To what extent has agricultural performance improved during the transition from Socialism in China and in Post-Soviet states? Is the improvement due to decollectivisation?

Agricultural performance has improved massively in China during its transition from Socialism, but this has been due to a number of factors of which decollectivisation is but one. Furthermore, in Post-Soviet states (FSU countries) the link between decollectivisation and improved agricultural performance is less than clear.

Firstly, in Figure 1, China’s growth in agricultural output is seen to clearly grow more quickly from either 1978 or 1981 onwards. This growth first appears in the period of decollectivisation in China, which occurred between 1977 and 1983 and thus a consensus has been made on the correlation with a move to family farming [Bramall, 2009]. In fact, during this period there was a surge in production in almost all agricultural outputs and agricultural growth rates were 4.6 per cent between 1976-80 and 10.1 per cent from 1980-84, much higher than the 2.5 per cent average from 1965-76 [Bramall, 2009] [Naughton, 2007, ページ: 242-3]. In Figure 2, the Central-Asia FSU countries agricultural output is shown to in some cases fall, i.e. Kazakhstan, Ukraine and Russia [Swinnen, Van Herck, Vranken, 2009], and in other cases shows modest growth at best from 1992, although there is some picking up towards the late 2000s. Uzbekistan’s growth seems to be fairly strong from about 2003 onwards after a period of stagnation. Uzbekistan at that time had far from fully implemented agricultural reforms [Rozelle Swinnen, 2004] and acts only to remove from the idea that decollectivisation itself is a cause of improved agricultural output in the transition from Socialism to Capitalism. Then again, there has been a general improvement in gross agricultural output in the transitional countries after the initial dip, although the amount is still below the pre-reform era for many FSU areas as seen in Figure 3 and Agricultural Labour Productivity in the Central Asia region has only recovered recently [Swinnen, Van Herck, Vranken, 2009]. On this data alone it would appear that the move to decollectivise itself cannot be seen as the only factor.

Figure 1　FAOSTAT | © FAO Statistics Division 2012 | 10 March 2012

Figure 2　 FAOSTAT | © FAO Statistics Division 2012 | 10 March 2012

 Figure 3　 Evolution of the Gross Agricultural Output (GOA) [Swinnen, Van Herck, Vranken, 2009, ページ: 2]

One argument may be that it is not the decollectivisation that matters so much as to how the process of the transition from Socialism itself is managed. There is a clear difference between Chinese gradual transition and the FSU countries’ transition in which the Communist governments collapsed, or were affected by the Russian collapse. In the case of China, the state government still governed the input and output of the farms, that is, the state controlled sales to the farmers of inputs such as fertilizer and procured grain at a set price [Naughton, 2007]. It is possible this control helped to steady the uncertainty of farmers in the move to a more market orientated system, as compared to in the FSU countries where uncertainty and price volatility negatively affected farmers in some cases [Sušjan Redek, 2008] due to subsidy cuts and price liberalization which made prices of inputs unaffordable (Swinnen, Van Herck, & Vranken, 2009) or the institutions for the necessary inputs were non-existent (Tyers, 1994, p. 24). This could further be tied to the problem of a lack of political will and the change in governments, which led to uncertainties in the decollectivisation process in many FSU countries and even within different regions (Mathijs & Swinnen, 1998). There are some cases where laws were changed in land redistribution by successive governments in Bulgaria for example, and in the Central Asian FSU countries there were considerable barriers to restructuring of collective farms as far as 1998 (Mathijs & Swinnen, 1998). This, if compared with China shows that some steadiness in the rural institutions along with market orientation through decollectivisation (as well as a clear political will seen by the decisiveness of China’s move to family farming, where decollectivisation was carried out despite protest against decollectivisation in some regions (Bramall, 2009)) has a positive impact on agricultural performance in a transition from Socialism and helped play a role in the improving Chinese performance and the decline in FSU countries’ performance.

To further analyze the impact of decollectivisation on the agricultural performance of transition countries, some of the theoretical arguments concerning collective farming must be looked at. Two in particular are of specific interest: a) the inverse relationship of farm size and yield, and b) the problem of worker incentives on collective farms and free riding or work shirking. The first argument is that farms cannot take advantage of economies of scale (Bramall, 2009). The evidence is unclear, but Rakshit shows that through a process of capital intensification some farms in West Bengal are subject to economies of scale (Rakshit, 2011). This goes hand in hand with the evidence of large-scale farms transformed from collectives in Hungary in the transition period and their quicker recovery of average yields, compared the slow recovery of countries which switched to a smaller, family farm style with less input access (Swinnen, Van Herck, & Vranken, 2009). Rather than the switch to family farming on small plots of land being a cause for Chinese agriculture performance increases, it is possible that, where inputs were affordable, i.e. where there was a movement towards mechanization causing protest (Bramall, 2009), the forced decollectivisation in fact acted as a constraint on Chinese agricultural performance in the transition. That said, in poorer Central Asian FSUs, the decollectivisation may have had a positive impact, if adequate institutions and political will had existed, if the mechanization process was not possible immediately (as suggested by (Mathijs & Swinnen, 1998)). Furthermore, the transformation to smaller production teams in China and evidence of Indian and Vietnamese cooperatives/collectivities show that smaller production units/cooperatives, especially which are made up of workers with social bonds, work more productively (Agarwal, 2010) (Wolz & Duong, 2008) (Naughton, 2007) although a general consensus seems to be that collectives tend to accrue economies of scale in risk management at the very least, through group marketing, infrastructure investment and also greater bargaining power and a greater ability to secure credit (Agarwal, 2010) (Mathijs & Swinnen, 1998).

This point ties into the second problem of incentive structures which seems a far more important issue in the case of China (Bramall, 2009). The most obvious problem is the coercive nature of the collectives in the Socialist countries (Agarwal, 2010) but another problem to the incentives was the temptation to shirk. This is a problem in larger collective farming groups seen in the varying measures of work point allocation and where production teams of communes were larger there was more incentive to shirk as social pressures aren’t as strong an incentive (Agarwal, 2010). Also in Vietnam, where the collectives were allowed to transform into cooperatives, the move from larger cooperatives to smaller ones may highlight this shirking problem as a factor (Wolz & Duong, 2008). In the Chinese collectives, there were in general work point allocation systems of piece-rate, i.e. based on what or how much is done, or time-rate, i.e. based on time spent doing the work (Li, 2009). The implementation and effectiveness depended a lot on leadership, with some leaders’ leadership helping to ‘stimulate production, provided that there was an identity of interest between the leaders and the led’ (Li, 2009, p. 207). Nevertheless there were often problems of shirking (Bramall, 2009) (Li, 2009). This came from a difficulty of supervision of workers on farms due to large size and difficulty in disaggregating the work done through the output which could be adversely affected by weather and other issues which were difficult to measure (Bramall, 2009). However there are some gains for peasants which may have offset the disincentives induced by these and the coercive aspect of the collectives along the lines of health and education gains, social security, and the removal of ‘exploitative class relations which typified the Republican countryside’ (Bramall, 2009, pp. 242-3). Furthermore, Bramall points out that during the decollectivisation process in China, collective farms were no less productive than the family farms which they ran alongside, which were relatively few in any case at the start of the fast growth period (Bramall, 2009). This plus the fact that the FSU countries agricultural output and labour productivity has yet to reach pre-reform levels in some countries (Swinnen, Van Herck, & Vranken, 2009) seem to show that neither the incentive issue and inverse relationship factors are necessarily significant constraints on collective farming and so do not show that decollectivisation was an important factor in improved agricultural production in China or the FSU countries in transition from Socialism. Neither of these factors is as important as the previous institutions problem in explaining the agricultural performances in transition from Socialism.

Land rights, or the lack of, may be somewhat correlated with the agricultural performance. In China the land rights of the farmers were to some extent changed through the decollectivisation process, with land leases being given in many areas for as long as fifty years (Naughton, 2007). This contrasts with the FSU countries where decollectivisation was slow and in some countries private land rights were not approved as a policy, such as Turkmenistan and Uzbekistan, as far as 1998 (Mathijs & Swinnen, 1998). Where private land ownership was allowed in Kyrgyzstan and Kazakhstan, growth in agricultural output is still limited when looking at 1992 as the first year, even compared to the other Central Asian FSU countries. This may be explained by the other countries starting from a lower per capita GDP where extra capital leads to a greater increase in production in theory, although the model is contested by some economists, such as Barro and Sala-i-Martin (1992) (Knight, Loayza, & Villanueva, 1993). Then again, if you look from 1999 onwards, the gains in output by Kazakhstan and Kyrgyzstan occur far quicker than the other central Asian FSU countries which maybe a sign that land ownership, or long land leasing as seen in China, has a positive effect on agricultural performance. This is supported further by Naughton who shows that once free to allocate labour themselves, farmers worked harder for less time, and switched to less labour-intensive crops, even if the returns were less, and this while overall output was increasing (Naughton, 2007). There is some evidence of land security leading to more long-term investments in Vietnam, however, although the more efficient allocation of inputs may be shown in some evidence, a number of other factors including social and political structures also play a part, either as a constraint or as an accelerator, as seen in China by region and Vietnam (Hare, 2008). Nevertheless, the evidence shown in agricultural growth rates plays out to this, where less secure terms of land ownership in the FSU countries (except Kyrgyzstan and Kazakhstan) is correlated with lesser agricultural performance (improvement), except in Turkmenistan which didn’t accept private land ownership in 1998 (Mathijs & Swinnen, 1998), although this is an oil exporting country which may affect this outcome (Dowling & Wignaraja, 2006)[1]. By this I would conclude that steady, long term land rights as given through the decollectivisation process, when coupled by proper/steady institutions and political structure, may have had a long-term effect on the agricultural performances of countries in transition from Socialism.

What may have been more important however, is a change in the terms of trade in the USSR and the Soviet States and China, and also the grain first policy of Maoist China. The emphasis on grain production as a whole in Maoist China, although less so in late Maoist China, acted as a constraint on agriculture, with areas unsuited to grain production being used to fulfill collective quotas (Bramall, 2009). While there are signs throughout the Maoist period that this ‘monoculture’ declined, it is still a key factor in the lower growth of the period (Bramall, 2009).  Perhaps more important was the role of agriculture as a ‘net-contributor to industrialization in the 1950s’ (Bramall, 2009, p. 245) and also through the late Maoist period through ‘unequal exchange, or a shift in ‘double factorial terms of trade – the terms of trade adjusted for sectoral productivity’ (Bramall, 2009, p. 246). This shift meant that due to low profitability it was difficult for the farms to invest in modern inputs, which at any rate were not being created due to a lack of investment, with investment in heavy industry and military being significant objectives (i.e. the Third Front Policy). The terms of trade from 1978 were in fact improved substantially in 1978, which may have had an important contribution (Bramall, 2009) as shown in the next paragraph. In the Soviet Union, a similar strategy was used, which may have left FSU countries’ farms with little profits for investment and development (Carter & Zhu, 2009, p. 3), similar to the Chinese situation pre-1978. However, the collapse of subsidies as a factor in the collapse of production in the FSU countries (Mathijs & Swinnen, 1998) contradicts this to some extent.

In fact, the main argument to explain the growth in China and lack of growth in the FSU countries may be the introduction of the Green Revolution in China from 1978 onwards, after a shift in the term of trade more favourable to agriculture allowed the farmers to invest in greater amounts of fertilizer and new high yielding varieties (HYV) of seeds (Bramall, 2009). Furthermore, under Maoist rule an irrigation system, a typical requirement of the Green Revolution package, was well set up throughout China (Bramall, 2009).  Bramall argues that the extent that this is an important factor is shown in the difference in Vietnamese improved agricultural performance and Chinese performance. While Vietnam has increased its productivity efficiently, the same chance under its much short collectivised system did not allow it to have the same extent of an irrigated system (Bramall, 2009). Furthermore, Vietnam’s HYV seed research came relatively later than China’s (Hossain, Ut, & Janaiah, 2003). As for the FSU countries, there was no such boost to agricultural inputs availability or income through better prices, which to some extent explains the poorer performance and supports the argument that the decollectivisation may have been a relatively small factor in the improvement agricultural performance. The use of ‘inferior tools’ in the FSU countries and the lack of availability of the necessary inputs due to institutional and political instability (Mathijs & Swinnen, 1998)  further supports this.

In conclusion, the terms of trade and inability to mechanise due to instability and an unclear process of change of FSU countries’ institutions affected the agricultural performance to start with in FSU countries, while land rights may also have been an influential factor in the later stages in some of the faster recovering countries. However, the rapid growth in China which occurred concurrently with the decollectivisation process may have had more to do with a Green Revolution process, directly affected by an extensive irrigation system available in China.

Word-count: 2337/2920

Bibliography

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Dowling, M., & Wignaraja, G. (2006, July). Central Asia’s Economy: Mapping Future Prospects to 2015. Retrieved from http://www.silkroadstudies.org: http://www.silkroadstudies.org/new/docs/Silkroadpapers/0607Wignaraja.pdf

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Appendices:

Country	average growth of output in agriculture, over 18 years of transition from Socialism
China	5.554075
Kazakhstan	-0.84866
Kyrgyzstan	1.334624
Russian Federation	-1.53401
Tajikistan	2.212311
Turkmenistan	5.205089
Uzbekistan	2.596304
Viet Nam	5.200102

FAOSTAT note: Value of gross production has been compiled by multiplying gross production in physical terms by output prices at farm gate. Thus, value of production measures production in monetary terms at the farm gate level. Since intermediate uses within the agricultural sector (seed and feed) have not been subtracted from production data, this value of production aggregate refers to the notion of "gross production". Value of gross production is provided in both current and constant terms and is expressed in US dollars and Standard Local Currency (SLC). The current value of production measures value in the prices relating to the period being measured. Thus, it represents the market value of food and agricultural products at the time they were produced. Knowing this figure is helpful in understanding exactly what was happening within a given economy at that point in time. Often, this information can help explain economic trends that emerged in later periods and why they took place. Value of production in constant terms is derived using the average prices of a selected year or years, known as the base period. Constant price series can be used to show how the quantity or volume of products has changed, and are often referred to as volume measures. The ratio of the current and constant price series gives a measure of price movements. US dollar figures for value of gross production are converted from local currencies using official exchange rates as prevailing in the respective years. The SLC of a country is the local currency prevailing in the latest year. Expressing data series in one uniform currency is useful because it avoids the influence of revaluation in local currency, if any, on value of production. Please note that livestock value of production is measured in terms of indigenous meat.

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[1] I calculate that over 18 years the average growth rate of Turkmenistan in agricultural output is 5.2%, and China, if taking the start of collectivisation as 1978, after 18 years the average growth rate of agricultural output is 5.6%. Impressive rates of growth for Turkmenistan, or impressive for China to beat agricultural output of an oil exporting nation?