Poland: Rural Co-operatives (1993)

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      This document has been made available in electronic
     format by the International Co-operative Alliance ICA    
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                         RURAL CO-OPERATIVES 
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Source : Tadeusz Kowalak : Co-operatives in Eastern & Central
Europe, Poland, Studies & Reports, Twenty-first in the series;
ICA, Geneva, 1993, 58pp., price 12CHF


Of Poland's 38 million inhabitants, about 46% live in rural
areas and 27% earn their living from work in agriculture. In
the period after the Second World War individual farmers never
owned less than 75% of the total arable land. This land was
owned by between 3.2 (1948) and 2.8 (1990) million private
farms, with an average size of about 5 hectares each. This was
the reason why, unlike other post-Communist countries, there
are many types of co-operatives operating in rural areas of
Poland. The great  majority of them were, and still are,
service-orientated rather than production-orientated. 


Peasant self-aid supply and marketing co-operatives 

With the official name of Communal Co-operatives of Peasant
Self-Aid, these were imposed by the Communist Party between
1945 and 1947 to take over the political control of
agricultural supply and marketing co-operatives and rural
consumer co-operatives.  The above two types of co-operatives
were merged to form an immense, monopolistic organization,
linking the private farms with the centrally-planned economy. 
Its main functions were: to supply private farms with
agricultural inputs; to market the agricultural products of
private farms; to process some agricultural products for
mainly local needs; to produce some consumer and production
goods; to supply the rural population with consumer
commodities and services, as well as productive services; to
run catering businesses.The Peasant Self-Aid supply and
marketing co-operatives created an important economic
infrastructure in rural areas, using for this purpose some of
the means accumulated in the process of their economic
activity.

They replaced the State in performing several social
functions. In 1988, 1,912 Peasant `Self-Aid' co-operatives had
a membership of over 3.5 million and employed 468 thousand
persons, of whom about 170 thousand were in retail trade and
catering, 68 thousand in the production of goods and services,
17 thousand in the purchasing of agricultural products and 64
thousand in administration.

To perform their economic functions they possessed 71,500
shops, 5,500 restaurants, cafes etc., 36,000 purchasing
facilities, 2,100 bakeries, 1,090 butchers' shops, 59 mineral
water factories, 226 animal fodder production plants, and
14,300 servicing facilities.

To perform their social functions they ran 340 sports grounds,
2,456 kindergartens, 4,300 rural clubs, and 1,400 libraries. 
Primary co-operatives enjoyed a monopolistic position in rural
retail trade, catering and services (the State secto~ of
economy was absent and the private sector covered not more
than 2% of the retail turnover). Peasant Self-Aid
co-operatives possessed the monopoly of purchasing the
majority of agricultural products from private farms. Their
share in the total purchase of agricultural products amounted
to 58%.

At the end of 1988, an average communal co-operative of
Peasant Self-Aid had 1,941 members, each of whom owned a one
thousand zloty co-operative share. Such a co-operative
employed 256 persons and normally covered the area of one
commune (in Poland at that time there were about 2,500
communes): it ran 39 shops; 22 facilities for the purchase of
agricultural products; eight service shops; three industrial
plants, mainly bakeries, slaughter houses and mineral water
production units; and three cultural units, be it peasants'
clubs, libraries, kindergartens or artistic ensembles.

With the introduction of economic reform in 1990 the position
of Peasant Self-Aid co-operatives started to diminish
dramatically.

As previously mentioned, there are no statistical data
available from any source, including the Main Statistical
Office, which would cover even the basic information about the
state of any co-operative branch as a whole. The data
presented below are based on a questionnaire sent in April
1992 by the Agricultural Trade Business Chamber of Peasant
Self-Aid Co-operatives (see 2.4) to over 1,600 primary
co-operatives, of which 370 answered.  

The analysis of data received indicates that, at the end of
1991, the average Peasant Self-Aid co-operative had 731
members, which equals 40% of the average membership in 1987
and 75.8% of that in 1990.  It employed 118 persons, in
comparison with 256 in 1987:  a decrease of 54%.  At the end
of 1991 an average co-operative ran 26 retail outlets, three
purchasing facilities, two processing plants, two catering
units and two servicing shops which, compared with 1987, means
a reduction of the number of retail outlets, industrial plants
and catering units by one third, of purchasing facilities by
87%, and of servicing shops by 75%.

The above statistical estimate hides a great diversity of
developments in individual primary co-operatives.  Of six
co-operatives in the branch which I visited at the end of May
1992 only one noted an increase in membership.  One of them
reduced its retail trade to virtually zero; others reported
this as their most profitable activity; all of them were
developing processing; all reduced both supply of agricultural
inputs and marketing of agricultural products to 10 - 20% of
their volume in 1987.  It may be stated with certainty that
the monopolistic position of these co-operatives within the
rural market belongs to the past.  They have to fight for
survival.  It is estimated that at the end of June 1992 about
2,000 Peasant Self-Aid primary co-operatives were in
operation, which exceeds the number existing in 1987.  The
main reason for this increase was the division of some
co-operatives which covered an area exceeding the territory of
one commune.

About 40 primary Peasant Self-Aid co-operatives have either
been liquidated or have entered the process of liquidation. 
Between two and three hundred co-operatives are facing
bankruptcy.  Their liquidation is imminent.

The comparison between the end of 1991 and the end of 1990
proves that the erosion of the economic and social position of
the co-operatives in question has not yet stopped. The
decrease in members during this one year period amounted to
24.2%, that of employees to 22%.

These conclusions can be justified if the basis of the above
analysis (370 co-operatives out of almost 2,000) is reliable
enough to suggest the possible situation of the whole branch.
It is probable that those co-operatives which answered the
questionnaire are in a better economic condition than those
which did not. If so, the general picture may be still worse.

The reasons for the above-described worsening of the economic
and social position of primary Peasant Self-Aid co-operatives
are: an economic crisis of catastrophic dimensions; the
increasing poverty of the population, especially that in rural
areas; lack of advisory services, as the higher-level
co-operative organizations are wound up; unexpected and
enormous increase in interest rates (in January 1990 44%
monthly); competition from private enterprises, which enjoy
privileged taxation; competition from imported Western
commodities, especially foodstuffs; closing of Eastern markets
resulting from the changes within the former Soviet Union and
in the resultant new countries; and co-operative management
bodies' lack of knowledge about rules governing the free
market economy.  The above also apply to other co-operative
branches.


Dairy co-operatives

In 1988 there were 383 dairy co-operatives with 1.2 million
members and 113 thousand employees.  At 9.8 thousand milk
assembly points, over 95% of all milk produced in Poland for
market purposes by private, State and co-operative farms was
purchased.  It was then processed by 712 dairies to produce
homogenized milk, cream, cheese, yoghurt, casein, powdered
milk etc.  Dairy co-operatives supply the retail trade with
their products, run a few retail shops of their own and
deliver dairy products to recognized foreign trading companies
for export.

Beside economic functions, dairy co-operatives have played an
important role in improving the quality of cattle and of milk
by providing producers with consultation services, carrying
out research and organizing training courses and exhibitions. 
Such socio-educational activities have been subject to severe
limitation in the last two years as a result of cost reduction
methods.

It is estimated that the numbers of co-operatives, and
co-operative members, as well as the economic and technical
infrastructure of dairy co-operatives, have not changed very
much over the period in question.  This is due to the fact
that the division of big dairy co-operatives into several
smaller ones does not seem to have good prospects because this
would entail sizeable new investments which would be difficult
to finance and which do not usually promise economic success.

Generally speaking, from 1990 on, new investments in existing
co-operatives have been postponed, with the exception of a few
dairy co-operatives which set up joint ventures with foreign
capital.  Those dairy co-operatives which took investment
credits in the 1980s, and did not manage to carry out the
investments planned, got into serious financial difficulties. 
Because of the dramatic reduction in demand for dairy products
on the home market (amounting to 50%), and the high interest
rates which they had to meet, they could not pay adequate
prices to their members.  This resulted in vigourous and
widespread protests by farmers.  The nomination of the
Plenipotentiary of the Minister of Agriculture for Dairy
Co-operatives was one of the results of these protests.  His
task was to elaborate a policy which would save dairy
co-operatives from bankruptcy and the Government from the
social and political troubles which would be unavoidable in
case of further reduction in demand for milk.

The financial situation of the vast majority of dairy
co-operatives is estimated to be bad or very bad.  They have,
however, maintained their monopoly regarding the purchase of
milk produced by individual farms.  

The main problems facing dairy co-operatives are the scarcity
of credit, the decrease in milk production, the shrinking of
the home market for milk products and the tough competition
from Western milk products, which are of better quality and
greater diversity.  The latter are also much more attractive,
because of the quality of packaging.


Horticultural and apicultural co-operatives

There were 140 horticultural and apicultural co-operatives in
1988.  They affiliated 372,600 individual owners of farms
producing fruit, vegetables and honey.  Some State and
co-operative farms were members of these co-operatives, too. 
Their main function is to market fruit, vegetables and honey
produced by their members, and to supply member farms with
inputs and special services.  They also render consulting
services, and organize training courses for members and
employees, as well as exhibitions.

In 1988, horticultural co-operatives employed 55,500 persons,
and owned and ran 6,500 shops, over 1,100 fruit and vegetable
collection points and 210 processing plants.  They made a
significant contribution to the improvement of the quality of
fruit, vegetables and honey produced by member farms.  They
had a very strong position on the home market (about 50% of
the total turnover) and their specialized foreign trade
enterprise had a virtual monopoly of the export of fruit,
vegetables and honey.

Unlike the multipurpose co-operatives of Peasant Self-Aid,
horticultural co-operatives did not establish a national
organisation to take over the advisory and other functions
from the Central Union which, like all other national
co-operative unions, went into liquidation by order of the Law
of 20th January, 1990.  There is, therefore, no global
statistical information about their situation in 1992. 

My talks with the managers of a few co-operatives of the type
discussed indicate, however, that their economic situation has
become critical.  In some cases, where new processing
facilities started before 1990 have not been completed,
co-operatives, if not already declared bankrupt, are on the
verge of bankruptcy.  Between half and two thirds of their
shops have been closed and partly taken over by private
shopkeepers.  Retail turnover has shrunk to about 33% of its
1989 level.  ]embership has also decreased, not as critically,
however, as in the case of the Peasant Self-Aid co-operatives.

The main reasons for this decline are: lack of advisory services,
high interest rates, reduction of demand by the home market,
lack of market opportunities abroad and rather a low level of
processing technology.


Agricultural production co-operatives

This kind of co-operative organization was not known in Poland
until 1949, when they began to be imposed on farmers by the
Communist Party and the State authorities.  The idea of
socialization of private agriculture through agricultural
production co-operatives (APCs) collapsed in 1956. 
Nevertheless, in 1988 there were 2,089 APCs with over 190,000
members, who belonged to over 155,000 families.  They
cultivated 3.6% of the country's arable land.

In 1990 there was a decrease in land cultivated by APCs to
about 662,000 hectares, i.e. to 3.52% of arable land.  The
number of employees dropped to 155,500, the number of members
to 146,000.

Just over half of these co-operatives act only in the sphere
of agricultural production.  Most of the land they cultivate
was assigned to them by the State; about 90% of members were
formerly agricultural workers with no land of their own.  A
negligible part of the land is legally the property of
co-operative members who were, in the past, compelled to give
it up for co-operative use.  The remaining APCs are
specialized co-operatives which started to operate in 1975. 
They affiliate individual farmers, who remain private owners
of their land and cultivate it individually, only producing a
minority of products collectively.  Since the liberalization
of legal regulations in the mid-1970s, several economic
activities, not necessarily connected with agriculture, have
been performed by both types of APC.  This made it possible to
use most of the work time which could not otherwise be
utilized for productive purposes, thus improving the
co-operatives" profitability.

In the period between the end of 1989 and the end of 1991
about 200 APCs went into liquidation.  At the end of June,
1992 165 co-operatives lost their credit rating.  So far,
however, this seems to be connected less with the poor
economic viability of this type of co-operative (which is
suggested by some agricultural economists) than with the
critical situation of Polish agriculture as such.

Increasing levels of collaboration between co-operative
members and management, with the aim of sustaining their
co-operatives, was noted.  The main reason seems to be the
fear of losing jobs in case of liquidation. In spite of some
pessimism among APC leadership (40% of existing APCs declared
their economic situation as bad, and 30% think that bankruptcy
is imminent) it seems that agricultural production
co-operatives will not disappear from Polish agriculture in
the foreseeable future.


Agricultural circles' co-operatives

The concept of Agricultural Circles' co-operatives derived
from the idea of finding another way to "socialize"
agriculture.  The first step in this direction was the use of
collectively-owned agricultural machinery to perform the most
arduous tasks connected with land cultivation.  This started
with the introduction of agricultural machine stations, owned
by agricultural circles (a traditional social organization of
farmers living in one village) and financed from a special
Agricultural Development Fund introduced in 1959.

The main task of these co-operatives during the 1970s was to
take over cultivation of the land turned over to the State by
elderly farmers, who could no longer cultivate their farms, in
exchange for a State pension.

In 1988 there were 1,908 co-operatives of this type, employing
158,000 persons.  Their membership, mainly agricultural
circles,amounted to 30,757.  The co-operatives  rendered
services such as ploughing, transportation, construction of
buildings and the repair of agricultural and horticultural
machinery to individual farms.  They had 4,360 mechanization
plants, 621 repair shops and plants producing building
materials, some 1,570 workshops and 350 agricultural farms.

The agricultural circles' co-operatives have proved to be the
least stable branch of the co-operative movement.  Between
1989 and 1992 about 400 of them entered into liquidation.  In
1990 they cultivated about 54,000 hectares of arable land 
which, in comparison with 273,000 hectares in 1980, means a
decrease of more than 80%.  Mechanization services rendered to
individual farms diminished by about 50%, mainly because of
the abolition of State subsidies.  Employment dropped from
about 220,000 in 1980 to about 100,000 in 1991.  According to
research carried out in April 1992, based on a questionnaire
sent to these co-operatives, 55% of them consider their
situation as critical and 40% anticipate imminent liquidation. 
As agricultural circles' co-operatives are co-operatives of
corporate bodies, there is a trend to divide the agricultural
machinery which they own and to transfer it to individual
agricultural circles: the members of the co-operative.  Some
cases of illegal distribution of this machinery among farmers
were noted.

It seems likely that this kind of co-operative will gradually
disappear, its functions being taken over by the agricultural
circles themselves, by private enterprise and by simple forms
of co-operation.