b
HUMBOLDT UNIVERSITY OF BERLIN
Chair of Resource Economics of the Institute
of Agricultural Economics and Social Sciences
EU PROJECT: INTEGRATED DEVELOPMENT OF AGRUCULTURAL AND
RURAL INSTITUTIONS IN CEEC - (IDARI)
THE ROLE OF SOCIAL CAPITAL IN
SUSTAINABLE USE OF FRAGMENTED
AGRICULTURAL LAND IN BULGARIA
Aleksi Aleksiev and Ivan Penov
Agricultural University of Plovdiv - Bulgaria
Plovdiv
January, 2006
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THE ROLE OF SOCIAL CAPITAL FOR SUSTAINABLE USE OF THE
FRAGMENTED LAND IN BULGARIA
1.
INTRODUCTION
1.1. Problem statement
The agrarian reform and restitution process in Bulgarian agriculture have led to severe
fragmentation of the land ownership, which considerably restricted the possibilities for
sustainable development of the farming systems. The agricultural land fragmentation is a
phenomenon of manifold aspects. Fragmentation of legal ownership refers to the number of
holders of a single title, sharing equal real rights (multiplicity of undivided shares). This type
fragmentation hampers the efficient and flexible property management because of the
frequent complications with decision-making and where actions requiring consensus of all
owners should be taken. Landowners presently deal with it either by subdivision, or by
making informal intra-family tenancy arrangements. Fragmentation within farming units is
the multiplicity of non-contiguous plots (regardless of whether owned or leased) within a
single farm enterprise. The two fragmentation types most directly affect the farm efficiency
and are rather common in Bulgarian agriculture.
The need of land consolidation arises from the small size and great number of parcels that
a farm usually runs. This makes the land cultivation difficult, increases the production costs
and restrains the possibilities for successful farm management. The farmland consolidation is
a main factor for sustainable development of the farming systems and an aim of most of the
medium sized farms in the country. The consolidation is expected to provide conditions for
more efficient land use and to help increasing the farm incomes. The question of whether to
use the land and organize production on individual or collective basis continues to be a point
of discussions.
2. OBJECTIVES AND CASE STUDY HYPOTHESES
In short run, fragmentation in land ownership, (especially in combination with an
underdeveloped land market) increases the cost for the land users to optimize the size of area
they cultivate. In long run, it lowers the incentives for preserving the land qualities by the land
users. In short and long run, fragmentation in land use may lower the efficiency of
agricultural production.
There are several approaches to solve the fragmentation problem. Fragmentation in land
ownership may be overcome by implementing policies such as land consolidation, support of
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land market, etc. Fragmentation in land use can be overcome by improvement of the land
leasehold market or cooperation in land cultivation. Cooperation however, can be achieved
only if the social capital in the rural area is well developed.
The social capital is a concept related to the actors' willingness to cooperate (or to work
together). The current state of social capital is a result of the socio-economic processes that
have been going in the past. This implies that if the people have cooperated in the past it
would be reasonably to expect that they would cooperate in the future.
Main hypotheses: The level of the existing social capital in the rural areas during the
transition period supports the cooperation for sustainable use of the fragmented agricultural
land in Bulgaria
Working hypotheses:
1. The social capital development prior to the World War II has been following the
similar path as in the rest of the European countries.
2. During the socialists period the state led an active policy for converting
cooperatives into state enterprises. As a result, the social capital in the rural areas
has gradually deteriorated.
3. Notwithstanding the low social capital level at the beginning of transition, the
processes of its improvement have already started.
In order to investigate the above hypotheses it is necessary to look at the main factors
generating the social capital. The case study is concentrated on the following factors:
•
Role of the trust / mistrust and opportunism (social and institutional)
•
Role of communication and learning
•
Role of transaction costs and governance structure of cooperation
•
Role of the State – national, regional, EU laws and the formal institutional
environment on cooperation
•
Role of the communities, social networks and informal institutions on
cooperation
•
Role of the market and competition in fostering / hindering cooperation
The arguments are presented in the following order. First, we look at the development of
cooperation in Bulgaria prior to the Second World War. Second, we examine the development
and the role of cooperatives during the socialism. Third, we analyze the factors that bring into
existence and failure of the cooperatives during the initial stages of transition. Then, we
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investigate the process of cooperation on micro level in one village located in the Plovdiv
agricultural region. Finally, we evaluate the role of the above listed factors on cooperation.
3. UNIT OF ANALYSIS
The unit of analysis is the willingness of Bulgarian farmers to cooperate. To investigate
the issue in this section we first, review the history of cooperation in Bulgaria and then we
justify the choice of region and case for in depth investigation.
3.1. Agricultural cooperative in Bulgaria – a historical review
Although the first Cooperative Law has been enforced in 1907, the cooperative movement
did not play an important role in the rural areas of Bulgaria until 1919 when the Agricultural
Party of Aleksander Stamboliiski won the elections. This government provided the legal
framework necessary for development of cooperation in different areas. The Agricultural
Party considered the universal cooperatives as a core stone of its economic policy in the rural
areas. Most of these cooperatives initially started as credit cooperatives as a response the
money-lenders. Over the time, they expanded their activities to the input markets (jointly
purchasing machinery, fertilizers, chemicals, forage and animals) and as a response to the
disadvantageous position of the small farmers toward the food traders, they also started
organizing processing and marketing activities. Some cooperatives also provided land
cultivation services with tractors, seeding machines etc. It is important to note that all
cooperatives in Bulgaria during that time supported the development of family farms. Until
1944 there has been a great variety of cooperative structures, but the credit and consumer
cooperatives were the dominant forms. There were more that 4000 cooperatives of about forty
different types uniting more then 1,5 million of people. Most of them were set up in rural
areas or were connected with agriculture.
Credit and insurance cooperatives. There were two types of credit institutions: credit
cooperatives mainly working in the rural areas and popular banks working in the cities. Both
institutions provided accessible source of capital for the middle and small farmers. The first
credit cooperative in Bulgaria was established in 1890 in village of Mirkovo ( Draganov
1980). In the beginning of twentieth century their number increased and in 1910 almost each
city and large village had a credit cooperative. The Union of popular banks included 212
banks, and the Union of the credit cooperative - 75. In 1942 both unions merged in the
Universal Union of Popular Banks, which included more than 300 banks. The popular banks
were limited liability cooperative organizations. They accumulated their capital through
installments by members, deposits, profit and other sources. The popular banks played an
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important role in trade, processing and export of agricultural products. The first insurance
cooperative in agriculture was established in 1925 with the purpose to share the lenders’ risk
regarding the larger loans.
Associations of agricultural producers. In 1898, the Association of vine growers - “Saint
Trifon” has been established in the town of Pomorie. This association supplied its members
with seeding material and equipment and helped them to market their produce. Later,
seventeen other branch organizations were created in plant growing and livestock breeding.
The Water Syndicates Law has been passed in 1920. This law specified the role of the water
users’ organizations and the main rules for water use. Voluntary cooperation among majority
of water users and compulsory enrollment of minority was the main organization principle
introduced in this law (Mollov, 1941). Until 1950, more than hundred water syndicates had
been established in the country. The Union of rice producers had also been set up during that
period.
Cooperatives for joint land cultivation. The first steps in cooperating for land cultivation
have been made during the period 1899-1902 by the universal cooperatives in the villages of
Krassen, Koshov, and Sturcelovo (Rousse region). These coops initiated renting school and
church land. Shortly after, the cooperatives in the neighboring villages of Trastenik,
Besarabovo, Pirgovo, Cherven, and Dolapite also started organizing production and
marketing activities.
In 1905 a group of agricultural producers from the village of Drinovo have bought land
with a loan and started cultivating it together. Because of deficiency in legislation, however,
this attempt has lasted only two years. To secure the loans, the control committee of the
“Agricultural Cooperative Casa” (Minkov, 1968), insisted that the coop profits to be
accumulated in a fund which to be used as a collateral. This requirement lowered the
incentives for joint land cultivation.
More serious attempts for collective land cultivation was made along the river of Tunja (in
the regions of Yambol, Sliven, and Elhovo). Initially the farmers started cultivating their rice
fields together. During that time rice demand and the price in Europe were high. Gradually,
the farmers started to grow other crops such as alfalfa, sugar beet and potatoes. In some
villages the farmers made efforts to grow together perennial crops. Initially, special
departments of the universal cooperatives in the areas organized the work. Later, with
accumulating enough capital from production activities some independent production
cooperatives began appearing.
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The Tolstoists and vegetarians have also contributed to the cooperative development in
Bulgaria. In accordance with their philosophy and ethical behavior, they developed own
vegetarian villages and cooperative farms. The first village cooperative of such type was
established in 1908 in Yasna Polyana (Bourgass region). However, this experiment has failed
because of insufficient agricultural experience and next year the cooperative was closed.
Good results were achieved from the vegetarians in the village of Ruzhinci (Belogradchik
area) and the village of Proslav (Plovdiv area). However, for political reasons, in 1928 the
government has closed the cooperative in Ruzhenci. The cooperative in Proslaf kept on
existing until 1948. With the financial support of people sharing the vegetarians' ideas and
credit from the Bulgarian Agricultural and Cooperative Bank the cooperative members
succeed in buying 26,4 hectares of fertile land.
During the period 1930-1944 the universal cooperatives started organizing agricultural
production. At the same time, active discussion was going on among economists, politicians
and agriculturists regarding the benefits and cost of the collective land cultivation. The
defenders of the idea for collective land cultivation argued that farms in Bulgaria are too small
and the land they cultivate – fragmented. They claimed, that the collective land cultivation
provides opportunity for economies of scale and hence would increase the farm income. The
opponents (Mollov, 1941) argued that the large mechanized cooperatives would reduce the
labor demand in the rural areas. The industry was not developed enough to absorb the
redundant labor, and in the end, this would rise the unemployment and poverty. According to
Mollov (1941), the main problem of Bulgarian agriculture is the land fragmentation, therefore
he argued not for collective land cultivation but for land consolidation.
Cooperation after the Second World War. After the Second World War, a union of
parties dominated by the communists assumed the power in Bulgaria. The enacted in 1945
Co-operative Law allowed existence of three forms of cooperatives: RPK (consumer and
universal co-operatives); TPK (co-operatives in crafts); TKZS, (co-operatives in agriculture).
The same year a special law for agricultural cooperatives (TKZS) and later in 1949 the land
reform laws were enacted. According to the 1949 amendments in the law the rural
cooperatives practically were transformed from landowner and producer cooperatives into
labor ones. This was the first step towards their transformation to collective and later to state
farms. Nevertheless, cooperation remained voluntary until 1956, when all the land was
forcefully included in TKZS. Up to the mid-sixties, most cooperatives had accumulated
substantial capital and with the state intervention, many of them united with the coops from
the neighboring villages.
Meanwhile, the Bulgarian industry was growing rapidly and
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demanded more labor. Since the industrial sector provided higher salaries and better working
conditions, the first to leave agriculture were the people with higher qualification. In the late
of sixties and the beginning of seventies, AIC (agro-industrial complexes) were created and
the independence of cooperatives was abolished.
The cooperatives' machinery was
transferred to special enterprises directly accountable to the AIC. During the next twenty
years AIC were downsized several times and in the end of eighties, the enterprises in
agriculture included the land of several neighboring villages and were operated as state farms.
The most active part of the rural population has moved to the industry and mainly old people
with no power to influence the decision-making remained to work in agriculture.
Transition period. Land reform is in many ways the most radical and most complex
reorganization of the economic activity in Bulgarian agriculture. The essence of the land
reform, developed in the Law of the Ownership and Use of Farm Lands (LOUFL) was that
the former owners or their heirs to receive the land they have owned prior to collectivization.
The LOUFL was implemented by especially appointed committees, responsible for
liquidation of the collective farms, and land councils, responsible for land restitution. The
process was expected to complete in less that two years, but in fact lasted for nearly a decade.
The total restituted land was approximately 5,3 million hectares, assigned to about two
million landowners. This led to severe land fragmentation in term of ownership and use. A
possible solution to the fragmentation in ownership is development of the land sale market.
Possible solutions to the fragmentation in land use are development of land rental market or
cooperation.
3.2. The case study region
The Plovdiv region is located in the western part of the Trakia plane along the Maritza
river. This is one of the most important agricultural regions of Bulgaria. The total area is
about 573 667 hectares, 58% of which are agricultural land. The Trakia plane is located in the
central part of the region, but the northern and southern parts are hilly and mountainous. The
soil is fertile, but of a great variety. This mostly applies to the villages located in the North
and South zone of the region, where part of the land located in the valley is fertile and the part
located in the mountains is poor. In the past (before 1944) an average rural family produced
most of the food products it needs. During this time, people took advantage of the great soil
variety by growing the forage crops in the hilly areas and the more intensive (often cash)
crops on the fertile land around the villages. Moreover, the land price or rent for poor soil was
lower than the one for good soil.
Because of the soil variety and the rural household
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organization, the farming system in the region before the socialist revolution, was such that
one household owned several plots of different quality, located in different places and having
different production use. This was also considered (before and even today) as insurance
against unfavorable natural conditions. Fruit and vegetables have always been the main crops
grown in the area. Contrary to grain production, fruit and vegetables can generate large
income per a unit of land, and hence comparatively small farms (in term of land) can provide
good standard of living to the rural households.
The village of Dubene is located in the North part of Plovdiv region, near by the towns of
Karlovo and Sopot. There are three large industrial enterprises in the towns and the
unemployment rate for the municipality is below the country averages (about 12%). Dabene
has nearly three thousand inhabitants. The village has about 3500 hectares of agricultural land
and the main crops are cereals, forage, vineyards and industrial crops. During the eighties
more than 40% of the agricultural land has been irrigated, but nowadays this share did not
exceed ten per cent.
4. METHODOLOGY AND ANALYTICAL FRAMEWORK
4.1. The concept of social capital
The concept of social capital has its roots in two main disciplines- sociology and
economics. It has two components. “Social” refers to the collective values and inclination that
arise from these values to do things for each other. “Capital” is used by analogy with the other
forms of economic capital and it is argued to have similar effects. However, despite the large
amount of research the definition of social capital remains unclear and most of the authors
consider it a multifaceted concept.
The sociologists concentrate on the network of interpersonal relations in which
individuals are embedded. The main idea is that the networks of social relations provide
access and opportunity for the individuals to exploit resources.
The initial position of
individuals in the network is understood not as their own choice, but a result of inheritance or
evolution. However, at some point each individual has a chance to change his position or
modify the network in which he operates. Therefore the networks are constantly changing and
evolving. From here the scientists derive the structural dimension of social capital, such as the
actors’ position in the network (actors’ centrality), power, structure of the network (cohesion,
groups and cliques); information flows (the direction of links).
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Although the term “capital” comes from economics there is a growing awareness about
the weaknesses of the analogy between the physical and social capital. Solow (1999) points
out that the physical capital has a rate of return and can be measured by the past investment
minus depreciation. While, according to Ostrom (1999) the social capital appreciates with the
use. There are measures and clear understanding for the stocks and flows of physical capital,
but the mechanisms of social capital formation are not so evident. Therefore, some
economists think that the term social capital is a poorly chosen name for the concept.
Regarding the choice of name however the concept is useful as it draws the attention to the
institutions influencing the economic life, which might otherwise go unnoted (Sobel, 2002;
Dasgupta, 1999).
The social capital is not a concept related to the individual but rather to the relations
among individuals. From this understanding originate most of the definitions such as trust,
norms, informal rules shared among members of a group, reciprocity, shared knowledge and
cooperation that can improve the efficiency in the society. The central argument is that due to
the higher level of trust and existence of informal self-enforcement mechanisms, the
transaction costs are lower and people can work together more efficiently. There is a positive
social capital, when it contributes to the economic development and negative one when it
hinders the economic growth.
The value and use of the social capital depend also on the institutional environment.
Bowles (1998), Gatzweiler (2003), Sickor (2002) claim that the policies markets and other
institutions also have influence on the motivations, values and trust, and hence on the social
capital. Therefore, even though the social capital is concerned with the relations among
individuals in a group, the external factors also play a role. (Therefore, though being related to
the inter-individual relations within a group, the social capital is also influenced by external
factors that could either stimulate or hold back its development.)
4.2. The social capital and the transition
The period of transition is not only a period of economic reform, but also a period of the
social structures adjustment. The reform in economy can be implemented comparatively
faster through introducing laws promoting the competition and private initiatives. The
changes in social structures necessary to support the market economy and democracy are
rather slow. The currently prevailing social structures are result from past events and hence
are path dependent.
They are shaped by the experience during the communist time.
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Therefore, the all-round restructuring of economic system requires economic reform and
reform of the social structures.
Actors. In a broader sense of the social capital concept, the actors are the citizens of the
country. There are number of studies that seek to explain the changes of peoples’ values
during transition (Rose-Ackerman, 2001; Chloupkova and others, 2002, Peeva, 2002). Most
of the studies conclude that people are not inclined to cooperate during transition.
In
Bulgaria, according to Peeva (2002), many people look at the transition as period of dramatic
change in their social status, but what is disturbing is that most socially active are the people
who still consider their status temporary rather then permanent.
Trust among actors. There are two main stories regarding the trust during the transition
from centrally planned to market economy (Rose-Ackerman, 2001). The first story is that the
socialist period was notable for higher level of trust among people, while the transition is
marked by increased level of opportunism. Possible explanations of this phenomenon are that
the communities were broken up and the traditional ties were destroyed. The second story is
that, since the governments and other institutions during the socialism were not a result of a
democratic process, the level of trust in the newly established institutions is low. Also, apart
from the past experience, the weakening of the state control mechanisms brought corruption
and hence further have reduced the level of trust.
Social networks. The Open Society Foundation in Bulgaria carried out a survey in 2002
under the project “The State of Society”. The study reached an interesting finding that the
peculiar to the socialism vertical networks, connecting high and low status people through
exchange of favors and loyalty, was replaced during the transition by horizontal network,
where people of similar social status, income and education maintain relations. Moreover,
there is a clear distinction between the networks of losers and winners. The “winners”,
maintain relations first among themselves and then with relatives, old friends or classmates.
The “losers” form networks to support themselves. The study also finds that the less
institutionalized the network is, the weaker the relations among the individuals are. The
poorer a person is the more isolated he is.
Cooperation. Chloupkova and others (2002), compare the development of cooperatives
and social capital in Denmark and Poland. Until the Second World War, the cooperative
movements in both countries have followed similar patterns. It was a bottom-up process as a
response to the weak bargaining position of small farmers leading to capitalistic exploitation.
According to these authors, circles of energetic entrepreneurs in the local rural communities
had initiated all of these peasant movements. After the Second World War, Denmark
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followed a normal democratic path of development and the cooperatives continue to play an
important role in agriculture.
Poland, however, followed a communist doctrine and all
voluntary organizations were brought under the control of the party. The bottom-up voluntary
cooperation was replaced with top-bottom forced “cooperation”. With the time, people got
used to obey orders rather than making their own decision and hence the level of social capital
eroded. Therefore, during the transition, the inherited lower level of social capital implies
reluctance of cooperation among the Polish farmers. What is interesting in both cases (Polish
and Danish) is that initially “circles of energetic entrepreneurs” have initiated the peasant
movements towards cooperation.
Bulgaria followed a pattern similar to that of Poland. In the early XX century, the
cooperative movement was a bottom-up driven process. There were a large number of credit
cooperatives, cooperatives for input supply and water users associations. During the
socialism, the top-down approach replaced the bottom-up one and all the land was allocated
to the producer and labor cooperatives or state farms. In the early 90ies, in Bulgaria, the
socialist state farms masked as cooperatives were broken up. Unlike Poland, where even
during the socialism there were independent farmers, the private farming in Bulgaria was
constrained only to small garden plots.
4.3. The interviews
Two main approaches were used to research the social capital development in the Dubene
village. First, in order to understand the path dependency of the process, we review the history
of cooperation in the village. Second, in order to investigate the main factors of social capital
formation and causalities between cooperation in land use and the main elements of social
capital formation we conducted interviews with the actors. The data for the case study were
collected, from centralized sources (such as the Regional Department of Agriculture and
Forestry in Plovdiv, Municipal Department of Agriculture and Forestry in Karlovo, and
documentation from the Dubene village). The interviews were carried out during the period
September 2004 - May 2003, when 39 open-ended semi- structured interviews were
conducted with the actors from the village. These actors included:
•
Mayor of the village
•
Two managers of the cooperatives
•
Four agricultural specialists from the cooperatives
•
Two former cooperative managers (1990-91 ; 1995-98)
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•
Four temporary working during the summer cooperative members
•
Eight cooperative members working out of the cooperative
•
Six landowners who are renting their land in cooperatives
•
Four tenant farmers (two large and two middle size tenants)
•
Eight members of farmers’ families
The different positions of people included in the interviews enabled us to collect diverse
information for the process of social capital formation in the village, which is a good basis for
evaluating the main factors.
5. VISUAL PRESENTATION OF ACTORS AND THEIR INTERACTIONS
5.1. History of cooperation in the village of Dubene
Cooperation prior to the World War II. Before the Second World War, notwithstanding
the existence of formal cooperative structures, the cooperation among the agricultural
producers in the village of Dubene was mainly informal. In the beginning of the last century,
a universal cooperation has been established in the village with the main goal to support
market position of the villagers. The cooperative was initiated in 1909 as a input supplier to
the farmers’ families. Later it started developing agricultural credit activities. The farmers in
the village had also cooperated in the field of irrigation and during the twenties a water
syndicate had been established. During the thirties, three comparatively large agricultural
producers purchased threshing machines and started providing services to the farmers in the
village. The use of these machines required comparatively large amount of labor for a short
time period. Therefore, families were exchanging labor when hiring the machine. The
experience in joint use of machines helps them to start collaborating in other farming
practices.
The first producer cooperative (1946-1956). In 1946, twenty-six small agricultural
producers established the first cooperative for joint land cultivation in Dubene. Because of the
poor land quality, insufficient size and lack of machinery, the cooperation at that point of time
was not successful. In the beginning of the 50ies the cooperatives in Bulgaria started to receive
increasing state support, but this did not improve their production results. The cooperation
during the period 1945-1957 was strongly influenced by the political and economic processes
in the country after the Second World War and the replacement of markets with Soviet type
centrally planned economy. The cooperation during that period was voluntary, but the efforts
and enthusiasm of the first cooperative members was not shared by most of the villages.
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Considering the poor performance, the middle size farmers did not see any economic interest
in cooperation and did not trust the founders of the first cooperative in Dubene.
The village cooperative in Dubene (1957-1962). In 1956 the Bulgarian government
launched a policy of forceful cooperation. Economic, administrative, and sometimes criminal
methods were applied to force all agricultural producers in the cooperatives. The cooperatives
were financially supported, while individual farmers heavily taxed. All agricultural producers
in Dubene joined the cooperative. There have not been significant conflicts. Some did it
voluntary, some were convinced, and a small group was pressured to join. However, since
people had to surrender their land and assets to the cooperative initially they felt that their
interests are suppressed. In addition, people felt insecure, since they still did not trust this new
for them organization. The production results during the first and the following years,
however, were good and according to some of the interviewed better then when they were
cultivating the land themselves. There were several reasons for this success. First, the land in
the village was consolidated and this provided opportunity for designing better and more
efficient crop rotations. Second, the agricultural assets of the village were pooled together and
this provided opportunity to use them more efficiently. Third, people with good agricultural
experience before cooperation (mainly middle size, comparatively larger farmers, and older
people with good reputation) took the leading positions. During that time, according to the
interviewed, the members of communist party from the village interfere in the cooperative
business only in limited cases. Most of the decisions were taken on a local level. The good
production results allowed the cooperatives to purchase tractors and other machines. All of
these led to large economies of scale and good production results.
United cooperative (1963-1971 г.) In the beginning of sixties the state carries further its
policy, which required the cooperatives from the neighboring villages to unite.
The
cooperative in Dubene merged with the cooperatives in the villages of Voiniagovo and
Kliment. The land of both villages was poor and both cooperatives were economically weak.
In addition, due to political reasons the people from Voiniagovo initially took the managerial
positions in the new united cooperative. Nevertheless, over the time the conflicts were
overcome. Although people knew each other less in this new and large cooperative, they still
had found a way to work together. Again, because of large economies of scale the results
from production were good. Gradually, agronomists and people with good education replaced
the older people involved in the management. Some of them were locals and some came from
other regions of the country. Most of the decisions were still being taken on the local level.
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The period 1963 - 1971 coincides with the period of rapid grow and development of the
industry. The salaries in the factories were higher and the working time fixed at 8 hours.
Logically, the young and most capable people moved to work in the industry. This, however,
did not cause significant problems for the cooperative in Dubene. The united cooperative had
accumulated the necessary assets. Most of the processes were mechanized and therefore the
industry absorbed the redundant labor force. Since the villagers had additional source of
income coming from the industry, the welfare of the area improved.
Agro-industrial Complex (1971-1989). In 1971 the united cooperative of the villages of
Dubene, Voiniagovo and Kliment was liquidated and all land and assets were transferred to
the Agro-industrial complex - Karlovo. This large enterprise controlled nearly 15000 ha of
land and several processing factories. To each village in the AIC a certain crop or group of
crops were assigned. The land in most of the villages, however, has a diverse quality that did
not support too narrow specialization. Consequently, the results from the production
worsened. In addition, the center of the decision-making was moved away from the villages
and concentrated in the town of Karlovo. The pressure from the communist party members
and the party's structures has increased. With the years the production continues to decline
and this led to dissolution of the AIC- Karlovo in 1989.
Back to a village cooperative (1989-1992). In order to stimulate agriculture, the state
issues in 1986 the Decree 922, in which provided incentives for development of private
enterprises.
In 1989 a group of agricultural specialists re-established the Collective
agricultural farm in village of Dubene. They received farm machinery from the dissolved
already AIC and the greenhouse in the village. In 1990 the farm was officially transformed
again into a village agricultural cooperative. The start of this cooperative was comparatively
successful, but surrounded by a great uncertainty. Therefore, although the decision-making
was moved again at a local level, the coop could plan its activities only in a very short run.
Agrarian reform. In the beginning of nineties the villagers started discussing different
options for development of the village and for ensuring a gradual transition to a new type of
cooperation. Despite the political arguments, the central points of the discussions were the
economic and social issues. The main idea was to preserve the production potential and to
restrict the political pressure on the development of agriculture in the village of Dubene.
However, the overall political processes in the country strongly affected the processes in
Dubene. The appointed in 1992 by the Minister of agriculture liquidation committee has
carried out decisions strongly influenced by political motives, which without considering the
local conditions and often even were not in accordance with the legislation. The strong
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political polarization had decisive influence over the activities of the liquidation committee. A
group of people was established in the village, which strongly favored the liquidation of the
existing agricultural structures. In this process, they saw an opportunity for redistribution of
the agricultural assets, enrichment and gaining strong positions in the village. The efforts of
the locals to organize a system of control over the assets' evaluation, distribution and
determining of assets shares had failed. One of the main reasons for this failure was the level
of social capital and the weak interests of young people in the village, most of whom working
for the military industry with salaries well above the average for the country. This allowed the
already formed group of individuals seeking enrichment from the privatization process to
strengthen their positions.
According to the Law of Ownership and Use of Agricultural Land of 1990, municipal
land committees organize the restitution of agricultural land in the country. Title deeds or the
documents for entering the cooperative in 1956 were used to prove the land ownership. Since
many of these documents were missing, a group of locals conducted about 100 interviews
with older people from Dubene in order to determine each owner plot location,. The land
committee however, did not take into consideration the results of the interviews. This
hindered the land restitution process and cast suspicious for corruption and favoring of people
close to the liquidation committee. As the reform came to close, the new owners received
between 6-18 small parcels, which prevented the effective land use in the future.
5.2. Actors in the agricultural development in Dubene after the reform
There are several actors regarding the land use in the village of Dubene: (1) landowners;
(2) two cooperatives; (3) two farmer associations; (3) market oriented small agricultural
producers; (3) small semi-subsistent farmers; and (4) subsistent farmers.
Table 1: Actors and cultivated in last year (2005)
Actors
Abr.
Hectares
%
Universal Production Cooperative “Agrotexnika servis-93”
UPC
987
29
Agricultural Production Cooperative “Dubene -95”
Large lease holders – Brothers Skoklevi
Farmers’ partnership
Family farms – about 30
Temporary abandoned land (mainly vineyards)
TOTAL
Source: Calculated from the survey
APC
824
935
120
200
300
3366
24
28
4
6
9
100
15
Land owners. There are about 1350 landowners in the village of Dubene. The majority of
them had received land through the restitution process. According to the Regional
Agricultural Office data, on average a land owner in the village has about 2,3 hectares,
scattered to 5-6 parcels, each of about 0,4 hectares in size. Most of them are old, some do not
live in the village and most of them are subsistent, semi- subsistent or small size farmers.
The Universal Production Cooperative “Agrotehnika Servis-93”. This cooperative was
established in 1993 by а group of landowners with a leading actor the manager of a former
enterprise for providing mechanized services in the area. Initially, this group invited 50
landowners to joint the new coop. The main criteria for selection were the position one has
during the transition period and the value of shares he was supposed to get after liquidation of
the old socialist type cooperative. Despite the expected benefits from the future membership,
about 40 of the invited attended the founding meeting. At this first meeting, the initiative
committee has presented the idea for establishing an association that will participate at
auctions for acquiring the farm assets from the former cooperative and then provide
mechanized services to the farmers in the villages. The main goals, management and the
control system of the new cooperative were also discussed at this meeting.
Table 2: The comparative analyses of the UPC “Agrocervise-93” and APC “Dubene-95”
Indicators
1. Number of members
2. Cultivated land ha
3. Specialization
4. Farm machinery
5. Full time labor
1. Goals
2. Investment
3. Participation of the members
in the management
1. Trust
2. Communication
3. Solidarity
4. Role of the leader
5. Networks
UPC “Agrocervise-93”
I. Basic characteristics
30
9 870
Grains-animal husbandry
New farm equipment
8 full time workers
II. Operation
Economic efficiency
The whole profit is invested
Active participation of the members
III. Social capital
Strong trust
Good
Strong in the core group
Important, trust, authority
Dense relations of the members in the
core group less dense with the rest of
the members
APC “Dubene-95”
473
8240
Grain
Old farm equipment
5 full time workers
Support of family farms
Insufficient investment
Passive participation of the
members
Doubt and suspicious
Insufficient
Weak
Growing trust
Large and disperce
Source: Information collected by the survey
The debates were stormy and part of the attending people refused to participate and left
the meeting. Finally, the Universal Production Cooperative –“Agrotehnika Servise-93” was
set up with the support of 30 people. At the first stage, the main goal was to consolidate the
16
share of members in order to participate in the assets distribution of the liquidated old coop.
In February 1994, “Agrotehnika Servis-93” was registered in the court with the following
sphere of activities: providing of mechanized services and production of agricultural
commodities.
The statue of the cooperative established this organization as a close
agricultural club, and this was in fact the initial intention of the founders. According to the
interviewed, through manipulations in the assets evaluation and the auctions, UPC
“Agrotehnika Servise-93” succeeded in acquiring most of the farm assets of the old
cooperative during its privatization.
The development of this cooperative has several interesting features. First, a small group
of people takes most of the decisions, despite of comparatively good performance of the
General Assembly, and the Control Council. These decisions are often with vague
justification and results. The bulk of members (about 20-24 people) are not involved in the
decision-making and are not interested in the results of production. During the period 19942004 the whole profit was reinvested and the share of each member increased several times.
This gave a reason to the management to increase the initial installment for admitting new
members to 22 thousand levs, which in 2005 represents 47 minimal salaries for the country.
There are rumors that a new redistribution of assets is going on among the active members of
the cooperative. This could mean that inside the cooperative a smaller “club of rich farmers”
has began to emerge. During the past several years, an opportunity was created to transform
this coop into a shareholding company.
Agricultural Production Cooperative “Dubene-95”. The second cooperative in Dubene
was established in 1995 at a village meeting organized by an initiative committee, supported
by the village mayor. Issues regarding collective land cultivation and marketing of
agricultural produce were discussed at the meting. The Agricultural Production Cooperative
“Dubene-95” was registered in April, 1995 and until the end of the year it attracted 454 local
land owners. The cooperative also purchased the village green house. Soon, however, the
green house was rented out, and later sold. Because of lack of farm machinery and working
capital, in 1996 the General Assembly took a decision to increase the share of each member.
The accumulated new resources, however, in addition to the rent received from the green
house were not used for investment and soon the cooperative was at the edge of a financial
collapse. The members refused to support financially the inefficient activities and in 1999 the
cooperative, cultivating only 30 hectares, nearly ceased to exist. In 2000 the General
Assembly has elected new management body. The old management was hold liable in the
court for mismanagement. The new management body reduced the number of full-time
17
employees, began to buy second hand farm machinery and expanded the cultivated area. This
saved cost, brought additional revenue and improved the financial condition of the
cooperative.
Currently the coop cultivates about 800 hectares, 470 hectares of which are owned by its
members and 330 ha are being rented. According to the manager, currently the goals the
cooperative pursues are rather social than economic.
They are related to ensuring the
cultivation of the land owned by the members and providing forage to the family farms. The
management thinks that the resources they control and the business conditions in the country
prevent further expansion and improvement of the financial condition of the cooperative.
Lease holders. There are two comparatively large lease holders in village of Dubene. The
first is the farm of the brothers Nikola and Todor Skoklevi. They cultivate about 935 hectares
and considering the organization and management we can classify this farm as a large family
farm. The Skoklevi’s farm was established in 1995. All the family members were engaged in
agricultural production even before 1990. This allowed both brothers to acquire good
agricultural experience, despite their comparatively young age. Nikola is 38, and Todor – 33
years old. The labor comes mostly from the family (father, mother and other relatives). They
share common goals and one can feel trust and confidence among them. The strong family
relations are the base for successful development of the social capital and create opportunity
for the prosperity of this farm. The brothers are continuously expanding and developing the
production activities and the farm is acquiring features of a family association.
Table 3: Main crops and animals grown by the actors
UPC
APC “DubeneActivities
“Agroservise95”
93”
Wheat
ha
340
290
Ray
ha
182
152
Corn
ha
130
95
Barley
ha
80
107
Sunflower
ha
210
180
Alfalfa
ha
45
Total land
ha
987
824
Sheep
Numb
300
Source: Calculated from the survey
Skoklev’s
brothers
Farmers’
partnership
Total
315
170
165
110
175
935
-
55
10
15
15
20
5
120
50
1000
514
405
312
585
50
2866
350
The second large lease holding is the association of Ivan Trifonov and Angel Nikolov,
which cultivates about 200 hectares. Until 2001 both of them were working independently,
but the frequent exchange of farm machinery, services and the established good relations led
18
them to the idea to work together. This is an example of cooperation among independent
agricultural producers. The difficulties during the transition and the trust led to cooperation
among them.
Small family farms. Parallel to both cooperatives and the large leaseholders there are
about 30 different in size market oriented family farms. The subsistent farmers are not
included in this number. The farm in this group sells between 50%-95% of their produce at
the market. Almost all of them have tractors and basic farm equipment. For specialized
agricultural practices, they use services provided by both cooperatives and the large
leaseholders. In some cases, the small farmers, except their own land, cultivate also the land
of relatives or friends.
Figure 1: Relations among the actors in the village of Dubene
1350 landowners, about 500 of them subsistent farmers
20 landowners
30 small family
farms
473 land owners - 200 of them semisubsistent farmers
Land, Capital
Land
Land, Capital
Universal Production Cooperative
"Agrotexnika -93"
Large lease holders - Brothers
Skoklevi
Agricultural Production Cooperative
"Dubene -95"
Services
Medium lease holders - Ivan Trifonov and
Angel Nikolov
Services, Rent
6. DETERMINANTS, EFFECT AND PROCESS OF COOPERATION AND
RURAL INSTITUTIONAL INNOVATION
The overall processes running in the country as well as the specificity of the local settings
have always influenced the level and development of the social capital in the village of
Dubene. Historically, the development of social capital after the Second World War went
through four main periods.
19
During the first period (1944-1956), the cooperation was affected by the state policy, but
remained voluntary. Since the poor agricultural producers entered the cooperatives, the
cooperation at this stage had limited success. The members of agricultural cooperatives were
mainly small size farmers and landless villagers with poor professional skills.
During the second period (1956-1962), the cooperation among agricultural producers was
forced by the state and the traditions in cooperation at a local level were standing against the
aggressive communists' collectivization. Although at this stage the cooperation was imposed
form outside (the state), the results were encouraging. There are several reasons for this. First,
the decision-making remained at the village level. Second, the middle sized and
comparatively richer agricultural producers entered the coop and took the managerial
positions. Third, after forcing the farmers into coop, the party members rarely interfere in the
decision-making. Fourth, there were large economies of scales created by improvements in
agricultural practices and introduction of machinery.
During the third period (1962-1971), by the communist party directives, the cooperatives
of neighboring villages merged into one bigger cooperative. After the initial tensions, the
results were also good. Although the interference by the party has slightly increased, the
decision-making was still being left at a local level. In addition, there were still economies of
scale and in addition the introduction of new crop varieties, as an effect of the first green
revolution, also contributed to the good results..
During the fourth period (1971-1989), AIC were established and the economic
independence of the cooperatives was liquidated. They were transformed into state
enterprises. The decision-making was moved away from the villages. The party members had
important role in this process and in the decision-making process. In addition, at this point of
enlargement of the agricultural enterprises there were huge diseconomies of scale.
The four different periods show the main policy trend during the socialism - breaking the
ties of people with the land and the tradition of cooperation. This inevitably led to destruction
of the social capital. As a result, at the beginning of transition in 1990 there was insufficient
level of social capital. The low level of social capital strongly influenced the transition
processes. The lack of trust among the landowners initially limited the opportunity for
cooperation and hence prevented the efficient use of the fragmented land.
6.1. The role of trust/mistrust and opportunism (social and institutional)
The trust among individuals allows the actors to discover their common interests and to
organize collective actions for their realization. Nooteboom (2002) considers seven levels of
20
trust and emphasizes on important role of the leading actors. He defines the trust as the
expected rational behavior of the others in the economic game. The process of social capital
formation in the rural areas goes on through different stages and reaches different levels. The
level and development of trust is often difficult to measure and therefore qualitative and
comparative methods are often used.
Our main question here is the role of trust among people in the sustainable use of the
fragmented agricultural land. To answer this question we study the rental transactions and the
relations among the individuals and the key actors. Parallel to this we have tried to evaluate
the level of trust in the formal institutions and in the groups of outsiders “outsiders”. The
evaluation of interpersonal relations is based on mapping the key moments in the social
capital development.
Trust among the landowners and the land restitution. The first example is from the
beginning of agricultural reform in the village (1992). During that time, there was missing and
insufficient information regarding the size and location of plots owned by the different
individuals. Initially, each landowner was supposed to submit a declaration to the land
committee for the land he claims. This process was not transparent and the claimed land was
30% more than the total available land in the village. To solve this problem, a voluntary
committee was formed by the locals, which conducted an inquiry among the older people.
The inquiry was successfully and the majority of landowners (about 60%) took active
participation. Then, the results were submitted to the land committee. According to the
interviewed however, the land committee did not take into consideration this information, and
villagers were not satisfied with the plan for the parcels' allocation prepared by the land
committee. Two parliamentary inquiries and endless court disputes did not improve situation.
This example demonstrates a process of establishment of informal groups in the village
(close to the land commission, and the rest of the villagers), with lack of trust among the
different groups.
Trust and cooperation in land cultivation. The second example is the process of
establishment of both cooperatives. The initiative committee of the UPC "Agrocervis-93"
invited at the constitutive meeting, only 50 of all 1300 landowners in the village. The
manager of this cooperative who is one of the founders, explained that they did not trust the
rest of the villagers and that they were not sure in their behavior in the cooperation process.
During the course of meeting and the discussion of rules, twenty of the invited people left the
21
meeting. They expressed suspicions regarding the correctness of the initiative committee
members and blamed them for lack of transparency.
Most of the remaining villagers became members of the second cooperative APK
"Dubene -95". In 1995 all of them elected a manager of the cooperative, but three years later,
in 1998, he was removed from duties by the General Assembly and was blamed in bad
management, braking the cooperative principles and lack of transparency in decision making.
Some of the members also accused the manager in corruption and using the cooperative's
resources for his own benefits.
The above example shows evolution of the informal groups into formal. It also reveals the
existence of conflicts within the groups and insufficient trust in the leading actors.
Trust in the formal institutions. The cooperation also is strongly influenced by the
successful partnership between farmers and farmers' organization, on one side, and on the
other the state and regional authority. The interviews conducted with cooperative members,
specialists and current managers of both cooperatives confirmed the traditionally low trust of
people in the formal authorities.
Trust to "outsiders". The level of trust in groups different from the local landowners was
evaluated according to the villagers' attitude towards the following social groups: gypsies,
people living in the neighboring villages and people which are doing business in the village
but are not local. Most of the interviewed expressed positive attitude toward the local gypsies,
but at the same time they were unwilling to cooperate with them. Their main arguments were
the gypsies' low level of education, lack of professional experience, unwillingness to work.
Most of these arguments, however, are related to the general perception of the gypsies in the
country rather than the local settings, where most of the gypsies were educated. Therefore, the
overall attitudes in the country can also influence the willingness of local to cooperate.
The level of trust in people from the neighboring villages is also low, but varies according
to the personal characteristics of the individual. The main factors influencing the attitude of
locals in this respect are the age, education, professional experience, and the ability to
communicate. The trust in people from the neighboring villages is important for the future
growth of both cooperatives and development of agriculture in the village of Dubene.
The level of trust in people who are not local but are doing business in the village is
similar to that in people from neighboring villages but the variation of opinions is larger. The
attitude of locals in this respect is strongly influenced by the individual characteristics of
outsider and the personal benefits of the interviewed.
22
In summary, the level of interpersonal trust among the landowners in village of Dubene is
low. The villagers are also suspicious about the activities of the key actors (managers of
cooperatives, tenants and outsiders). Both cooperatives and the other form of collaboration in
the village are strongly influenced by kinship relations, friendship or economic reasons and
perform mainly social functions.
6.2. Role of communication and learning
The exchange of information is an important factor for the social adaptation of the
individuals. It speeds the process of learning, dissemination of knowledge and improves the
results of the human activities. The communication among the members of the society
increases the opportunity for co-operation and solving the problems related to the sustainable
use of natural resources. The unconstrained flows of information can soften the problem of
asymmetric information. Co-operation is achieved easier if the actors communicate often and
as equal. The communication and exchange of information help the actors to build trust and
reputation. The information exchange among the people in village of Dubene is restricted by
different factors, which constrain the development of the social capital and cooperation.
Information exchange, communication and young villagers. One of the main factors,
constraining the communication process, is the insufficient interest in agriculture of the young
people in the village. Many of them have graduated technical schools and have not been
involved in agricultural activities during their childhood. They have worked and some are still
working for the military plants located in the neighboring towns, for salaries much higher
than that in agriculture. The young people living in the village know each other well. They
communicate often, trust each other, and cooperate in their personal life as well as in small
business activities. Most of the young people do not own land and are not interested in the
processes running in agriculture. Interestingly, their skills to communicate and to cooperate
are not transferable to the landowners in the village.
Communications among landowners. The level of communication among landowners in
the village is low. They seldom meet to talk about the problems related to the sustainable use
of fragmented land, water and forest resources in the village. They prefer to communicate
directly with the managers of both cooperatives and the leaseholders, regarding their land. In
this case, there is a problem of asymmetric information. In the process of negotiating the
conditions for renting land, the managers and the leaseholders have more information about
the production cost, yields, markets and the agricultural policy and therefore they have
stronger bargaining position.
23
The insufficient communication among the young people regarding agriculture and the
lack of communication among the landowners (older people) leads to asymmetric information
and strengthening the positions of the key actors. This prevents a large part of the landowners
to participate in the process of solving the land fragmentation problem. The insufficient
communication was also one of the main constraints, which prevented the establishment of a
water users’ association in the village.
6.3. Role of the transaction costs and governance structure of cooperation
One of the main goals of the cooperation in agriculture is to establish more efficient
governance structure and to lower the transaction cost.
Land fragmentation and transaction cost. The fragmentation in land ownership, defined
as the number of parcels and their size, increases not only the production cost, but imposes in
addition transaction costs. The large transaction costs are one of the main reasons constraining
the development of the land markets (sale and rental). They also have a strong influence on
the speed of land redistribution among the inheritors and creating a land cadastre in the
country. The unsettled ownership on part of the parcels creates opportunity for violation of
the ownership rights and threatens the legitimacy of both cooperatives in the villages.
Transaction cost and management of the cooperatives. There are two types of
transaction cost regarding the cooperatives. The first type is related to the external
environment, such as searching for information regarding different markets; contracting with
the input suppliers and output buyers; maintaining contacts with the state authorities; etc. In
this case, the costs of both cooperatives are lower compared to the situation in which
individual landowner conducts the same activities. The second type is the cost related to the
internal management. These are the cost of arriving to decision; exercising control over the
management, signing land contracts, etc.
The UPC “Agroservise-93” has its own agricultural equipment and rents land. The land
contracts are signed for 5 years and the rent is 10% of the yield. The contracts do not take into
consideration the differences in the land quality and location. The remaining 90% of
production are sold at the market. The revenue covers the production cost and the remaining
part is invested in the coop. Dividends are not distributed among the members, but the
investments increase the value of their shares. The management of this cooperative is
conducted according to rules voted by the General Assembly. The General Assembly meets
once a year. The opportunities for entering new members are constrained by the value of the
entering shares and the mistrust towards the new entrants. Dating from the beginning of the
24
establishment (11 years), new members were not accepted, but nobody of the founders left
this cooperative. Therefore, the cooperative resembles a close club of agricultural producers.
Because of the increasing differentiation in the shares owned by the members, an opportunity
(or danger) arises this cooperative to be converted into a shareholding company.
Currently 473 landowners are members of the APC “Dubene-95”, and they provide about
60% of the land cultivated by this cooperative. The remaining 40% are rented from other
landowners. Therefore, we may conclude that the transaction cost for renting land in this
cooperative are lower compared to UPC “Agrocervise-93”. However, the large number of
members creates difficulties in functioning of the General Assembly. During the last years,
the attempts to organize annual meetings of the Assembly failed. Still, the annual meetings
were hold but not with all members. The cooperative law allows if the first time there is no
quorum, the meeting to be postponed for the following week. If the second time there is no
quorum again, the meeting is put off for another hour and then held regardless of the quorum.
This approach influences negatively the control over the management and creates opportunity
for power abuse. The problems related to the General Assembly are among the main reasons
for the conflict with the former manager. The large percentage of land owned by the
cooperative members (60% of the land cultivated by the coop) on one hand provides stability,
but on the other decreases the level of produce commercialization. According to the
cooperative statute, each member has the right to get up to 50% of the production grown on
his land if he pays the production cost. As a result, in bad years, the level of
commercialization drops to about 60%. This constrains the future investment activities.
In summary, both cooperatives have lower transaction cost for maintaining relation with
the external environment compared to situation in which individual landowners perform the
same activities. The transaction costs related to renting land seem to be higher in the case of
UPC “Agrocervise-93” compared to APC “Dubene-95”. The cost for arriving to agreement
and management seems higher for APC “Dubene-95 compared to UPC “Agrocervise-93”.
6.4. Role of the State – national, regional, EU laws and the formal institutional
environment in cooperation
During the past 60 years, the State has played a key role in the Bulgarian agriculture. The
village of Dabene is an illustration of the results of this policy. During the WW II and even
until 1946 agriculture was supposed to supply products to the state and army. Later, the
communist administration led a radical policy towards mass collectivization. The foundations
of this policy are outlined in the Land Property Law and the Collective Farms Law (1946).
25
The first law changed the land ownership rights in the country, while the second one
established the legal framework of the cooperative governance structures. The collective farm
in the village of Dabene is established in 1946 based on this legal framework. The frequently
changed legislation eroded cooperation process in the village. The most significant change
has happened in 1949 when the cooperative members stop getting rent and dividends for the
land and capital they brought into the cooperative. This change in the ownership rights
liquidates the economic incentives for the owners of land and capital and set the path of
converting the cooperative into collective farm. In 1956 the communist government
undertook a forcible cooperation and this exerted a strong economic, moral and sometimes
physical pressure on the farmers. That period is important for the degradation of social capital
in the rural regions and developed a negative attitude towards cooperation. The pressure over
the cooperative structure persisted throughout the next thirty years and finally they were fully
transformed into state enterprises. In the middle of the seventies, this brought agriculture to a
crisis and people deserted the sector.
The main objective of the agrarian reform in 1991 was to restore land ownership as it was
before collectivization and to provide conditions for sustainable agricultural development.
The high political polarization, relatively low level of social capital and the broken
democratic traditions in the country were among the reasons why the reform was
implemented with numerous mistakes and distortions. Two of them will influence the
agricultural development in the following decades. First, the re-establishing the land
ownership as it was 60 years ago led to land fragmentation. Second, the negative attitude of
the State toward rural cooperatives directly affected the use of the fragmented after the reform
land. In 1991 all agricultural cooperatives in the country were liquidated regardless of their
economic performance and the state of social capital in the area. Interestingly, the coops in the
other branches of the economy were not closed down (industrial and consumer cooperatives).
The liquidation committees often included people with no experience in agriculture, but loyal
to the government. This demonstrates that during the reform in agriculture, the political
considerations were above the economic and social concerns. The villagers of Dubene
expressed mistrust in the liquidation committee.
The role of the State during the accession process (to the EU) becomes more important.
The functions of the regional government agencies within the framework of implemented
agricultural policy are expected to expand. Currently these agencies maintain (1) the land
register, (2) the agricultural producers’ register and they support the establishment of the
organization of agricultural producers. At this stage, the regional agricultural offices have
26
restricted functions and the landowners and farmers do not trust them. The municipal
agricultural office in Karlovo has no precise information about the land use in the area, and
only eight agricultural producers from Dubene are registered there.
6.5. Role of the communities, social networks and informal institutions
The informal institutions, as a part of the institutional environment, have a strong impact
on the development of social capital and cooperation in the rural areas. They often reproduce
the traditional for the region, village or group, ethical norms of behavior, professional
knowledge and skills. The existing official and religious holidays provide opportunity the
people to meet together. The families usually meet at Christmas, Easter, name days, and local
fairs.
Very important for Dubene is the village fair that is organized every year during the last
weekend of August. Many people related to the village visit this fair, though now they live in
other places. The fair provides opportunity for active face-to-face communication, and
important problems are discussed and solved. These meetings consolidate the families, kin
and people now living in other places. In addition, people get to know each other better and
are more likely to work together in the future. The village fair helps establishing a horizontal
network of comparatively weak relations among people linked now or in the past with village
of Dubene.
Several informal groups have been formed in the village during the transition period. They
are based, on economic interests, political bias, kinship and friendship. Some of these groups
have existed for a short period, while others have evolved further. The first type of groups are
usually hierarchical networks with an ex or present party leader at the top. The second type,
are horizontal networks without clearly expressed leader. According to the mayor, the
informal groups created on the base of political prejudices and economic interests are not
durable.
Initially, UPC “Agrocervise-93” was established as the second type network. Several
locals, holding key positions at that time, united to participate more effectively in the
privatization process. Each of them had upward links with certain politicians and downward
links with part of the landowners. Gradually, however, the links with politicians weakened
and a process of stratification of the members began. APC “Dubene-95” was created as a
response to the actions taken by the initiative committee of the UPC “Agrocervise-93”.
Initially, it functioned as a hierarchical network with one leading actor, who had links with
politicians. Gradually, the links with politicians weakened and nearly broke up and the role of
27
the leader declined. In both cases, the network of relations among the members was
transformed from centralized vertical to horizontal.
The informal groups based on kinship and/or long friendship, were established as
horizontal networks. There are two such groups in the village of Dubene: brothers Skoklevi,
relations based on kinship, and the farm of Ivan Trifonov and Angel Nikolov, relations based
on a long friendship.
The network of socio-economic relations in the village of Dubene has several layers. The
first layer includes comparatively weak relations among people related now and/or in the past
with the village. The second layer comprises of relations between the both cooperatives, the
two partnerships, and the 30 individual farmers. The links here are both of competition and
cooperation. These actors compete for land, but at the same time, they provide services to
each other. The third layer includes the relations among the members within each
organization unit. The cooperatives initially maintained links with politicians, but now these
links are either very weak or broken up. The APC “Dubene-93” evolved from a centralized
network with a leading actor- the manager, into horizontal one, where the manager organizes
the production activities according to the needs of members living in the village. The UPC
“Agroservise-93” evolved from a network with core members maintaining strong relations
among them and periphery members maintaining weaker relations among themselves and the
core members, into a more centralized network of relations with a limited number of core
actors.
6.6. Role of the market and competition in fostering / hindering cooperation
The market is an important institution for economic development. The perfectly
competitive market creates conditions for effective use and allocation of the resource. The
land sale market in the village is weakly developed, due to shortage of capital, difficult access
to credits, low land prices. The rental market is more intensive and during the last years about
50% of the village land was rented. It becomes very dynamic after 2002 (table 4).
The existence of the two cooperatives, three leaseholders and about 30 market-oriented
small agricultural producers has increased demand for land. While during the period 19961999, a large part of the village land was abandoned (from 35%-to 75%), in 2004 nearly all
land was cultivated. Currently, the competition is strong for the fertile and irrigated plots
located around Striama river, but demand for the other plots increases. This will lead to a
better land reallocation and more effective land use.
28
The increased competition regarding the land decreases the need and opportunities for
cooperation in the land use. The leaseholders, by offering a slightly higher rent, gradually
expand the land they cultivate. They are also trying to buy fertile parcels.
The main crops grown in the areas are cereals (wheat, barley, corn). The cereals markets
in the country are comparatively stable and the prices - predictable. Production processes are
fully mechanized, and there are economies of scale if cereals are grown on a large scale.
Therefore, the crop structure in the village favors large scale farming activities.
Table 4: Land sale and rent market in the village of Dubene
Markets
Transactions
2002
2003
2004
12
1,2
4
Area in ha
9,3
3,7
2,8
Price leva/ha
800-2200
Number of transactions
Land sale market
Number of contracts
Rental market
Area in ha
Rent
2000-3000
1500-3000
1192
1199
27
884,2
871,5
79,4
10% of yield
10% of yield
10% of yield
Source: SAPI and information collected by the survey
7. CONCLUSIONS
We can derive the following conclusions regarding the development and state of the social
capital and its influence on the process of cooperation for sustainable land use in the
conditions of fragmentation in ownership:
The level of trust among the landowners is low and this constrains the development of a
successful cooperation. The level of trust is low in the case of the formal institutions and the
case of actors outside of the groups.
The landowners in the village possess limited ability and/or opportunity to communicate,
which constrains the development of trust and exchange of knowledge over the time.
There is a shift in the state policy towards cooperation in the rural area from a policy of
liquidation and suppression of cooperation to a policy of support and assistance.
The four large agricultural producers in village of Dubene evolved from informal groups
into formal enterprises. The formation and development of informal institutions is an
important mean for development of the social capital for use of fragmented agricultural land.
29
The development of land market (sale/buy, rent) and increasing competition reduces the
economic incentives for cooperation with regard to using the fragmented land.
The findings in this paper lead us to conclusions that cooperation is achievable even in a
low trust with insufficient communication environment due to lack of options. In this situation
the role of the leaders becomes important.
LITERATURE
Bowles, S. (1998) “Endogenous Preferences: The Cultural Consequences of Markets and
other Economic Institutions”, Journal of Economic Literature. Vol. XXXVI, (March). pp.
75-111.
Bristow John A.,(1996), The Bulgarian Economy in Transition, Edward Elgar Publishing
Limited, Cheltenham UK.
Chloupkova, Jarka and other (2003), “Building and Destroying Social Capital: The case of
Cooperative movements in Denmark and Poland”,. Agriculture and Human Values”. 20
pp. 241-252.
Dasgupta, Partha and Ismail Serageldin, eds. (1999), “Social Capital: A Multifaceted
Perspective”. Washington. DC. World Bank.
Deininger, Klaus (19950, “Colective Agricultural Production: A Solution For Transition
Economies? , World Development, Vol. 23, No 8.
Draganov D.,(1980), “ The First Bulgarian Cooperative”, Sofia.
Gatzweiler, Franz. (2003),“Patterns of Institutional Change for Sustainability in Central and
Eastern European Agriculture”, CEESA Discussion Paper N16/2003. ISSN 1616-9166.
Minkov M., (1968),“Appearance and development of cooperative agriculture in Bulgaria”,
Zemizdat, Sofia.
Mollov Janaki ,(1941), “The cooperatives in the Bulgarian Agriculture”, Sofia University.
Ostrom, Elionor. (1999), “Social Capital: A Fad or a Fundamental Concept” in Dasgupta and
Serageldin, eds. op. cit. pp. 172-214.
Peeva, Ralitsa- team leader. (2002). Project “The State of Society”. Open Society Foundation.
Rose-Ackerman, Susan. (2001),“The trust and Honesty in Post-Socialist Societies”. Kyklos
54 (2/3).
Sobel, Joel. (2002), “Can We Trust Social Capital?”, Journal of Economic Literature. Vol. XL
(March, 2002). pp. 139-154.
30
Solow, Robert. (1999), “Notes on Social Capital and Economic Performance”., in Dasgupta
and Serageldin, eds. op. cit. pp. 6-10.
Sikor, Tomas. (2002),“The Commas in Transition”. CEESA Discussion Paper N10/2002.
ISSN 1616-9166
Swinnen, Johan F. M. (1997), Political Economy of Agrarian reform in Central and Eastern
Europe, Ashgate.
31
ANNEX I
Social Capital and Cooperation
Questionnaire for Bulgarian case
PART 1
TRADITIONS IN COOPERATION AND NON COOPERATION IN THE AREA
Research question: To what extend does the past experience influence the cooperative
behavior at present?
1. Around what issues in the past has the community organised itself (to address the
issue/problem)? Were they successful? Which members of the community participate
most in solving issues facing the community? (could give discrete list, including farmers,
politicians, local businesspeople, women, men, older people, etc)
2. Can you think of conflicts which within your community/area in the past? If yes, what
issue brought about this conflict? What were the main differences between people that
caused this conflict? (discrete list, including education, wealth, social status, men and
women, older and young generation, outsiders to the community and community
themselves, political party affiliations, ethnic backgrounds, religious beliefs,
environmental beliefs etc.)
3. How many different social organisations are you involved in? (include recreational
groups, religious groups, community groups, voluntary organisations, non-governmental
organisations, governmental organisations etc).
32
PART 2
ROLE OF TRUST/MISTRUST (SOCIAL AND INSTITUTIONAL) AND
OPPORTUNISM
Research questions: Is trust essential for successful cooperation?
Are high levels of trust an effective means of reducing transaction costs within the case
study?
4. Generally speaking, would you say that most people can be trusted, or you can not be too
careful in dealing with people?
5. How much do you trust (on a scale from 1 to 5) the following:
(1) To a very great extent (2) To a great extent (3 )Neither to a great nor small extent;
(4) To a small extent (5) To a very small extent
Relatives
Friends
Neighbors
Fellow-villagers
Strangers (newcomers, foreigners, tourists)
Manager of the local cooperative
Local government officials (village mayor)
Regional government officials (NUTS III- commune)
State authority in agriculture (regional offices of
Agriculture and Forestry)
National government officials
The European Union (its institutions and officials)
NGOs
6. Why do you cooperate with this group/these people?
33
7. Are there serious problems in the group? What mechanisms are in place to solve conflicts
amongst the group?
PART 3
ROLE OF COMMUNICATION AND LEARNING
Research questions: Is communication used as a source of power by central actors within
the case study, in terms of opportunism by limiting access to information?
Is there a process of inclusive collective learning amongst all actors (social learning and
sharing mental models)?
How do actors learn to use information within a changing institutional setting?
8. What are your main sources of information about what the government (both local and
national) and the EU is doing? What are your main sources of information about what is
happening within your community?
Sources of information
National
level
Local
level
Relatives, friends and family (‘word of mouth’)
Community bulletin board
Local market/local shops
Community or local newspaper
National newspaper
Radio
Television
Internet
Community leaders (mayors)
Groups or associations I am involved with
Business or work colleagues
Government agencies
Political parties I am involved with
Non-governmental organisations I am involved with
Other
34
9. Do you think that you all group members are well informed, and know each other well?
PART 4
ROLE OF TRANSACTION COSTS AND GOVERNANCE STRUCTURES
Research question: How do transaction costs affect the choice and changes of governance
structures?
10. Can you think of any factors that would affect your willingness to work with other
people?
(1) To a very great extent (2) To a great extent (3) Neither to a great nor small extent
(4) To a small extent (5) To a very small extent
Geographical distance
Education
Incentives
Background of relationships (history)
Membership in the group – cooperation with the
people who are not currently part of the group
Personal relationships (relatives)
Other
11. What are the cost regarding your membership in the group?
a) entering in the group
b) daily activities
c) achieving a outcome
35
PART 5
ROLE OF THE STATE – NATIONAL, REGIONAL, EU LAWS – AND THE
FORMAL INSTITUTIONAL ENVIRONMENT ON COOPERATION
Research question: To what extent can the State and its formal institutions enhance
cooperation?
12. Have the State support cooperation in your village?
13. Did you vote in the last elections?
a) Local
Yes
No
b) National
Yes
No
14. How does accession to the EU affect people’s behaviour within the group?
15. Have you received support from state or EU program?
a) State
Yes
No
b) EU
Yes
No
PART 6
ROLE OF COMMUNITIES, SOCIAL NETWORKS AND INFORMAL
INSTITUTIONS ON COOPERATION
Research question: Are informal institutions a necessary determinant of achieving
cooperation?
16. How would you rank (on a scale from 1 to 5) the relative importance of the following
factors affecting the cooperation?
36
(1) Very important (2) Somewhat important (3) Neither important nor unimportant (4)
Somewhat unimportant (5) Not important at all
High levels of trust within the community
Past experiences of all stakeholders with working together
Having a highly motivated group of people/community who are willing to cooperate
Having good communication between all actors
Keeping well informed and having enough information to make decisions
Actors understanding each other and sharing the same objectives
Involvement of governmental agencies in the process
Active involvement of the local community
Market driven incentives for cooperation
Other
17. If a community project does not directly benefit you, but has benefits for others in the
community, would you be willing to contribute
a) money
Yes
No
b) time
Yes
No
18. If there was a problem within your community which required different people coming
together to solve it, how likely do you think they would be successful?
Very likely
Somewhat likely
Neither likely nor unlikely
Somewhat unlikely
Very unlikely
PART 7
ROLE OF THE MARKET AND COMPETITION IN FOSTERING/HINDERING
COOPERATION
Research question: How does the market environment affect cooperation?
37
19. What is your crop structure?
Crop
ha.
Average
yield
kg/ha
Cost per ha
To whom do
you sell
Price lv/ton
20. Are the prices reasonable for you?
a) Input prices
a) Output prices
21. How do you market your products?
38
ANNEX II
The list of interviews
1.
Mayor of the Dubene village
2.
Two managers of the cooperatives
3.
Four agricultural specialists from the cooperatives
4.
Two former cooperative managers (1990-91 ; 1995-98)
5.
Four temporary working during the summer cooperative members
6.
Eight cooperative members working out of the cooperative
7.
Six landowners who are renting their land in cooperatives
8.
Four tenant farmers (two large and two middle size tenants)
9.
Eight members of farmers’ families
39