Policies to Promote Cooperative Forms in Agriculture

The diversity and persistence of associative forms of cultivation throughout the world underscores the fact that agriculture is a sector which, more than most, is characterized by co-operation among producing agents. Labor exchanges, for example, are traditionally practiced on farms in all continents. As Platteau has expressed it:

.. . even when individuals have to perform the same task (for example, preparation of the field, sowing or harvesting) and there are no labor indivisibilities .. . team work may be more productive than 'isolated' production. This is because of the morale-boosting effects of group work: there are indeed good grounds for believing that individuals derive a positive utility from working in company, especially if the tasks to be performed are arduous and toilsome (an effect completely ignored by economic theory), and that team work increases the speed of operations and the intensity of effort. That these two effects may play an important role is probably evident for all those who had the opportunity to see large groups working in the fields of Africa, generally under the stimulus of pace-setting songs sung in unison by all the team members. In fact, the prevalence of reciprocal work groups throughout the whole African continent - e.g. the 'ploughing companies' (Kampani) or the kafo work groups in Lesotho and the Gambia, respectively - may to a large extent result from the significance attached to such efforts in the African cultures.. . .216

These forms of collaboration are not confined to Africa. In South Korea, traditionally rice has been transplanted in teams formed of community members, usually accompanied by musicians with traditional instruments and a banner-bearer. In frontier agriculture of the United States, community collaboration in 'barn raising' for each family was a firmly rooted tradition.

Service co-operatives, as noted earlier, are also useful forms of co-operation, especially in light of the economies of scale in input purchase, storage, marketing and provision of machinery services. Farmers' associations also play important roles in many countries, for example, in facilitating the provision of farm advisory services, veterinary services and other services for their members.

Given the widespread desire for and usefulness of co-operation in agriculture, a constructive role for policy is to support its spontaneous manifestations and to direct it into the most productive

215. Renee Giovarelli and David Bledsoe, 'Land Reform in Eastern Europe', report prepared for the FAO, The Rural Development Institute, Seattle, WA, USA, October 2001, pp. iii-iv [emphasis added].

channels. Modes of co-operation also need to be given juridical and institutional support, and in some instances transitional finance to initiate the new co-operative structures. In this regard, in many countries it would be appropriate to develop not only a strategy for land tenure but also a strategy for reinforcing modes of cooperation within the sector, particularly in regard to farm services. For land tenure, a long-term view is necessary, particularly when the issues include the evolution of communal and collective land rights. More than one stage may be required in the development of a new system of these rights, and new administrative structures associated with land rights have to be created and consolidated along the way.

It is difficult to form effective and independent corporate structures or other entrepreneurially oriented co-operative units in agriculture without appropriate legal structures and a clear definition of land rights and factor markets. This lesson emerges from Zhang Xioashan's recent review of Chinese experience with market-oriented agricultural production co-operatives:

In terms of the legal framework, there is no cooperative law in China and, in company law or legislation concerning other economic organizations, there are no articles or chapters specifically about cooperatives. Since the regulations or charters issued by the ministries concerned do not have the authority of law, cooperatives cannot be formed and operated under the law, nor can they be protected by the law. To a large extent, the survival and development of rural cooperatives depends on the policies issued and implemented by local governments, i.e. they are dependent on people, not law. ... It was probably for this reason that rural cooperatives used to invite local leaders to take the position of director-general or chairman, and such a phenomenon is now seen in [other associative forms]. This inevitably has a great influence on the independence of cooperatives.

... in China in the past, the centrally planned economic system, together with a household registration system that separated urban from rural residents, hindered the free movement of production factors. In addition, the markets for these factors are not yet mature, the foundation on which to build free combination of resources is still weak and it would be unfavorable for cooperatives to grow independently. For instance, since there is no sound market for land transactions, if a cooperative wants to purchase the use right to rural collectively owned land, it has to obtain permission from the many government institutions concerned.. . . Another case regards the credit supply. In China . . . banks and credit cooperatives, to a certain extent, are still affiliated to government and have not become independent financial organizations. . ..

For these reasons, at this stage of Chinese development, while a sound market system has not yet been established, the production factors market is still imperfect and the legal foundation defective, it is a rational decision for cooperatives to seek support and protection from government. Cooperatives that are completely self-organized and have no government support have to pay high transaction costs and spend a lot of time and effort doing business on their own.. . . The protector-protected relationship is useful and beneficial for both sides. ... As the market economy develops and cooperatives grow, the costs of direct transactions between cooperatives and the market will decline. When the costs of government protection (the loss of a degree of independence) equal, or even exceed, the benefits of being protected (reduced transactions costs), the protector-protected relationship between rural cooperatives and the State might come to an end.217

217. Zhang Xioashan, 'Cooperatives, communities and the state: the recent development of Chinese rural cooperatives in transition', Land Reform, Food and Agriculture Organization of the United Nations, Rome, 1999/1-2, pp. 103-104.

As in other areas of economic policy, an adequate legislative foundation is a prerequisite -although not a sufficient condition - for making progress.

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