Research Article: 2017 Vol: 16 Issue: 2
Tatiana Pavlovna Maksimova, Plekhanov Russian University of Economics
Nataliya Evgenyevna Bondarenko, Plekhanov Russian University of Economics
Olga Alexandrovna Zhdanova, Plekhanov Russian University of Economics
Business Patterns, Small Business Patterns, Peasant Enterprise (Farm), Family Farms, Institutional Conditions, Informal Institutions.
The analysis of the current transformation of the business entities in the agrarian economy of Russia over the past two or three decades shows the presence of the clear trends in the enlargement of business patterns towards the creation of agricultural holdings and improvement of their role in agro-industrial production. At the same time, according to the National Report of the Ministry of Agriculture of the Russian Federation, currently the volume of agricultural products manufactured by peasant (farming) enterprises and households makes up about half of the industry's output, while the growth rates of production in the farms outstrip the same in the agricultural enterprises. According to existing official data, the index of agricultural production in the peasant (farming) enterprises in 2016 was equal to 114.3% (Including: Plant production-116.7%, livestock-104.7%). This was 7% more than the growth rate in the agricultural enterprises, which amounted to 107.7% (National Report, 2016).
Therefore, given that the driver of economic development is the presence of a competitive environment that is provided by the creation of the necessary institutional conditions and the variety of small business patterns, there is a need for a more detailed theoretical and practical study of the characteristics of the transformation of peasant (farming) enterprises, which are the main structural element in the small business system of the agrarian economy.
It is quite obvious that the diversity of business patterns, the nature of their economic relations is of a historical nature. Back in the late 18th century, one of the fundamental discoveries in this field of economics was that small manufacturers engaged in production achieved higher productivity in the process of economic activity in cooperation with each other, specializing in various types of economic activity and taking the advantages of labour separation. According to Smith (2016) different production stages in a pin factory were carried out by different workers, each of which specialized in one operation and as a result of this the volume of production was many times greater than the volume of production achieved with all stages of production carried on by one worker alone (Maksimova & Bondarenko, 2017). In the Russian agrarian economy, a great contribution to the theoretical substantiation of such interrelations was made by Chayanov in the course of study of various aspects and multifunctionality of the peasant (farming) enterprises (1992, 1993). The great attention to the study of the transformation of the agrarian relations in the Russian economy was introduced by I.N. Buzdalov, who defines the agrarian relations as "A combination of production, social, cultural and moral relations between people, based on their system of natural interests and aspirations, on the universal human values and the rights of a working farmer" (2008). The internal source and the basic principle of the complex development of such relations are the contradictions between different business patterns, as well as the conditions for their sustainability and development, existing in the economic system. All the existing organizational and legal business patterns are logically divided, first of all, into two groups: Small and large business patterns.
The study of the main factors of sustainability of small business patterns in the long run is of particular relevance, because the role and importance of small business to maintain a competitive environment in the economic system is quite high.
At the same time, it is important to choose the methodology, making it possible to perform the most objective and complete study of the features and factors of the transformation of farms in the Russian economy.
The general scientific methods of scientific abstraction, induction, deduction, data generalization and systematization, monographic analysis and synthesis are used herein. The historical-logical approach, the dialectical and systematic methods allow expanding the boundaries of objectivity in the course of analysis of the main factors of transformation and the conditions of sustainability of farms in the Russian economy. The official data of the Federal State Statistics Service of Russia, the data of the Ministry of Agriculture of the Russian Federation, the data of the first and second All-Russian Agricultural Censuses (ARAC) and the expert assessments of Russian and foreign researchers are used as the information base of this study. The official foreign and Russian information resources, as well as the official websites of the research agencies, institutions and other enterprises are also used in this article.
The conceptual aspects of the development of economic relations in the agrarian field of the national economy were the subject of the studies carried on by such well-known domestic economists as (Chayanov, 1993; Kondratiev, 1993; Nemchinov, 1945). In modern conditions, various aspects of the transformation of the system of agrarian relations and their main subjects are studied by (Shmelev, 2000; Kalugina, 2015; Shagaida, 2010; Gaysin, 2016).
However, it is true that the issues of the theoretical and methodological study of the indicated range of problems in terms of transformation of the main subjects of agrarian relations are usually considered partly. In particular, the use of the potential of methods and approaches of the institutional theory remains outside the scope of the study, although this methodological approach currently makes it possible to consider more fully the specificity of modern peasant economies (farms) and to understand the features of the development of the Russian agrarian economy as a whole. In the authors' opinion, in this case, special emphasis is placed on the influence of the system of formal and informal institutions on the transformation processes in the Russian agrarian economy.
The author's approach and the results obtained in the course of study of the peculiarities of transformation of farms in the agro industrial field of Russia can be divided into three groups of problems:
First, the main existing provisions on theoretical approaches to the study of the specificity of farms in the Russian economy under modern conditions are clarified by the authors.
Second, the results of the second ARAC of 2016 are studied and the main trends in quantitative indicators and the use of land resources, the main factor of production, are identified based on a comparison of the results with the official data of the first ARAC 2006.
Third, the main features and factors of sustainability of the farms in the Russian economy are defined.
So, with regard to the development of the theory of the issue on the transformation of the farms, which in the Russian economy are referred to as the peasant (farming) enterprises, the authors were guided by the lack of a unified approach when disclosing the essential characteristics of the economic category "business patterns". This is due to the fact that some small business patterns (such as peasant (farming) enterprises and private subsidiary farms) have been subject to analysis in Russian agrarian science for a long time. However, there remain many controversial issues, first of all, in the part of clarifying the general economic category of "business patterns". For example, unlike the Russian researchers and analysts, the English-language scientific works do not define the concept of "business patterns" as the economic entities: In the English version, the business patterns are defined as the forms of management; the forms of farming; the forms of business, etc. Therefore, in terms of definition of the business patterns in general and their basic form-the peasant (farming) enterprises-as well, a variety of approaches can be applied. For example, even the denomination of the peasant (farming) enterprises is of dualistic nature: Being focused on the market nature of the modern farms in the advanced economies, the main attention is paid to the historical specificity of the Russian peasant (farming) enterprises.
Here with, in the opinion of the authors, the institution of farming (farming institution) can be studied as the entity, on the one hand, by considering the peasant (farming) enterprises as the independent institution, using the modern institutional methodology. On the other hand, it is logical to study the specificity of the institution of Russian farming enterprises from the stud point of an interrelated system of formal and informal relations, especially at the level of formation of the features of economic mentality in the process of economic activity.
The comparative economic analysis of the transformation of the business patterns in the course of market reforms in Russia shows that the official statistics currently distinguishes, first, such business patterns as the agricultural enterprises, peasant (farming) enterprises, private subsidiary farms and non-profit associations of citizens.
In turn, the agricultural enterprises are divided into large, medium, small, micro and subsidiary agricultural enterprises at large industrial firms. The private subsidiary farms are divided according to their territorial attribute: Located in rural areas and in urban settlements. The non-profit associations include vegetable gardening, horticultural and country households. The country households or dacha (country cottages with the parcel of land), in accordance with changing institutional conditions, will be reorganized in the coming years in accordance with the adopted law, which will come into force on 01.01.2019 (Federal Law, 2017).
The analysis of the dynamics of quantitative changes in the period between the first and the second ARAC indicates that in the period from 2006 to 2016 the number of peasant (farming) enterprises decreased almost twofold (from 253.1 to 136.6 thd. pcs). The private subsidiary farms decreased by 20% and the number of non-profit associations decreased by 4%, respectively. However, in rural areas, the stability in the quantitative composition of the private subsidiary farms and even a small increase of 1% is observed. This can be explained from the standpoint of the existing institutional conditions in the agrarian economy, including the development of the regulatory framework, the creation of conditions for state support of the agricultural manufacturers. The relative increase in quantitative parameters is observed only among the individual entrepreneurs: By more than 10% (from 32 to 36 thd. pcs) (Table 1).
| Table 1: The Quantitative Dynamics Of The Business Patterns In The Period From 2006 To 2016 | |||
| Business patterns | The first ARAC of 2006, in thd. pcs | The second ARAC of 2016, in thd. pcs | Dynamics of changes 2016 to 2006, in % |
|---|---|---|---|
| Agricultural enterprises | 59.2 | 36.4 | -39% |
| Of them: | |||
| Large | 27.8 | 15.2 | |
| Medium | |||
| Small | 20.4 | ||
| Microenterprises | 17.0 | ||
| Subsidiary agricultural enterprises | 11.0 | 4.1 | -63% |
| Peasant (farming) enterprises | 253.1 | 136.6 | -46% |
| Individual entrepreneurs | 32.0 | 36.0 | +12.5 % |
| Personal subsidiary enterprises-total | 22,000.8 | 18,000.2 | -20% |
| Of them: | |||
| In rural settlements | 14,000.8 | 15,000.0 | +1% |
| In urban settlements and districts | 8,000.0 | 3,000.2 | -40% |
| Non-profit associations of citizens-total | 79.8 | 76.3 | -4 % |
| Of them: | |||
| Horticultural | 73.3 | 67.2 | -8% |
| Vegetable gardening | 5.5 | 3.0 | -45% |
| Country | 1.0 | 6.1 | + 6 times |
Source: Compiled by the author on the basis of the data of the first and second ARACs (Federal State Statistics Service, 2006, Federal State Statistics Service, 2016)
Most of the beginning farmers register a peasant (farming) enterprise on the basis of their personal subsidiary enterprise, engaged in the commodity production of agricultural products and over 40% of farmers operate in the field of livestock and are registered as family livestock farms based on the use of personal labour. (National Report, 2016) Many new peasant (farming) enterprises are formed "due to state financial support, including grant support programs": A grant competition is usually 3-10 people per grant (Seleznev et al., 2016).
At the same time, despite the decline in the number of small business patterns, there is an obvious process of consolidation of the land resources: Among the peasant (farming) enterprises this growth is more than 2.3 times (from 102.6 ha per farm to 268.9 ha) (Table 2).
| Table 2: The Dynamics Of Changes In The Total Area Of Land Per One Business Entity In The Russian Agrarian Economy | |||
| Business patterns (or business entities) | Total land area per one business entity, ha | ||
|---|---|---|---|
| The first ARAC of 2006, in thd. pcs | The second ARAC of 2016, in thd. pcs | Dynamics of changes in %, rounded to integers (2016 to 2006) | |
| Agricultural enterprises-total: | 6,930.1 | 6,018.0 | -13 % |
| Of them: | |||
| Large | 11,858.5 | 12,107.8 | -12% |
| Medium | |||
| Small | 3,740.0 | ||
| Microenterprises | 1,597.6 | ||
| Subsidiary agricultural enterprises | 390.9 | 1,749.2 | +4.47 times |
| Peasant (farming) enterprises | 102.6 | 268.9 | +2.34 times |
| Individual entrepreneurs | 106.2 | 140.0 | +32 % |
| Personal subsidiary enterprises-total | 0.4 | 0.7 | +75% |
| Of them: | |||
| In rural settlements | 0.6 | 0.8 | +33 % |
| In urban settlements and districts | 0.1 | 0.3 | +3 times |
| Non-profit associations of citizens-total | 15.1 | 14.6 | -4 % |
| Of them: | |||
| Horticultural | 15.3 | 14.6 | -5 % |
| Vegetable gardening | 12.0 | 10.0 | -17 % |
| Country | 17.9 | 16.0 | -11 % |
Source: Compiled by the author on the basis of the data of the first and second ARACs (Federal State Statistics Service, 2006, Federal State Statistics Service, 2016).
According to the official statistics, the area of land plots registered by the peasant (farming) enterprises in 2016 amounted to 2.888 thousand hectares, which was twice as much as planned (ARAC, 2016). Such growth trends make it possible to make an assumption about the evolution of the internal content of these business patterns. Thus, it becomes obvious that with the enlargement of the area of land there appears the need for hired labour and additional material and technical resources and hence the need for additional investments (Zhdanova, 2013). The private subsidiary farms also have an increase in land resources by 75%. At the same time, in rural settlements this size is close to 1 ha. Therefore, it can be assumed that the nature of the activities of such households will also change. On the contrary, the horticultural, gardening and country households tend to reduce the total area of land per one business entity.
Along with reciprocal processes: The reduction in the number of peasant (farming) enterprises and the enlargement of the total area of land per household, the authors consider it reasonable to outline the following features of the formation of new peasant (farming) enterprises:
Most of the beginning farmers register a peasant (farming) enterprise on the basis of their personal subsidiary enterprise, engaged in the commodity production of agricultural products;
Over 40% of farmers operate in the field of livestock and are registered as family livestock farms based on the use of personal labour;
Many new peasant (farming) enterprises are formed "due to state financial support, including grant support programs": A grant competition is usually 3-10 people per grant (Seleznev et al., 2016).
It is quite logical that the development processes, including the stability of informal institutions, influence the processes of transformations of the peasant (farming) enterprises, which thirty years ago at the beginning of market transformations were considered the future drivers of small business development.
The questions about the essence and economic nature of Russian peasant (farm) enterprises, as well as the ways and determinants of their development, remain the ones of the most controversial issues in Russian agrarian science.
One of the most complete justifications for the characteristics of the peasant (farming) enterprises was given by the Russian researcher Chayanov, who distinguished two main criteria of this business pattern: Its marketability and the absence of hired (alienable) labour. The peasant enterprises are defined by Chayanov as the "households based in the overwhelming part of the work done in them on the labour of the host family, without attracting any hired labour; in their pure form-they are the households that do not attract any hired labour at all and that cannot be hired by any person (Chayanov, 1992). From this point of view, the essential characteristics of the Chayanov's model of the peasant enterprise are contained not only in modern peasant (farming) enterprises, but also among such patterns as the individual entrepreneurs (IE), family farms, the private subsidiary farms of commodity type.
Another distinguishing feature of the "classical" Russian model of peasant (farming) enterprises was and, partly, is that the maximization of profit is not the main criterion of the utility function. In this case, the market economy theory cannot explain objectively the reason why such farms keep using their own land as a production factor, even in situations where it does not yield income. In the Russian context, the attitude toward the land at the micro level of rural areas is historically respectful. In modern conditions, this phenomenon can be explained from the standpoint of institutional theory: in particular, the nature of the tradition, established at the micro level of rural areas, to treat the land respectfully as a "breadwinner". Moreover, these traditions have become a part of the economic mentality and value system of the business entities over a long historical period, which is reflected in the methods of management of the modern peasant (farming) enterprises.
According to Chayanov, one of the conditions for the stability of the peasant (farming) enterprises is their ability to adapt to the economically inefficient activities by reducing the family consumption, as well as to take the independent decision on the degree of intensity of use of their combined family labour. Chayanov named this effect self-exploitation and according to him, "the degree of self-exploitation depends to a very great extent on the degree of encumbrance of the worker with the consumer demands of his family" (Chayanov, 1993). When such decisions become the components of the economic mentality of the business entities within the framework of a single enterprise, this can also be seen as an obvious manifestation of the specific informal institutions. In the Russian economy, such features are more characteristic to the private subsidiary farms, country and horticultural households and also for some modern peasant (farming) enterprises.
Moreover, Chayanov considered the peasant (farming) enterprises as a special type of socio-economic structure and noted that in a real economic life, there is rarely any one type of the structure, emphasizing, that the economists will "long, if not constantly", witness such coexistence of various economic forms. In recent years, the studies of the Russian scientists contain the viewpoints regarding the comparison of the business patterns and the economic structures (Frolova, 2011; Fadeeva, 2015; Gaysin, 2016).
The modern Russian farming differs significantly from the classical Chayanov's model of peasant (farming) enterprise, because, firstly, it functions in completely different historical and macroeconomic conditions, which is reflected in the change in the motivation of activity and the transformation of the economic mentality and system of values. The empirical analysis, performed by the authors, in the form of sample interviews shows that at present the individual business entities at the level of economic mentality identify and feel themselves, primarily, as an entrepreneur, as against a peasant (Ryazanova, 2015). Moreover, the transformation of perception influences the formation of new informal institutions and leads to a change in the objective-setting: For example, when the persons are registered as farmers solely to accumulate the land for speculative purposes or such persons are profit-oriented in the short-term run, while the payback period in the field of agriculture is much higher than in other spheres of activity.
The issue on the ways of further transformation of the peasant (farming) enterprises and the determinants of their development remains one of the most controversial problems of the Russian agrarian science. Therefore, it is important to identify the main groups of factors that affect the transformation of the peasant (farming) enterprises.
In modern conditions, the following groups of factors of sustainability of the peasant (farming) enterprises can be distinguished:
Firstly, the geopolitical ones, including the policy of sanctions. So, the "import ban for a number of food products resulted in the reduction in their supply in the domestic market" (Amirova & Sargina, 2016). On the other hand, this contributed to the activation of the activities of the small business patterns, which in accordance with the laws of supply and demand respond more dynamically to the existing economic challenges of this kind and are able not only to meet the needs of the domestic market, but also "to switch to new markets, participating in value chains" in the production of agricultural goods (Ustyuzhanina, 2016).
Secondly, the institutional factors, including a system of state support formal institutions. The main program document defining the benchmarks for the transformations in the agro industrial sector of the Russian economy is currently the State Program for the Development of Agriculture and Regulation of Agricultural, Raw Materials and Food Markets for 2013-2020. The support of small business patterns is carried out within the framework of the subprogram "Support of Small Business Patterns" (State Program, 2012). A significant role in recent years has been played by the grant support and the implementation of the "Beginning Farmer" subprogram. (State Program, 2012) In 2016, the average size of the grant for one peasant (farming) enterprise of a beginning farmer amounted to 1.26 million rubbles, which was 10.5% more than in 2015 (1.14 million rubbles) and 21% more than the level of 2013 (1.04 million rubbles). The highest average value of one grant was recorded in the Krasnoyarsk Territory-2.89 million rubbles, in Magadan & Murmansk regions-1.75 million rubbles (National Report, 2016).
The specific role of the factors of sustainability of the peasant (farming) enterprises was played by the informal institutions. In fact, it were the "informal institutions that ensured the "survival" of the farms in conditions of macroeconomic instability and financial" turbulence".
Thirdly, Social factors play the significant role in the transformation of modern peasant (farming) enterprises. The social factors, including the solution of the problem of employment at the micro level of rural settlements. For example, in 2016, due to the "Beginning Farmer" program, more than 5,000 new jobs were created in the rural areas.
At the same time, these factors can also play a negative role: For example, they may negatively affect the availability of the loans for the peasant (farming) enterprises and the credit conditions. The lack of a "systematic approach to the support of the system of cooperative relations also increases the vulnerability of the peasant (farming) enterprises" (Maksimova & Bondarenko, 2017). A negative effect on the influence of social factors is also observed: For example, the general trends in the reduction and obsolescence of the rural population; the loss of qualified personnel with the experience in management. The outflow of youth from the village leads to a gradual loss of the historical traditions of collective interrelationships in the course of land farming. The negative effects complement the imperfection of the informal institution of trust at the micro level of potential agricultural manufacturers, who are often sceptical and wary of on-going reforms. Therefore, in the opinion of the authors, the further trajectory of the transformation of the Russian peasant (farming) enterprises will depend on the factors dominating the economic mentality of the agricultural manufacturers.
Thus, based on the study, the following conclusions can be drawn:
First, the analysis of theoretical approaches in studying the characteristics of Russian small business patterns allows asserting that modern farms include both features of peasant (farming) enterprises, studied by Chayanov and the properties of farms of the "Western type". The first ones include: The use of family labour, the commodity character, the independent determination of the measure of "self-exploitation" and the personal consumption, a special attitude to the land resources as a factor of production. The second ones include: The commodity nature of production, the main motivation of the activity: Profit making, the possibility of use of the hired labour.
Secondly, the results of the second ARAC of 2016 show that the institutional transformation of the modern peasant (farming) enterprises during the last ten years has led to a large quantitative reduction in the small business patterns. At the same time, there are obvious processes of enlargement of the total land area per one economic entity.
Thirdly, the empirical data suggest that the modern farms in the Russian economy are multifunctional: In particular, they combine the economic and socio-cultural functions in the process of economic activity. The economic function should include: The production of agricultural products; the satisfaction of the differentiated demand of the Russian consumer in connection with the change in the general trajectory of consumer preferences towards the consumption of the environmentally friendly products; the creation of a competitive environment in the agrarian economy among the agricultural manufacturers. At the same time, the peasant (farming) enterprises perform the socio-cultural and settlement-forming functions in the territories of production activities of such farms: They act as the points of preservation and development of the rural settlements; they contribute to solving the problem of rural employment; they are the basis for the preservation of the cultural traditions and rural way of life.
In modern conditions, the following groups of factors of sustainability of the peasant (farming) enterprises can be distinguished:
Firstly, the geopolitical ones, including the policy of sanctions. So, the "import ban for a number of food products resulted in the reduction in their supply in the domestic market" (Amirova & Sargina, 2016). On the other hand, this contributed to the activation of the activities of the small business patterns, which in accordance with the laws of supply and demand respond more dynamically to the existing economic challenges of this kind and are able not only to meet the needs of the domestic market, but also "to switch to new markets, participating in value chains" in the production of agricultural goods (Ustyuzhanina, 2016).
Secondly, the institutional factors, including a system of state support formal institutions. The main program document defining the benchmarks for the transformations in the agro industrial sector of the Russian economy is currently the State Program for the Development of Agriculture and Regulation of Agricultural, Raw Materials and Food Markets for 2013-2020. The support of small business patterns is carried out within the framework of the subprogram "Support of Small Business Patterns" (State Program, 2012). A significant role in recent years has been played by the grant support and the implementation of the "Beginning Farmer" subprogram (State Program for the Development of Agriculture and Regulation of Markets for Agricultural Products, Raw Materials and Food for 2013-2020, 2012). In 2016, the average size of the grant for one peasant (farming) enterprise of a beginning farmer amounted to 1.26 million rubbles, which was 10.5% more than in 2015 (1.14 million rubbles) and 21% more than the level of 2013 (1.04 million rubbles). The highest average value of one grant was recorded in the Krasnoyarsk Territory-2.89 million rubbles, in Magadan and Murmansk regions-1.75 million rubbles (National Report, 2016).
At the same time, according to the authors, the informal institutions continue to play an important role in the sustainability and specificity of small business patterns, including: Traditions, customs and established practices of management and the specifics of informal mutual assistance and cooperation. Therefore, in the course of further institutional transformation, it is important to take into account not only the formation and the changes of formal institutions with the prescribed rules of conduct, but also the sustainability of the informal institutions.
This study was financed by a grant from the Plekhanov Russian University of Economics.