PUTIN’S BIG COMPROMISE: THE LAND REVOLUTION IS DEFERRED
Publication: Prism Volume: 8 Issue: 5
The outcome of the latest State Council session on April 22 was something of a surprise. Putin, who was until recently rigidly insistent on the need for a rapid transition to the free sale and purchase of land, backed down. First, he granted the governors the right to determine when to bring into force the new Law on Agricultural Land Turnover, which will most probably be adopted at its first reading in the Duma at the end of May. Second, under considerable pressure from the governors, Putin conceded that Russia is not yet ready to allow the sale of agricultural land to foreigners.
These statements are interesting because they reveal all the dramatic clashes Putin has run into as president in his pursuit of liberal reforms in Russia.
There can be no doubting his determination to see his anticommunist revolution in Russia through to the final victory. But it is impossible for him to complete this task until land–Russia’s main asset–is made an article of commerce. Until this issue is resolved, it will be impossible to create the preconditions needed to allow deep-rooted market-based activity and the capitalization of Russia’s still unstable capitalism.
The Yeltsin constitution of December 1993 had already laid the legal foundations for a move towards the free sale and purchase of land, stating that land and other natural resources could be privately owned. But Yeltsin himself was unable to overcome the opposition of the Left and others who were against the privatization of land that had formerly belonged to state or collective farms. Yeltsin most probably saw his task as providing for the privatization of industrial production. Moreover, with the Left controlling the Duma from 1993 to 1999, it was not constitutionally possible to bring in a legal code regulating the turnover of any land, agricultural or otherwise.
But for Putin, who had from the very outset presented himself as a pro-market liberal on economic matters, the issue of the transition to genuine private land ownership became a matter of honor. His resolve was strengthened by purely economic considerations. The lack of a law allowing private ownership of land by industrial enterprises was both hampering the investment of foreign capital in Russia and reducing the capitalization of newly established private businesses. The confusion over land transactions (a law on private ownership existed, but with no mechanism to implement it) gave rise to a shadow or underground turnover of land. Local administrations, taking advantage of the muddle, sold off the best bits of land under the counter, to be used for building dachas. Technically, in 1992, former collective and state farm workers had received a so-called share of the land that was held in common by their enterprises. But no one knew how to convert these shares successfully into real property holdings, so there was soon under the counter speculation in these land parcels too. Moreover, as a result of the confusion and the fact that no one knew who actually owned the land, agricultural areas were left to go wild and became overgrown with weeds. This, incidentally, was one point Putin raised in the State Council meeting mentioned above.
Putin’s breakthrough on land transactions began early this year, when he literally dragged the Law on Nonagricultural Land Turnover through the Duma. The communists were unable to block its adoption because at this stage it was a matter of transferring no more than two per cent of the country’s land into private ownership. Nevertheless, even after the law was adopted, many regions of Russia were still categorically opposed to it.
But, as the April 22 State Council session showed, reaching a decision on the fate of agricultural land proved more difficult. Take, for example, the above-mentioned concessions that Putin had to make to the traditionalists. Putin could see–as does the whole of Russia now–that the transition to private land ownership was a potentially explosive problem, and that it was essential to proceed with the utmost caution. It is clear that the government bill on the turnover of agricultural land, supported by Putin, has divided Russia. This time, almost all the regions in the south of Russia, where there has always been a shortage of arable land–in particular, Krasnodar and Stavropol Krais, and the Islamic republics of the North Caucasus–are categorically opposed to any move to allow the free sale and purchase of land. In these regions, the overwhelming majority of the peasants also oppose private ownership of land. In this, peasants and regional leaders alike are governed by both ideological and practical considerations. The problem is that here in Russia’s south, home of the Cossacks of the Don and Kuban, land has always been held under common ownership, even in Tsarist times. Here, communal land use prevented the concentration of land in private hands, and the Soviet system only served to reinforce the principle of communal land ownership. Therefore the people of these regions fear that, with the transition to private ownership, the land will no longer be in their hands, leaving them to work as farm laborers for the new landowners. The psychology of this fear is both Soviet and old Cossack in nature, for these people have hardly ever had to work as laborers, a role traditionally fulfilled by newly arrived peasants from other regions.
But the south of Russia is even more adamantly opposed to the free sale of land to foreigners. There is great anxiety that in circumstances where the local population is relatively poor, and has the means neither to purchase land nor to acquire agricultural equipment, land may be bought up on the cheap by outsiders, be it foreigners or businessmen from the Caucasus. It should be noted that even in those regions of Russia that are more comfortable with the idea of free land turnover, the sale of land to foreigners is seen in the same negative light. This is probably not only for social and psychological reasons–the peasants, as a coherent ethnic group, have always regarded outsiders a negative light–but also for ideological reasons. Even the present generation remembers that, prior to collectivization, this land belonged to their forbears. So, recognizing that they can no longer keep the land in their own hands, they oppose its transfer to foreigners, or–as they see it–into the hands of outsiders.
Now it seems to them that what was already a blatant injustice is being aggravated. When the Bolsheviks appropriated the land, they at least didn’t claim ownership and treated everyone equally unjustly. But now there is a danger that this land, long since stolen from them, will find a real owner. The problem is essentially that the transition to private land ownership is taking place in conditions where the people have very little spending power, though cheap credit is available to the peasants, and where there is neither any cooperative marketing nor any system for leasing agricultural equipment. And to be honest, there are serious grounds for their concerns. Given the current ratio between the costs of agricultural and industrial output, it is practically impossible for the peasants to organize any effective production without government help. Compared with 1990, the cost of fuel and oil products per unit of agricultural production has grown tenfold.
The problem is that because Russia, unlike the countries of Eastern Europe and the Baltic states, has no body responsible for dealing with restitution, the current land reforms are considered unjust.
And all the fears and emotions of Russia’s peasants can be seen in the proposed Law on Agricultural Land Turnover, drawn up by the Duma’s left-wing agrarians. The Left has reflected exactly the current thinking of the Russian countryside: If we haven’t the resources to manage production on our own land, then let’s leave everything as it is, just so long as it doesn’t fall into the hands of foreigners or fat cats. In this sense, this bill on the free sale of land drawn up by the agrarians can quite legitimately be seen as nationalist or populist. The bill, which has the support of most of the land committees of the subjects of the Russian Federation, naturally says nothing about the sale of land to foreigners. It currently permits private ownership of land only by individuals living and working on the land, who have already received a share of the property formerly held communally by state or collective farms. Incidentally, the fact that the Left will contemplate private land ownership by the peasants means that in reality there is now no one left in Russia who opposes the principle of privatizing agricultural land. They are however showing definite caution on the issue, a quality that was lacking in the government’s version. The agrarians of the Left hold that whoever first works the land should be given it on a leasing basis. Then it is envisaged that, once the portions of land allocated have been in effective use for a period of not less than ten and not more than fifteen years, the individual will be entitled to convert them into private property, on averaged terms for the cost-free transfer of land into ownership.
The ideas and attitudes which have found expression in the government’s liberal draft bill on Agricultural Land Turnover run directly counter to those outlined above and reflect the thinking not so much of the peasants as of the reforming intelligentsia. In its pure form, the bill has the support of no more than a handful of governors, and then only with reservations. In the bill (a sign of its liberalism) foreigners have the same rights as Russian citizens to acquire land as private property. The bill allows for the transfer of up to 35 percent of the arable land in rural districts to a single owner. As observed by many experts, it is designed to create a number of large-scale land barons. It is now clear that Putin has supported–and still supports–the government proposal only in order to emphasize his liberal line on land reform. This is also why he recommended that the governors should take as their blueprint a bill that is attractive to both foreigners and big business. But, wishing to avoid conflict with the prevailing mood of the peasants, he decided on the compromise referred to above. In essence, when Putin said that the governors themselves should determine when the sale and purchase of agricultural land should be brought into force, he was placing the real responsibility for land reform on the regional elite, although not without quite reasonable limitations. In those areas where land has already been transferred into private hands, particularly in Tatariya and Saratov Oblast, there will be no turning back and the new situation will remain as it is. But in areas that have not yet seen the transfer of former state-owned land into private hands, the governors will have free rein and the right to either push through or hold off land reform.
I believe Putin has acted with careful consideration in reaching this compromise with Russia. We have already had the sad experience of seeing the overly hasty privatization of industrial production. It was precisely because we rushed to dismantle it, root and branch, that for us, unlike the countries of Eastern Europe, privatization has brought neither any growth in production, nor any noticeable improvement in the people’s living standards. Until very recently, the outcome of privatization was the opposite of what was expected. It is completely reasonable, therefore, that we should approach the necessary and timely privatization of agricultural land without undue haste, taking into account the specific character of the Russian regions as well as specific national traditions.
This is why, in my view, these land reforms are clearly indicative of Putin’s new thinking as he proceeds to organize reforms for which the time is now ripe.
Aleksandr Tsipko is a senior associate at the Russian Academy of Sciences’ Institute for International Economic and Political Research and a columnist for Literaturnaya Gazeta.