Read an Excerpt
The Evolution of Agrarian Institutions: a Comparative Study of Post-Socialist Hungary and Bulgaria
By Mieke Meurs University of Michigan Press
Copyright © 2001 Mieke Meurs
All right reserved. ISBN: 0472112090
Chapter 1 - Introduction The Issues With the collapse of the state socialist regimes in East Central Europe, it was widely expected that collectivized agriculture in the region would quickly be remade in the glowing image of China--a patchwork of small, privately run farms yielding rapid increases in output and rural incomes. The European experience has been quite different from the Chinese case, however. Although socialist collective farms have disappeared from the East Central European countryside, individual private farming has been slow to emerge in many places. In Romania, where land was decollectivized almost instantaneously through land grabs by the peasantry, 43 percent of agricultural land had been returned to collective forms of production by 1993 (Brooks and Meurs 1994). Forty-eight percent of agricultural land remained in cooperatives in the Czech Republic in 1994 (Ratinger 1995, 81), as did 70 percent of agricultural land in Bulgaria (BNIS 1995, 259). In Hungary, individual private agriculture grew slowly until 1992 but then developed much faster, and by 1994 only 29 percent of agricultural land was farmed by cooperatives. Still, in some Hungarian provinces, over 50 percentof arable land remained in cooperatives (HNIS 1995b). In 1998, after almost a decade of reform, just under half of all agricultural land remained in cooperatives in Bulgaria; about one-quarter of agricultural land did so in Hungary (nsi.bg; HNIS 1998, 380).
The question of why the emergence of private farming has been so slow and uneven in parts of East Central Europe, and whether this matters, remains the subject of much debate. The debate is important for understanding the transformation taking place in East Central European agriculture. Are households not adopting private farming because it is not as µnancially rewarding to households as expected? Or are social or political constraints preventing households from shifting land into higher-return private use? An understanding of the causes of the slow emergence of private farming is essential to effective policy intervention in agriculture. Further, policymakers will also need to know whether the slow emergence of private farming in certain areas is a likely cause of poor agricultural performance and distribution of rural incomes.
In this volume, I contribute to this debate over the causes and implications of cooperative persistence in East Central Europe through an analysis of agricultural restructuring in Bulgaria and Hungary. These two cases present an interesting test of explanations of patterns in agricultural restructuring, because in many ways the countries are similar. Both Bulgaria and Hungary are small, open, agrarian economies that experienced only limited capitalist development in agriculture before collectivization, had the majority of their land in collective farms during the socialist period, and promoted limited private farming in the 1980s. Despite these similarities, the two countries have followed quite different trajectories since 1989. In addition, both countries exhibit signiµcant regional variation in their patterns of agricultural restructuring, which provides the basis for two other, independent tests of the explanatory variables. The contrasting trajectories also permit an analysis of the implications of these differences in outcomes for agricultural efµciency and rural income distribution.
An analysis of the emergence of private farming in East Central Europe is also related to broader questions about how and why people change their patterns of organizing economic life, questions treated by the growing new literature in institutionalist economics. I draw on this new literature in developing the analytical framework used here and return to this framework at the end of the volume, bringing the experience of institutional evolution in East Central Europe back to bear on the developing body of theory.
The Process of Change in Hungary and Bulgaria When the legal limitations on private production and landownership were removed across East Central Europe after 1989, many observers in both formerly centrally planned economies and the West believed that households would rapidly abandon collective forms of agriculture for private farming. One reason for these expectations was the experience of China in the early 1980s. The system of team farming on collectivized agricultural land began to be reformed in China in 1979, when some households in poorer regions were permitted to take parcels of collective land under individual contract, providing the state with a quota of grain at predetermined prices and structuring and disposing of the rest of production as they saw µt. By 1983, only four short years later, 98 percent of production teams had adopted the "household responsibility system." At the same time, the state signiµcantly freed agricultural prices, allowing prices to provide signals to households about needed adjustments in production. This reform fell far short of a complete privatization and marketization of production. Still, given a choice, most households quickly opted to produce independently and in response to market signals. Output rose rapidly as decollectivization of production proceeded. According to one estimate, crop production grew at a rate of 6 percent per year during the period 1978-84, while livestock production grew at a rate of 18 percent (Lin 1992, 34-37).
In the case of East Central Europe, analysts had long argued that the systems of collective farming did not yield optimal returns on inputs (Nove 1986; Pryor 1992). In contrast, the limited private farming permitted in East Central Europe before 1989 often generated higher levels of land productivity than did state and collective farms. If rural households in East Central Europe were permitted to choose their organizational form, it seemed that they, too, would further shift their efforts from collective to private production.
When legal constraints on private production were removed after 1989, however, the expected radical shift failed to occur in many places. Instead, many of those who received land placed it in newly organized producer cooperatives (often only slightly reorganized versions of the old collective farms). In both Hungary and Bulgaria in 1994, signiµcant amounts of land remained in production cooperatives and the majority of private farmers continued to farm as a sideline on tiny, subsistence-oriented plots. But there have also been signiµcant differences in outcomes across countries and among regions within countries. The majority of Hungarian agricultural land began to be managed as private farms, while in Bulgaria the majority of land remained in reorganized cooperative farms. In addition, many of the cooperatives in Hungary have begun to behave more like capitalist businesses than typical cooperatives, and many of the current farm managers hope to complete the transformation of the cooperatives into typical capitalist shareholding µrms over the next years (Kovacs 1996). In Bulgaria, the cooperatives continue to resemble old collective farms or, in some cases, typical producer cooperatives, and Bulgarian cooperative management has to date shown little interest in transforming the cooperatives into capitalist farms. These outcomes are somewhat paradoxical in that political forces presiding over the land reform in Hungary were much more sympathetic to preserving some continued role for cooperative farms than were the political forces presiding over the formative period of Bulgarian reform.
Both countries also exhibit signiµcant regional variation. In both Hungary and Bulgaria, for example, outcomes in traditional grain-growing regions are distinct from outcomes in regions with an alternative production focus-- mountainous areas focused on livestock or wine grapes or peri-urban areas focused on truck farming. In Hungary in 1994, the provinces (megyes) of Somogy and Vesprem both had 38 percent of agricultural land and more than 50 percent of arable land in cooperatives, while the counties of Pest (containing the capital, Budapest) and neighboring Bacs-Kiskun had only 16 percent and 21 percent of agricultural land, respectively, and less than 30 percent of arable land in cooperatives (HNIS 1996) (see µg. 4.1). In Bulgaria, data from the province (okrug) level are not available for the percentage of land in cooperatives, but survey data reveal similar patterns of difference. In 1994, 73 percent of households in the grain-growing northern counties of Silistra and Rouse planned to place all or part of their land in a cooperative, while in the southern counties of Blagoevgrad and Kurdjali, where grazing livestock and tobacco production are more prominent, only 17 percent and 22 percent of households, respectively, had such plans (BSD 1994) (see µg. 3.1). Land in these areas tended to be used as small private farms.
How can these differences in restructuring between and within countries be explained? Why have households in some areas been reluctant to move land into private production? A review of possible explanations for the often slow and uneven pace of agricultural restructuring is developed more fully in chapter 2. Here I will provide only a brief sketch of my argument. While Bulgaria and Hungary exhibit important similarities, the countries also exhibit signiµcant differences in variables which the theoretical literature reviewed in chapter 2 suggests may also be particularly important. First, the two countries arrived at the year 1989 with very different historical experiences in private farming. In Hungary, although many remnants of feudalism remained in rural areas prior to World War II (Kovach 1999), commercial farming was widely practiced by large landholders and a small group of commercially oriented peasants. The main political representative of rural interests, the Smallholders Party, advocated entrepreneurial commercial farming as a model for rural development. As a result, private farming offered the most visible (although not necessarily attainable) path to social mobility for the majority of impoverished smallholders and landless rural dwellers. In Bulgaria, the vast majority of land was held in small plots by poor or near poor households. Commercial farming was not an important means of overcoming poverty. The dominant rural party, the Agrarian Party, was supported by smallholders and advocated the widespread development of cooperatives as a means of improving rural livelihoods. These differences in the social norms and expectations related to agricultural production in the prewar period persisted to a certain extent in 1989 and may play an important role in the transformation and restructuring of agriculture in the future.
These differences in the sociopolitical context of prewar agriculture were accompanied by signiµcant differences in the levels of prewar market development in the countryside. In terms of both market development and orientation toward private farming, the differences between Hungary and Bulgaria continued under central planning. Collectivization was resisted µercely in Hungary, and the resulting structure of collective farms made signiµcant concessions to local control and household-based production. After 1968, Hungarian cooperative managers were increasingly freed from some of the constraints of central planning and young, technocratic managers were encouraged to run the farms as proµt-oriented enterprises. A large share of labor-intensive production was subcontracted to individual households, which produced on a semi-independent basis, under the supervision of the collective farms.
In Bulgaria, collectivization proceeded rapidly and relatively smoothly, and under central planning private production was largely limited to gardens to supplement household consumption. The reforms of the 1980s resulted in little real independence for the cooperative farms, and individual commercial production remained limited despite ofµcial government policy to promote its expansion.
Bulgaria and Hungary thus arrived at 1989 with very different levels of preparation for further market development. These differences in market development resulted in differences in the costs associated with the development of private farming, in particular the transaction costs associated with adjusting the holdings of land, labor, and agricultural machinery.
Political traditions, histories of private and cooperative agriculture, and levels of market development also vary signiµcantly by region within each country. I will argue that these differences in social norms surrounding private farming and in levels of market development, which are explained more fully in the chapters that follow, are key to understanding the different paces of the decollectivization of agriculture across and within countries. Differences in these variables in×uence the relative returns that households expect from private and cooperative forms of agriculture and thus household choices about how to use their assets. I will also argue that differences in traditional productive specializations compound the impact of these variables by exposing some farmers to higher transaction costs. These differences result in the regional distinctions in outcomes outlined previously.
The comparison of the Hungarian and Bulgarian cases underscores the importance of history and geography in explaining the variation in rates of the decollectivization of agriculture across East Central Europe. The cases also suggest, however, that current policy plays an important role in the process of agricultural reorganization. Policy structures the relative transaction costs associated with private and cooperative farming. For example, the particular agrarian reform chosen by Hungary appears to have signiµcantly reduced transaction costs in land markets and thus has sped the privatization of land. Similarly, in China the local government limited transaction costs associated with private farming by providing consolidated parcels of land and associated inputs directly to households. Policy also affects the impact that slow privatization of agriculture may have on agricultural productivity by structuring choices available to cooperative farms. Still, current policy acts on the historically and geographically given conditions and not upon a tabula rasa. Consequently, a given policy package results in different restructurings of agriculture across the various regions.
The research presented here also suggests that there will be no economic beneµts of trying to impose a uniform outcome, however desirable a certain organizational form may appear in the abstract. After examining the causes of the slow and uneven pace of decollectivization, I conclude that, under some conditions, cooperative organization may improve returns to households over those attainable in private farming, even if the cooperative falls well short of its own optimal performance. Under these conditions, policies that seek to impose private farming on reluctant rural populations are likely to be both economically and politically deleterious. Improvements in agricultural efµciency and rural income distribution might be better pursued through other policies, including those aimed at equalizing the transaction costs faced by private and cooperative farms and those that assist cooperative members in redesigning cooperative incentive and governance structures.
Organization of the Book In the remainder of this volume, I develop the analysis of the causes and implications of cooperative persistence in Hungary and Bulgaria. The analysis is based heavily on survey data collected in the two countries in 1992 and 1994. This information is supplemented with data from various historical and secondary sources, including province-level data, which permit an analysis of patterns of change across counties within each country.
The chapters are organized as follows. In chapter 2, I lay out in more detail the theoretical debates over the relative efµciency of private and cooperative farming and outline the model of institutional change I will use in the analysis of the Bulgarian and Hungarian cases. In chapters 3 and 4, I provide evidence on the starting point and process of the post-1989 agrarian reforms in Bulgaria and Hungary. The dynamics of the reform and the characteristics of the emerging private and cooperative farming sectors and their market contexts are examined in detail. I then test the model of cooperative persistence for each country, using a simple OLS (ordinary least squares) regression. In chapter 5, I compare the two cases and informally test the model as an explanation of the differences between the two experiences. Chapter 6 presents conclusions, including lessons that might be drawn for both regional agricultural policy and for our understanding of institutional and organizational change in general.
Continues...
Excerpted from The Evolution of Agrarian Institutions: a Comparative Study of Post-Socialist Hungary and Bulgaria by Mieke Meurs Copyright © 2001 by Mieke Meurs. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
