Commentary
August 4, 2001
Russia: Land Code: Compromise on Ownership R G Gidadhubli
On June 15, 2001, the Russian Duma (parliament) approved the Land Code Bill,
allowing buying and selling of not more than 10 per cent of land in the
country. The importance of this law lies in the fact that it has great
socio-economic and political implications for Russia in the decades to come.
The president of Russia, Vladimir Putin, has thus taken a bold step on the
issue of land ownership initiating the process of reversing the policy of
forced collectivisation of land undertaken by Joseph Stalin in 1928 which
ended private ownership of land in agriculture in the former Soviet Union.
Stalin had then proudly claimed that by his policy of collectivisation of
land, he had brought communist ideals to the countryside thus eliminating
not only kulaks but also owners of land among middle and small farmers. The
Russian peasants who were earlier guaranteed the ownership of land by
Vladimir Lenin by his famous 'Decree on Land' which was promulgated soon
after the Great October Socialist Revolution in 1917 were made to part with
their land even without compensation. Thus, between Vladimir Lenin and
Vladimir Putin, Russia has, in 80-odd years, come full circle on the issue
of ownership of land.
It has, however, not been easy for Russia to make this historic decision,
because after the Soviet break up there have been debates and controversies
in the country on the issue of land ownership with exclusive right to buy
and sell land. Some sections of Russian society and political parties are in
favour of it while some others are against. This was evident from the manner
in which the bill was passed in the Duma. According to the press reports,
members of the Duma belonging to the Communist Party and Agrarian Party
tried to block the consideration of the Land Code Bill and even physically
prevented German Gref, the minister-in-charge of economic affairs, to
present it. After they walked out threatening the dissolution of the
parliament, the bill was passed by 251 votes in favour and 22 against with
two abstentions.
Over the past decade, the question of the right to ownership of land has
become a symbol of how far Russia will go on its declared policy of economic
reform. While communists and agrarians have vehemently opposed the Land Code
Bill, reformist groups and some economists have been putting pressure on the
government to pass it. Presumably, to assure the latter section, German Gref
stated in January 2001 that the "Land Code may be passed in 2001 although
laws governing the sale of land might be postponed". In February, he further
stated that all categories of land, that is, agricultural and
non-agricultural, would be treated equally on the ownership issue, including
sale and purchase. Vladimir Putin also lent his support on the issue of
economic reforms and land code including proposals to protect all forms of
property in Russia. But differences have persisted on this sensitive issue
even within the Russian government. For instance, in contrast to the
position of German Gref, minister of agriculture Alexei Gordeev said in
February 2001 that the "new draft land code did not contain (a) provision
for free buying and selling of land". However, disagreeing with the
contention of the minister of agriculture, Duma deputy Viktor Pokhmelkin of
the Union of Rights Forces asserted that the new land code might not
prohibit the proposal of freedom to sell and buy once ownership issue was
accepted by the Duma.
>From this account, the seriousness of differences on the land ownership
issue becomes evident. In fact, as per the federal law of 1993, which was
adopted by Russia in the euphoria of anti-communism, Russian citizens were
able to own land. But Russia has been functioning under the former Soviet
legal system, and as per the old rules there were no legal provisions for
sale and purchase of land. For instance, the collective farms themselves did
not legally own the land which was given to them for use by the Soviet state
under perpetual lease. Subsequently, by 1994-95 under former president Boris
Yeltsin's leadership collective farms were reorganised into joint holding
farms as 'joint stock companies' in which all members of the farms became
joint owners of the land. But although state farms and collective farms were
officially reorganised, in practice there was hardly any change. Moreover,
what added to the complexity of the situation was that the federal law on
land ownership contradicted regional laws on the issue of sale and purchase
of land, because regional laws did not permit it. Hence, some Russian
economists have pointed out that there was a peculiar situation prevailing
in the country in which there were two laws on land issue - federal law and
regional law - and both were legal. In this situation local officials and
bureaucrats could, therefore, interpret the law to suit their political and
economic interests, resulting in considerable arbitrariness in the Russian
legal system.
The debate on land issue has persisted also because the advocates of reforms
have argued that private farming existed in Russia and hence farmers could
own land just as they own a home or agricultural implements. Hence the right
to sell and purchase land should be permitted as a matter of right. In
support of their contention they further argued that most of the collective
farms and state farms were not efficient and were making losses. In
contrast, productivity on private farms was much higher. In view of this, it
was contended that legalising land ownership and free sale and purchase
would help the development of agriculture in Russia. On the other hand, the
communists and agrarians have argued that private ownership of land with
right to free sale of agricultural land would result in the abuse of land by
the new owners. In their opinion, unscrupulous people can speculate on land
property. A Russian expert has also argued in a Russian journal that in a
worst-case scenario, new owners with no rights might convert workers on land
into serfs. It appears that some collective-farm workers have echoed this
worry and opposed privatisation of land.
In fact, the privatisation policy of the Russian government during the past
decade has seen insiders and those who managed such property grabbing state
property. Moreover, there has been large-scale illegal appropriation of
state property, which has resulted in the enrichment of a few Russians at
the cost of many others. Greed and corruption have been rampant in Russia in
the acquisition of property. As a result of this, a new class of Russians
known as the 'Novie Russkie' (New Russians) has emerged in a historically
short period of time. It is, therefore, feared that what has happened in
industry and trade may also take place in agriculture.
The issue of ownership of agricultural land has raised controversies and has
been strongly resisted also due to social and historical reasons. During the
Soviet era, even as collective farms were given land by the state under
perpetual lease, members of the collective farms felt they were all equal so
far as land ownership was concerned. In this sense, the tradition and
feeling of collective ownership of land goes back to the tsarist period,
when the institution of 'mir' (village commune) had been widely prevalent in
Russia for centuries. While most agricultural land belonged either to the
tsar, or to the Church or to kulaks, in practice, mir looked after the
cultivation of the land and agriculture as a whole. Although serfdom (a form
of slavery) was practised in many parts of Russia, in villages peasants
would address kulaks with, "We are yours, but the land is ours". This shows
how peasants were attached to their land with a collective spirit.
Private farming with the right to use land independently got a boost under
Mikhail Gorbachev's perestroika or, policy of restructuring. There was
enthusiasm for this policy in some parts of the USSR, particularly with
regard to cattle farming. After the Soviet break up, this form of private
farming in agriculture was expected to gain greater momentum and popularity.
But from available reports it appears that many farmers who had left
collective farms and state farms and who had started private farming taking
their share of a few hectares of land for cultivation, surrendered the land
and joined back in their collective farms. There are many reasons for such a
development. It appears that there are several problems such as getting
supply of agricultural inputs like seeds and fertilisers. There were
instances where collective farms or state farms, which had monopoly over
agricultural inputs, did not cooperate with private farmers either due to
general shortage of supply of inputs or to discourage private farming.
Several economists opined that the lack of a market for agricultural inputs
was partly affecting private farming in the country. Notwithstanding this,
officially some form of private farming has been going on in Russia. In
fact, as per the federal land registry reports, as of January 2001 130
million hectares of land had been privately owned over the past decade.
Further, there are 43 million landowners in Russia who own 130 million
hectares of land, which accounts for about 8 per cent of the total land area
of the country. In this connection, it is important to note that even before
the Soviet break up about 5 per cent of land was under private farming which
included family farming, also known as subsidiary farming on personal plots
of land. The land for this form of agriculture was given by collective farms
to their members who worked on their personal plots of land along with their
family members after their main work in collective or state farms. It is
possible that this category of land is also included in the statistics on
private land maintained by the federal land registry of the Russian
government. If so, there is only a marginal increase in the share of land
under private farming in Russia.
Private Farms
To achieve the objective of establishing a market economy in the country,
the Russian leadership has to promote private ownership of land as part of
restructuring the agricultural sector. Moreover, another strong reason for
permitting private ownership with the right to sale and purchase of land
seems to be the issue of investment. At present, there is a lack of
investment in agriculture. After reorganising state farms and collective
farms, investment by the Russian state has gone down drastically, as has
subsidy on agricultural inputs on items such as oil and lubricants and
fertiliser. In fact, according to Russian publications, during the year 2000
Russia lost 15 million tonnes of grain due to inadequate supply of
agricultural machinery and due to outdated machinery and equipment. It is
hoped that private ownership of land might attract investment both for the
improvement of land and for modernising agricultural machinery.
Apart from the economic aspect, landownership may also involve a
sociological question. Over the past 4-5 decades, one major problem in
Russian villages has been the steady migration of youth from rural to urban
areas. Hence there is a demographic imbalance, with the dominance of older
men and women engaged in the agricultural sector. The pace of migration
seems to have slowed down after the Soviet break up but the problem
persists. In view of this situation, it is possible that this section of the
old-age farming population may be exploited by vested groups and individuals
to part with their land once sale and purchase is permitted. In that case,
this may eventually result in social tension and economic disparities
creating a class of landlords and landless agricultural workers. Hence the
fears of communists and agrarians may be quite legitimate. It is also quite
likely that Russia's 'new rich' class may buy up thousands of 'dacha'
(summer house) plots and land on which Russians are known to produce fruits
and vegetables.
There are reports in the Russian press that foreigners may also exploit the
land code provisions to buy up land in the country. Some Russian analysts
opine that there is a possibility, for instance, in the far eastern regions
of Russia, where millions of Chinese have settled down during the past
decade both legally and illegally in Russia's border regions with China.
Agrarian Party leader Mikhail Lapshin said last month that Putin was against
foreigners owning land in Russia, while foreign corporations would be
allowed to buy and sell land. It is reported that Putin is also in favour of
creating a buffer zone along the borders of the country in which no land
could be sold to any foreigner. In this regard, the cooperation of the
regional administration has to be sought by the Russian authorities to
prevent illegal transfer of the ownership of land.
If Russia has to achieve its economic objectives - establishing a market
economy in the countryside, removing the Soviet-era inefficiencies of state
and collective farming, attracting investment in agriculture - private
ownership right of land might be an inevitable requirement. At the same
time, efforts have to be made by the authorities to prevent the misuse of
privatisation of land, which may benefit a few at the cost of the larger
interests of the country. The outcome of the implementation of the land code
will be evident in the years to come. But as of now, the land code appears
to be a compromise formula. By setting a limit of 10 per cent, the protest
by the communist and agrarian parties might have been partly lost its sting.
But at the same time, reformist groups could also claim that they have
succeeded in their effort to push the Land Code Bill into practice.
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