Land reform in Russia - A shiny free-market blueprint. But will it work?

Russia is making a big symbolic break with the past by freeing the market in agricultural land. Turning theory into practice will be harder

A TOTEM lies in fragments. State control of land symbolised Soviet communism. After a wrenching collectivisation that cost millions of lives, huge farms, managed either directly by the state or through sham collectives, gobbled resources and dribbled results. Soviet agriculture was a byword for waste, inefficiency and farm labourers' drunkenness. Now the land is to be freed for sale to whoever (except foreigners, who may only lease it) thinks he can run it best.

One big shift has already happened since 1991. Nearly 90% of Russia's 190m hectares (470m acres) of agricultural land is now privately owned. But without a legal framework for buying and selling, the land market is small, bureaucratic and murky. For private farmers, consolidating small plots into sensibly sized holdings is all but impossible. So is using land to borrow money for new equipment. Though some remaining big farms have been working better in recent years, and harvests are up, the number of individual farmers, who are wide open to harassment, both criminal and official, has declined. Russia's villages, home to more than a fifth of its people, are among the poorest and most depressing places in the country. Now, following a law on urban land last year, a new bill that has just been passed by the Duma, the lower house of parliament, has set a legal framework for the sale and purchase of farmland.

It all sounds wonderful. Land will now be, more or less, an asset like any other. This marks a huge psychological move from the Soviet past, and from earlier centuries of serfdom. But as with many impressive reforms of the past two years, there are still tricky obstacles before splendid theory can change dismal practice.

The biggest snags, as usual, are bureaucratic: the people needed to make the reforms happen are those who have the biggest interest in blocking them. Though stunted, the land market has been a lucrative business for officialdom.

Even optimists agree it will take years before a real land market develops; pessimists think of a generation. For a start, ownership is unclear. There is no proper land registry, detailing the physical boundaries of each piece of land. The state land registry is short of cash and people. Optimists there hope to have a publicly accessible database in about five years' time.

Then there is bureaucratic infighting. There is no single authority dealing with the land market. Among the powerful bodies wanting their slice of the pie are the ministries of tax, justice and state property, and the state construction committee. That confusion is replicated at a local level.

Last year's urban land code illustrates the problem. It covers the most attractive land for investors, but has had little practical effect. Parts of the code are so badly drafted and vague that even experts argue about what they mean. Local government still has huge discretion. In Moscow, by far the richest part of the country, the city authorities have barely implemented the new law at all. That may be illegal, but nobody has taken them to court.

One reason is that for investors tough and wily enough to be in Russia at all, the old system works well enough. Despite its greedy and interfering city government, Moscow is currently enjoying a notable construction boom. Those who want to invest in the countryside have been doing so anyway, leasing the land they need, sometimes with impressive results. Yet for all but the biggest and most skilful, the problems are legion.

No garden of Eden If anywhere in Russia should be an agricultural success story it is the Kuban, a region on the Black Sea coast with fertile soil, a balmy climate, a sturdy peasant tradition and easy access to the outside world. In Merchanskoye, a village about an hour's drive from the coast, a bunch of private Russian businessmen has leased 2,800 hectares of land from the members of a defunct collective farm, to grow vegetables.

A year ago, hopes were high. The new managers paid wages punctually, for the first time in years. The neatly tended fields were in sharp contrast to the ruined buildings and fallow land roundabout. Now things look bleaker. Neglected drains turned out to have become blocked, and the land got waterlogged during the autumn rains. The most valuable crop, rice, was not fully harvested. Russian food-processing companies are proving capricious customers. The biggest problem, though, is a shortage of good workers: among 150 jobs, 12 are unfilled, and some workers commute from 60km (37 miles) away. Life in the village is bleak, and many of the best have moved to the town. Those who are left mostly prefer subsistence farming, sometimes supplemented by pilfering.

The new manager of the Merchanskoye farm, Alexander Ksendzuk, thinks of contract labour from abroad. He is intrigued by a news report from a farm in the neighbouring Stavropol region that uses Chinese workers, willing to toil from dawn to dusk for $100 per month. And the new land code? “Even if we could buy the land, we wouldn't want to,” he says. It costs little to lease, and there is plenty more if he needs it. His main hope is government subsidies and protection—these, he says, are what make agriculture work properly in other countries.

After the collapse of the Russian economy in 1998, the IMF rode to the rescue, though its $22.5 billion bail-out did little to bring stability. In August 1998 the Russian government announced a devaluation of the rouble, debt defaults and a bank bail-out. The reforms boosted Russia's trade competitiveness, while high prices for oil and gas (the country's two main exports) saw GDP rise after plunging in the early 1990s. The arrival of Vladimir Putin as Russia's president in 2000 further cheered investors.

Growth was strong in 2001, but problems remain. Falling oil prices could dampen the boom, and productivity growth has been low. Moreover, the country's infrastructure desperately needs investment, its banks are unreformed (causing companies to put their roubles in corporate bonds) and its trade unions are restless. Land reform, though underway, faces huge obstacles.

Nonetheless, Mr Putin, who wants more economic reform, has done a good job managing Russia's (shrinking) foreign debt. In March 2002, he also replaced the ineffective head of Russia's central bank. America's designation of Russia as a market economy will help smooth its path to eventual membership of the World Trade Organisation.

Much of the problem in Russia is with the people. Instead of marveling at someone who owns some land, makes it productive and makes a nice profit they are bitter, jealous and envious. I have read an account of peasants actually killing many of a collective farm's cows. The owner of the farm was finally run out of town.

In Soviet times, everything had a fair price. The worst thing, they were taught, was to be a middleman. The only honest work was done at the assembly line or in a machine shop. Hopefully, there is a new generation, leaving these warped values behind.

This marks a huge psychological move from the Soviet past, and from earlier centuries of serfdom.

Except that they fail to notice that under Nicholus II most of the Russian peasantry had their own land, deed in hand...especially when Stalipin got done with it. As for the blocking of the land, the Agrarian party has a lot to do with it....farmers who do not want to compete.

"..instead they are bitter, jealous and envious"

I'm reminded of a story describing the difference between a German and a Russian peasant.

The German looks down the road at his neighbor's beautiful farm and shakes his fist, crying "If it takes all of my life, I will build a better farm than his".

The Russian peasant looks down the road at his neighbor's beautiful farm and shakes his fist, "If it takes all my life, I'll see to it that he lives in a miserable hovel just like me"

LOL. Alas, nowdays, the German, would raise his fist half way and say "I would shake my fist but it's not in my contract, besides I am taking urlaub for the next four weeks and it's always been done this way why would we do it any different?"

And the French peasant howls, "If it takes all of my life, I'm going to get a government subsidy big enough to buy a better condo in Paris than his!"

ownership is unclear. There is no proper land registry, detailing the physical boundaries of each piece of land. The state land registry is short of cash and people. Optimists there hope to have a publicly accessible database in about five years' time.

This can be done, it need not be expensive, and it need not take so long. All it requires is agreement amongst the elected officials, one clerk who knows what to do, and 3 or 4 other clerks who can stay on the job for a while. Simple, no?

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