Cooperatives in Action: Agriculture in the former East German state

Over the course of the history of this blog, I have repeatedly celebrated the benefits of cooperative economics[1] by bringing up exciting examples of collaborative projects going on throughout Upstate. However, I have never presented an example of how cooperative enterprise operates when it dominates an entire sector of an economy. The simple reason for this failure is the fact that I didn’t know of any such examples. If you will, I would like to look a bit further a field for my discussion today because all of that has changed since I began studying Eastern Europe.

The topic of this discussion will be the cooperative agricultural enterprises that have dominated what was once the German Democratic Republic (the GDR), better known to us as East Germany, since the fall of the Berlin Wall. Before we move any further, I would it to be known outright that I am not a supporter of state-controlled economics in any form and have previously written my opposition to the state meddling in the economic sphere[2]. I do not intend for this essay to be a validation of a command economy or a police state. What I do intend is to point out how the altered values of cooperative enterprises vis-à-vis purely capitalistic enterprises are highly beneficial to communities under severe economic duress.

Cooperatives in the ex-GDR are the direct descendents of collectives called “LPGs” during the communist era[3]. Originally, the LPG was created out of a coalescence of agricultural cooperatives created in the 1940s and 50s—these institutions were made of freely associated small farmers who pooled their mechanical and technical needs. Pressure from the State eventually forced greater collectivization upon these cooperatives, creating the LPG, but were never able to undermine the ultimate nature of the cooperative: it was an enterprise owned and operated by those who worked it, not the State. Despite heavy control by the State apparatus, the LPG maintained greater autonomy than perhaps any other aspect of the GDR economy.

With the dissolution of the GDR in 1990, there was a concerted effort by the Federal Republic of Germany (the FRG), or West Germany, to eliminate all traces of the command economy. They were, however, hampered in the case of the LPG because of the fact that they were still technically owned by the members. Thus, the members of the LPGs were given the choice of remaining within the collective or becoming independent farmers. Remarkably, the vast majority of LPG members instead chose to reform their collectives back into the cooperatives they once were. The State began applying immense pressure upon these newly remade cooperatives: denying access to loans, refusing to renew leases on state owned lands, limiting their ability to gain or change quotas (especially in milk production). Simultaneously, the cooperatives were faced with the complete disintegration of the East German economy—the factories they once sold food too closed, their markets were flooded with Western produce, prices rose but profits remained stable. In general, by the mid-‘90s virtually no East German industry remained; what had been considered the world’s 10th strongest economy in 1989, by 1994 had been completely dismantled for the profit of the West.

But the cooperatives survived.

Not only that, but they had stood directly against the current of unemployment and decay that had swept East Germany: “an editorial in the Neue Landwirtschaft… calculates that between 1990 and 1993 an average of 25,000 workers were employed by cooperatives that were not actually needed… the fact remains that cooperatives have provided far more jobs both in absolute numbers and in relation to the surface cultivated than other types of farms” (Buechler and Buchler 178). Despite the freefall of the ex-GDR economy, “the statistics on agricultural cooperatives show a progressive stabilization of their numbers since the conversion of collectives was completed at the end of 1991. Their numbers continued to decrease between 1992 and 1998. That decrease slowed from 10.2% between 1992 and 1995 to 7.4% between 1995 and 1998… Given the prevalence of plan closings in other economic sectors, ‘the stability of the successor enterprises to the LPG is quite spectacular’ ” (ibid, 187).

Coming from a region of the world where absentee-ownership of all major sectors of the economy meant that we were particularly susceptible to mass layoffs, it is difficult to understand the ideological and economic reasons for the cooperatives maintenance of swollen employment rolls. There are, as I see it, three reasons for this phenomenon: 1) the basic nature of a cooperative, 2) new Capitalist values and 3) long held Cooperative-Socialist values.

Simply put, when a company is owned by those who work in it, it is far more difficult to lay them off. Managers recognize that their authority will disappear if the votes for them vanish. Simply put, in a cooperative lay-offs become the ultimate last resort; in East Germany, managers would employ every possible alternative before letting worker-owners go. The structure of the cooperative further influences continued employment because of the direct ties between management and labor: managers work with, live with (in the communist era) and are, in effect, part of the labor force. Many emerge from within the ranks of the cooperative and must maintain those ties in order to continue to enjoy re-election.

Secondly, the arrival of Capitalism put an emphasis upon greatest profit for the owners of a company; for the first time profit was king and the East Germans realized it quickly. For the cooperative manager unlike the corporate farm manager or the private farmer, the laborers in the farm are the ultimate reason for the farm’s existence. They have no higher master and no boss to answer to. Thus, the value of making profit for the owners and the reality of sending your owners into absolute poverty does not jive well.

Finally, the cooperative farm managers were steeped in values that were not of Capitalist origin, but instead harkened back to Socialist or pre-Socialist Cooperative days. As Buechler and Buechler write: “the cooperatives still hold on to the socialist ideals whereby priority is given to livelihood consideration for all over abstract principles of profit or economic aggrandizement of the management. They have done this at the cost of maintaining a modest image and relatively low compensation of their managers” (188). Simply put, the ideals of the Cooperative are real for the East Germans and have a measurable, positive influence upon an otherwise devastated economy.

What does this ponderous essay have to do with Upstate New York and our economic problems? For all of our troubles, we have had nothing of the economic destruction of the ex-GDR, yet at the same time our problems echo theirs and we can learn from both their mistakes and their successes. The value of cooperative enterprises, which is completely ignored by American policymakers and economists, to stabilize economies and protect jobs is the greatest lesson for those of us on this side of the Atlantic. The greatest difficulty that would face us in this regard is the fact that a cooperative enterprise benefits the workers, not the stockbrokers, corporate masters or other powerful elements in our society, thus there will always be little impetus for official aid for such experiments. However, we as citizens, as human beings for whom jobs are more important that corporate dividends, might begin to look for new ideas and new answers to our old problems. Perhaps its time that we look to the beleagured former Soviet Bloc for the solutions they’ve found to our shared problems.

-Posted by Jesse

[1] I have featured a potential purchasing cooperative in Saranac Lake, a Boston-area neighborhood initiative, local money systems in Ithaca, a cooperative kitchen in Washington County and my attempts to join “Cooperative Ownership Society” in Syracuse.
[2] For instance, I wrote Buffalo and New Orleans: Sisters in Suffering about how reliance upon Big Government and Big Corporations had betrayed those two cities and a more straightforward essay entitled The Promise of Government Development: Hiding Behind a Leaky Dike.
[3] The primary source for this essay is Contesting Agriculture: Cooperativism and Privatization in the New Eastern Germany by Hans C. and Judith-Maria Buechler (2002)