Main Characteristics

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     This document has been made available in electronic 
    format by the International Co-operative Alliance ICA 
    -----------------------------------------------------
                         November 1995

                    ICA Studies and Reports
           Co-operatives in Eastern & Central Europe

                           Bulgaria
               by Professor Dinonysos Mavrogiannis


1    Main Characteristics

Throughout the 18th and 19th centuries pre-co-operative groups
and associations were the vehicle of economic and social
action in all the Balkan countries. The producers'
associations of Bulgaria and Romania, the self-governed
municipalities of Greece and the collective agricultural units
of the patriarchal family of Slavs of the South, provided the
social, economic and administrative framework for the
emergence and functioning of pre-co-operative organisations.
Their activities covered not only the primary sector of the
economy such as agriculture, fishing and cattle breeding but
also the more advanced enterprises of maritime trade, and
trade in cloth and cotton yarn exported to markets in Central
Europe and Russia.

The poor and landless of the Balkans made use of group action
to protect themselves against the adverse conditions they
experienced under the Ottoman empire, and to improve their
economic circumstances, thus preparing the path for political
independence.

Groups formed for the collective ownership and cultivation of
land, for cattle-breeding, fishing, shared ownership of
shipping and participatory forms of work, and itinerant teams
of qualified weavers, masons and craftsmen, were some
associative forms witnessed in the region's pre-capitalist
economy. Their activity was facilitated by the mobility of the
population within the Balkan countries and the raw materials
produced, manufactured and sold within the region and in the
neighbouring markets through the gates of Vienna, Budapest,
Leipzig, Odessa, Trieste, Marseilles and Alexandria.

However, modern co-operative development in Bulgaria, and in
neighbouring countries, did not evolve from these forms of
action. This was mainly due to political, cultural and
economic factors common to all Balkan countries during and
immediately after the disintegration of the Ottoman and the
Austro-Hungarian empires. The Balkan countries were slowly but
deeply penetrated by the cultural models and values of Western
Europe. Domestic economic and social groups and associations
were considered retro-active and, as such, they were
neglected, and progressively abandoned.

Co-operative models, therefore, were introduced from various
countries, mostly the Raiffeisen credit system, the French
workers' production co-operatives and the English consumer
societies. 

Enlightened individuals, political leaders and social
activists facilitated such a pro-cess during the 19th and
early 20th centuries.


1.1  Brief history (1890-1944)

Until 1944, co-operative societies were created voluntarily
and functioned as independent organisations in most sectors of
the economy: agriculture, credit, trade, industry, forestry,
fishing and the service sector.


1.1.1       Rural credit co-operatives

The first rural credit co-operative was established in the
village of Mirkovo in Sofia, as early as 1890, under the name
of Oralo (Plough). This co-operative was organised according
to the model of the Raiffeisen credit system. It provided
saving and credit services for individual farmers. The need
for such co-operative action was dictated by the bad
conditions prevailing in the agricultural sector: difficult
financial conditions, problems in capital formation,
exorbitant interest rates for loans obtained from
money-lenders, and scattered patterns of land ownership.

The Mirkovo co-operative was founded by 103 members with an
initial capital of 218 levas. Following this, the development
of rural credit co-operatives was rapid and impressive:

Table 1:      Growth of rural credit co-ops
 
Year                   Primary co-ops             Membership
 
1890                         1                        103
1900                         3                        163
1910                       576                     39,561
1924                     1,024                    103,813
1946                     2,455                    480,209

Source:  Central Co-operative Union

Regional unions also started functioning in 1907 (in the city
of Thirpan). By 1920 their number had increased to eleven, and
by 1946 there were 53, with 2,455 member societies of 527
million levas as share capital.


1.1.2       Urban credit co-operatives (popular banks)

The first popular bank was created in Sofia in 1903 with 33
members. There were seventeen by 1910, and 156 by 1925. In
1946, 243 popular banks had 351,041 members and 2,333 billion
levas as share capital. They established their first Union in
1915, in Sofia. In 1942, the Unions created the General Union
of Popular Banks.

In the field of saving, credit and banking activities other
types of co-operatives and associations were functioning in
parallel, mostly in the form of Mutual Aid Funds and
organisations involved in the construction and development of
independent professions and trade.


1.1.3        Consumer co-operatives

These were introduced from Western Europe at the end of the
nineteenth century. Their activity was concentrated in the
urban centres because the rural areas were served by shops and
services organised and managed by rural credit co-operatives.
Later on, consumer co-operatives were also established in the
rural sector. The first eight pioneer consumer co-operatives
to make an impact on the social history of Bulgaria were:

- the "Bread" consumer co-operative, Barna, 1898;
- the "Worker" consumer co-operative, Yambol, 1899;
- the "Worker" workers' consumer co-operative, Plovdiv, 1899;
- the consumer co-operative of Samokov, 1900;
- the "Fraternal Labour" consumer co-operative, Sofia, 1902;
- the "Solidarity" students' consumer co-operative, Trade
College
of Svishtov, 1902;
- the "Brotherhood" consumer co-operative, Yambol, 1903; and
- the "Forward" consumer co-operative, Sofia, 1903.

The development of consumer co-operatives increased
considerably over the decades:


Year         Number of societies

1910                   12
1920                   70
1934                  134
1936                  192
1946                  180

By 1946, consumer co-operatives had 152,000 members and one
fifth of the societies operated in rural areas.

Between 1919 and 1946, the "Forward" and "Fraternal labour"
primary consumer societies of Sofia became the apex
organisations, to which two-thirds of the existing
organisations were affiliated. In 1945, they merged to form
one union, under which were organised 908 shops with 112
million levas of share capital and an annual turnover of seven
billion.

The Bulgarian consumer societies joined the ICA in 1903.


1.1.4       Producers' and workers' co-operatives

Various forms of production workers' associations were
developed throughout Bulgaria from 1895 onwards. The earliest
were the handicraft and workers' co-operatives. In 1918 there
were 41 such small societies with 264 members, in 1930 the
number of societies had increased to 754, and in 1946 there
were 625 with 18,292 workers carrying out tailoring,
carpentry, shoemaking, metalwork and other similar activities.


1.1.5       Forestry co-operatives

Two types of forestry co-operatives were developed. The first,
started in 1915, were workers' forestry co-operatives. In
1946, 280 such co-operatives were functioning in State
forests, employing some 44,038 worker-members. The second,
started in 1932, were co-operatives of forest owners. In 1946
there were 24 of these co-operatives, with 4,960 members.

Primary forestry co-operatives were organised in regional
unions from 1921 onwards. In 1922 the National Forestry
Co-operative Union was created, and 14 regional unions were
affiliated to it by 1945.


1.1.6        Agricultural production co-operatives

Between 1930 and 1945, a new form of agricultural co-operative
was established: the production co-operative. Some of these
were new independent co-operatives (46 in 1946), but most of
them functioned as specialised sections of the existing rural
credit co-operatives (462 in 1946). Together both types of
production co-operatives were involved in the cultivation of
4% of the country's farming land (some 180,000 hectares). All
types of agricultural co-operatives are included in the
category of rural credit co-operatives listed in Tables 2 and
3.

Wine growers created their first co-operative in Pomorie in
1898. In 1929, there were 34 wine co-operatives with 3,529
members and ten million levas of share capital. In 1933, the
Head Office of Wine Co-operatives was created, to which were
affiliated the primary societies (44 in 1946 with 16,792
members and 42,476 million levas of share capital).

Tobacco co-operatives started in 1915. They were involved in
the production and selling of a significant part of the
national production. In 1923, there were 34 tobacco
co-operatives. In 1924, the first Regional Union of Tobacco
Co-operatives was established, and in the following year a
second regional union was created. In 1939, these merged to
form the Union of Tobacco Co-operatives of Bulgaria. In 1946,
23 primary co-operatives, with 64,487 members, were in
operation.

Dairy co-operatives started in 1903. In 1946, 44 such dairies
and cattle-breeding co-operatives with 4,726 members were
processing 80% of the milk produced in the country.

Sericultural co-operatives appeared as early as 1899. In 1946,
there were eleven large primary co-operatives, plus 174
sericultural and silk-worm breeding sections within rural
credit co-operatives.

Fish merchandising co-operatives were involved in the sale of
fresh fish from the Black Sea. In 1935, a Head Office was
created for these co-operatives. In 1946, there were 31 such
societies, with 2,492 members. 

Other co-operatives were involved in various economic and
social activities such as poultry-breeding, housing, health,
insurance, water supply, and electrical services.

Tables 2 and 3 summarise the data concerning this period. In
1918, there were 994 co-operatives, while in 1946,  4,603
societies, with 1,430,000 members and 4,906 billion levas of
share capital, operated throughout the country.

Table 2:  Types and number of co-operatives (1918)

Type                          Number                  %

Credit                         790                  79.5
  of which: rural credit       738                  74.3
            popular banks       43                   4.3
            other                9                   0.9
Consumer                        79                   8.0
Production                      41                   4.1
Insurance                       28                   2.8
Supply, trade & manufacturing   39                   3.9
Miscellaneous                   11                   1.1
National and regional unions 
  and head offices               6                   0.6
                                       
  TOTAL                        994                 100.0
  of which:        urban       181                  18.2
                   rural       813                  81.8

Source : central co-operative union


Table 3:   Types and number of co-operatives (1946)

Type                        Number                      %
     
Credit                       2,775                    60.27
  of which:rural credit      2,455                    53.33
           popular banks       243                     5.27
           other                77                     1.67
Consumer                       180                     3.91
Production                     625                    13.57
Forestry co-ops                304                     6.60
Supply, trade, processing 
and fish                       391                     8.49
Miscellaneous                  245                     5.40
National and regional unions
and head offices                83                     1.80

TOTAL:                       4,603                   100.04

Source: Central Co-operative Union

In conclusion, the following should be emphasised:
-      Co-operative development started as a bottom-up
movement according to the needs felt by the primary societies.
Head Offices, Regional Unions (secondary organisations) and
National Unions (tertiary organisations) were created
progressively by the local co-operatives and then by the
unions.
-       Membership, administration and management of all
co-operative societies were based on the international
democratic values, principles and practices of the Western
Europe co-operative movements.
-       Some of the rural credit co-operatives progressively
diversified and increased their activities to such an extent
that they effectively became multi-purpose societies.

The legal framework established by constitutional provisions,
laws and decrees adopted and applied throughout this period,
created favourable conditions for the progress of the
co-operative movement. (Annex 2 gives a list of the main
constitutional and legal texts concerning co-operatives from
1879 onwards.) Although there are no data available to
quantify the effects and economic results of the co-operative
action for the whole period under consideration, it can,
however, be suggested that the Bulgarian co-operative movement
contributed to the smooth and ongoing development of the
agricultural sector and had a direct and positive impact on
the life and working conditions of farmers, workers, producers
and consumers.


1.2    Co-operatives in the centrally-planned economy
            (1946-1989)

During the first five years of the country's Socialist regime
(1944-1948) nationalisation of the industrial sector and
banking activities took place. Land collectivisation followed,
first on a voluntary basis and then as an obligatory movement.
In this new context, the role of co-operatives was
considerably strengthened. The number of co-operatives
increased by 50% in comparison with the past years. One
particular phenomenon of the new situation was the development
of the so-called agricultural production "co-operatives"
(collective farms) based on pooled land of their members.
Political leaders such as Georgy Dimitrov had for years urged
the low income population (small farmers and landless workers)
to embrace Socialist co-operatives alongside with Lenin's
principles and proposals, according to which co-operatives
were seen as a means of accelerating the transition from
capitalist economy to Communist society. Poverty and the
miserable living conditions of small farmers and farm
labourers contributed to the success of collective forms of
agriculture.


1.2.1   Co-operative development

As from 1951, all types of co-operative organisations were
integrated and consolidated in three main branches: consumer
societies, handicraft and workers' co-operatives and
agricultural production co-operatives (collective farms).


1.2.1.1      Consumer co-operatives 

Consumer co-operatives were strengthened in terms of members.
They diversified their activities, embracing almost all
activities involving the production and sale of goods and
services to the population. In 1958, there were 1,770 large
primary societies with activities throughout the rural areas
of the country;  53 other societies were very active in the
urban sector. Additionally, there were 93 Unions at the
regional level, and the Central Co-operative Union (CCU) acted
at the national level from 1947 onwards. 

During that period, 20% of the total population of Bulgaria
(1.6 million out of 7.6 million) belonged to the consumer
societies. The structure of the CCU as well as the number of
the primary and secondary organisations, changed many times,
becoming stronger and ensuring more and better services. In
this respect, the CCU incorporated the Central Union of
Producers' and Workers' Co-operatives between 1971 and 1988
and mergers resulted in the reduction of the number of
regional unions. Some of the State trade activities lost
ground to consumer societies and the evolution of the consumer
co-operative system is significant in this matter. Its
turnover was only 10% of the national trade turnover in 1939.
By 1947 the percentage reached 33.5% and in 1957 it was almost
half of the national turnover. 

Table 4 shows the evolution of the main activities of consumer
societies between 1955 and 1985. With the exception of
distilleries, all the trade networks, shops, restaurants and
bakeries doubled in number during this period. Confectionery
workshops increased by 50%. Consumer societies also made
appropriate agreements with collective farms for the purchase
and sale of fresh and processed agricultural products. Thus
the consumer societies played a wide and vitally important
role in the production and distribution of food, soft drinks
and other basic necessities to the people.


Table 4:   Economic activities of consumer co-operatives

Activities                         Numbers

                        1955      1965      1975       1985

Trade network, shops   10,842    13,914    18,099     19,988
Restaurants and         5,568     7,828     9,657     12,315
other places
Bakeries                  991     2,055     1,913      1,694
Distilleries of alcohol 2,500     2,570     3,502      1,624
Confectionery workshops   *         242       169        341


Source :  Central Co-operative Union
* No data available

Autonomy and democratic management within consumer societies
suffered heavily during the years of the centrally-planned
economy. In fact, the planning of their activities and pricing
system were managed as part of the Socialist system. The
organisations' structure, with large primary societies, weak
unions and an oversized and monopolistic national union,
militated against democracy and control by the members. State
interference and the Party's direct involvement in the
day-to-day administration and management completely distorted
the functioning of the consumer co-operative system.


1.2.1.2     Agricultural production co-operatives (collective 
            farms)
The spontaneous popular movement in favour of such types of
co-operative action was inspired by the Soviet model of
collective farming. During the first years of the Socialist
regime private land ownership was maintained despite
collective cultivation. However, under State pressure, and
with the Party's support, collectivisation progressively
increased until it became the exclusive form of farming.

Certainly, collective farms had various advantages in the
beginning: better cultivation of land, better exploitation of
equipment and processing activities. Economic and social
benefits for the member-workers were increased, too. They were
able to benefit from more inputs, extension services and
applied agronomic sciences. Whereas in 1944, there were only
28 collective farms with 1,677 members and 4,032 hectares of
cultivated land, by 1947 their number had increased to 543,
with 48,827 members and 183,740 hectares. By the end of the
1950s, 3,290 collective farms were cultivating a total of
3,793 million hectares of land. For the purposes of
rationalisation, this farming system was re-organised and
centralised in 1960. The existing collective farms were
reduced to 932 by means of mergers to form units approximately
three times the size of the old co-operatives (4,266 hectares
each). In 1970, their number was further reduced to 744, with
an average size of 4,395 hectares.

In parallel, from 1955 State farming was organised on a
limited basis. In 1957 there were 49 State farms, cultivating
only 4.8% of the arable land. In 1970 this increased to 156
farms, responsible for 16.3% of the cultivated land.

The ultimate form of collective farming experienced in
Bulgaria came with the formation of the agro-industrial
complexes from 1970 onwards. This organisational structure,
imposed from above by the State and the Party, forced the
State and collective farms to pool together their land and
means of production and form a new farming system , the
agro-industrial complexes. The average amount of land
cultivated by each complex was 27,000 hectares (4,330 million
hectares in total). Some of these were enormous production and
socio-economic networks and settlements, such as that in the
region of Plovdiv, where some 80,000 persons were involved in
the cultivation of 50,000 hectares and the running of
important industrial processing factories. Almost 95% of the
cultivated land was in the hands of the agro-industrial
complexes pooling horizontally and vertically in two groups,
State and collective farms, all the agricultural activity and
social life of rural areas.

The objective of this was to bring the industrial and
agricultural sectors closer together, with a view to
abolishing the traditional inferiority of the rural workers
and of rural society as a whole, compared with the industrial
sector and urban living conditions. According to the political
thinking of the leaders of that period, the co-operative form
of action and the role of trade unions could, and should, join
forces to ensure the success of Socialism.


1.2.1.3    Handicraft and workers' co-operatives

These lost their importance and social function in the context
of the new system which, where co-operative action was
concerned, favoured collective farms and consumer co-operative
societies. Their area of operation was directed towards
handicraft production and repairs.

In 1951 the National Union of Craftsmen and Producers'
Co-operatives was established. In 1953 the reference to crafts
was deleted and this apex organisation became the Central
Union of Workers' and Producers' co-operatives. In 1971 it
merged with the Central Co-operative Union of Consumer
Societies. In 1988, however, the two Unions separated again,
and each organised its own programme of activities. The
situation of workers' and producers' co-operatives was shaped
by the State, which reduced their number and decreased the
scale of their activities. They played a complementary
economic role, securing their survival by virtue of their
social function in providing day-to-day ser-vices to the
population. The State did not favour their development, and
even opposed any promotion of their role within the Socialist
economy. The growth of the State enterprises and the extension
of the collective farms absorbed part of their activities. At
the end of the period under consideration only 110 primary
co-operatives and 40 co-operatives of handicapped workers,
with a membership of 63,000 were in operation. Their annual
turnover amounted to 639 million levas. The Socialist taxation
system resulted in 67% of the workers' and producers'
co-operatives' net income being taken away in the form of
taxes and other contributions:  50% to the State budget, 10%
to the local councils, 5% to the Labour Insurance Fund and 2%
to the Amelioration Fund. The remaining 37% was distributed as
follows:

- wages for member-workers, plus occasional bonuses;
- dividends distributed to members according to their
  shareholding and productivity;
- interest paid on loans and working capital;
- insurance premiums for co-operative property;
- the development fund (1 to 2% of net income);
- funding for social and cultural activities.

Table 5 indicates production, productivity, expenses and taxes
and other related figures for 1989.

Table 5 : Main indices of workers' and producers'
          co-operatives for 1989 

Description                                  Amount 
                                      (thousands of levas)


Output                                       639,032
Industrial commodities                       626,388
Total industrial production                  644,558
Home market commodities                      292,002
Public services and utilities                 77,981
Commercial cost                              515,887
Commercial cost per 100,000 levas                 80.73
Material expenses                             34,022
Material and other expenses per 100,000 levas     53.52
Depreciation                                  17,220
Net production                               331,911
Total income                                 159,998
Tax on turnover                               38,237
General labour productivity                    5,271
Productivity per capita 
(based on output figure above)                10,148
Number of member workers and employees        62,966
Average salary per member                      2,460


1.2.2       Assessment of the situation

Even those co-operatives, old and new, which managed to
survive during the Socialist regime, have experienced
considerable losses. At the end of the period under
consideration, agricultural production "co-operatives" and
their complexes proved to have been a disaster. This was not
only disastrous for agricultural production:  rural society
based on the village structure and the self-governed municipal
system, were destroyed. The tradition of solidarity and
spontaneous mutual aid also disappeared. Former private
farmers, workers and technicians worked hard to boost
production, which the State had transferred from the rural
sector into the urban one. In Bulgaria, more than in any other
Socialist country within Europe, agricultural revenue from the
rural sector was utilised to support the State budget by
reducing direct taxation and bringing foreign currency into
the country through the export of processed agricultural
products (tobacco, wine etc).

Evidence of the negative impact of collective farming is seen
in the distribution of agricultural income to member-workers.
According to the legislation of 1945, 60% of the collective
farms' profits were to be distributed to members as wages and
40% as dividends on their pooled land. In 1950, the percentage
of wages increased to 70% and that of dividends was reduced to
30%. In 1953, the respective percentages became 75% and 25%.
And in 1958, immediately prior to generalised land
collectivisation, more than one third of the collective farms
decided to cease the distribution of dividends. Thus,
progressive collectivisation and integration of collective
farms into the centrally-planned economy resulted in less
revenue for the member-workers.

The workers' and producers' co-operatives were suspect in the
eyes of the regime, and therefore allowed to suffer as a
result of the strong State enterprises, the omnipotent
collective farms and the appetite of the consumer co-operative
system. Workers' co-operatives became, in effect, units of
labour working according to regulations imposed from outside
and above them, continuously watched by the Party by means of
a dense and opaque administrative machinery funded by the
co-operatives themselves. Their only worth was that they
allowed some twelve thousand artisans and skilled workers to
work and fight for survival without being completely under the
domination of the authoritarian economic system and its sphere
of influence.


Consumer societies, although small in number at the beginning
of the Socialist regime, managed to spread throughout the
whole country and to become indispensable from an economic and
social point of view by taking advantage of the shortage of
consumer goods and the weakness of the State trade system.
They absorbed some 15 national unions of various types of
co-operatives, most of which were integrated, at the local
level, with State enterprise, collective farms and consumer
societies. In practical terms, the Central Co-operative Union
became a unique monolithic apex organisation with the capacity
to plan and act from the top downwards. In place of activities
taken away from it by the State, new areas came under the
control of the consumer societies, which employed more than
60,000 people.

However, a series of advantages have to be recognised in the
Bulgarian consumer co-operative system. First, they defended
their system and role much better than consumer co-operatives
in some other Socialist countries of Europe (e.g. in the USSR,
where consumer co-operatives were limited to the rural areas
from 1930 onwards). Secondly, they produced part of the goods
sold in their shops, thus avoiding dependence on State
enterprises. And thirdly, they used their profits to finance
an independent educational system which supplied them with the
managers and professional staff they needed. Fourthly, they
avoided total extinction and managed to save part of their
traditional co-operative spirit by making use of their
international collaboration and membership of the
International Co-operative Alliance.