___________________________________________________ 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). 18.104.22.168 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. 22.214.171.124 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. 126.96.36.199 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.