of horizontal and vertical integration in agriculture. As for reality the new enterprises maintained the basic features of their founders. The idea of interfarm cooperation was to establish a production organization that would perform a service from which the participating, share-holding collective farms would benefit. However, what could be expected from interfarm cooperative enterprise, e.g. for fattening cattle, if it was created and run from the top, with the state monopoly in marketing, supplying, banking, and when its patrons were in fact pseudo-cooperatives? Of course, interfarm cooperation could bring some advantages but it was far from real restraeturing. Vertical integration, usually between processing plant and specialized farm, was also fully regulated. Large processing facilities as a rule were the property of the state. The activity of agro-industrial production systems was essentially hindered by departmental disconnection, dependence on higher organization, serious technical and technological problems of processing industry, instability of agriculture as an economic partner, and unsatisfactory production infrastructure.

Brezhnev's rule finished with the adoption of the Food Program — the last loudly sounded and the most expensive Soviet project for agriculture development. On the eve of its adoption, there were many expectations for fundamental changes. But high expectations for increased production were never fulfilled. The publication of the program in May 1982 brought no surprises. The Food Program was a typical product of command system, and the urgent agrarian problems were proposed to be solved with the old methods: more investments, more machinery and chemicals, higher procurement prices, higher salaries, new reorganizations of old governmental control bodies on each and especially local level. The Brezhnev leadership was capable neither of conducting a radical reform nor even analyzing the critical agricultural situation but only of blaming weather conditions for recent agricultural-failures. All tasks of the Food Program were fulfilled except the increase of agricultural production [Medvedev Roy, p.407]. And again, as many times before, this type of restructuring was not successful because it was a formal change of the structure with new combinations of existing elements.

During the Khrushchev-Brezhnev period the Ukrainian agriculture remained very dependent on the decisions of the central government. State agrarian policy, including such economic instruments as allocation of principle investments, supply of limited resources, financial and price policy, incentives and establishing level of incomes, development of individual subsidiary farms, social policy for rural people, etc., were a prerogative of highest leadership. The system of management in agriculture became more unified for all regions of the Soviet Union. The national and regional agrarian traditions were not taken into consideration or were simply forgotten. Ukrainian Government obediently followed lead of Moscow bosses.

The new generation of Ukrainian agriculturalists was educated under collectivized farming. Because of the Cold War they were not familiar with advantages of market oriented agriculture. They had no idea how agricultural producers could be independent, how they could control their private business and cooperate for mutual benefit, what democratic management is, and how significant contribution of agriculture for national economy could be. Neither were they familiar with the real agrarian history of their own country, including the development of real cooperation before the Stalin's terror. The falsification or ignoring of historical facts and economic realities were constantly used for creating new illusions about potential possibilities of collective farms.

The living standard in rural areas was considerably lower than in urban areas. The conditions of daily life were still on a primitive level. Rural young people on a mass scale left native places for cities, accepting any urban job and living conditions. A dangerous situation for both agriculture and cities could be portrayed. Poorly educated or older people were left to deal with land and agricultural animals. Stealing, drinking and negligence ceased to be a rarity. Economic and social indifference covered Ukrainian villages. The "era of great promises" was ending.