Pioneering Land Reform

To anyone with even the slightest knowledge of Russian history, it is clear that the success or failure of economic reforms will depend to a huge extent on the depth and consistency with which land reform is conducted. Tsar Alexander II triggered capitalism's swift growth in Russia when he abolished serfdom in 1861.

Pyotr Stolypin's reforms produced astounding results within a few years. Between 1906 and 1915, thanks to the efforts of Stolypin's farmers, the productivity of crops nationwide grew by 14 percent, in Siberia by 25 percent. In 1912, Russia's grain exports exceeded by 30 percent those of Argen-tina, the United States and Canada combined.

Unfortunately, post-Soviet reforms in Russia have barely touched land reform. The initial, sole focus on farming was utopian. As a rule, the farmers who leave their collective farms are poor, and what money they receive from the government is not enough to get them on their feet.

The dramatic situation in the countryside today -- primarily a result of the catastrophic decline in production, the decrease in the productivity of herds and the reduction of areas under crops -- may be resolved in one of two ways: by bailing out the existing system with generous subsidies and not making any substantive changes; or by finding more effective forms of management which, with moderate government support, would make agricultural production profitable and competitive.

The first alternative -- the road to destruction and deindustrialization -- would promote politicians who believe in handouts and special audiences for the disgruntled. The second alternative -- a painful but constructive process -- would require a detailed program of action and thorough organization. This program would have to avoid the mistakes of the last reforms (the compulsoriness, the insistence on a single method of management, the land disputes), and yet alter production and property relations fundamentally.

The main aims of reforms in the countryside, and this program, should be:

?To create effective agricultural enterprises based on various methods of labor organization;

?To support peasants who show initiative;

?To increase labor productivity and discipline;

?To increase competitiveness of production.

In order to meet these goals, the following principles would have to be observed:

?Voluntary participation of farms in land reorganization and privatization on the basis of decisions taken by the workers, not management.

?Freedom of choice with the new owners determining their own legal-organizational form;

?Honest and open distribution of land and property;

?Social security for pensioners and invalids living in rural areas.

In 1993, on the basis of the aims and principles above, a group of scholars from the Academy of Agricultural Sciences' Agrarian Institute teamed with experts from the Nizhegorodsky region's department of agriculture and, with the help of the World Bank's International Finance Corp., came up with a program for the reorganization of state and collective farms. This became known as the Nizhegorod model of land reform. A more detailed legal and technical program does not exist in Russia. It provides for the creation of new private farms, farming associations, joint-stock companies and other agricultural enterprises by distributing the land and existing farm property among them. To date, 57 agricultural enterprises in the Nizhegorodsky region have been reformed according to this model. Already there are positive results.

In the first stage of the program (fall 1993 to spring 1994) five "pilot" farms were reorganized to create 42 agricultural enterprises. Since most farms went through reorganization in the second half of 1994 and the first half of 1995, we have basic production and economic indicators for the pilot farms only, at this point.

Before the reform, the pilot farms produced substantially less than the average farm in the region. In 1991-93, grain production fell by 15.2 percent overall, and by 18.9 percent on the pilot farms; potato production fell by 12.2 percent and 24. 6 percent respectively; vegetable production by 10.8 percent and 22 percent. Milk yields in the region fell by 4.6 percent and on the pilot farms by 14.4 percent. Labor productivity fell by 7.7 percent and 24.5 percent respectively.

In 1994, the first year of work for the newly created enterprises, appreciable advances were made, according to various indicators. If on average in the region, grain yields amounted to 1,660 kilograms per hectare, then on the pilot farms the yield was 2,160 kilograms per hectare. To be fair, we should note that potato and vegetable production, as well as milk yields, have continued to drop. The gross volume of production on farms in the region fell by 22 percent overall, and on the pilot farms by 17 percent. Labor productivity in regional enterprises decreased by 11 percent, while on the pilot farms it increased by 5.6 percent. In the enterprises created from the five reorganized pilot farms, more attention is devoted to sales and processing of agricultural production. In their first year of operation, they opened 12 stores, built two processing plants and commissioned four more, and opened a cafe. Based on the 1994 results of the reorganized farms, the average worker produced 777,400 rubles ($220, at end of 1994 rates) in profit, as opposed to the 19,200 rubles in profit produced by the average worker in the region. On the reorganized farms, the pay is 30 percent higher.

But these numbers, in my view, are not the best indicators of the positive changes in agriculture in the Nizhegorodsky region. The main thing is that here the peasant has a new relationship to his labor and to his farm. We have broken with the old communist ideology of collectivism.

Boris Nemtsov is the governor of Nizhny Novgorod. He contributed this comment to The Moscow Times.