Cooperative tradition in Russia: a revival of agricultural service cooperatives?

ABSTRACT

Agricultural cooperatives in Russia have had an uneven evolution: from their initial form of service cooperatives based on classical principles of cooperation in the decades before 1929, they evolved to predominantly production cooperatives during the Soviet era and then back to service cooperatives with the rapid decline in the number and share of production cooperatives after 1992. The number of agricultural cooperatives providing product marketing, input supply, machinery and farm credit services matches the number of production cooperatives as of 2016 but formal membership in service cooperatives is minuscule. Yet, the potential membership in agricultural service cooperatives is conservatively estimated at between 3.8 and 7.5 million rural households, or between 29% and 56% of the rural households in 2017. These numbers represent the pool of small agricultural producers in Russia that are most likely to benefit from cooperation in farm services. More optimistic estimates put the potential number of cooperators at over 90% of all rural households. Examination of possible policy measures for the development of service cooperatives has led to a disturbing conclusion that cooperatives flourish in regions that provide ample budgetary support. No tendencies for significant bottom-up development of cooperatives are observed.

KEYWORDS:

• Agricultural cooperation
• service cooperatives
• production cooperatives
• collectivisation
• transition in agriculture
• agricultural reforms

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Because of its empirical focus, the article does not touch on issues of cooperative theory, which are amply covered in the available English-language literature. The interested reader is referred to R. Carson’s seminal article (Carson, 1977), the edited volumes of Jeffrey S. Royer and David Cobia (Cobia, 1989; Royer, 1987), and Royer’s neoclassical primer of the theory of agricultural cooperatives (Royer, 2014). Grashuis and Cook (2018, pp. 625–626) provide a concise summary of the theoretical features of a traditional cooperative, while Parliament, Lerman, and Fulton (1990) develop a theoretical framework for performance comparison of cooperatives and investor-owned firms based on the functional features of the two forms of organisation.

2. For a concise overview of service cooperatives across other post-Soviet countries, see Lerman and Sedik (2014).

3. The first artels – production cooperatives – emerged, mostly outside agriculture, as early as in the seventeenth century (Sobolev, Kurakin, Pakhomov, & Trotsuk, 2018). The distinction of being the first consumer cooperatives in Russia based on modern principles of cooperation belongs to the Big Artel (Bol’shaya artel’) and the Small Artel (Malaya artel’) established in 1831 and 1834 respectively in Siberia by Decembrists, who were exiled after their failed rebellion in 1825 against Tsar Nicholas I. The Big Artel specialised in wholesale purchase of goods and commodities for the benefit of the members, whereas the Small Artel functioned as a mutual help (‘savings-and-loan’) association for families in exile (see Wikipedia in Russian, 2018).

4. The production cooperatives in the 1920s had various organisational forms: an updated version of the traditional ‘commune’, the generic ‘farming association’ (zemledel’cheskaya artel‘), ‘society for joint cultivation of land’ (TOZ) and finally ‘collective farm’ (kollektivnoye khozyaistvo, or kolkhoz).

5. State farms (sovkhozes) were referred to in official Soviet rhetoric since the 1930s as ‘the highest form of organization of socialist agriculture’ (see, e.g. Achievements, 1957, p. 158).

6. Law of Production Cooperation (1996, art. 2.1) applies to cooperatives with non-agricultural activities (industry, construction, etc.) and explicitly excludes agricultural production cooperatives (art. 2.2). Agricultural cooperatives are also excluded from the Law of Consumer Cooperation (1992, art. 2) and from the Law of Credit Cooperation (2009, art. 1.2). USSR Law on Cooperation (1988) does not apply to agricultural cooperatives as of May 1996 (Law of Production Cooperation, 1996, art. 28.2).

7. EMISS – the Unified Inter-Administrative Information-Statistical System www.fedstat.ru –contains all the enterprises and organisations registered with the tax authorities.

8. This number is a lower estimate as some of the ‘unclassified’ consumer cooperatives may ultimately turn out to be ‘agricultural’ consumer cooperatives on closer inspection.

9. These categories are defined in detail in Article 4: Agricultural consumer cooperatives of the Law of Agricultural Cooperation (1995). Russia’s Civil Code provides a very general legal definition of a consumer cooperative as a non-commercial corporation that operates without a profit objective and does not distribute its profits to the members (Civil Code, 1994, as amended to 2018, art. 50, 123.2).

10. National Priority Project for the Development of the Agroindustrial Complex in 2006–2007 was rolled out on 5 September 2005 in President Putin’s speech to the government, parliament and regional leaders. For implementation guidelines, see MinAg Order (2005).

11. About $60 million or EUR50 million at the average exchange rates in 2015–2017 (data from the Central Bank of Russia).

12. Exceptions are the Tatarstan Republic, Voronezh, Novosibirsk and Omsk oblasts, and Krasnodar and Krasnoyarsk krays. In these regions, the corporate sector leads in milk and meat production.

13. Located on the Volga River, south of the Tatarstan Republic.

14. According to Table 7, 3.1 million cows in household plots and 0.7 million in peasant farms with less than 100 cows per farm (59% of 1.2 million).

15. The share of household plots in the area under cash crops – cereals, legumes, oilseeds – is minuscule (about 1%). The main contributors in these crops are the peasant farms and the agricultural enterprises. As we cannot separate out the small peasant farms, any discussion of the share of all small farms in cash crops is a mere speculation.

16. For definitions and methodology, see Uzun, Saraikin, and Gataulina (2010). Standard revenue is a resource-based weighted measure of annual farm output, aggregating areas sown to different crops, headcount of different animal species, average yields per hectare and per animal, and average prices for crop and livestock products. This is an analogue of the Standard Gross Margin used in the EU (http://ec.europa.eu/agriculture/rica/methodology1_en.cfm). The bounds for economic activity classes were calculated in 2010, when the exchange rates averaged 30.4 rubles/USD and 40.2 rubles/EUR (Rosstat, 2017, Table 27.49, p. 664).

17. Note that this traditional sense is different from the legal sense of peasant farm that first entered the Russian usage with the adoption of the RSFSR Law of Peasant Farm in September 1990.

18. Excluding credit cooperatives.

19. For definitions and other details, see Uzun et al. (2010). The average exchange rates in 2010 were 30.4 rubles/USD and 40.2 rubles/EUR.

20. The highest frequency of districts with a predominance of commercial family farming is observed in the Republic of Bashkorostan (48 out of 55 districts), in Altay Kray (43 out of 61), Saratov Oblast (35 out of 39), Krasnoyask Kray (30 out of 32), the Republic of Tatarstan (25 out of 44), Tyumen Oblast (25 out of 34) and Astrakhan Oblast (11 out of 12).

21. The highest frequency of districts with predominantly capitalist and large capitalist farming is observed in Krasnodar Kray (31 out of 44 districts), Belgorod Oblast (19 out of 22), Kursk Oblast (23 out of 29), Kirov Oblast (25 out of 40), Stavropol’ Kray (19 out of 27) and Rostov Oblast (21 out of 44).

22. Household plots and peasant farms produced about 77% of potatoes, 63% of other vegetables, 69% of fruits and berries, 78% of meat (by live weight, including poultry) and 50% of meat in 2017 (National Report, 2018). The importance of dairy cooperatives in the USA is well known, but it may be instructive to note that, according to Golovina and Nilsson (2009), all operating cooperatives in the Kurgan region in South-Western Siberia deal with dairy farmers.

23. More detailed recommendations for encouraging the development of cooperatives in CIS, including Russia, can be found in Lerman (2012, 2013).