Friday, May 30, 2014

8 ALEXANDER CHAYANOV The Theory of Peasant Co-operatives

are involved, the reprocessing of milk into butter and the marketing of the product in this more easily transportable form - which previously produced low remuneration - now begins to bring a return higher than the return from the sale of fresh milk. Table 31 illustrates in an approximate but visible manner this change in the balance of profitability.
When making the transition to marketing combined with reproces­sing, the need to have a broad dairy farming base becomes particularly obvious, since this form of marketing is possible only when the milk is reprocessed mechanically, owing to the decisive advantages of mechanical over manual reprocessing. But the profitable use of the equipment of a butter-producing factory is possible only when the amount of milk reprocessed is substantial. Otherwise, the costs of amortization and the cost of the foreman's wages will be disproportionately high in relation to each pail of reprocessed milk. Therefore, for a small peasant household like the one in Vologda, which we examined above, the organization of mechanical reprocessing and marketing is only possible as part of a co-operative system including many other households.
Practice has shown that the use of mechanical cream-producing equipment can be profitable where at least 4,000-5,000 poods of milk are reprocessed every year. Let us, therefore, try to calculate how many peasant households need to combine in order to create such a dairy farming base.
If, instead of taking averages, we look at the figure for milk production in particular households, we get the data shown in Table 32, by examining the budgets of one in ten of the Vologda households.
As can be seen from Table 32, some households do not sell milk at all. Among the Vologda households these constitute 19.2 per cent of the households whose budgets have been analysed.
If we calculate that the average delivery of milk to the market by a household which sells milk is 121.4 poods, we can then reckon that the profitable use of mechanical equipment for marketing purposes requires at least 40 households which share in its use. Practical experience gives us figures which are quite close to this. Thus an average partnership in Novgorod has 60 members who own 140 cows and produce 5,600 poods of reprocessed milk; and an average partnership in Kostroma has 50-60 members owning 110-50 cows and producing 5,000 or 6,000 poods of reprocessed milk. Partnerships in Vologda exist on an even greater scale: they include, on average, 144 members owning 289 cows and they produce 18,841 poods of reprocessed milk every year.
This, then, is the essential foundation for the setting up of a
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Table 32  Amount of milk sold by households annually
No. of households according to Vologda statistical records Milk sales (poods) Revenue from milk sales (roubles)   
10 58.5 25.20   
20 69.5 29.90   
30 No sales   
40 No sales   
50 54.0 23.20   
60 97.7 44.10   
70 No sales   
80 125.0 54.00   
90 80.0 34.58   
100 185.0 80.00   
110 146.5 63.20   
120 174.5 75.25   
130 130.0 56.00   
136 415.0 178.88   
Average for 136 households 68.8 44.30   
Average for 110 households   
selling milk 121.4 53.5  
butter-producing association. It has to be noted that an average household, which belongs to a butter-producing co-operative and which has two cows and supplies 130.9 poods of milk to the market, is slightly bigger than an average peasant household in Vologda and approximates more closely to households of the category which sows between 3.1 and 4 desyatiny [i.e. between 8.37 and 10.8 acres] of land.
Thus 144 peasant households, when organizing the marketing of their dairy farming products, pool a significant amount of the milk which they produce; and they arrange for it to be reprocessed by a co-operative for the purpose of jointly marketing the butter which constitutes the final product.
Let us now examine how the co-operative enterprise is built up on this foundation. For the purpose of building it up, there are four organizational problems which have to be solved, namely:
1. The acceptance of the product as fit for marketing;
2. The organization of its reprocessing;
3. The organization of its marketing; and
4. Financial settlements.
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Table 33 The influence of the seasons on dairy farming resources   
No. of Daily supplies of milk (pails)   
cows per Milk-   Sales    Residue Sales as Prices per   
Season home yields percentage pail   
selling of milk- (kopecks)   
milk yields   
of large   
summer 2.43 2.02     1.43     0.68 66.1 77.3   
of small   
summer 2.30 1.32     1.01     1.31 76.6 81.1   
-March 2.39 0.95     0.88     0.07 93.5 106.1   
nedelya) 2.10 1.49     1.11     0.38 74.6 87.6  
Let us examine each of these problems in turn.
The organization of the formal acceptance of the product relates to the organization of milk production in the members' households. When they organize their dairy farming in co-operative forms for marketing purposes in order to earn a financial return, peasant households nevertheless continue to carry on dairy farming for the purposes of their own consumption; and their consumption require­ments are sometimes interwoven with the requirements of farming for the market and may take precedence over the latter. On the other hand, dairy farming may be linked with agriculture as well as other predominant economic activities on the farm; with the result that dairy farming is affected by the way these other activities are organized.
Thus, for example, in an area near Moscow, we have the following circulation of resources on a dairy farm during different seasons of the year.
Dairy Farming Reprocessing and Cattle-rearing Co-operatives
Looking through Table 29 we can see that in this area near Moscow, which might appear to be totally governed by market forces, the amounts of milk produced are, in fact, determined not by demand or by price levels, but by spring calving and by the availability of fodder. It is only the high prices in winter which lead the peasant households to increase the number of cows they keep and to curtail their own consumption.
A cream-producing association built on this kind of economic foundation will have a very unstable basis as an enterprise, since it will suffer from a milk shortage at the times when the demand for milk is greatest, while it will be saturated with milk during periods-when storage and preservation are extremely difficult. It is true that these fluctuations are less severe in the case of an association which reprocesses milk into butter, which is a less perishable product. But even so, the fluctuations make themselves felt. Therefore, all co­operatives, acting on the basis of their interests as enterprises, always try for as long as possible to prevent the milk which they collect from being spoiled. And they do so by trying to persuade their members to change from spring to autumn calving and by making their members undertake to deliver at least a stipulated minimum quantity of milk so as to guarantee an adequate and permanent supply.
The co-operative reprocessing of milk is, like any other co­operative undertaking, carried out for the ultimate purpose of increasing the remuneration of the agricultural labour applied to the reprocessed product. The successful achievement of this purpose with the concerted backing of workers in butter-producing co­operatives depends on the following conditions, when reprocessing is carried out:
1. The amount of expenditure on production;
2. The technical standard of manufacture;
3. The manufacture of products of high quality;
4. The quality of the material;
5. The rational utilization of skim milk and butter-milk; and
6. The level of the market prices of the raw material and of the final product.
We shall examine each of these conditions on the basis of a detailed study of butter-producing partnerships in Vologda, which was presented to the Vologda co-operative congress of 1913. According to the data assembled by this study, the cost of producing butter is made up of the following components:
174  Dairy Farming Reprocessing and Cattle-rearing Co-operatives
1. The wages of the workers and foreman;
2. Payments to those who transport the milk;
3. Payments to clerical staff;
4. Management;
5. Transport of the butter;
6. Amortization of stock and property;
7. Raw materials;
8. Miscellaneous expenditure.
Needless to say, the larger the partnership, the greater its overall total of expenditure; and if we calculate it per unit of reprocessed milk, we can observe great variations between individual cases. The cost of reprocessing varies between 5.8 and 18.2 kopecks per pood of milk. This enormous difference may be due to the distance between the place where the partnership works and the market-place; or it may be due to the partnership's technical standards of work or to the size of the partnership. However, the size of the partnership is less important than might be supposed.
When comparing the cost of equipment with the capital and equipment owned by a peasant household, we arrive at the following outline picture of a butter-producing co-operative in the Vologda province:
1. It is based on 144 peasant households.
2. Their overall capital comprises 115,000 roubles.
3. This includes capital consisting of 289 head of cattle (289 cows) worth 14,450 roubles.
4. The factory equipment is worth 2,000 roubles.
5. The factory equipment comprises:
(a) 1.8 per cent of the capital of the peasant households; and
(b) 13.8 per cent of the value of their cattle.
6. The overall gross income of the 144 households equals 64,500 roubles.
7. This includes the value of milk amounting to 12,000 roubles.
8. The value of the milk handed over to the factory (19,000 poods) equals 8,000 roubles.
9. The cost of reprocessing is 1,800 roubles.
10. Receipts from the sale of butter amount to 11,000 roubles.
11. Proceeds from the sale of waste material equal 1,100 roubles.
12. Payment to the butter-producing partnership for one pood of milk is 54 kopecks.
13. Milk used for reprocessing amounts to 13.3 per cent of the household's income.
14. The profit from butter production represents:
Dairy Farming Reprocessing and Cattle-rearing Co-operatives   175
(a) 21.2 per cent of the value of the milk; and
(b) 2.8 per cent of gross income.
Such are the typical entities producing most of the butter which goes on to the world market. They are partly based on individual households and are partly socialized in a co-operative form. Every success or failure in the co-operative part of the system has an immediate effect on the family farms which form its base. Conversely, every shortcoming in the family farms undermines the stability of the co-operative part of the system.
When examining the conditions for the success of butter manufacture, we have more than once had occasion to note the influence which the economic activity of the membership exerts on the economic activity of the co-operative. And conversely, a number of recent investigations have demonstrably shown the organizing influence of co-operatives on their members households. Thus researchers on co-operatives in Vladimir write that:
When we compare the present state of the farms with the state of these farms 15 years ago, we are unable to discern any significant increase in the use of intensive methods in the farms of today. However, there have been significant changes in the way the farms are organized, especially with regard to tillage. Fodder-grass cultivation is beginning to play a prominent role; and there is a significant expansion of the use of labour-intensive crops.
The changes in tillage which have taken place on our farms over a period of 15 years are shown in Table 34. In these cases, no radical change in tillage methods is yet apparent. What we find here is the old three-field system, in which two fields are set aside as a special area for clover, which does not form part of the general seed-turnover. All the same, this does represent a step forward. An attempt is being made to add a new ingredient to the overall resources of productive farming - namely, a new kind of fodder. The substantial changes which have occurred in these farms during 15 years have meant that the farms are better provided with cattle; and that cattle have become distributed more equally among different farms.
The existence of a larger number of cattle is now making it possible to dispense with outside help in working the land and thus to offer more jobs on farms to those who had previously sought work outside agriculture. At the present time we can observe a greater use of intensive methods of tillage as well as the use of new kinds of crops.
Table 34 Proportion of field crops
Year Crop Spring crops Grasslands sown Total   
Rye Oats Buckweat Flax Potatoes Peas Total Wine      Clover   
1893 1913 Increase 47.5 39.7 18.0 4.4 24.1 22.1 5.5 10.2 4.6 9.8 0.3 52.5 49.6 3.1      10.7 100.0 100.0   
(+) or   
(-) -7.8 -13.6 -2.0 +4.7 +5.2 -0.3 -2.9 +3.1      +10.7 0  
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Price of Proceeds of Difference   
1 pood sale per in payment   
of butter pood of milk for milk compared with payment in April   
January 15.52 68.9 14.4   
February 14.41 61.7 7.2   
March 13.25 57.1 2.6   
April 12.82 54.5   
May 13.34 58.6 4.1   
June 13.56 58.5 4.0   
July 14.91 64.9 10.4   
August 16.81 76.9 22.0   
September 17.69 80.8 26.3   
October 19.75 93.1 38.6   
November 19.75 102.5 48.0   
December 22.53 87.0 32.5  
We have so far been examining the organization of the butter manufacture co-operative system and the organization of the collection and reprocessing of milk. We should not forget, however, that, here as elsewhere, the main factor in the success of the work of a co-operative apparatus is the marketing of the finished product.
Marketing conditions as well as marketing policy are what determine both the forms and the scale of the co-operative organization itself. It is precisely in relation to dairy farming co­operatives that the influence of these factors is particularly important because, in this case, milk can be marketed not only in the form of various kinds of butter but also in the form of fresh milk or various kinds of cheeses or other dairy products. The eventual revenue from the sale of milk depends, in the last resort, on the ability of those who organize it to study and exploit the complex situation on the dairy market by making appropriate adjustments to their economic apparatus.
What is particularly complex is the building of market relationships in the market for fresh milk in the outlying areas of towns, where seasonal price fluctuations are sometimes exceptionally severe, as can be seen from Figure 11.
The price of butter, like that of milk, although to a lesser extent, is itself subject to seasonal fluctuations. Thus, for example, variations in the price of butter and in the corresponding prices of a pood of milk in the Vologda province showed this picture for 1912 (Table 35).
Table 35
178  Dairy Farming Reprocessing and Cattle-rearing Co-operatives
Figure 11: Price of a mug (half a litre) of milk in 1924 during diffferent months
Dairy Farming Reprocessing and Cattle-rearing Co-operatives   179
If we compare the lowest payment for milk, in April, when a partnership was able to pay a total of no more than 54.5 kopecks per pood, with the payment of 102.5 kopecks in November, we can see a difference in the payment for the product equal to 48 kopecks, that is 87.2 per cent.
Financial calculations alone will lead co-operatives to sell all their butter during the autumn and winter when prices are high; and, during the remainder of the year, to store their supplies of unsalted butter in well-equipped ice-boxes. For this reason, the problem of installing refrigerators in central co-operative organizations is one of the most immediate problems facing Russian butter producers, since, if it is successfully resolved, it can achieve an increase of 20 or 30 per cent in the peasants' revenue from their milk.
There is, however, another solution. We have already noted that in addition to reprocessing milk into butter, a dairy partnership can also undertake the manufacture of cheeses. The prices of cheese have been noted for their great stability. The price paid for milk reprocessed into cheese is significantly below that paid for butter products in November and December; but, on the other hand, the price paid for cheese was higher than that paid for butter during the spring and summer. This can be seen from Figure 12. Therefore,
Figure 12: Seasonal prices of cheese and butter during different months
Jan  Feb Mar Apr May Jun   Jul  Aug Sep  Oct Nov Dec Jan
180 Dairy Farming Reprocessing and Cattle-rearing Co-operatives
although it is impossible to organize a perfect system of storage in refrigerators, it is nevertheless possible to divide output according to two periods, namely (1) the period from February to July, which is taken up with the production of cheeses; and (2) the period from August to January, which is occupied with butter manufacture.
The changeover to cheese-maldng is convenient in this case for the further reason that cheese, which is an item of mass consumption in Western Europe and America, has a considerably wider market than butter and, therefore, can always be sold more easily than butter. It is true that cheese-making involves a much slower capital turnover and that a partnership engaged in cheese-making needs considerable resources in order to store the cheeses while they are maturing. But if well-organized co-operative credit facilities exist, this is no longer such a serious obstacle as it was in the past.
★ ★ ★
Potato-grinding, vegetable-drying and other co-operatives engaged in primary reprocessing are essentially almost identical to the butter manufacture co-operative system which we have just analysed. While leaving agricultural production under the control of individual peasant households, these co-operatives socialize all the work of reprocessing; and they organize the marketing of the final products. When we examine their organizational principles stage by stage, we can see the same methods of delivering raw materials, the same depersonal­ization of the raw material when it is reprocessed, the same methods of marketing and, lastly, we can see the same methods of distributing the revenue amongst the peasant membership.
However, despite the similarity of organizational principles, we should nevertheless note certain distinctive features, which are due to the very nature of the particular types of economic activity which are being brought within the co-operative system.
Vegetable-drying, the production of potato starch, the growing of tobacco and sugar beet and all other similar activities have their own special characteristics, which differ in each case.
It should be noted first of all that - in contrast to dairy farming products - the work of potato-grinding, vegetable-drying, sugar beet cultivation and other similar production activities does not and cannot offer any wide scope for spontaneous production within the home. These kinds of production can be carried on only within the factory. They are not a derivative of the organizational plan of the peasant household, but are created by the peasants from scratch or are captured by the peasants from the control of industrial capital.
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Therefore, they are not in competition with the individual peasant household.
On the other hand, in the overwhelming majority of districts, this kind of agricultural base for co-operative industry - that is, the growing of sugar beet and the industrial cultivation of potatoes and vegetables - is itself possible if, and only if, reprocessing work organized on factory principles is carried on in the vicinity. For in this case there can be no substantial local market for the reprocessed raw material; and the raw material is unsuitable for transportation to the larger markets owing to the very considerable weight per unit of the commodity.
Therefore, the existence of an agricultural base for these kinds of reprocessing is itself impossible without co-operative reprocessing in the factory, and vice versa. Wherever potato-grinding or vegetable-drying co-operatives appear, they will give rise to potato-growing and market gardening organized on industrial lines, which would previously have been unthinkable. It is therefore impossible to examine the profitability or otherwise of these co-operative undertakings without at the same time examining the profitability or otherwise of potato-growing or market gardening. Cases may possibly arise where vegetable-drying or starch production make losses if taken on their own and therefore cannot, for example, exist in a capitalist form; but where their losses will nevertheless be offset by the benefits which these crops provide for agricultural production itself.
Cases of this kind may arise in densely populated areas which suffer from a shortage of land and, consequently, from an underemployment of manpower. In such cases, the appearance of labour-intensive crops such as potatoes or vegetables will always provide employment for previously redundant manpower and thus increase the labour earnings of the peasants throughout the whole area. In this case the peasantry will stick to the labour-intensive cultivation of potatoes and vegetables and to the co-operative system needed for this purpose, even if, from a book-keeping point of view, this makes a loss. The need for, and profitability of, a co-operative system will be determined in this case not by the conditions obtaining in the co-operative enterprise but by the existence of its agricultural base.
Another way in which the types of co-operation which we are examining differ from those of butter manufacture is that they find it possible and profitable to use large-scale factory installations. As a result of this, co-operatives, particularly those engaged in sugar beet production, must, when they start their business, possess a considerable basic capital together with equipment on a scale which,
182  Dairy Farming Reprocessing and Cattle-rearing Co-operatives
1. N. Makarov, P. Kolokol'nikov and others, Molochnoye khozyaistvo v Moskovskom uyezde (Dairy Farming in the Moscow District), Moscow, 1914.
if it to be fully utilized, requires a quantity of raw material considerably greater than the raw material stocks owned by the co­operative's founding members. This heavy dependence on capital considerably weakens the standing of a co-operative vis-รค-vis a capitalist enterprise; and it hampers the rapid and easy development of co-operative undertakings.
A good many of the distinctive features of the above cases are of a purely technical nature. The most important thing here is that, unlike milk which is sent for reprocessing every day throughout the year, potatoes and vegetables are produced on the farm all at the same time, after the harvest has been gathered. This in turn raises the problem of the organization of storage, which is sometimes extremely complex as well as being very important in view of the possibility of spoiling.
It is also possible to undertake numerous other kinds of reprocessing in addition to those just enumerated.
Peasant Co-operation for the Purpose of Cattle-rearing
If we open the pages of Dr Eduard David's well-known work on Socialism and Agriculture, or if we consult books by other authors who dealt in their time with the struggle between large-scale and small-scale agriculture, we find the most sincere assurances to the effect that of all branches of agriculture, it is precisely modern intensive cattle-rearing that is, par excellence, the province of small-scale production.
Modern cattle-rearing consists of complex biological processes whereby a living organism converts the crude raw material of fodder into food products containing an unusually high concentration of assimilable energy. The organization of this kind of cattle-rearing is both unique and non-mechanical. Its processes are so completely individualized, and they require so much assiduous attention in the care of each animal, that cattle-rearing, so David insists, can be properly undertaken only by a small farmer who has a personal interest in the success of what he is doing and who can constantly observe the small number of animals which he keeps.
A peasant family that keeps three to five head of cattle is alone capable of putting in the effort that is essential to the animals' care. Such effort cannot be provided even by dozens of workers, who merely carry out general routine directives from the management, while having little personal interest in the success of their work. David ended his argument by saying:
If one bears in mind the enormous importance of assiduous care for the lives of the ennobled species, one can easily understand why practically all those who are competent to judge recognize that in relation to cattle-rearing, a small-scale
184  Peasant Co-operation for the Purpose of Cattle-rearing
farm directly managed by its owner enjoys an immense advantage over a large-scale farm.
Despite this, however, the practice of cattle-rearing in the agriculturally advanced countries of Western Europe has shown that, even in this area, where the peasant farm has had a special importance, such a farm is still able, without sacrificing its individuality, to single out certain types of activity, which have been shown to be more profitably organized as large-scale farming. Indeed, when we look at the organization of peasant cattle-rearing, we find a good many cases where the economic measures which are required are beyond the usual capacities of the small self-employed peasant farm.
Thus, for example, as regards the very foundation of cattle-rearing, that is, the reproduction of the animals, a small farmer with only one or two cows and a horse is totally helpless, since he cannot, with such a herd, exploit even a quarter of the animals' breeding capacity. It makes no sense for a peasant family to keep a bull or a stallion on the farm for the purpose of breeding, since the costs of keeping such an animal - in relation to two or three cows instead of twenty or thirty - will be disproportionately high and will not be compensated by the increase of cattle. Therefore, the collective use of studs for breeding has been a fairly long-standing practice in the peasant economy. In areas of communal land tenure, this has long since taken the form of unrestricted mating between a jointly-used herd and a jointly-used bull.
But in areas where land has been owned by separate households, a widespread practice developed, on a commercial basis, of keeping a bull [and offering its services as a stud] as a method of paying for cows purchased from others. The struggle against entrepreneurs of this kind, who were often selfish and unscrupulous in exploiting the owners of cows, resulted in the joint co-operative acquisition and upkeep of animals for stock-breeding purposes.
However, in the case of a peasant household which has set out along the path of agricultural progress, the question of the pedigree qualities of its cattle's offspring has a relevance which goes beyond the maintenance of the number of cattle. It gradually becomes a problem of constantly improving the productive qualities of this cattle. The need to improve the quality of the cattle becomes increasingly important and grows especially acute with the development of the production of dairy products and other products of cattle-rearing for sale on the market. Industrial cattle-breeders, who send out most of their output to the market, start to become especially sensitive to the valuation in money terms of the quantity
Peasant Co-operation for the Purpose of Cattle-rearing  185
as well as the quality of this output.
The rouble is always the best teacher for anyone learning about weights and measures. The peasant begins, from his everyday experience, to discover how the remuneration for his work depends on the quality of the animals that he keeps. Agronomists in the Vologda province have more than once observed, and not without reason, that the peasant's interest in the improvement of his cattle becomes visibly aroused only with the development of co-operative industrial butter manufacturing. Cattle-breeders, when they cease to be concerned only with consumption and turn to production for the market, will naturally seek to raise quality by improving the pedigree of their cattle.
However, although we can discern a new need within the peasant economy to improve its cattle, we are almost entirely unable to indicate any methods which might help a small family farm to satisfy this need. It is, admittedly, possible when buying cattle to select good specimens; but such a selection can only be made out of the existing stock. If carried out over several decades, it might eventually have an effect on the average stock of cattle. But this method of spontaneous improvement is a slow one, and it is in no way guided by social or agronomical criteria.
But so far as the small, fragmented farms are concerned, all other paths are closed, because artificial selection and extensive cross­breeding require the availability of a great deal of biological material, the setting up of special stud farms, breeding-grounds and tens of thousands of roubles of capital. Most important of all, they require a highly educated staff of agronomists who are versed in the art of cattle-rearing and who have experience in this field. None of this can be attained unless the work is organized on the largest possible scale. And it can be attained by the peasantry only if a co-operative approach is adopted towards the solution of the tasks in question. < Societies of cattle-breeders, combining the efforts of hundreds of individual farms, can gain access to stock-breeding material which is of such a vast quantity that it is beyond comparison with any private cattle-rearing farm. Such associations, if they are provided with adequate resources, can improve the cattle in ways which are more profound and more successful than a private breeding-ground for cattle.
The difficulties facing the peasant are just as serious with regard to the rational organization of the feeding of the cattle, which requires constant laboratory observation, both of the content of the fodder and of the milk-yield. Modern methods of individual feeding, which correlate the fodder given to the cattle with the live weight of the cattle and their daily milk yield, require extremely complex
186 Peasant Co-operation for the Purpose of Cattle-rearing
calculations and assessments.
The care of cattle organized on these principles is aimed at getting the highest possible return, in the form of products, from every unit of fodder which is fed to the cattle; and it produces exceptionally good economic results in terms of revenue. But it is possible only with the help of laboratories and the help of specialists who have experience as well as an adequate training. Such things are accessible only to a large-scale farm which has substantial supplies of milk and which can pay the costs of agronomical observations by increasing its production of milk. For a peasant household, which stands isolated and on its own, all these advances in the techniques of agronomy will forever remain a closed book. Even the doubling of the milk yield of a farm with two cows would still be insufficient to pay a month's salary for a specialist in agronomy. However, exactly the same kind of monitoring by agronomists of the ingredients of the fodder given to cattle, as well as every kind of laboratory research, can easily be undertaken for a group of even the smallest farms -provided that the total number of cattle which they keep is large enough to ensure that such measures are profitable and can adequately pay for themselves through their economic results. Associations which handle this are widespread in the West and are successfully tackling the problems mentioned.
The co-operative principle has been bringing the latest advances in the science of agronomy into the stalls of peasant households, and has been producing an immediate and tangible benefit from these advances. This same co-operative principle has been enabling small farms, which are deprived of pasture and obliged to keep their cattle in stalls, to graze their young animals on good mountain pastures which are jointly leased by co-operative cattle-breeders and which ensure that they have strong and healthy young cattle.
When surveying the examples mentioned above of co-operation in the organization of cattle-rearing, we can divide them into twc categories:
1. Co-operation for the improvement of cattle pedigree; and
2. Co-operation for improving the conditions for the exploitation of cattle.
In the USSR none of the different types of co-operation in relation to cattle-rearing has come anywhere near to completing its initial development. Nor have their organizational types yet been firmly established or developed into a final form.
Co-operative Insurance
In one of the early chapters of this book, we carefully traced the processes by which capital circulating in the peasant economy is replenished, and we identified the ways in which a co-operative credit system could powerfully assist these processes.
It must be noted, however, that co-operative credit is by no means the only or even the best way of providing co-operative support for the replenishment and maintenance of capital in the peasant economy. In this respect, co-operative insurance is just as important, if not more so.
It is true that the economic problems of co-operative insurance are more complex and are harder to solve than those of small-scale credit. This is the reason why viable solutions were found in practice only a long time after the great principles of Raifeizen were formulated. The development of co-operative insurance is still only in its early stages. Nevertheless, the right path has already been explored and discovered; and the most viable organizational forms have been arrived at by a process of selection. The example of the co-operative insurance of cattle, which has become widespread in Belgium and France, holds out the prospect of rapid development for this new branch of the co-operative movement.
The problem of insurance is at first sight simple. Every farm over the course of the years suffers unexpected losses or accidents which hit part of its turnover capital or basic capital: for example, cattle plague infecting a horse or cow, fire in a house or shed, damage caused by hail, and so on. Although from the point of view of each individual farm, these unforeseen events are both unexpected and fortuitous, nevertheless from the point of view of a very large
188  Co-operative Insurance
number of farms which are situated over a substantial land area, they represent a normal phenomenon which recurs from year to year and which, in any year, affects only an insignificant percentage of farms. The larger the number of farms that we survey, the more constant and stable this percentage will be. It is therefore entirely feasible, in respect of any large group, to calculate in advance the amount of loss which will be suffered by individual farms belonging to this group, as the result of a 'fortuitous' disaster. By dividing this amount between the farmers, insurance can provide each of them with an alternative to the risk of heavy losses, through the payment of small contributions into a fund which covers losses suffered by farms in a particular year.
The practice of insurance has shown that in relation to large groups these percentages are so constant that they can be used for making firm calculations and can provide a basis for setting up enormous commercial enterprises. The vast organization of fire insurance and life insurance is an undoubted proof of this. But in the case of some types of economic misfortune, the routine operations of large commercial insurance companies are not a very suitable method for solving the problem of insurance. This applies to types of loss where the real value of the item insured is very variable; or where the loss may have been caused by the malice or negligence of the owner, which is hard to detect.
Insurance of this kind - which mainly relates to the insurance of cattle and the insurance of crops sown - requires constant and vigilant observation of the item insured. This can be undertaken at a low cost only where the insurance agency is situated in close proximity to the insured and where the insurance itself is based on comradely supervision. Indeed, a detailed examination of co-operative forms of insurance against cattle plague and damage from hail indicates that agricultural co-operative insurance has an advantage over commercial insurance by virtue of being a stable enterprise which incurs no losses. The reason for this is that it is based not on the principle of fixed premia versus fixed payments in the event of accidents, but is essentially based on the comradely apportionment of the victim's losses between all who participate in the insurance.
This last-mentioned fact gives us grounds for hoping that, in the course of time, the co-operative principle will replace the commercial principle in other branches of insurance as well. But for the moment, we can deal at length with only two kinds of co-operative insurance - relating to cattle and crops - which we shall now proceed to describe in greater detail.
Co-operative Insurance   189 THE INSURANCE OF CATTLE
One of the gravest disasters which can afflict a small peasant household is cattle plague among its horses or cows. Assuming an annual money turnover of 150-200 roubles, of which three-quarters is spent on the barest necessities of life, the expenditure of some 50 roubles in order to acquire a new animal is very large; and such a payment can very often spell economic ruin, particularly during the months when the harvest is still a long way off. A household which has lost a horse will very often be totally unable to afford a new one and will get into the distressing position of having no horse at all, from which it may be difficult to escape. One is bound to assume that any peasant householder who has lost his livestock and is having financial difficulty in replacing it would be thankful beyond words if offered the chance of paying for it by instalments, spread, let us say, over five or six years. The whole misfortune is that horses and cows are not sold in the market on the basis of payment by instalments; or if they are, the trader imposes an onerous rate of interest. But it would, however, be possible, to arrange matters between the peasant householders themselves, so as to ensure that money spent on the replacement of losses of cattle is repaid by instalments spread, not over two years, but over a period of twenty years. It is this possibility which is realized through the insurance of cattle.
It may confidently be said that a peasant household with one horse is certain during the course of twenty years to experience at least one case of unexpected cattle plague. The peasant householder who foresees this will insure his horse in just the same way as he insures his house and his shed; and he will make an annual payment of, let us say, 2 roubles. In the event of an occurrence of cattle plague, he will receive 40 roubles compensation from the insurance agency; and out of this sum he will be able to replace the animal which has been lost.
The only question that arises here is, in effect, whether the insurance of cattle can be organized on the same principles as the insurance of buildings against fire, and how this insurance ought to be undertaken. To answer this question we need carefully to examine the reasons for outbreaks of cattle plague, as well as their frequency in relation to the total numbers of livestock. In doing this we need, first of all, to distinguish as sharply as possible between two kinds of death rate, namely:
1. The ordinary death rate, caused by ageing, accidents, lightning, wild animals or various not very contagious diseases; and
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2. The death rate from epidemics, that is, deaths due to epidemic diseases (epidemic pneumonia, tuberculosis, malignant anthrax, and so forth).
More than three-quarters of the cases of cattle death here in Russia can be attributed to the ordinary death rate. Epidemic diseases become increasingly rare as cattle-rearing improves and as the country becomes more cultured. Therefore, the main task of this study is to examine the nature of this ordinary death rate.
Within any large herd - comprising, let us say, 200 head of cattle -between five and eight animals will die every year through chance, or as the result of ordinary causes of whatever kind. In large, well-run farms, this ordinary incidence of cattle death is always allowed for in advance, and a certain sum of money is set aside, in the farm's financial estimates, for the replacement of losses of cattle. It comprises a small percentage of the total value of the cattle (usually no more than 4 per cent) and is included in the expenditure on the maintenance of the cattle.
Let us now suppose that one such large herd is bought up by peasants and therefore passes into the possession of small-scale owners, each of whom owns one, two or at the most three cows. The incidence of ordinary cattle death remains as before; and it can be anticipated with equal certainty that five to eight head 9f cattle will be lost each year through the normal death rate. However, it is totally impossible to know in advance exactly which of the animals will fall victim to such accidents. Therefore, unlike a large-scale owner, the owner of, let us say, two cows, which originally belonged to this herd, cannot set aside a sum equal to 4 per cent of the value of the herd as a cover against cattle death since it is quite possible that over the course of many years he will not have a single case of cattle death, although the other owners will suffer losses of cows. Even if this owner is sufficiently far-sighted to set aside 4 per cent of the value every year in the hope of eventually saving enough to provide for future accidents, his good intentions will not always be realized. Thus, for example, if, in the ordinary course of events, one of his cows dies in the very first year, he will have to pay not 4 per cent of the value of his cattle, but 50 per cent, assuming he owns two cows. And if he has only one cow, he will have to pay 100 per cent.
Thus for a large farm forming part of a landed estate, the ordinary incidence of cattle plague is a normal economic phenomenon and is a minor item of annual expenditure alongside other expenditure on cattle-rearing. But we have already seen that for a peasant household, even assuming this same ordinary incidence of cattle
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death, the loss of an animal will be an appalling calamity.
It is obvious from this comparison that if any institution could be found which was prepared to collect from our peasant householders an annual sum equal to 4 per cent of the value of their cattle, then the money thus collected could easily cover these losses due to cattle death, just as it does in the case of large farms forming part of landed estates. And the peasants would, by making a comparatively small payment, rid themselves from the serious losses caused by cattle plague, thus preventing all kinds of unforeseen disturbances in the economic equilibrium.
The only prerequisite for success is that such insurance payments should extend to the greatest possible number of livestock. Indeed, if, for example, we take a number of neighbouring villages, we will see that in some villages the incidence of cattle death in the current year was higher than usual, while in other villages it was lower. In the following year the opposite may be true: in the former group of villages the incidence of cattle plague may be slight, while in the latter it may be greater than usual. But if the two groups are treated as a whole, their losses will be mutually offset and the overall incidence of cattle death will be more constant.
The study of the realities of everyday life confirms this conclusion: the larger the numbers of livestock insured, the more constant will be the incidence of cattle death from year to year. Thus in Belgium, for example, the incidence of cattle death in relation to the country's total livestock showed the following extremely stable picture during the most recent years for which we have information (Table 36).
Table 36   The incidence of cattle plague in Belgium
1st 2nd 3rd    4th     5th 6th 7th   
Incidence of cattle plague among: year year year   year   year year year   
Horses 3.7 3.6 3.7     3.7     3.5 3.7 3.6   
Cattle 4.3 4.2 4.4     4.2     4.2 4.3 4.3  
The figures are so constant that they can be used as a basis for the most definitive insurance calculations. Exactly the same principle of covering the largest possible numbers provides the basis for all calculations relating to fire insurance, as well as for all other insurance operations.
The situation is entirely different in the case of cattle death caused by epidemic diseases. These do not occur every year; however,
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