Kazakhstan's Countryside Needs Its Own Stolypin

In a country where the rural share of the population has remained unchanged for many years at roughly half of the total, while agriculture's contribution to GDP keeps falling, the development of agriculture is the most pressing question of all. This is especially so given that labor productivity and incomes in agriculture are far lower than in industry and in cities, as the statistics clearly show.

Finally, compare the share of self-employed people in the rural population with their share of rural income: the 69.9% of the rural population who are self-employed account for just 17.4% of rural income. This points to hidden unemployment in the countryside. All of these figures are characteristic features of agrarian overpopulation, a situation in which the actual working-age population exceeds the real need for it.

According to official statistics, 1.519 million people were registered as self-employed in agriculture, forestry and fishing in 2012. Statistical reporting does not say how many of these one and a half million people live off subsistence farming. But given that in 2012, 557,500 families engaged in collective gardening on 66,100 hectares, one may assume that they account for a significant share.

It follows that the foundation of our agriculture is a poor peasantry working on scraps of land, which shapes some of the distinctive features of our agricultural sector. With agriculture in this state, steady and sustainable national development is impossible.

It would be unfair to claim that the state ignores the problems of agriculture. Two programs have already been implemented, and a third is under way: the Program for the Development of the Agro-Industrial Complex of the Republic of Kazakhstan for 2013–2020, "Agribusiness 2020." The program gives a harsh assessment of the state of our agriculture: "…the low level of labor productivity in the sector, the imperfection of the technologies used, and the small scale of production do not allow farming on an intensive basis, the fullest possible use of material, labor and other resources, or compliance with environmental requirements." On the basis of this assessment, the program set a goal: "creating conditions for increasing the competitiveness of agro-industrial complex entities of the Republic of Kazakhstan."

What strikes one on reading the program is that, while describing the current state of affairs in detail, its authors pay no attention to agrarian overpopulation, the main cause of the situation in agriculture. A clarification: by agrarian overpopulation we mean an excess of the actual working-age population over the number actually needed. It manifests itself not only in open but also in hidden unemployment, and in low labor productivity.

A natural question arises: can the stated goal be achieved under these conditions? Another important question: what will happen if the problems of agrarian development are not resolved?

The main instrument of the adopted state program is subsidization. Everything is subsidized: loan rates, the cost of planting orchards and vegetable gardens, the cost of breeding livestock, the cost of educational services, and so on and so forth. But by ignoring agrarian overpopulation, the program overlooks the fact that a population gripped by poverty is unreceptive to investment aimed at intensifying production, which may pay off only after several years. These people are preoccupied with survival today.

If you look at the figure below, you can see, for example, that for household farms the more pressing problem is securing feed, not improving the breeding stock. Yet the program makes no provision for subsidizing feed.

In fact, the same analysis can be applied to every type of subsidy built into the program. Accordingly, however fully the program is implemented, it will have little effect on productivity and, more importantly, on the living standards of the bulk of the rural population. What is more, it could result in an even deeper social and economic decline. Nor should growth in output and investment be misleading. For example, before the first Russian revolution, agricultural output in the Russian Empire was growing by an average of 2.5% a year, and investment by 2%. But amid overall growth in output and living standards, the gap between the poor and the prosperous rural population was widening.

Even more important, the program creates additional competitive advantages for medium-sized and large agricultural producers, which are more receptive to subsidies, over small producers and household farms. This means the former will squeeze out the latter. The program does not even consider this scenario, yet the released labor will have to be put to work somehow. Some of it (most likely a small share) will find jobs in the countryside, while the rest will migrate to cities that are not ready to receive them.

Resolving the agrarian question requires a comprehensive approach, and a program for developing the agrarian sector must be an integral part of the country's overall development strategy. Moreover, as history teaches us, abandoning such an approach can lead to the gravest consequences. A case in point is post-reform tsarist Russia, where policymakers addressed not the essence of the "agrarian question" (the same agrarian overpopulation) but only its outward manifestations.

The largest and most comprehensive attempt to resolve the agrarian question was made by Pyotr Stolypin. Under the laws he enacted, the peasant was granted equal rights with other categories of the population, was allowed to leave the village commune freely, was freed from restrictions on movement within the country, and was permitted to separate his farm, together with his allotted land, from the commune. In addition, crown and state lands were transferred to the Peasant Land Bank for subsequent sale to peasants on credit. Finally, the resettlement of peasants beyond the Urals, to Siberia, Central Asia and Kazakhstan, was encouraged. Nevertheless, Stolypin failed to resolve the problem of agrarian overpopulation and thereby eliminate the causes of peasant poverty. By 1914, the rural population, even after accounting for resettlement and migration to cities, had grown by an estimated 4 million people compared with 1909. In other words, the problem of overpopulation not only failed to ease but actually intensified. The reason is that Stolypin did not take into account that agrarian overpopulation can be solved only in tandem with industrial growth and the development of the urban economy. Far too little was done in those areas.

In general, the "agrarian question" in post-reform Russia was addressed belatedly, with long delays; its consideration was accompanied by bureaucratic red tape and hampered by interagency disputes. As a result, the delay in resolving the peasant question gave birth to the First Russian Revolution of 1905–1907. The February Revolution, predominantly an intelligentsia affair (if we count among the intelligentsia not only the Kadets and Octobrists but also the generals of the Russian army, who almost unanimously came out in favor of Nicholas II's abdication), proved possible only thanks to the support of the peasantry or, at the very least, its neutrality.

Returning to the present day, in our view Kazakhstan first of all needs a broad public discussion of the state of affairs in the countryside, similar to the Special Conference on the Needs of the Agricultural Industry held at the beginning of the twentieth century. Pavel Milyukov, the leader of the Kadet party, wrote of it: "One can confidently expect that the very fact of a broad exchange of opinions resulting from the survey contributed to a very significant degree to a further convergence of views on the tasks of domestic zemstvo policy and, no less important, that this exchange of opinions and the publicity that the debates in the committees received must also have leveled out the mood of the public circles involved in the discussion. The overwhelming majority of committee members left the sessions different people from those who had entered: better informed, more developed and better educated in the civic sense."

Our vision of what could be included in the Program is set out below.

Developing financial support measures for the self-employed population

In this area, the optimal form of organization is cooperation among small agricultural producers. Voluntary cooperatives can receive state support to address the problems of small producers, in particular to attract financing for building storage facilities, jointly purchasing fertilizers and seeds wholesale, and acquiring machinery for shared use.

Incidentally, the development of credit cooperation proved to be one of the most successful of Stolypin's reforms.

Developing financial instruments for the self-employed population

Credit resources are inaccessible to household farms. The measures provided for by the Program (interest rate subsidies, state guarantees and insurance policies) are aimed at medium-sized and large producers.

First, the circulation of promissory notes needs to be improved. This financial instrument was popular as far back as tsarist times. The same cooperatives can serve as conduits for promissory notes in rural settlements. For example, small producers could pay for fuel, fertilizers and seeds with their own promissory notes and settle them after selling their produce.

Second, commodity credit should be developed, including through warehouse receipts issued by produce storage facilities, which banks would accept as collateral. At present, inventories are not accepted as collateral by lending institutions, yet inventories are the main assets of most agricultural producers.

Developing urban agglomerations and enabling the resettlement of the rural population to suburbs

We already have programs for developing food belts around Astana and Almaty, and a program for developing the Almaty and Astana agglomerations will soon appear, but the shortcoming of all these programs is that they are not linked to one another.

The development of urban agglomerations addresses two tasks:

• creating sales markets for small agricultural producers;

• tackling overpopulation in rural areas.

Small producers find it hard to take their goods to the country's distant markets; they are oriented more toward nearby cities or Almaty and Astana, which offer higher prices. On the other hand, the development of urban agglomerations will make it possible to employ the unemployed rural population.

It is also necessary to implement without delay the decisions already adopted on developing infrastructure around our largest cities:

• organizing cooperation among small agricultural producers for the joint sale of finished products in the markets of Astana and Almaty;

• building affordable housing in the suburbs of Astana and Almaty, allocating plots with infrastructure for individual housing construction, and developing a mechanism for providing all of this to migrants from rural areas;

• setting up free training centers to teach skills in demand in large cities.

Subsidizing the construction of industrial facilities in rural areas facing overpopulation

The Program of Accelerated Industrial and Innovative Development (PAIID) is currently focused on building large facilities near sources of raw materials (petrochemical plants in western Kazakhstan, the Balkhash thermal power plant, and so on). However, large-scale programs are not being implemented in densely populated regions with a high share of rural population (southern and northern Kazakhstan). The construction of production facilities is calculated on the basis of many parameters, yet the question of labor resources is rarely taken into account in decision-making, even though the costs of resettlement and infrastructure creation may be higher than the costs of subsidizing the transport of raw materials to the plants.

It is necessary to encourage the creation of small production facilities in rural areas, for example for producing feed, the primary processing of agricultural products, and so on and so forth, which will create additional jobs in the countryside.

In any case, the agrarian question cannot be resolved by a single program: it requires a comprehensive, well-thought-out approach, with in-depth economic calculations and factor analysis of the impact of various processes on program implementation.

Today, the words of the well-known prerevolutionary economist Pyotr Migulin, written about the response to the aftermath of the 1891 crop failure, could be applied to our agricultural policy: "What, then, has the government done to prevent such disasters in the future? Absolutely nothing. A suitable amount of paper was covered in writing, under various reference numbers, there was much talk at various meetings, and many very pleasant business trips to the localities were made to study the disaster <…>, but the matter did not advance a single step. The peasants were left with their land shortage, with their beggarly allotments, with no possibility of moving to intensive farming, to agricultural industry. <…>. Everything was left to the will of God. If God grants rain in good time to all parts of the vast Russian Empire, the harvest is assured, and consequently there is nothing to worry about."

On the whole, one can state that modern Kazakhstan is reproducing the agrarian policy of post-reform Russia with astonishing precision and consistency, with the sole exception that public opinion is not taken into account. And one may assume that as long as the problem of agrarian overpopulation is not addressed energetically and in good time, the risks of social upheaval rise, and such upheaval could bring many misfortunes to our country. It is worth learning this lesson of history so as not to repeat the same mistakes.