Professor Vladimir G. Treml Comparative Economic Systems Economics 140 Spring 1997 (See pp. 287-291 in Gregory and Stuart for Soviet cooperatives, "Kolkhozes" and pp. 414-417 for Chinese "Rural Peoples Communes." These notes should be used to supplement the discussion of "Cooperative Variants" and "Participatory Economies" in Chapter 7) COOPERATIVES, COMMUNES, AND OTHER WORKERS ASSOCIATIONS 1. Producing enterprises owned by a person(s) or by stockholders and employing hired labor is a dominant form of business in market economies (including proprietorships, partnerships, and corporations with limited liability). Of lesser importance is a large and a diverse group of enterprises known as cooperatives, co- ops, communes, collectives, kibbutzim and moshavim (Hebrew), work teams or gangs, "artel" (Russian) and other associations of producers and consumer which are characterized by joint or communal ownership of capital, with labor inputs supplied mainly by members, and run by democratically elected managers. Broadly speaking, these associations emphasize communal interests over competition and reject individual ownership of productive assets and income based on these assets. There are many types and categories of cooperatives. Some (usually known as communes) hold all productive capital and even household goods in common ownership, regiment living styles of their members and go as far as to dictate communal housing patterns, including communal parenting and separation of sexes. Some cooperatives are large with thousands of members, jointly owned land, livestock, and tools, and strict regulations governing the work of their members. Some, on the other hand, have a limited purpose of coordinating processing or marketing of agricultural produce or running supply of electrical power in rural areas. Members in most cooperatives supply capital in unequal shares and differ in skills, education, experience and other characteristics of their labor inputs. Equitable distribution of income to members which would reflect differentiated capital and labor contributions has been the most vexing ethical, legal, and administrative problem for cooperatives. Agricultural producer and consumer cooperatives began in the 19th century in England (considered the mother of the cooperative movement), spread to Belgium, Sweden, Germany, Japan, Russia, the United States, and continued to operate with intermittent success throughout the world. In contemporary England consumer cooperatives have about 13,000,000 members. In the United States in the early 1990s, farmers' investment in producer and consumer cooperatives reached about $31 billion. But, by and large, cooperatives have been of marginal commercial importance in market democracies. 2. Of particular interest are the well developed and commercially successful Israeli cooperatives, known as "Kibbutzim" and "Moshavim" KIBBUTZ, (plural KIBBUTZIM), Hebrew for "gathering," or "collective". Israeli - collective settlement, usually agricultural and often also industrial, in which all wealth is held in common. Profits are reinvested in the settlement after members have been provided with food, clothing, and shelter and with social and medical services. Adults have private quarters, but children are generally housed and cared for as a group. Cooking and dining are in common. The settlements have edged toward greater privacy with regard to person and property since the formation of Israel in 1948. The kibbutzim, which are generally established on land leased from the Jewish National Fund, convene weekly general meetings at which the kibbutz members determine policy and elect their administrative members. The first kibbutz was founded at Deganya in Palestine in 1909; others were created in the following years, and by the late 20th century there were more than 200 kibbutzim in Israel, having a total population of more than 100,000. The kibbutzim played an important role in the pioneering of new Jewish settlements in Palestine, and their democratic and egalitarian character had a strong influence on early Israeli society as a whole. The kibbutzim still make contributions to Israel's economy and leadership that are disproportionately large when compared to the kibbutzim's relatively small share of the country's population. MOSHAV, (Hebrew: "settlement"), plural MOSHAVIM, in Israel, a type of cooperative agricultural settlement. The moshav, which is generally based on the principle of private ownership of land, avoidance of hired labour, and communal marketing, represents an intermediate stage between privately owned settlements and the complete communal living of the kibbutz. Moshavim are built on land belonging to the Jewish National Fund or to the state. The commonest type, the moshav 'ovdim ("workers' settlement"), consists of privately farmed agricultural plots. In a newer variant, the "partnership settlement", the land is farmed as a single large holding, but contrary to practice in the kibbutz, households are independently run by their members. In the moshav, light industry, as well as farming, is common; the older moshavim emphasize citriculture and mixed farming. In the period of large-scale immigration after the creation of Israel (1948), the moshav was found to be an ideal settlement form for the new immigrants, almost none of whom were accustomed to communal living. In the late 1970s some 136,500 persons lived in moshavim 'ovdim, and about 7,000 in moshavim . From ENCYCLOPEDIA BRITANNICA It should be noted that in addition to kibbutzim and moshavim a large number of cooperative (i.e., non-state) industrial and service enterprises operate successfully in Israel. Most of these had been organized and partially funded by the Histadrut, a centralized umbrella organization of labor unions. The Histadrut which is the largest single employer of labor in Israel is also heavily involved with workers' health, welfare, and education. 3. Historically, socialists, Marxists, and non-Marxist social- democrats favored cooperatives with shared capital and communal labor as equitable alternatives to the system of competitive privately owned enterprises and corporations employing hired labor. Ironically, in centrally-planned command economies the cooperative paradigm became the prototype for a complete confiscation of land and productive assets of peasants and for total subjugation of agricultural labor to state interests. In the Soviet Union the cooperatives became known as "agricultural artels" or kolkhozes. Technically speaking, kolkhozes were private producers' cooperatives working on land granted to them without charges by the state. Organized by armed force on a large scale in the late 1920s -- early 1930s, kolkhozes became the main form of agricultural organization under the full control of the Communist Party. The forced collectivization campaign resulted in a famine in 1932-1933 in which some 5 to 6 million rural residents perished. Under the collectivization scheme peasants were forced to surrender without compensation their land, livestock, tools and implements upon joining the kolkhoz. Under a director, ostensibly elected by members but in fact appointed by the local Party organization, kolkhozes had to deliver targeted quantities of agricultural produce to the state at nominal prices. Net income of kolkhoz (revenues from state deliveries less taxes and cost of inputs) would be distributed to members depending on quality and quantity of their work. Kolkhoz members were allowed to farm a small plot of land and to sell the produce at market prices. In the 1980s the Soviet Union had about 26,000 kolkhozes with 13,300,000 members; sovkhozes. Kolkhozes have been always poorly run and known for remarkably low labor productivity; according to Soviet statistics labor productivity in all Soviet agriculture was about 20-25 percent compared with labor productivity in the US. Soviet-type kolkhozes had been introduced in almost all East European socialist countries but with less brutal force. A small number of independent private farms which have virtually disappeared in the Soviet Union continued to operate. The share of collectivized agriculture in these countries was accordingly smaller than in the Soviet Union. After Communists came to power in China in 1949 agricultural land was redistributed to poorer peasants and Soviet-type collectives had been set up. Mao Zedong was, however, unsatisfied with the slow progress of Chinese agriculture and industry and launched the so-called "Great Leap Forward" campaign (1958-1960) which promised to rapidly modernize the backward agrarian economy. It will be recalled that Marx's Communist Manifesto called for "... an establishment of industrial armies, especially for agriculture" and for "Combination of agriculture with manufacturing industries; and gradual abolition of the distinction between town and country..." Inspired by Marx's ideas and Soviet collectivization and industrialization experience Mao Zedung focused his "Great Leap Forward" program on collective agriculture and establishment of small-scale rural industrial production. The program created a militarized system of Rural People Communes in which peasants lived in communal houses, ate in communal kitchens and were even issued identical clothing. Communes ran by local Party cells were subdivided for administrative purposes into "production brigades" and "production team." Initially, about 26,000 communes were organized averaging 5,000 peasant households each; the system encompassed some 98 percent of Chinese peasants. Among some of the more absurd Marx- inspired schemes was an attempt to triple steel production in China in two years relying on small-scale facilities to be created in rural areas. Peasant members of Communes were forced to surrender metal household tools, cooking utensils, bicycles, and the like and to smelt them into steel in small backyard furnaces. Virtually all metal objects used as raw materials as well as trees and wood used as fuel disappeared from rural areas while steel produced in these small furnaces by unskilled peasants turned out to be too brittle and impure to be used. In the meantime, a large part of peasants was diverted from agricultural pursuits to backyard steel furnaces, construction of irrigation projects and other non-agricultural work. The results of the "Great Leap Forward" campaign were disastrous -- agricultural production dropped for several years and at least 30,000,000 peasants starved to death (the horrendous human cost of this man-made famine was carefully concealed from the world until the early 1990s). The campaign was abandoned in 1960 but Rural People Communes continued to operate for several more years until they were gradually transformed into less regimented farming collectives and cooperatives. 4. A fascinating question should be posed. Kibbutzim and Moshavim introduced on a large scale often on poor land and with unskilled immigrant labor in Israel produced flourishing and commercially profitable communes and cooperatives. Small cooperatives have also been operating successfully in a number of market economies. Soviet and Chinese collectivization, on the other hand, resulted in tens of millions of deaths and economic disasters from which the two countries took many years to recover. How was it possible? It seems that a somewhat simplistic answer is that a relatively small group of committed volunteers sharing a common ideology (or religion) can indeed form and operate economically viable communal autonomous units in a market environment. Communes and cooperatives organized by force by state authorities and run under centralized political controls are likely to be highly inefficient.