Agriculture and Human Values 20: 241252, 2003. 2003 Kluwer Academic Publishers. Printed in the Netherlands.

Building and destroying social capital: The case of cooperative movements in Denmark and Poland
Jarka Chloupkova,1 Gunnar Lind Haase Svendsen,2 and Gert Tinggaard Svendsen3
1 The Royal Veterinary and Agricultural University, Copenhagen, Denmark; 2 The Danish Centre for Rural Research and Development, Esbjerg, Denmark; 3 The Aarhus School of Business, Prismet, Aarhus C, Denmark

Accepted in revised form November 30, 2002

Abstract. Social capital, measured as the level of trust among people, may be regarded as a new production factor alongside the traditional ones of human and physical capital. With appropriate levels of social capital, monitoring and transaction costs can be saved and thus economic growth stimulated. Via linking social capital to rural development and comparing the cases of agricultural cooperative movements in Denmark and Poland, this paper identies possible roots of building social capital and suggests that social capital was built through a lengthy process in both countries during the 19th century. However, the comparison of the present level of social capital indicates that the level of social capital is signicantly higher in Denmark than in Poland. The paper concludes that the reason for this difference is the fact that the original accumulation of social capital in Poland was destroyed by the communist regime. Key words: Capitalism, Communism, Denmark, Poland, Rural development, Social capital Introduction Literature on social capital mentions that totalitarian regimes (e.g., communism) destroy social capital (Paldam and Svendsen, 2000). Putnam (1993) argues that there is a correlation between time of dictatorship and destruction of trust and cooperation. It is also mentioned that in post communist countries, there is a widespread tendency toward passive reliance on the state (Putnam, 1995). The heavy state intervention in centrally planned economies meant that the state made almost all decisions and coerced people into doing certain things. There was no room for entrepreneurship, experiments, and voluntary organization into social groups (see also Fukuyama, 1995). Thus, Paldam and Svendsen (2002) suggest that the level of social capital has decreased in the former communist countries of Central and Eastern Europe (CEEC). Social capital is dened as mutual trust and how effectively people work together, i.e., transaction costs are lowered because informal self-enforcement of contracts can take place without third party enforcement. Because agents in this way can save monitoring and transaction costs, social capital may also be regarded as a new production factor alongside the traditional ones of human and physical capital (Coleman, 1988). Social capital has not been measured in any satisfactory way yet (Paldam, 2000; Svendsen, 2003). Thus, the new data collections from Denmark and Poland in this paper attempt to ll this gap. The implications of this social capital analysis are preliminary suggestions only, but they do help to address the urgent need for more research into the rapidly expanding area of social capital. For example, earlier work such as Bonanno (1993) has not taken social capital into account but has rather focused on elements such as homogeneity of the agricultural sector, the role of the market, and changing social stratications of rural regions. Thus, it is the purpose of this paper to suggest the link between social capital and rural development, rather than undertaking strict chronological comparison in cooperative movements. This is achieved via two approaches. Firstly, the paper identies possible roots of building social capital by using the cases of Denmark and Poland. For the time being, social capital cannot be measured directly, therefore various proxies have been suggested for its conceptualization (see Paldam, 2000). Based on the fact that, during the 19th century, Denmark and Poland were both agricultural countries with strong traditions of private farming and cooperative movements encompassing a major part of the rural population, the paper utilizes the proxy of voluntary agricultural cooperatives. Thus, the paper traces how stocks of social capital in the form of peasant cooperatives initially were formed bottom-up in 19th century Europe, as a buffer against uncontrolled capitalism (section Early agricultural cooperatives in Europe); and how, specically, social capital was built and

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maintained by agricultural cooperative movements in Denmark and Poland during the 19th and early 20th century (section Cooperative movements in Denmark and Poland). Secondly, the paper illustrates that the present level of social capital in Denmark and Poland differs signicantly. At present, the level of social capital is signicantly higher in Denmark than in Poland. It is argued that this difference can be explained by the fact that communism was introduced in Poland whereas controlled capitalism and democracy continued unhindered in Denmark. As Putnam (1993) argues, social capital takes a long time to build (see also Fukuyama, 1995). Therefore, despite the relatively fast economic transformation, the level of social capital in Poland has not changed signicantly since 1989. When assessing the economic and social situation in the Central and Eastern European countries (CEEC), Mlcoch (2000) conrms Putnams ndings. These ndings are documented in a questionnaire survey in Denmark and Poland from 2000 and 2001 (section Levels of social capital in Denmark and Poland). Finally, the paper suggests that the reason for this difference in social capital is the fact that the original accumulation of social capital in Poland was destroyed by the communist regime (section Destroying social capital).

Early agricultural cooperatives in Europe Historical evidence shows that inclusive network cooperation based on trust and regular face-to-face interaction i.e., positive social capital has been one of the crucial means by which small farmers have managed to survive. Hence, in many European countries, prior to the upswing of a regular cooperative movement, agriculture was controlled by middlemen, who discouraged and often impoverished the farmer, while at the same time exploiting the consumer. Lacking the immediate alternative of marketing his produce, the farmer had to market his produce through these middlemen. However, if the farmer would be able to carry on all the necessary tasks, such as making butter and cheese and slaughtering animals, his situation would improve (Haagard, 1911). As capitalism developed, and larger companies were selling inputs to farmers and buying their produce, the farmer with the relatively small bargaining position had to protect himself from being exploited. So we see that a wide-spread counter-reaction to capitalistic exploitation entailed that farmers pooled their buying power in order to attract lower prices from suppliers. By grouping, farmers also pooled

their selling power, so that on the market one farmer could not be played off against the other. This process is clearly evidenced in Danish sources (e.g., Sonne, 1867; Haagard, 1911; Christensen, 1983), including Danish agricultural journals. Likewise, Thugutt (1937), Inglot (1966), and Maliszewski (1995) support the claim that the birth of the Polish cooperative sector happened as a reaction to the transformation of social structures in early capitalism. Capital concentration and accumulation, industrial specialization, and changes in agriculture were among macro level factors that led to wide-spread proletarianization in Europe during the 19th and early 20th century, in the country-side as well as in urban areas. The relatively poor private small-holders and farmers had no organization defending them against the upper class and from the exploitation and competition of the capitalists. This stimulated the development of agricultural cooperatives. For example, the cooperative wholesale movement in Denmark from 1866 inspired by the rst cooperative wholesale society in Rochdale, England, 1844 was established as a declared anti-capitalistic reaction against class privileges and monopolies (Sonne, 1867: 13). And, likewise, during the years before and during World War I, the inuential Danish agricultural cooperative movement (Andelsbevgelsen) declared war on American inspired industrial rings. These monopoly companies kept on increasing prices, particularly at the disadvantage of the economically less liquid, Danish rural population. This they did by imposing a hidden and illegal tax on Danish peasants, as one of the pioneer cooperative leaders declared (cf. Severin Jrgensen in Andelsbladet, 1904). Also in the CEEC, various cooperative movements were formed as a buffer against harsh capitalism. Thus, the rst wholesale and credit cooperative in continental Europe, Farmers Society (Spolok Gasdovsk), was established in Slovakia in February 1845, only 90 days after Rochdale (Kaser and Radice, 1985: 283). And in the Czech countryside, a cooperative movement grew strong, especially after 1919 (Kaser and Radice, 1985: 282). Other examples of early Eastern European agricultural cooperatives are Agraria, established in 1922 in Voivodina, Gospodarska Sloga in Croatia (1935), and the Bulgarian Agrarian Cooperative Bank, founded in the late 1920s (Kaser and Radice, 1985: 180).

Cooperative movements in Denmark and Poland A cooperative is dened by the International Cooperative Alliance as a group of people who join together

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in a common undertaking, in accord with the six principles that are as follows (ICA, 1999): (i) Membership is open and voluntary. (ii) There is democratic control, usually on the basis of one man, one vote. (iii) Interest on share capital is limited. (iv) There is equitable distribution of any surplus, usually in proportion to transaction with or work done in the society. (v) Cooperatives devote some part of their surpluses to education. (vi) Cooperatives cooperate among themselves. Thus the cooperative process is basically an interaction between: (a) cooperatively committed members, (b) cooperative values inherited from the past and expressed in principles, (c) practical cooperative structures, also inherited from the past, and (d) the institutional environment where cooperatives operate. In the following, we will show how social capital building, the outcome of inclusive and democratic forms of network cooperation, has taken place within agricultural cooperative movements in Denmark and Poland before World War II. The Danish cooperative movement Although agricultural co-operative movements traditionally have been strong in most Scandinavian countries, the Danish cooperative movement (Andelsbevgelsen) appears to have been particularly strong and inuential. In particular, this movement grew strong when cooperative dairies were established from 1882. These were soon followed by cooperative enterprises within other agricultural sectors, such as co-operative fodder purchase associations from 1883, co-operative slaughterhouses from 1887, a regular Co-operative Bank with branches in provincial towns from 1914 and so on, until wholly voluntarily established cooperatives nally became the way of organizing all common practical matters among the Danish rural population. Furthermore, right from the beginning, Andelsbevgelsen was closely linked to a peasant political movement centered around the farmers party (Venstre), and to rural cultural movements, such as the free church, free school, and folk high school movements (Svendsen, 2000; Svendsen and Svendsen, 2001). It is clearly documented that all these peasant movements were formed bottom-up by circles of energetic entrepreneurs in the local rural communities. Such circles of dedicated souls people who met regularly, and who knew and trusted each other often participated in numerous local and regional co-

operative associations, and often as highly trusted leading board members. These consisted of agricultural as well as cultural associations, forming stable and long-lasting networks with signicant overlaps of members. Hence, valuable social capital was created bottom-up, enhancing economic growth and the general educational standards of the rural population in an extraordinary process of self-organization (see also Svendsen and Svendsen, 2000, 2001). In particular, the Danish cooperative dairies are good examples of self-organized peasant cooperation, institutionalized in the form of commonly agreed upon, written rules of the game, i.e., the articles of such an association. Such democratic processes led to trust and, ultimately, to a lowering of transaction costs to the benet of all milk producing farmers (Svendsen and Svendsen, 2001). Prior to 1882, each peasant made his own butter and sold it himself in the nearby town. And/or he had to rely on the food traders, who canvassed the country. This process was costly, and the returns received were uncertain, and so the small farmer, of which there were many thousands, was at a disadvantaged bargaining position (Christensen, 1983). From 1882, an increasing number of Danish peasants bound themselves to deliver all their milk to their own cooperative dairy, except from the amount they used at home. Peasants bound themselves to be individually responsible for any debts that might be incurred, and if the dairy made any prot, it was divided among the members proportionally to the amount of milk each of them had delivered, thus securing an important capitalistic incentive for the farmers. In this way, members were obliged to trust each other, sharing the risk of economic disaster a trust that, once established, became an important and multi-functional glue in the local community, facilitating all kinds of self-organized activities. The cooperative dairies became an immediate success. The quality of the butter was increased. It became possible to standardize output and thus demand higher prices. Technical improvements upgraded both the quality and the quantity of the butter. And soon the cooperative dairy butter surpassed the celebrated Estate Butter for which Denmark had been famous (Haagard, 1911). Consequently, the number of cooperative dairies increased rapidly from 1 in 1882 to about 700 in 1890, including one third of all Danish milk producers. The movement made farmers aware of the scientic possibilities of dairy production and of cattle breeding, thus increasing educational levels a process that was enhanced by the establishment of self-organized peasant folk high schools and agricultural schools. Milk was delivered in good condition, and the social

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control mechanism of the members of a cooperative (who often participated in the same associational networks) guaranteed that none of the neighbors would cheat. When all the farmers in the district were members, a single horse-drawn carriage collected the milk from every farm, which reduced the transportation cost. Among the economies was the skimmed milk, saved for feeding hogs, which consequently stimulated the bacon industry and thus brought about the opening of cooperative slaughterhouses. Particularly the small farmer, who had otherwise a negligible bargaining position at the market, now gained greater possibility to market his produce. This, in effect, contributed to the development of small-holdings (Christensen, 1983). A typical method of establishing a dairy cooperative was that a group of trustworthy and highly respected farmers in a locality got together and borrowed the necessary capital from a savings bank. All the work in the dairy cooperative was performed with an unlimited liability. The original funds for construction purposes were repaid in installments, while the working capital was supplied by a guarantee paid by each member. When the original loan was repaid, a new loan was taken from the bank at the same rate of interest. The nancial resources obtained were handed over to the original members who all alike proceeded to repay the new loan. Savings banks were thus directly interested in the development of the dairy cooperatives (Christensen, 1983). The cooperative dairies were governed in a democratic way. In most dairies, each member had one vote, irrespectively of the number of cows he possessed. The members themselves elected the board of their association, including a dairy manager, who was expected to be an expert within his eld. Local cooperatives were united into a central national confederation, which aimed at developing the dairy production industry by expositions, conferences, and collection of material. The constitutional articles of a local dairy cooperative always obliged members to bring all their milk to the cooperative dairy, with the exception of milk needed for household use. Such contract between the farmers and the dairy was made for a xed period, usually ten or fteen years. Heavy nes were imposed for everyone breaking this rule. Furthermore, the articles contained strict but, as ever, commonly agreed upon rules relating to proper feeding of the cows, sanitary milking, etc., thus hindering free-riding and the formation of exclusive, negative social capital (Svendsen and Svendsen, 2001). As mentioned, the Danish farmers soon found it necessary to carry cooperation a step further, in a dynamic proliferating process that was initially inspired by the success of the dairy cooperatives. For

example, it now became urgent to control the distribution of their produce in England, which was the chief market for many Danish agricultural products. Danish farmers managed this in a characteristically independent way by forming a distributive and selling agency. As cooperation was not conned only to the selling of farm products and buying of merchandise and farm supplies, the improvement or supportive societies emerged, such as cooperative fertilizer plants and canning factories. Another example was the maintenance of cow and swine improvement and breeding societies and seed-testing organizations (Haggard, 1911). The breeding of cattle, horses, swine, and sheep was promoted by cooperative societies. The main purpose of these societies was to improve breeding of farm animals by keeping accounting systems of the quantity of milk produced per cow, its content of butter fat, as well as the relative cost of maintenance. The rst central society was established in 1895. In 1913, there were 592 such societies, all of which received some subsidy from the state. Almost every need of the farmer was supplied through one or more organizations of this kind. In addition, there were societies for accident insurance against, e.g., hail and other storms, re, and for the insurance of livestock (Svendsen, 2000). So we see that in rural Denmark, during the second part of the 19th century, network cooperation spread to include nation-wide cooperation. Consequently, about 1890, the Danish state however obstructive it had behaved towards these peasant initiatives reluctantly had to admit the national economic importance of the cooperatives (Svendsen and Svendsen, 2000). At this time, a valuable stock of social capital had been established among Danish peasants, kept alive by circles of energetic local and regional peasant entrepreneurs and institutionalized in the constitutional articles of the cooperative association, as well as in more informal traditions of generalized trust, civic participation, and democracy. Polish cooperative movements As has already been mentioned, cooperative movements have also played an important role in other parts of Europe, including the CEEC. In Poland, there has been a long and strong tradition for private farms and mostly small-holdings, particularly before World War II (Nelson, 1983: 175). Thus, the pre-war mode of organization among Polish peasants was in many ways similar to the one prevailing among Danish peasants in the same period. Moreover, the cooperative way to counteract harsh 19th century capitalism can also be found in Poland. Here, the establishment of

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Hrubiewzw Agricultural Association in 1816 became a predecessor of voluntary peasant cooperatives. The rst real cooperative was a wholesale and credit cooperative association, founded in Poznan in 1861 by two of the pioneers of Polish agricultural cooperatives, A. Szamarzewski and P. Wawrzyniak (Inglot, 1966). These were eager idealistic entrepreneurs and social capital builders, that is, the same type of entrusted, dedicated souls we also nd in great numbers within the Danish cooperative movement. Later on, various cooperative enterprises were formed in other parts of Poland as well. So we see that, in Galicia, the rst cooperative was established in 1890, while in the Russian part of Poland, consumer cooperatives played a major role, especially among the workers of Plock (Ldz) and Warsaw after the 1905 revolution (Inglot, 1966). As a result, the Union of Consumer Cooperatives (Zwiazek Spldzielni Spozywcw or Spolem) was established in Warsaw in 1908 by two other dedicated souls, namely the leaders of the nation-wide Polish Cooperative Association. However, from 1945, Spolem was gradually overtaken by the Polish Socialist Party (Landau and Tomaszewski, 1985: 205206). As will be shown in Section 4, this implied a dramatic shift from voluntary cooperation to state enforced cooperation. Due to the specic politico-historical context of Poland, the development of cooperatives until World War I followed different patterns in the Prussian, Russian, and Austrian part of Poland. In the western region under Prussian occupation, a widespread network of cooperative banks and agricultural marketing and supply cooperatives developed, primarily as a counter-reaction to the policy of Germanization from the side of the German state, providing economic subsidies to German colonists so that they could dominate their Polish neighbors (Landau and Tomaszewski 1985: 16). Exactly the same process took place in the German-Danish border region from the beginning of World War I. Here, the patriotic credit institution The National Safeguard (Landevrnet) was established in 1913, as a protection against German colonialism (Fink, 1999). In both cases, the formation of social capital by means of a cooperative form of organization served as important survival strategies, not unlike the strategies applied under 19th century roaring capitalism. As already mentioned, in the Russian part of Poland mainly consumer cooperatives developed, both in the urban and rural areas. The south of Poland had a higher concentration of savings and credit cooperatives, due to the inuence of Austrian rule where, e.g., the system of the Raiffeisen credit was highly developed (The World Bank, 1990). In particular, a dynamic development within the

Polish cooperatives took place from 1918 to 1939 (Landau and Tomaszewski, 1985: 76). Like in Denmark, dairy cooperatives became a common form of peasant cooperation. Although not so complexly developed as in Denmark, their main role was also to organize the supply of dairy products to the urban market (OECD, 1995). And similar to the development in Denmark, Polish cooperative banks supplied farmers with credit. Thus, before World War II, Poland had approximately 1,600 cooperative banks, which provided savings and credit services for agricultural and household use (Hunek, 1994). Another illustrative example of the fruitful interwar growth within the Polish cooperative movement is the Union of Consumer Cooperatives, Spolem. Before World War I, this union had 274 consumer cooperatives with 40,000 members. However, at the beginning of World War II, this number had increased to 1776 Spolem cooperatives, 87% of which were located in villages, and with approximately 400,000 members (Lerski, 1996: 562). Furthermore, after 1918, when Poland had regained its sovereignty and unity, the regional differences gradually became less signicant as regionally developed cooperative models extended into other regions, and gradually a coherent movement evolved. As a result, most of the twenty basic types of cooperatives were associated at the central level in nine auditing unions and 24 different trading and nancing organizations (see The World Bank, 1990 for more details). By 1938, Poland had about 14,000 viable cooperatives united in various auditing unions (Lerski, 1996: 562). Outside these unions, there were several thousand weaker and generally short-lived societies. Although different than the Danish ones, various supportive cooperatives also existed in Poland. During the communist time, private farmers were cooperating under the framework of Peasant self-aid cooperatives (Samopomoc Chlopska). This type of cooperative had a more third-party enforcement character, since it had roots back in 1948 when a number of agricultural and marketing cooperatives were merged into the Peasant Self-Aid Supply and Marketing Cooperatives (Hunek, 1994). The main function of this cooperative was to supply private farms with agricultural inputs; in particular to market agricultural products from private farms; to process some agricultural products for mainly local needs, and to supply the rural population with consumer commodities. The Peasant Self-Aid Supply and Marketing Cooperatives had a dominant position in purchasing the majority of agricultural products from private farms, and performed also other services, such as running catering businesses (OECD, 1995). Thus, the economic activities of these cooperatives were divided into three main groups: production,

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wholesale and retails trade, and purchase of products. The activities classied as wholesale and retail trade were the most important for the existence of these cooperatives that operated over 70,000 retail stores as well as warehouses and purchase centers. In 1988, there were 1,912 Peasant self-aid cooperatives, with 3.5 million members, and employed 434,000 people (The World Bank, 1990). The other important type of Polish cooperatives was known as Agricultural circles. The objective of this type of cooperatives was similar to the Peasant Self-Aid Supply and Marketing Cooperatives, but their distinguishing feature was that they functioned as Machinery Pools, and were also known by this name. The service they offered to private farms included ploughing, chemicals applications, transportation, construction of buildings and the repair of agricultural machinery (OECD, 1995). In 1988, there were in total about 2,000 agricultural circles. Usually one agricultural circle served farmers in one gmina.1 Depending whether the gmina was located in a rural area or not, there were usually 10200 farmers per circle.2 In sum, the two case studies show that voluntary agricultural cooperatives in Denmark and Poland from the 19th century to the beginning of World War II were not established by a circle of philanthropists, or even by the landlords for the purpose of beneting the practical farmers. In contrast, these organizations grew up bottom-up, as local and regional peasant responses to economic threats from other social classes or from abroad. Once established, they paved the way for inclusive and lubricated (Putnam, 1996) cooperative relations among peasants, that is, productive social capital implying trust and civic engagement. Even today, the Danish cooperative movement is wholly voluntary. It receives no subsidy from the state, nor is it subject to regulation of any kind. Cooperatives are independent of one another and spring into existence when farmers nd it necessary. Although the state does not directly interfere in the cooperatives, it promotes the general cooperative idea. In contrast, the Polish cooperative movement, which was almost completely destroyed during the communist regime after World War II, seems to have difculties in regaining power after 1989. Possible explanations for this contemporary status quo will be discussed further in the next and penultimate sections.

Level of social capital in Denmark and Poland After having indicated how social capital was built on equal terms during the 19th century, the paper turns to compare the current level of social capital

in Denmark and Poland. In the following, we focus on the Putnam-style of social capital theory and measurement, which assumes that social capital exists at a society-wide level, see also Fukuyama (1995). Another body of social capital theory emphasizes another measure, namely network formations within various social subgroups such as communities, occupations, families, and ethnic groups (see e.g., Bourdieu, 1986; Portes, 1996; Portes and Sensenbrenner, 1993; Wacquant, 1998). As argued by these network theorists, farmer cooperatives develop social capital among their members to compete with other actors in society such as consumers, the state, middlemen, etc. In this way, farmers use their social capital in order to gain higher prices from consumers and benecial regulations from the state. This can occur in various ways increasing quality, withholding merchandize, excluding farmers who are free riders or rate busters from cooperative membership, etc. On the other hand, governments use military or legal power to break the power of cooperatives and destroy their social capital (as in the Polish case). The reason that we do not use the network measure as a proxy for social capital here is that this measure deals with negative social capital, i.e., the presence of social capital that is detrimental to economic growth. This in contrast to positive social capital in the Putnam (1993) and Coleman (1988) setting that deals with the lowering of transaction costs and thereby more transactions in society that enhance economic growth. As argued by Paldam and Svendsen, 2002, strong informal networks with face-to-face interaction were developed during communism simply to survive, and these networks developed negative social capital that was harmful rather than benecial to economic growth, a suggestion that is conrmed by a whole set of studies by Richard Rose (Rose, 2000). Rose argues that social capital networks in Eastern Europe (used to produce goods and services) are distinctive in a society characterized by organizational failure and corruption of formal organizations. In a response against the state, individuals can invoke informal networks: begging or cajoling public ofcials, using connections to bend rules or paying bribes that break rules; social networks compensate for organizational failure. In this way, Rose suggests that citizens in Russia have formed many private networks for getting things done. However, these networks develop negative social capital and do not t into a modern market economy, where it is crucial that the participants respect the rules of the game (Rose, 2000; see also Svendsen, 2003). Therefore, the paper omits the measure of networks in the following where we focus on three other theoretical approaches to measure social capital, namely:

B UILDING AND DESTROYING SOCIAL CAPITAL Table 1. Membership of voluntary organizations (Putnams instrument). Memberships Denmark (%) 23.4 29.1 21.8 13.3 6.8 3.3 1.3 0.7 0.2 0.2 1.72 Poland (%) 88 10.5 1.1 0.5 0.14 Table 2. Standard generalized trust. Frequencies in % Can trust Cannot be too careful Do not know Source: Hjllund et al. (2001). Denmark 73.9 21.3 4.8

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Poland 20.1 79.9

0 1 2 3 4 5 6 7 8 9 up Average

Table 3. Trust in institutions compared (rounded gures). All frequencies are in percent Denmark A great Quite Not very None Do not deal a lot much at all know 29.5 34.6 9 10.2 20.8 Poland A great deal 1.3 3.9 1.1 2.2 2.1 55.2 59.5 63.2 58.5 59.1 6.7 3.1 18.3 21.7 12.4 2.4 1.3 3.4 3.5 2.7 6.2 1.6 6.1 6.1 5

Legal system Police Administration Government Average All frequencies are in percent

Source: Hjllund et al. (2001).

(1) membership of voluntary organizations, (2) trust, and (3) civic participation (Paldam, 2000). For investigating the level of social capital in different countries, Paldam and Svendsen (2002) have produced a questionnaire for catching these above-mentioned aspects of social capital. The paper now turns to the empirical results in these three groupings from Denmark (1,206 respondents, year 2000) and Poland (1,004 respondents, year 2002), see Hjllund et al. (2001). First, concerning membership in voluntary organizations, Putnam (1993) suggested that this proxy could be used for social capital. In the terms of this paper, the agricultural cooperative proxy measures the voluntarism aspect. Putnam, for similar purposes used the density of organizational membership in Italy. He found that a person in North Italy on average was a member of far more organizations than a person in the South. This difference should then explain the striking difference in economic wealth between the North and the South. The results from this measure are listed in Table 1. It shows that the average Dane is a member of twelve times more voluntary organizations (1.7) than the average Pole (0.14). Also, roughly only one out of ve Danes is not a member of any voluntary organization at all compared to ve out of six Poles. Second, general trust among citizens and trust in formal organizations can be measured. Concerning general trust among citizens, people were asked whether they trust other people in general. The result is that Danes trust other Danes three and a half times more than the Poles do (73.9% compared to 20.1%), see Table 2 below. Similar results are found for corruption and general trust in formal institutions, (Table 3). The results are

Quite Not very None Do not a lot much at all know 37.4 53.4 40.7 36.7 42.1 35.6 24.9 31.6 33 31.3 15.4 9.6 15.7 14.8 13.9 10.4 8.3 10.9 13.4 10.7

Legal system Police Administration Government Average

Source: Hjllund et al. (2001).

presented as an average of citizens trust in four types of formal institutions, namely (1) the legal system, (2) police, (3) administration, and (4) government. In comparison, Danes trust these four institutions ten times more than the Poles (20.8% vs. 2.1% concerning a great deal). Civic participation, such as participation in elections, contact with the press concerning societal problems, charity, etc. is the third attribute of social capital. In a range of thirteen sub-questions covering different civic actions, the respondent was asked whether he/she had engaged in this particular civic action within the last three years. Table 4 below simply displays the average number of yes and no, expressed in percentages. As shown, Danes participate in twice as many civic actions as the Poles do (34.7% vs. 17.1%).

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Table 4. Civic participation. % Yes No Do not know Source: Hjllund et al. (2001). Denmark 34.7 65.1 0.2

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Poland 17.1 82.6 0.3

Destroying social capital Considering the current economic conditions in CEEC, it would be desirable if the level of social capital was higher and farmers would trust each other more and thereby reap the gains of cooperation (Chloupkova and Bjrnskov, 2002a). However, the bad experiences incurred during the previous regime act as a mental block, as shown by our analysis. Thus, the re-installed democratic regime and free-market economies in CEEC have a tendency towards passive reliance on the state (Chloupkova and Bjrnskov, 2002b). A main objective of Communist rule in Poland was to replace the capitalist man with the new socialist man. During World War II, practically the whole cooperative movement of the country, with the exception of consumer cooperatives, was abolished by the occupants (The World Bank, 1990). A period of somewhat more independent rebuilding of the cooperatives from war damages ended as early as 1948. At this time, the introduction of a socialized economy implied that the natural evolution of the cooperative movement was disturbed. The socialist reconstruction of agriculture was proclaimed at the Central Committee meeting in July 1948 by Trade and Industry minister Hilary Minc. Having promoted the idea of big-scale nationalization of the Polish economy since 1945 (Landau and Tomaszewski, 1985: 205), he now imagined a fruitful mixture of modernized state farms driven by enthusiastic cooperatives: Within the socio-economic system of a peoples democracy farm co-operatives are the simplest and easiest way, within the grasp of a common peasant, to develop a new system of large-scale economy, capable of utilising all the benets of modern technology and agricultural knowledge (Landau and Tomaszewski, 1985: 193). The program of agricultural reconstruction was started in autumn 1948. In reality, this meant an enforced collectivization. However, the Polish collectivization did not imply liquidation of farmers, threat of physical violence and exportations, as had been the case in the Soviet Union under Stalin 19291936. Instead, it involved a variety of economic reprisals

directed against the private farmers, who, at this time, owned 77% of the agricultural land. Thus, a compulsory saving system was introduced in order to hit medium-sized and better-off farms. And already in 1949, the rst attempts to exert administrative pressure on private farmers began (Landau and Tomaszewski, 1985: 193194). Furthermore, private farms were in advance obliged to sign contracts specifying the volumes of produce they would sell to the state and accept the prices set by the state. This in fact meant that although they were considered as private farmers, they were not allowed to exploit the properties of a freemarket (Chloupkova, 2002a, b). At the same time, state cooperatives were favored by receiving state subsidies as well as tax reductions (Landau and Tomaszewski, 1985: 194). Consequently, and despite continuous peasant opposition to collectivization, the number of state cooperatives grew rapidly, approximating 10,000 collectives by 1955 (Nelson, 1983: 176). In this process, also the voluntary peasantowned, cooperative farms were subordinated to the central economic plan and their independence limited (Nelson, 1983: 206). These amounted to 4% of the agricultural land, while the state farms amounted to 19% (European Commission, 1998). Overall, the communist regime restricted voluntary cooperation, similarly as they restricted the church and religious movement, in order to avoid any rise of potential political opposition. In this way, they purposely destroyed valuable social capital within the voluntary sector. The cooperative (collective) farms that existed during the communist regime in Poland as well as in other CEEC, were not based on any principles of voluntarism, they were an extended hand from the state. Membership in the secondary and tertiary cooperative organization was obligatory. For example, this was revealed in 1956 when the more liberal policies of Gomulka led to a removal of obligatory membership. Immediately, farmers withdrew en masse, and the number of collectives was reduced to under 2000 (Nelson, 1983: 176). So we see that, although most of the Polish farmers more or less reluctantly were involved in the state cooperative structure, small-scale private farming persisted even in the communist period. As documented above, the cooperative farms, essentially collective farms, which appeared on the order of the communist government, never enveloped a great portion of Polish agricultural land.3 That is also why Polish agriculture today continues to be dominated by small, subsistence-oriented farms. In practice, they carried out the orders of the central authorities. Their productivity was somehow comparable to that of state-owned farms, but was usually slightly higher as few aspects of private ownership were main-

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tained. These cooperative (collective) farms assumed a monopolistic/monopsonistic role in the provision of inputs, purchase and processing of agricultural products, deposit and credit activities in rural areas, provision of marketing and other services, as well as housing. Collective farms had also a social element, as they played a major role in training and education, in organizing events in local communities, and in creating new jobs and rehabilitation for the disabled. Generally, cooperative unions provided the links between the planning authorities and primary cooperatives by operating wholesale and processing enterprises (The World Bank, 1990). Thus cooperatives of various kinds were assigned special tasks within the national economy. This resulted in a near split of the consumer movement into an urban movement and rural peasant self-aid cooperatives. The introduction of the command system into the cooperatives was destructive to self-governing functions and led to lack of involvement of the members, thereby reducing the level of social capital (The World Bank, 1990). In this way, the communist regime violated the abiding principles of cooperatives in a number of ways; the imperative of meeting central-planning objectives effectively eliminated the right of cooperatives to make their own decisions, to potentially leave the cooperative, to select their leaders. The leader was an assigned apparatchik from the communist party. As cooperative (collective) farms grew in size, the feelings of responsibility faded, and members adopted a wage-worker mentality in their relationship to the enterprise and its property.4 And soon it became evident to almost everybody that the state farming system was inefcient, involving corruption, ctitious gures, and the general ignoring of cost accounting principles by farm operators, an attitude that was abetted by the regular provision of subsidies to cover losses (Nelson, 1983: 178). There were political and ideological reasons why the real, democratic Polish cooperative structures were so easily abolished from 19471956. For communists, cooperatives were the tool for transforming the whole society, while negating the market. On the assumptions that cooperatives work for society as a whole, all the advantages that a cooperative member had previously obtained, such as the dividend, priority rates, priority in using the cooperative services, etc., were abolished. Furthermore, the cooperatives lost their voluntary character, and became more like a state enterprise (Maliszewski, 1995). By 1956, there were no more credit, housing, dairy, supplies, and distribution cooperatives, the latter being replaced by the peasants cooperatives (Samopomoc Chlopska). In the years 19561957, the cooperative idea was somehow reviewed in Poland, although it

was more-or-less a semi-cooperative movement, as the value of democratic management was tolerated only as a panacea for the bureaucratic state economy. From 1958, the cooperative sector became centralized, involving that local cooperatives were replaced by giant complexes, where membership became obligatory (Maliszewski, 1995). With the abolition of real cooperatives, the communist regime created collective farms (and called them: cooperatives/cooperative farms). Compared to many CEEC, Poland was fortunate in that collective farms did not evolve into a great proportion of the Polish communist agricultural sector (Chloupkova, 2002a). These collective (cooperative) farms were not based on any principles as we know them from the precommunist cooperative movement, thus eliminating the important social control mechanism. Therefore, during the communist time in Poland, there existed a range of state subordinated cooperatives, with a usually monopolistic market position (membership in them was explicitly obligatory), whose advocated goal was to cater to the interests of private farmers as well as collective farms. Table 5 illustrates the operation of cooperatives during the communist regime. Despite the communist doctrine proclaiming a collectivist vision of society (and thus perhaps creation of social capital), the socialist ideology led to a society that was entirely fragmented. Thus, the cohesive/cementing role of social capital, acting as a primary drive in the pre-communist cooperative movement, was substituted by third party enforcement (centrally directed orders from the communist government). Since (a) membership was not voluntary, (b) there was no democratic control, based on one man, one vote (was subject to central planning), (c) members were dispossessed of any properties in favor of the collective farm, (d) members inuence on the collective farm operation was rather limited (e.g., the owners of land could not take any decisions regarding their land), led to the destruction of social capital. A further reason for this was the above-mentioned ban on forming associations, and the workers total dependency on the workplace, indeed the state. In this pattern the social capital has deteriorated over time under the totalitarian regime, and its replacement under the renewed democratic system is not an easy or a short term project. Since 1989, as a consequence of the restoration of the democratic regime and the free market economy, agricultural circles went gradually into liquidation. Nowadays, each farmer owns a tractor, even though, considering the small plot of land they own, it might not be efcient.5 This leads to machinery overinvestment, although the machinery equipment used is usually old, technically out-dated, and non-efcient.

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JARKA C HLOUPKOVA ET AL . Table 5. Polish rural co-operative movements, 1988. Type Supply & marketing Dairy cooperatives Horticultural co-operatives Agricultural production co-operatives Savings & credit Agricultural circles Total Number 1,912 323 140 2,086 1,663 2,006 8,130 Members 3,531,500 1,199,400 372,600 177,000 2,566,100 113,200 7,959,800 Employees 434,570 112,793 55,519 2,700 31,290 154,447 791,319 Signicance 59% of marketing of agricultural products 95% of milk processed 50% of fruit and vegetable 2.8% of arable land 18.5% of populations savings Important share in mechanization service

Source: ICA 1993.

The inherited low level of social capital from the communist regime still implies reluctance of cooperation among the Polish farmers today. Considering the small and fragmented structure of private farms in Poland, purchase of common machinery would be justied as an efcient means of cooperation. Polish sources do not explicitly mention anything about the aspect of social capital, they argue that the relatively weak development of producer organization is rooted in the fact that the development of producers groups and organizations requires a longer time in which farmers will be exposed to the appropriate market stimuli (SAEPR/FAPA, 2000). Agricultural Circles could benet from assistance in adapting the German concept of agricultural machine ring to Polish conditions (FAO, 1994). Similarly, bilateral cooperation with West European cooperative societies is viewed as potentially useful in assisting the renaissance of the Polish agricultural movement. Thus, based on the lack of social capital as well as other reasons, the renaissance of cooperative movement in Poland is postponed.

Conclusion This paper highlights the well-developed cooperative movement in Denmark, as well as in Poland, prior to World War II. Most of the farmers operations were based on trust, cooperation, bridging, linking. Politically speaking, in both countries in the period between the wars all range of political parties (left and right), and thus also market stimuli, existed and were supporting the idea of cooperation. The underlying objective of this political support was the ght for inuence in the cooperative movement. As Denmark, after World War II, followed a normal, democratic path of economic development, the democratic cooperative movement was not for-

bidden and continued to play a crucial role in the success of agriculture. The Danish cooperative movement created a strong pillar for various farmers operation. Thus, a range of horizontal and vertical links between people satisfying their different needs in particular social groups existed in democratic societies. Unlike Denmark, Poland was obliged to follow a communist doctrine. First fascists, then communists, tried to ght the cooperative idea, and then to inltrate and subordinate it. Since cooperative movements play a crucial role in building a capitalistic and democratic society, it is no surprise that it was one of the rst targets of the communist government to liquidate it. Therefore, these voluntary organizations were brought under the control of the party and people got used to obeying orders rather than making their own decisions, this lead to fewer voluntary organizations and less social capital. Our ndings conrmed this hypothesis: the average Dane is a member of twelve times more voluntary organizations than the average Pole. Being a member of a voluntary organization gives Danes, in addition to achieving the purpose of organization, a platform for social mingling and the exchange of other information. Likewise, one could argue that the massive state intervention in the Polish economy during communism, established heavy bureaucratic systems monopolizing the right to approve all actions in society. Arbitrary use of central power frightened the citizens and taught them to trust no one. Also, it created room for corruption among bureaucrats, party ofcials, and state monopolies, reducing the citizens trust in formal institutions. This hypothesis was also conrmed by our empirical ndings. Concerning trust among citizens, Danes trust other Danes three and a half times more than the Poles do and Danes would in general trust the four most important formal institutions (legal system, police, administration, and government) ten times more than the Poles do. Finally,

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like the case for membership of voluntary organizations, we would expect more civic participation and entrepreneurship in a capitalist country than in a communist country, where entrepreneurs were persecuted as potential threats to the system due to their capability of organizing resistance. Accordingly, we found that Danes participate in twice as many civic actions as the Poles. As demonstrated, cooperatives have both an economic component and a civic component, which make them a good example to shed light on the formation and destruction of social capital. Thus it can be argued that the capitalistic democracies (especially Scandinavian countries see Svendsen, 2003) are in general superior to the communist dictatorships in facilitating and building social capital. Overall, the cases of cooperative movements in Denmark and Poland suggested that social capital was built to the same extent and along the same lines in both countries in the 19th century. However, we suggest that two different political systems during the 20th century led to different levels of social capital. Capitalism maintained and perhaps built social capital whereas communist dictatorship destroyed it. The lack of social capital in CEEC could therefore be one explanation for the rather disappointing economic results and hardships of transition so far. However more research has to be undertaken to validate these suggestions.

per tractor has decreased from 15 ha (beginning of 1990s) to 14 ha (1999). This gure is even lower for private farms, where one tractor serves only 12 ha (Chloupkova, 2002a).

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Acknowledgments We thank Martin Paldam and four anonymous referees for helpful comments. Also, we are most grateful to the Danish Social Science Research Council and the Rockwool Foundation for funding this social capital research. Needless to say, the authors alone are responsible for the content.

Notes
1. In oral communication with J. Idczak, University of Poznan, Poland, September 2001. 2. There were 2,086 agricultural production co-operatives in 1988 farming 2.8% of arable land and they had 177,000 members and 2,700 employees (ICA, 1993). 3. In 1988, there were 2,086 agricultural production cooperatives farming 2.8% of arable land. They had 177,000 members and 2,700 employees (ICA, 1993). 4. This feature pertains to all co-operative (collective) farms in the CEECs during the communist period. 5. Although available data do not mention anything about the technical status of the machinery used in Poland, it can be documented that the number of tractors in Poland has increased since the transition, and the agricultural land area

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