Privatization of agriculture in the former Soviet Union ...Can it work?

by Teresa Acklin
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   “All landed estates and privately owned lands, as well as ... Church Lands, etc., must be turned over immediately to the People without compensation.” Lenin, 1917

   “The revival of Russia is unthinkable without the formation of a full-blooded, viable, individual farming system.” Yeltsin, 1992

   in 75 years, the wheel turns full circle. Or does it? The picture varies in the different republics of the former Soviet Union (F.S.U.). In most of the F.S.U., family farms were abolished by forced collectivization in the early 1930s. The re-establishment of private farms is justified as helping to create an independent rural middle class and an independent work ethic among young people.

   Economically, privatization should create incentives by relating rewards to work and good management. Environmentally, only individual ownership leads to responsible care of the land. All these are arguments any Western farmer or government would support.

   In Russia itself, basic legislation was passed in late 1990 establishing the individual peasant farm as a legal entity, and prospective farmers were allowed to receive land from “poorly farmed” collective and state farms. Supervision was to be exercised by the newly created State Committee for Land Reform and Support of the Peasant Farms, which in turn established local committees in all regions and districts.

   The district committees made the initial decisions on allocation, appeals being allowed to the regions. The maximum area that individuals could own free of charge was based on the area a single family could farm, but provision was made for the leasing of additional land by farms with hired labor.

   Table I shows the progress in establishing private farms in the Commonwealth of Independent States (C.I.S.) as of Jan. 1, 1992. (Georgia, Latvia, Lithuania and Estonia did not join the C.I.S.).

   Some of these figures look impressive, but the extreme diversity is also striking and reflects the differing political and physical conditions in the various areas. Later figures for Russia show that by Dec. 1, 1992, the number of registered farms had increased to 173,000, with a total area of 7.3 million hectares. Nonetheless, this represents only 3% of Russia's total farmland area (4% of the arable area), and at least 3,500 private farmers were officially admitted to have gone bankrupt. On average, each private farm has only four head of cattle (including one cow), two pigs, six sheep and goats and 11 chickens — hardly a large operation.

   Livestock production on private farms has increased, but the total is down by 13% because of feed shortages. There is pressure to reverse this trend, which could be good news for Western grain exporters. On the other hand, grain production is up, as seen in Table II.

   President Boris Yeltsin's enthusiasm for private farming is well known, and his position has been strengthened by the results of the April referendum. What, then, are the factors hindering further development?

   They are many — psychological, political, economic. Most Russian farmers are deeply skeptical of government intentions in light of coups and counter-coups, and this lack of commitment will remain until the reformist government is perceived to be solidly established. The extent of local opposition and jealousy on the part of local officials and even neighbors is not generally appreciated in the West. Sabotage, theft and arson on the new private farms are widespread.

   Several generations of command economy have led to a lack of enterprise among rural people accustomed to “half a day's work for half a day's pay.” Moreover, most of the old collectives provided social clubs, housing, clinics and creches of varying standards, but better than nothing. Many local officials feel their established positions threatened by reform, or have an interest in depreciating the value of existing enterprises in the hope of re-acquiring them cheaply. Economically, although credit is available, there is a lack of capital.

   Large-scale cereal production in the F.S.U. takes place on collective and state farms, so the future of these farms (amounting to about 26,000 in number) is of critical importance for grain production. There are four options — breaking down into private farms, turning into joint stock companies, turning into producer cooperatives, or remaining as they are.

   The decisions will lie in the hands of the members themselves, and so far, about half have elected to remain as they are. Of the remainder, many of the farming companies are still being run by the old managers, who bought shares and now regard themselves as democrats rather than communists. Here the French adage plus ça change holds sway.

   Another important factor hindering reform is the continuing lack of full property rights for land, except for small household and garden plots. Private farms now account for 73% of the potatoes and 52% of other vegetables grown, many in the vicinity of cities. But foreigners are still prohibited from owning land, although they may lease it.

   The situation elsewhere varies. In Ukraine, for example, the establishment of private-sector farms has now reached more than 11,500 yet the vice premier recently described the agricultural situation as “appalling.” There is constant lack of machinery and equipment, technical resources and funds. Only half the private farms possess a tractor, one in four a truck. For every 100 farms, there are only 24 plows, 21 seed drills, seven combine harvesters, etc.

   If the general picture is still one of chaotic re-adjustment to a market economy and chronic lack of money, one might with profit reflect on what it was like when Stalin decided in 1929 to collectivize agriculture.

   In that year, there were 25 million private farmers in the Soviet Union. Two million were prosperous, so-called kulaks (kulak literally means “fist” and was used to describe any farmer who hired labor), 15 million to 16 million were “middle peasants,” and 5 million to 8 million were destitute.

   Stalin was impelled by the danger of famine in 1928 and 1929 to embark on his program of collectivization. The ransacking of barns and hidden stocks belonging to the kulaks seemed to offer the best hope of averting disaster. Thousands of agents were dispatched into the countryside, with instructions to “liquidate the kulaks as a class.”

   The kulaks, with their families amounting to 8 million to 10 million people, were deprived of their property and banned from the collective farm. They were shot or deported to the gulag where virtually all perished. A contemporary account states that within a short time, rural Russia became pandemonium, and the overwhelming majority of the peasantry confronted the government with desperate opposition. Collectivization degenerated into a military operation, rebellious villages being surrounded with machine guns and forced to surrender. Livestock were slaughtered, implements smashed, and crops burned. By Stalin's own account, 18 million horses, 30 million cattle and 100 million sheep and goats were killed — more than half the total stock. Land was left untilled, and the famine was severe, both in the towns and in the black soil steppe of the Ukraine.

   If the memory of the inter-war period still haunts the F.S.U., it is not surprising that present-day agricultural reform is accompanied with much suspicion, hesitation and circumspection. Happily, the circumstances are different now. If the Yeltsin government remains in power, the chances are that pri- vate farming, whether organized as individual enterprises or as cooperatives, will prevail. But we are talking in terms of decades, not years, and of a generation, not an overnight transformation.

TABLE I Private farms in the C.I.S.* as of Jan. 1, 1992

Number ofArea in
*Excludes Georgia, Latvia, Lithuania and Estonia, which did not join the C.I.S.
Source: Interfax and Russian data.

TABLE II Grain production in the F.S.U.

in million tonnes and tonnes per hectare (includes rice)
Production Yield
Azerbaijan1.2 .91.91.4
Total F.S.U.152.3181.5
Source: Toepfer International