The state and Agrarian reform in post-communist Russia

Abstract

The purpose of this article is to survey the evolution in the role of the state in Russian agriculture. Six specific policy realms are examined in order to measure the role of the state. The analysis begins with an overview of how the state intervened in agriculture during the Soviet period. In the post-Soviet period, the role of the state has changed and is divided into two periods. The first period is one of‘state withdrawal,’ based upon laissez faire, neoliberalist conceptions of the state that spanned 1992–98. The second period, termed‘bringing the state back in,’ is characterized by continuity with the period of state withdrawal in some policy realms, while in other policy arenas the role of the state has become markedly more interventionist. This second period spans from late 1998 to the present. The socio-economic effects of increased intervention are examined. Finally, the article assesses the prospects for‘keeping the state back in’ going forward.

Notes

1 Needless to say, the wholesale price paid to farms by the state was determined by the state, not market forces.

2 The January 1918 law forbade the renting or exchange of land, thus precluding the normal peasant practice of trading land plots.

3 Izvestiya, 7 March 1990, pp. 1–2.

4 It was the Russian Republic (one of 15 republics comprising the USSR) that finally reversed the 1922 legislation regarding land ownership. In December 1990, at the Second Congress of People's Deputies of the Russian Republic, a ‘Law on Property’ was adopted that was different from the USSR Law on Property in that it distinguished between private (chastnaya) and state property. This was the first legislation since the Bolshevik revolution that allowed persons to buy and sell land. That 1990 legislation, however, placed strict moratoria on land sales, and only the state was permitted to buy land from landowners. In April 1991, a new land code for the RSFSR was adopted, replacing the 1922 code. This new land code provided for the distribution of land to individuals and codified private ownership of land, with rights of leasing, barter, and exchange. It did not, however, provide for the sale of land among individuals or the establishment of a genuine land market.

5 This section draws from Wegren 1998: Ch. 2].

6 Attitudes and policy toward the private sector varied according to who was the Soviet leader, and even within leadership periods. Khrushchev, for example, followed a lenient policy toward the private sector during 1953–58, and thereafter pursued a strict and regulatory policy that taxed output heavily, as he attempted to create incentives to abandon private production and contribute more to collective farm endeavors [Wadekin, 1973.

7 Shock therapy had economic and political dimensions. Economically, it was intended to jump start the economy from the decline that had begun during 1988–89. Politically, shock therapy was intended to diminish state authority (that was based on the nomenklatura system) and to undermine the power of the Soviet era-nomenklatura, although the material property of the nomenklatura was not seized. The idea was to supplant the Soviet system of power and legitimacy with a new, market-based system of power and legitimacy, thereby ushering in a different political and economic elite.

8 Indeed, it may be argued that Russian reformers neither used state capacities inherited from the Soviet state, nor engaged in state-building and establishing links to postcommunist Russian society.

9 Sel'skaya zhizn', 5 April 1997, p. 1.

10 Through the middle of the decade, ‘food funds’ existed at the national and regional levels, based upon ‘contracts’ signed between producer and state-licensed procurement agents. The producer was supposedly obligated to deliver (sell) specific quantities of various food products to be used to feed the military, orphanages, and regions where agriculture was too poor to support the population. Non-compliance was to be fined. In reality, contractual obligations were often ignored or not completely fulfilled, without penalty (at least in some regions where the author worked and conducted interviews).

11 Krest'yanskiye vedomosti, No. 43, 1993, pp. 8–9.

12 Izvestiya, 6 November 1993, p. 4.

13 In mid-December 1993 a presidential decree was signed ‘On Strengthening State Control for the Use and Preservation of Land During Land Reform.’ This decree linked fines to the minimum wage, whereas before fines had ranged between 50 and 10,000 rubles – sums that had become merely ‘symbolic’ given the effects of inflation since the Land Code was adopted in 1991 [Krest'yanskaya Rossiya, No. 50, 1993, p. 2]. With this new decree, there were four broad categories of fines regarding land. The first was assessed on farm managers for not distributing land. The second type of fine was assessed on individuals who took land and built on it without permission – this was reported to be the most common violation. The third category of fines was for not improving land. And the fourth category of fines was for ecological destruction of the land.

14 The decline in capital investment from the federal budget was accompanied by other financial cutbacks as well. For example, monetary advances, to be repaid with revenue from the upcoming harvest, were promised by the state but not forthcoming. Federal budgetary expenditures that were allocated in the annual budget were not actually dispersed. Payment for crops for the federal food fund often was not forthcoming, sometimes due to corruption, mismanagement, or theft, but also due to inadequate financial resources. Finally, production subsidies to farms and various state-funded compensations for energy, transport, fertilizers, etc. were promised but not delivered in full.

15 For example, in 1996, it was reported that large farms were financing 65 per cent of all rural capital investments, increasing to 83 per cent in 1999 [Sel'skoye khozyaystvo Rossiyskoy Federatsii, 2000, p. 23].

16 A variety of different forms of land tenure continued to exist during the early 1990s. Private ownership was but one form, and the least regulated, with rights to sell, lease, give away, or mortgage. Other uses included lifetime inheritable use, permanent use, and temporary use rights, all of which were regulated by local municipalities and had limitation on disposition [see Brooks, et al., 1996: 17].

17 Private farmers who had previously obtained land in ‘permanent use’ could convert to ownership, and farmers who obtained land after 1991 were granted land in ownership at the time of distribution.

18 To the best of my knowledge, public concerns over national ‘food security’ and high levels of foreign imports began to appear as early as 1995. For a contrary view of Russian food insecurity, implying that the motivation behind the slogan was political and not medical, see Sedik, Sotnikov, and Wiesmann 2003. Whether food insecurity was real or not, compounding those concerns and the financial collapse in August 1998 was a disastrous harvest – the lowest in more than 40 years – that gave rise to the threat of widespread starvation and led to food aid from the EU and US during 1999–2000; and led to price controls in various regions and cities in Russia in order to prevent price gouging. In 1998, food production from all producers (large farms, private farms, and the population) was only about 55 per cent of the 1990 level [Sel'skaya zhizn', 16 February 1999, p. 1].

19 Financial Times, 19 June 2006, p. 11.

20 Izvestiya, 25 July 1998, p. 1.

21 Semenov served as Minister of Agriculture during March 1998–May 1999. He was replaced by V. Shcherbak, who served from May 1999–August 1999. In August 1999, Aleksei Gordeev was named Minister of Agriculture, and was still serving in that capacity at the time of this writing (late 2006).

22 The legal basis for state intervention dates to the Yeltsin period, in particular a 1997 law on the regulation of agriculture, but this law was never fully funded and therefore did not achieve its objectives.

23 For more detail, see Wegren, 2005a: 232–33].

24 It may be argued that the policy of purchase intervention has been successful, as the plant-growing sector of agricultural production remained among the most profitable, particularly for large farm enterprises [Epshteyn, 2004: 54].

25 The state intervened in the domestic grain market for the first time following a very good grain harvest in 2001, when the harvest was 85 million tons, up from 65 million tons in 2000. Since 2001, the Russian state has intervened annually: 2002, purchase intervention; 2003, commodity intervention; 2004, commodity intervention; 2005, purchase intervention; and in 2006, purchase intervention. By 2006, the need for state intervention was due to a combination of factors: increased grain production and forecasts of a good harvest (Minister of Agriculture Gordeev predicted that in five years one area (the Kuban) consisting of strong agricultural producers would be able to supply grain to Germany, Italy, Austria, and other nations of Europe); decreased demand for grain and increased demand for animal husbandry products owing to rising incomes; and increased reserves of grain on hand [Krest'yanskiye vedomosti, No. 33, 2006, pp. 2, 3].

26 The financial responsibility for some subsidies that were considered ineffective were transferred to regional budgets inn 2005 and thereafter, for example, subsidies for the purpose of feed for animal husbandry and poultry farms, while other subsides, for example for elite cattle breeding, were increased. In addition, the state increased funding for special purpose programs such as the state leasing program whereby large farms and private farmers may lease agricultural machinery at subsidized rates, and for the program on increasing land fertility [Kosholkina, 2005: 81].

27 At the end of 2005, after seven consecutive years of positive growth in agricultural production, agricultural and food processing production reached 74 per cent of its pre-reform levels, respectively [Osnovnyye tendenstsii, 2006, p. 6].

28 Those who do differ, leave government service and are rather quickly marginalized for instance economic advisor Andrei Illarionov and former Prime Minister Mikhail Kasyanov.

29 Sel'skaya zhizn', 22 March 2005, p. 1.

30 Sel'skaya zhizn', 12 April 2005, p. 1.

31 The other priorities are housing reform, health, and education.

32 A description of the program in agriculture is available at the website of the Ministry of Agriculture: www.mcx.ru.

33 The programme states that loans up to eight years will be subsidized, but as one set of Russian analysts point out, it is not clear whether loan subsidization will extend beyond the two year period [Serova and Shik, 2006.