The Crisis of the Bulgarian Cooperatives in the 1990-s

Christian Giordano and Dobrinka Kostova

Abstract

This paper describes the crisis faced by the cooperatives in Bulgaria during the period of transition beginning in 1990 when the collapse of the socialist agricultural system has started. It examines the transformation of the agrarian relations based on a case study of four villages located in the northeastern part of Bulgaria (the region of Dobrudzha). It points out the decline of the significance of the cooperatives in the new environment and analyzes the basic reasons for the crisis in the cooperatives. The conclusion is that the cooperatives have not succeeded to adapt successfully to the changed economic and political situation in the 1990-s insisting rather on continuity with the old socialist mechanisms of collective production and lacking new high tech investments and young initiative people among them. The philosophy of the transition emphasizing on individual rather than collective importance has contributed to the political isolation of the coops and as a consequence to the lack of investments and credits for them.

Introduction

The land reform in Bulgaria in the 1990-s is a key moment of the agrarian policy in the process of reconstruction from command to market economy. The basis for the agrarian reform is the Land Law, accepted by the parliament in 1991, additionally changed in 1992 and revised in 1995 and onwards. It creates the legal framework for the return to the previous owners of the land accumulated into the collectives. The consequence of the expropriation of land in the years of communist rule meant the liquidation of private ownership in agriculture. With the political and legal changes in Bulgaria in 1990-s comes a reprivatization of land ownership and a restructuring of agriculture on private basis along.

This has significantly influenced the development of the agricultural cooperatives. The changes include the following basic transformations with regard to the socialist collectives. First, a change in land relationships, which involves the establishment of a new type of land ownership, second, a liquidation of the existing collectives, and third, a creation of new types of structures in agriculture.

The liquidation of the socialist collectives in the 1990-s includes three steps: the definition of the previous owners of land, the restitution of the land to the old owners in the boundaries that existed in 1946, and the division of the property (buildings, agricultural and other technical equipment, animals etc.) of the collectives between the owners of land and the employees of the collectives. Many reasons slowed the restructuring process down and made it very difficult: the long period of collective cultivation and its impact on people’s attitudes and habits, the accumulation of land into blocks of several hundreds of hectares each, the nationalization of the land for industrial units, buildings and roads, and the loss or the liquidation of possession titles and land registers.

The historical interplay of interests has created a very specific situation in Bulgarian cooperative development. The objectives of this essay are to analyze it.

The dynamics of agrarian development

The 20th century involves three basic models of agrarian development in Bulgaria: early capitalism, socialism, and a transitional model. This evolution in Bulgarian rural society reflects the overall development of the country, which passed during one century (1870-1970) from a patriarchal to an urban-industrial social order. In their ideological paradigm the second model rejects the first and the third rejects the second.

Bulgaria in the period before World War Two can be shortly portrayed as a „small country of small peasants“ (Bakardjiev, D., 1940: 21). From this perspective, the overcoming of the country's agrarian specificity was considered as a social necessity under socialism. The widespread opinion that socialism was a harmful period in Bulgarian history determined the „transitional“ agrarian policy. Its main purpose has been to reestablish in the countryside the existing before World War Two social and economical relations. In this regard, despite the differences in the experience and knowledge of the various generations, the idea of the reversibility of history is perceived as a main line in the ideology of the society since the transition from socialism to capitalism has begun.

The agricultural development in Bulgaria till the 1950-s characterizes the period of small land ownership and a low level of technological cultivation. Although the economic crisis in the 1930's has revealed the need for a change in the process of production (Botev, S. and Kovatchev, J., 1934: 232; Radoev, G., 1934: 85 and the next) Bulgarian agriculture has remained underdeveloped until World War Two. This backwardness caused by the low productivity, the agrarian overpopulation, the indebtedness of the peasants, etc. was also connected with the high parceling out of the land property (Dontchev, T., 1941: 3 and 51). This high level of apportionment in agriculture is shown by the data on land ownership in 1934 and 1946.

Table 1: Size of Land Ownership in 1934 and 1946

Resource: Minkov, Lazov 1979: 12

The interviews we have conducted since 1991 reveal that in the „collective memory“ of the old peasant generation the inter-war period is remembered as a time of poverty and underdevelopment. But this appraisal which is not only that of inveterate old communists is confirmed also by history. This situation of backwardness in the countryside has created the basis for the popularity of a „peasantist“ ideology developed mainly by the agrarian leader and Prime Minister Alexander Stambolijski (Bell J. D., 1977: 17). The early capitalist development has not been flourishing (Mollov, J., 1930: 181 and the next), as some post-socialist ideologists would like to represent it. This explains also the positive acceptance by a great number of peasants of socialism as an alternative for Bulgarian development after the World War Two.

The „philosophy“ of the socialist policy in the second half of the 1940's in Bulgaria was to abolish the existing social inequalities and especially the private property as the main resource reproducing these inequalities. The mechanism to realize this objective in agriculture was the collectivization (Valtchev, I., 1967: 110). The main socialist concept for the development of agriculture has been therefore the accumulation of land and its collective cultivation. The idea was that agriculture has to develop on a modern basis and that work force has to be released for the expanding industrial sector.

The model has not been established immediately after the war. To liquidate the land ownership was not easy to realize. The socialist reformers had to consider that 80% of the population were earning their incomes from agrarian activity, about 75 % of the citizens were living in the villages and the land for cultivation was distributed in 12 millions plots within the possession of 1.1 million households, only 0.9 % of them were owning more than twenty hectares and 200 families were possessing more than fifty hectares (Sotsialno-ikonomitchesko razvitie na Balgaria 1944-1984: Figuri i Fakti., 1984).

The accumulation of land and its collective cultivation became realized in two stages. First, an agrarian reform was carried out in 1946 with the objective to expropriate the land of the families possessing more than 20 ha (in the region of Dobrudzha more than 30 hectares) and giving it to landless people and to very small proprietors. As a result of this reform 300 000 hectares of land from 3 600 families were dispossessed. From this land, 130 000 hectares were distributed among 135 000 families and the rest was given to either collectives or state agricultural service enterprises.

The objective of this first step was to provoke a change in ownership relations and in people's perception toward land possession. It was an experimental step, not so difficult to realize as the rights of a few people were cut and many others received land for free. This happened during the first stage of communist rule and for the new government it was extremely important to obtain the support of the population in order to succeed in their management of power. Therefore, the right to own land was not suppressed in this first stage.

The second stage was very difficult and much more painful. It concerned both ownership structures and relations in the process of cultivation. It required a significant change of the system of production and in the way of thinking. This stage was realized step by step, decreasing individual activities and undertakings in favor to the collective ones.

From cooperatives to collectives: the making of a socialist agriculture

The cooperative movement in Bulgaria has an old and rich tradition. The first cooperatives appeared in the country already at the end of the 19th century. The first coop is created in 1890 in the village of Mirkovo (80 godini, p. 18). After the First World War Alexander Stambolijski, the leader of the Bulgarian Agrarian National Union, dreamed in accord with the Danish model to transform Bulgarian peasants into farmers through the establishment of a wide network of cooperatives. In the 1930’s the number of such associations reached 2852. In 1941 there were existing in Bulgaria 4476 coops with a total of 48'618 members (Kozhuharova V, p. 111). Among them were a number of agrarian cooperatives based on the principle of collective cultivation of land.

It is evident that these agrarian cooperatives were a welcome „Trojan horse“ for the new rulers after the Second World war. The greater portion of the prewar agrarian cooperatives survived the socialist „revolution“ and were transformed step by step into collectives.

The organization and the functioning of these associations were institutionalized in a decree accepted by the Bulgarian Agrarian Coop Union in 1945 (Darzhaven vestnik 1945). The decree was based on three main assumptions:

private ownership of land by the members of the coop,

receipt of rent for the property included in the coop (up to 40 % from the profit of the coop),

possibility of each member to have a farm for personal cultivation (from 0.3 up to 0.5 hectares of land) and a definite number of animals.

Within the period of the existence of the socialist collectives, three main stages can be distinguished. The first one starts after 1944 and ends at the beginning of the 1950's. It is characterized with the establishment of the so named Labor Collective Agricultural Farms. During this period about 98 % of the land was accumulated in the collectives. At the end of this stage the rent for the ownership of land within the collectives stopped to be paid.

The creation of the collectives had social and economic objectives: socially it revealed the possibility for survival of small peasants and economically it involved the necessity to improve marketing, credit policy, technology, storage possibilities, etc. Some people joined the collectives with enthusiasm and without being pushed. Others were forced economically to become members of the collectives through not being allowed to take credits for their agricultural activity. The private owners of more than five hectares were obliged to pay very high taxes. In some cases, in the region of Dobrudzha for example, all the production of the private producers was taken away in form of a tax to force the owners to join the collectives. People who received land after the reform in 1946 were also forced to become members of the collectives. Moreover, some other non-economic mechanisms of social pressure were applied. For example, town migrants were compelled to return to their villages in order to have the opportunity to become members of the collectives, the continuation of the study of the children was burdened till the parents join the collective, etc. As a whole the process of collectivization meant a total change of the early capitalistic peasant economy and the collapse of the patriarchal social order. The peasants were forced to loose their identity and to live in a new and very different social environment (Draganov, M. p.71).

From the moment of their establishment till 1960 in every village was formed a collective. In 1960 several villages united constituting in this way a larger collective. For comparison, in 1957 the collectives in the country were 3 302, while in 1960 their number had decreased to 932. On the average, each collective was responsible for the cultivation of one thousand up to four thousand hectares. The accumulation of land was at that time considered as a necessary to allow the use of advanced technology in order to reach high economic efficiency.

The collectives from an economic point of view were quite independent units in which the labor was organized in teams and the cultivation was done in joint way, regardless to whom the land belonged before dispossession. Nevertheless, this was the period when the young and better-educated people left the villages. Despite that, the agricultural production results did constantly increase. The use of new technologies in agriculture was the main reason for this favorable development.

In the early 1970’s began a period of important social and economic changes in Bulgarian agrarian collectives. First, almost all labor functions in the collectives were mechanized. That consequently encouraged two processes:

the improvement of the education of the labor force in the collectives and

the release of unnecessary workers.

As a result of these processes a part of the villagers quit to deal with agriculture as a main labor activity. State enterprises were established in the villages for the production of meat, milk, eggs, etc. The released workers from the collectives have been employed there. In this way the first steps towards overlapping of rural and urban structures in the countryside were achieved.

The fulfillment of a highly mechanized production with few employees pushed the launching of a new agrarian order in Bulgaria. Then began a stage characterized by the introduction of the so-called Agrarian Industrial Complexes (Vladov, D., 1977: 29) in which the State-party was defining every detail of organization, production, marketing, etc. Also the property of each AIC turned to be de facto State owned.

This stage reflects the transition of the agricultural units from collectives of virtual landowners into state organizations where the land became nobody's property. As a consequence many members of the collectives moved to the cities or retired and the remaining people became agricultural employees.

The centralization and unification allowed new advanced production methods to be experienced and applied, but the weak sides of the AIC were the organization of work and the labor motivation. The production became cheap because a small number of machines were used and their capacities were totally exploited. At the same time the labor cost was very cheap. In spite of that, the successful units were not stimulated to produce more as their surplus income was given to weak farms and factories within or out the AIC. In the region of our investigation, in Dobrudzha, the local AIC which included 67 villages with 33’000 employees gave to the State up to 70 % of its profit.

The socialist agrarian policy connected with the AIC underestimated material interests of the people and the units. The production was extensive and the irrationality in the use of labor force led to human capital decay. The lack of economic independence of employees did not motivate them to think and to produce in terms of economic efficiency. This situation encouraged social apathy and alienation. Furthermore it destroyed peasant “savoir” and “savoir faire” (Roth 1989: 344-362), peasant rationality, initiative, work ethos and attitude to land. This phenomenon also touched the leadership of the collectives. They chose tactics where they did not have to take risks, but where they could follow the State-party instructions because this strategy was safer to protect their individual employment positions.

This was an unsuccessful reform aiming accumulation of land, concentration of resources and centralization of decision-making processes. Heavy organizational and productive shortcomings were connected with this policy whose main fault was its structural gigantism. Consequently a deep crisis in agriculture followed in the second half of the 1980’s. In 1988 the AIC split and the previous collectives were reestablished. This process of decentralization was suddenly interrupted in 1989 with the collapse of communism in Central and Eastern Europe.

From collectives to individual farming: reprivatization without cooperatives

The essence of the proposed agrarian reform in the 1990-s is the reintroduction of land ownership. The problem of land ownership in Bulgaria was solved with the acceptance of a law, requiring all the accumulated land in the collectives to be given back to the previous owners. The legal basis for the agrarian reform in Bulgaria is the Land Law (Zakon za izmenenie: 1991; Zakon za izmenenie: 1992; Zakon za izmenenie: 1995).

Not in any other post-socialist country, but in Bulgaria, was proposed such a radical agrarian reform. The collectives had undergone many changes during this period of transition. The reform meant to destroy the existing collectives. It has been realized in two stages. With the adoption of the Land Law in 1991, the collectives were transformed into coops. The institutional change meant a decentralization of the collectives and an organization of a coop in each village. For example in Dobrudzha one collective included more or less five villages. After the reform about 25 new coops were registered as independent associations. All of them were based on the principle of land ownership but the principles of collective organization of work and cultivation remained unchanged. The social facts revealed that the collectives had only changed their names into coops. This was the reason why the revision of the law of 1992 approved the liquidation of these coops. The revision of the law defined that their property - animals, machines, offices, storage, etc. should be divided between the owners of land and the collective employees. This measure was considered by the legislator as the best guarantee against the reestablishment of the collective system in agriculture. A second significant provision of the law was the restitution of the land, which had to be given back to its former owners piece by piece, as they had possessed it after the agrarian reform of 1946.

In the mountain regions, the application of the Land Law did not create difficulties because the boundaries mostly remained the same since 1946. The problems came up in the plain regions as this of Dobrudzha where blocks of land of several hundreds of hectares have been put together changing radically the previous rural landscape.

The motivation behind the approval of such a law could be analyzed from several perspectives. One explanation is that the politicians would like to satisfy the criteria for justice by returning to the owners or to their heirs the collectivized land under socialism. However, the following events show that this has been rather a political myth than a social reality.

Another, more realistic explanation, seems to be connected with the right oriented ideology of the political forces, which were at that time in power. They followed the „rustic ideal“ of a return to pre-socialist Bulgaria, when the country was still a „small nation of small peasants”. This ideal has been most probably supported by western experts considering it as a good guarantee for the smooth transition from collective to private and effective agriculture.

The law tended therefore to implement the reversibility of history, to erase socialism from Bulgarian history and to go back to the point where the previous historical stage has stopped.

Having in mind the fact that this policy has been proposed by post-socialist leaders of urban origins who had no correct knowledge of the real situation in the villages, it is evident that the de-collectivization has turned into a long lasting and painful process.

The reform caused a deep crisis in agrarian development for several reasons. First, the return of the land to the previous owners in “real boundaries” means to get it back piece by piece as existed in 1946. The statistical data from the 1990-s show that 1 783 808 owners possess between 0.1 and 1 hectare, 171 394 - between one and five hectares, 8 508 - between five and ten hectares and 580 people - more than ten hectares. The last group makes 0.03 % of all the landowners. The land pieces will be additionally divided as the majority of the owners are dead and they have a number of inheritors. This would mean a return to fragmented agriculture, which will burden the modernization of agrarian sector.

Second, land registers, as it is the case of many villages in Dobrudzha, have been destroyed in socialist times by communist functionaries as a symbol of the final suppression of capitalism in agriculture. The commissions for restitution of land have declared in front of us that they rely on the good memories of older people. The selective character of people’s memory provoked many conflicts in defining the land ownership. Moreover, the Ministry of Agriculture has recognized that 928 village plans have to be reconsidered, as there are mistakes in the definition of the ownership. In this way the process of restitution in real boundaries has been delayed and has created a legal uncertainty, which has as a consequence a slow down in the process of planning, investment and restructuring of agriculture.

Third, the myth of “historical reversibility” has neglected the prerequisites for a neglect of the deep transformations taking place in the villages and people’s value system during socialism. Industrialization, urbanization and collectivization have significantly changed attitudes and aspirations of the rural population and the restitution of the land has turned into a paradoxical reprivatization without peasants.

The latter fact has led to a development with deep social impact and it has to be analyzed in more details. The migration of the peasant population to the towns in the period 1950-1990 has turned these people into city dwellers employed in industry and services (Eberhardt, P. pp. 31-40; Zlatanova, V., 1980: 74) who could be interested in a cultivation only of a piece of land of 0.5 up to 1 ha in order to satisfy family food needs or to have the opportunity for an additional labor activity.

The land reform in Bulgaria involves a variety of ambiguities. The majority of the owners want their land back although, they do not plan to cultivate it themselves. As a consequence, the contradiction between the desire to possess land but not be willing to cultivate it is a barrier for the realization of the agrarian activity in the country. For the „new“ owners the possession of land is seen as a mere investment and a pure financial resource. The „new“ proprietors are looking therefore for alternatives which do not involve their future as „peasants“.

The possession of small pieces of land, however, does not stimulate people whose main job is an agricultural one. In this sense, the ownership itself is not a mechanism for the appearance of creative motivation in agricultural activity. The „new“ owners of land rarely start agrarian production on the returned land except for satisfying family food needs. Because of the negative experience with collectivization during socialism the new coops have low prestige among the owners, especially if the latter are living in the towns. They consider the coops as “an appendix” of the old collectives. So their strategy is rather to lease their land to private capitalistic entrepreneurs “arendatori”. The motive for this choice depends on other reasons as well. In the region of Dobrudzha for example the arendatori are the ones to have the knowledge, the necessary contacts and the abilities to take risks in cultivating the returned land. Being the leaders of the collectives in the last years of the socialist rule they have the necessary know-how to start agrarian entrepreneurial activity expecting significant incomes. The arendatori, as previous members of the local agrarian elite, have also the necessary contacts with the people who control the market in the cities. Not less important is the fact that in the process of liquidation of the socialist collectives they have been able, thanks to their former status, to get the best kept machines, storage, offices of the collective ownership at a very low price.

On the contrary, the newly organized coops have got the remains of the socialist collective ownership. Their members are the landowners from the villages who are either quite old and not enough educated or too much adapted to and accustomed with the socialist collective cultivation, so they rarely have the courage to develop agriculture on capitalistic principles. The coops are organizations of landowners but only a minority of them are taking part themselves in the cultivating of the returned property and are participating in the life of the associations. Moreover, the coop leaders are very often in the age just before retirement and they have rarely good contacts and links with the trading agricultural firms and food industry. Because of the low political support for the coops the latter have no good chances to get financial credits or investments at favorable conditions.

The coops formed after 1992 are therefore in an extremely critical situation. Technical, economic and managerial problems are compromising the actual existence of the Bulgarian coops. Besides that, they are more and more facing the aggressive competition of the better organized „arendatori“, who - as the example of Dobrudzha shows - are starting to buy the land from the small owners. The members of the coops are quite old people and it is doubtless that their heirs will prefer to lease or to sell the land to the „arendatori“ if the latter are paying higher rents or proposing more favorable leasing prices than the coops.

The land is therefore more and more controlled by the previous agrarian elites that are forming the nowadays capitalistic entrepreneurs. At the beginning of the reform they were possessing only small plots of land in comparison to what they think they would have to possess in order to develop modern farming. One of them declared that he could cultivate thousands of hectares, but he and his brother were possessing only five hectares. That is why their strategy is to lease and in the future to buy from the nowadays owners a high number of parcels to be able to cultivate land between 600 and 20’000 ha.

In this sense the legal framework of the agrarian reform in Bulgaria has led to the formation of two social groups. The first one includes a large number of owners who have no interest to cultivate their land. This group includes people whose quality of life in the period of significant changes is deteriorating (Sotsialno i ikonomitschesko razvitie na Balgaria 1990-1994, 1995: 35).

)and their strategy is the one of survival, so they lease the land to get some financial support. Their situation is quite fragile also because the legal framework is lacking still clear definitions about leasing relations in agriculture. The second group involves a small group of entrepreneurs-peasants belonging to the leadership of the socialist collectives, who are becoming agricultural capitalists. Paradoxically, the land reform brought profits mainly to them. The liquidation of the collectives with the law of 1992 has meant the suppression of the agrarian socialist management through distributing the property of the collectives and dismissing their leaders. This has been a political attempt for “de-communization” of the agrarian sector in the country. The idea has also been to deprive the agrarian local elites as leaders of the collectives from political as well as from economic power. This objective of the law has not been achieved. After a short time of disorientation the socialist agrarian management has begun its reorganization into successful agrarian entrepreneurs and in a short period of time they transformed their “economic ethic” becoming enthusiast supporters of the “free market economy”.

The previous leaders of the socialist agrarian enterprises who till 1992 were declaring their loyalty to communism have transformed into savage capitalists after the liquidation of the collectives. At the end of the 1990-s they are beginning to reinvest their profit in buying the land from the small owners and in this way they are becoming the most powerful agrarian actors in the post-socialist Bulgaria. However, their status depends to a great extent on the traders and brokers in the agricultural sector. The entrepreneurs from the big cities, the so called “sharks with Mercedes and mobile telephones” are using crude methods to establish a monopoly on the trade with agrarian goods and have the last word on the prices. Since the national independence of Bulgaria in 1878 country’s agriculture has always been a resource for enrichment of urban economic sectors. Under socialism the redistribution of agricultural profits was in favor of industrialization. In the period of transition the goods necessary for agricultural activity and the market of the produced agricultural goods are controlled by trade economic groups living in the towns.

Concluding Remarks

The agrarian reform has accelerated the return of the private property to the Bulgarian villages. But the restitution of the land has not restored the old peasant society of pre-socialist times. The idea of the "reversibility of history" has proved to be a wrong one. Moreover, some unexpected and, for many politicians as well as for the legislators, unwelcome facts characterize the dramatic development in the Bulgarian countryside during the 1990's.

One of them is the reprivatization without peasants. The 'new' owners, who are living mostly in the towns, were not coming back to their villages as wished by the 'peasantist' politicians. The proprietors do not intend to cultivate the returned land themselves and they refuse to become peasants or farmers. They are city dwellers with own specific urban lifestyles and values. This part of the urban population as well as the villagers use the land ownership in order to lease it or to produce the necessary food supply for survival. Such a 'minimalist' agriculture is mainly subsistence orientated and the people involved in it have set themselves the sole goal to overcome the troubles and turbulence of 'transition'.

Another fact concerns the economic rising of the agrarian capitalist entrepreneurs. The reprivatization of the land without peasants has encouraged some leaders and members of the technical and managerial staff of the old collectives to invest individually in private agriculture. They lease a huge number of little parcels from the ‘new’ small owners. In this way a little group of aggressive capitalist ‘arendatori’ which could be defined with the terminology used by Max Weber (Weber M., 1956) as ‘Raub-‘ and ‘Beutekapitalisten’, are more and more controlling and monopolizing the land. Most probably in the future the ‘arendatori’ will become a new class of quasi-latifundist owners. At the moment they are nevertheless the social and the economic ‘winners’ of the ‘transition’ in Bulgarian agriculture.

The obsolescence of the cooperatives is the next fact. The so-called ‘new cooperatives’ are in reality a post-socialist continuation of the old collectives. Even if they are now based on the principle of the private property, they are keeping on with the collective cultivation and production. All the decisions concerning economic activities are taken by the management of the association without consulting the assembly or the membership. This behavior is partly caused by the managerial style inherited by the staff from the ‘democratic centralism’ of the previous regime. Moreover, the members of the cooperatives as small owners are totally indifferent to the activities of the associations. They are interested only to get their rents after the selling of the harvest. The cooperatives are the ‘losers’ of the ‘transition’ and the future will show if they can survive under the economic pressure of the more competitive ‘arendatori’ and under the political stonewalling of the actual government, whose aim is the destruction of any relict of the socialist past. On the other hand real new forms of cooperatives which are combining economic efficiency with democratic management are still unknown in Bulgaria.

The situation of Bulgarian agriculture shows finally that the passing from a collective to an individual social and economic order was successful. At the same time a gulf between the legal frame and the social practices is existing and is becoming more and more deep in the countryside. This rift is a clear social indicator – using the words of Max Weber – of a conflict between State ‘legality’ and cultural ‘legitimacy’ which probably is affecting the whole country.

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Dobrinka Kostova, Bulgarian Academy of Sciences, Sofia, Bulgaria