$Unique_ID{COW04136} $Pretitle{299} $Title{Yugoslavia Chapter 3C. Manufacturing and Agriculture} $Subtitle{} $Author{Darrel R. Eglin} $Affiliation{HQ, Department of the Army} $Subject{percent hectares land private agricultural industrial production million cooperatives industry} $Date{1982} $Log{} Country: Yugoslavia Book: Yugoslavia, A Country Study Author: Darrel R. Eglin Affiliation: HQ, Department of the Army Date: 1982 Chapter 3C. Manufacturing and Agriculture Although Yugoslavia was predominantly an agrarian nation at the end of World War II, a start had been made on industrialization. Besides traditional industries (food processing, wood and timber products, and building materials), crude oil extraction, mining and processing of copper, zinc, and bauxite; steel, chemical, and textile industries; and electric power had been established during the interwar (1919-41) period, mostly by foreign investors. It was known that important additional natural resources were available for exploitation. At the war's end, the country was ready for industrial expansion regardless of the political complexion of the new government. When the Communists assumed control in 1945, they immediately began adopting the Soviet economic model that emphasized development of industry, particularly heavy industry. The extensive war damage to industrial equipment was quickly repaired, helped by international assistance. By 1948 the official index of industrial production was 50 percent above that of 1939. Meanwhile the state had nationalized most of the economy including industrial facilities. The Soviet economic model centralized nearly all economic decisions and included almost complete control of economic variables. Thus consumption and investment were controlled by plan, as was the allocation of investment funds for development. Yugoslavia started with this system in 1945 and began channeling the major share of fixed investment to industry out of a very high rate of savings. The introduction of workers' self-management in 1950 and other measures that decentralized economic decisionmaking only partly diluted central control over the allocation of investment funds and development policy. Since 1945 development policy has remained consistent in stressing industrialization-including education, vocational training, and incentives to workers-as the means to modernize the economy. In 1981 the primary focus continued to be on expansion of the energy base, exploitation of other natural resources, and development of basic industries which included metallurgy and capital equipment. Emphasis did vacillate between the priority branches because of specific circumstances, but the focus remained on heavy industry. The development policy achieved its basic purpose. By the early 1960s industry surpassed agriculture in its contribution to social product, and by 1978 the value added by industry was more than three times that contributed by agriculture. The consistent policy, supported by large investment allocations and a flow of workers from rural areas, caused industrial output to lead the economy in its expansion. The official index of industrial production increased by 8.5 percent a year between 1949 and 1979. Some economists, pointing out deficiencies in the methodology of the index, calculated the growth rate of industrial expansion some 20 percent lower and close to rates achieved by other rapidly industrializing countries. Even with qualifications, Yugoslavia achieved a notably high rate of industrial growth-supported by statistical evidence and observation over time. One incidental measure of industrial growth not available in statistics is the supply of locally manufactured equipment to the country's defense forces. This expanded from clothing and other minor items, for example, to aircraft, submarines, surface vessels, and a wide range of infantry weapons by the late 1970s (see Missions and Organization, ch. 5). One basic reason for industrialization was to develop the country's defense capabilities. The break with the Soviet Union in 1948 increased official attention on an economic structure that would contribute to defending the state's independence. Between 1949 and 1979 the fastest growing industrial branches (as reflected in the official indices of industrial production) were oil and gas extraction, manufacturing of electrical machinery, transport equipment, chemicals, electric power, and oil refining. These were essentially priority branches that started from low levels of production. Other priority branches that were more developed in the late 1940s-such as coal mining, ferrous and nonferrous mining and processing, and metal manufacturing-expanded output significantly, but growth rates were considerably lower. Several non-priority branches, such as furniture, paper, and extraction of construction materials as well as the traditional food and beverage industries, expanded faster than the industrial average. Three decades of concentrated investments resulted in an impressive expansion in the range and depth of industrial output. The aluminum industry, for example, expanded from one of essentially extracting and exporting bauxite to one increasingly capable of producing aluminum ingots and manufactured products. Manufacturing increasingly supplied the domestic market with a wide range of consumer goods, including frozen foods, cars, refrigerators, and television sets, and a growing amount of machinery and equipment for additional expansion. The structure of industry changed markedly from that dominated by food processing in the 1940s. In 1978 the value added by industry (in 1975 prices) amounted to the equivalent of about US $11.7 billion, of which food processing contributed 15 percent; textiles and clothing, 14 percent; machinery and transport equipment, 21 percent; chemical, 8 percent; and other manufacturing (in which metal fabrication was most important), 42 percent. The structure of Yugoslav industry was approaching that of West European countries. The government, at various levels, used many tools to influence the pace and direction of industrial growth. Until the mid-1960s the federal government directly allocated a substantial amount of the investment funds. Since then recourse has been more toward such indirect measures as credit, tax incentives, and commercial policies. Innovations and adoption of advanced technology were encouraged by various means, including joint ventures with noncommunist industrial firms. The Yugoslav law on foreign investment requires 51 percent Yugoslav ownership but otherwise leaves most matters to be worked out between the participants in the joint venture. The flow of foreign investment has not been as large as hoped, but by 1980 several joint ventures had been formed. One of current significance was participation by a large international chemical firm in a large petrochemical complex at the crude oil terminal of Krk Island. The focus on energy and the development of basic industries resulted in an industrial structure consisting of a small number of large facilities with heavy capital costs and offering relatively few jobs. In 1977 basic industries (primarily energy, ferrous and nonferrous metallurgy, chemicals, and paper) accounted for 56 percent of fixed assets in the socialized sector, contributed 32 percent of value added, but employed only 21 percent of the workers in the socialized sector. Small-scale industry in Yugoslavia was usually defined as firms that employ fewer than 125 workers. In the social sector there were a relatively large number of such industrial facilities (perhaps 4,000), but they contributed around 10 percent of value added by industry. In addition there was a small private industry-basically artisans and handicrafts. Limited data suggested that small organizations were generally efficient and provided valuable supplements to production in larger plants. In the 1970s officials encouraged private individuals to form industrial cooperatives through various incentives. Although the index of industrial production sustained a high rate of growth between 1945 and 1980, there was a significant slowing of the rate of increase, which attracted the attention of economists both Yugoslav and foreign. The slowing was perceptible by the early 1960s, but several economists have used the economic reforms of 1965 as the beginning of a new period. Between 1948 and 1965 the official index of industrial production increased by 9.9 percent a year compared with a rate of 7.1 percent a year between 1965 and 1978. Several reasons have been advanced for the slowing of the rate of growth in industrial output, all of which probably contributed but none of which appeared paramount. For several years after the war, industrial production rose quickly because only simple reconstruction was needed in some industries to raise production; economies of scale were easily achieved in the transition from artisans and workshops to mechanized factories, and greater education and skills in the labor force contributed to productivity. Higher technology also played a part. As effects of these positive factors diminished, negative forces assumed more prominence in affecting industrial output. By the 1960s the easily exploited resources and areas of the economy had been largely developed. Additions to industrial output required larger investments and became more difficult to accomplish-extending cost estimates and completion times. Overall coordination and management of development and of individual projects became increasingly necessary even though decentralization of economic decisionmaking was the trend. Efficiency in investments and production, although a sought-for goal, was often difficult to achieve for a variety of reasons. Institutional factors affected efficiency of production and investment. Capital was less mobile than assumed, for example. Private capital was encouraged to establish entities that would produce parts, products, or services needed by the economy, but investors would lose control of their assets and hence have been reluctant to invest. Units of associated labor were encouraged and expected to invest in other aspects of production and areas, particularly the less developed republics and provinces. Since such investments resulted in creation of organizations of associated labor that could decide to become independent, by 1981 there had been less of a flow of capital to the underdeveloped regions than expected. During the 1970s the growing influence of the regional governments resulted in greater intervention in economic matters. For example, there were an excessive number of slaughterhouses-there was one in almost every locality, and most were small, antiquated, and lost money-but closing them would create unemployment and problems for farmers. Despite an excess of crude oil refining capacity in 1980, the industries' importance in the economies of most regions meant that even more refineries were being installed. At the same time, investments in coal mining and expansion of electric generating and transmission were substantially behind schedule, contributing to a shortage of electricity. In addition natural gas supplies were available to help the country's energy balance, but construction of pipelines for distribution had fallen considerably below the plans. Moreover producers that incurred continuing losses were supposed to be liquidated, but few were. Reasons were usually found to finance the losses. The iron and steel industry provided in a single industry an example of many of the problems that existed in varying degrees in other industries. During the 1960s and 1970s consumption of iron and steel products grew rapidly, usually faster than industrial production itself because its output supplied the growing fabricating industries that produced finished products. The main consumers were metal manufacturing (consuming over half of output), construction, and defense industries. Production lagged behind consumption, thus requiring growing imports to meet needs. In the early 1960s domestic production supplied about 90 percent of requirements, but it was substantially lower by 1980; in 1980 some projections indicated a continuing decline in self-sufficiency at least to the mid-1980s. The iron and steel industry consisted of about a half-dozen independent plants, essentially one in each republic, with a total capacity in 1981 of about 4.3 million tons of crude steel and 5.5 million tons of other products. This meant that the units were too small to achieve economies of scale. Expansion and addition of new facilities had been almost continuous, but construction schedules frequently were not met and cost overruns were high. The planning and designing of units tended to be oriented toward regional markets, and as a result there was insufficient coordination between plants. The result was excess capacity for some products and not enough of others. Many facilities were underutilized because of lack of familiarity with some of the imported technology, irregular supply of inputs, and failure to install subcomponents in time to avoid bottlenecks. Underutilization was an important contributor to the inability of the domestic industry to meet consumption needs. Inefficiencies required frequent price increases for steel products, including a 20 percent increase in late 1980 and a proposed increase of 14 percent in 1981. In 1980 some mills complained that they had been unable for years to make the necessary investments in ore mining to maintain sufficient supplies for the plants because of the prices enforced on their products. At the same time, Yugoslav journalists claimed that domestic steel products were 20 to 70 percent more expensive than those imported, depending on which mill was used for price comparison. In 1981 the iron and steel complex in Serbia reportedly was to be the recipient of the twenty-second financial rescue operation in recent years in order to keep it from defaulting on its foreign and domestic debts incurred in various expansion programs. Many of the iron and steel plants were set up to use domestic iron ore, but the mines had not been expanded fast enough to meet needs. Other plants required imported ore and steel scrap to operate. Where coke or coking coal was used, it also had to be imported. It was normal and economical for an industry of this size to import some semifinished and finished steel products to provide the varieties required by consumers, but such imports increased as the domestic industry fell behind consumption. Nonetheless the domestic industry had capacity for nearly 900,000 tons of specific products for which there was no market, either locally or in foreign countries. In 1979 about 1 million tons of iron ore, 3 million tons of coking coal, 345,000 tons of scrap, and nearly 2 million tons of semi-finished and finished steel products were imported; the total value of these imports was nearly US $1 billion, compared with exports of steel products of about US $100 million. In the late 1970s and early 1980s the import needs of the iron and steel industry were a serious drain on the country's foreign exchange resources in spite of the potential of domestic sources. By 1981, when foreign exchange was short and imports were being limited, steel producers and consumers found it difficult to arrange production plans. Estimated consumption requirements were about 5.7 million tons of iron and steel products, but substantial increases over 1979 would be required in imports of ore, cooking coal, scrap, and semifinished and finished products to meet these consumption needs. Bargaining between producers and consumers was reflected in numerous press articles; finding the necessary foreign exchange for the expanded level of imports proved difficult. Although the production planning had started in September 1980, by April 1981 the problem of foreign exchange, and therefore production, had not been settled, and some steel mills were announcing reduced production programs because of the lack of imported materials. It was uncertain that the industry would be able to supply even 4 million tons of steel products. Yugoslav observers candidly acknowledged the lack of coordination among iron and steel plants in constructing facilities and developing raw material supplies and the excessive costs resulting from underutilization of expensive imported equipment and technology. Moreover they were aware that the situation for iron and steel would deteriorate further by 1985 if planned expansions were carried through because costs would increase. Some writers proposed studies and plans on a national basis to develop the raw material supplies and balanced production at the various stages of production of steel products so that equipment would be used as near the optimum level as possible. They pointed out that the more difficult the situation, such as the shortage of foreign exchange that would probably last for some time, the more important efficiency became, and that by 1981 financial losses at some mills had already drained considerably income from fellow workers in other industries in the region. The iron and steel industry represented perhaps the worst case in Yugoslav industry, but a few others, such as chemicals, exhibited some of the same problems. Other branches-such as electrical engineering and motor vehicles, both closely linked to international firms-appeared better organized and more efficient. Since the 1960s, industry has become exposed to foreign competition as the economy has been freed, and many firms have proved an ability to compete at home and abroad. In the 1980s efficiency will become even more important in all branches of industry if exports are to grow; otherwise the balance of payments constraint will retard industrial growth. Agriculture Between the early 1950s and the late 1970s, agricultural output increased about three times as fast as the population, lessening the country's dependence on imports. By the late 1970s Yugoslavia was only a small net importer of agricultural products. Except in years of adverse weather, the country had become generally self-sufficient in cereals and was usually an exporter of meat and live animals. Domestic production was deficient in dairy products, eggs, vegetable oils, and high-protein livestock feed; imports of tropical fruits and coffee were necessary to meet the increasing demand for those commodities. Between the early 1950s and the mid-1970s, the average daily caloric intake increased by over 850 calories, leveling off above 3,500 calories a day since then, a high level. Starch and fats contributed most of the calories, but in the 1970s the consumption pattern shifted toward livestock products, high-quality fruits and vegetables, and processed foods. The effect was to increase the net import deficit in agricultural products by the late 1970s. Although agricultural output had increased about two and one-half times between 1947 and 1977, the average rate of growth was only about 3 percent a year between 1968 and 1978 while domestic food consumption increased at about 4 percent a year. During the 1976-80 five-year plan, the agricultural sector expanded an average of only about 1.6 percent a year instead of the planned rate of 4 percent a year-partly because of unfavorable weather. Agriculture's relative importance in GDP steadily diminished after World War II as other sectors grew more rapidly. In 1979 agriculture contributed about 13 percent of GDP and employed between 26 and 31 percent of the labor force. Increasingly during the 1970s, officials recognized that agriculture needed more attention. Employment objectives for the economy were not being met, partly because private farmers left their small plots to seek higher incomes in other sectors. Moreover, domestic demand, exceeding the growth of agricultural output, and changing dietary preferences combined to increase imports and diminish exports of agricultural products. By 1981 authorities viewed agricultural development as critical to easing the balance of payments constraint and to renewed high growth in the rest of the economy. Land Use The territory of Yugoslavia totals nearly 25.6 million hectares. Forest occupied almost 9.2 million hectares or approximately 36 percent of the total area. In 1978 total agricultural land amounted to 14.4 million hectares (56 percent), 4.3 million hectares of which were mostly highland pastures suitable only for grazing. Over 9.9 million hectares were cultivated, consisting of cropped areas (7.2 million hectares), orchards (476,000 hectares), vineyards (247,000 hectares), and meadows (2 million hectares). In 1978 the cropped area contained 4.4 million hectares of grains; 904,000 hectares of fodder crops; 651,000 hectares of vegetables; 540,000 hectares of industrial crops; and 670,000 hectares of fallow or untilled acreage. The remainder of the total area consisted of mountainous terrain, urban development, and rivers, lakes, and marshes. Until the early 1960s the amount of agricultural land, especially the cultivated acreage, was expanding. Increasingly, however, it was marginal land that was brought under cultivation. In 1960 or shortly thereafter, the amount of agricultural land peaked at about 15 million hectares (10.3 million hectares of cultivated land). Since then the amount of agricultural land has been slowly declining, largely because of urbanization and industrial development. The decline in the cultivated area was somewhat more rapid because some of the more marginal cultivated plots were returned to livestock grazing. Although agricultural activity exists throughout the country, the most productive and highly developed is that in the fertile plains of Vojvodina and Croatia, which produce over half the country's grains and three-quarters of the sugar beets. In the hilly areas of Serbia, Slovenia, and Bosnia, cropping and livestock rearing are usually combined. Raising livestock predominates in the mountainous west and south (see fig. 8). The Mediterranean climate near the Adriatic Coast permits cultivation of grapes, olives, and citrus fruits. Further south in Macedonia, tobacco, cotton, and rice are grown. In 1978 over 60 percent of the cropped area was planted in grains, largely wheat and corn. The grain acreage peaked in the early 1960s and has since been declining because of government policies and changing dietary habits. In 1978 the grain acreage amounted to 4.4 million hectares, about 1.2 million hectares less than in 1960. The decline in grain acreage was partially compensated for by an expansion of the area planted in vegetables, fodder, and such industrial crops as sugar beets. There was also a small increase in tree crops (orchards) since 1960 and a smaller decline in vineyards. The bulk of the country's agricultural land depends on rain for moisture, causing substantial variations in production from year to year. In 1978 only about 145,000 hectares were irrigated, approximately 1.5 percent of the cultivated land. Between 1955 and 1978 the irrigated acreage increased by 47,000 hectares or an average of slightly more than 2,000 hectares per year. Most of the irrigated land was located in Macedonia and Kosovo, where intensive vegetable gardening had developed. Socialized farming accounted for a disproportionate share of the irrigated fields and had most of such modern equipment as sprinkler systems. Much of the irrigation on private farms was traditional gravity feed, which was usually inefficient and often antiquated. Estimates of the country's potential for irrigation exceeded 3 million hectares. In some regions irrigation would only supplement rainfall, but it would permit intensive cultivation in other regions now too arid for cropping. Large-scale expansion of irrigation offered significant increases in productivity, but large irrigation systems would be costly. Officials appeared cautious about rapid expansion of irrigation. The country also had about 1.2 million hectares of land in need of drainage systems for full realization of the crop production potential. Croatia, Slovenia, and Montenegro had the most serious drainage problems. Drainage systems could raise production appreciably, but detailed studies would have to establish those that would be the most cost-effective. Land Tenures and Agrarian Reform In 1918 when the country was formed, it was an agrarian nation in which owner-operated small farms were the norm. Nonetheless because of its diverse ethnic groups and land tenure systems stemming from foreign rule, considerable variation in nationality of ownership and size of landholdings existed. Strong backing for land reforms pushed through one such measure in 1919. Serbia and Montenegro were unaffected because small peasant-operated farms were traditional. The targets were the other areas that had had the most pronounced effects of the Austrian, Hungarian, and Turkish control. Implementation of land reform progressed slowly because of various local problems, but by the late 1930s ownership of nearly 25 percent of the agricultural land had been transferred to about 30 percent of the peasants. Although the reform corrected the worst inequities in landownership, reduced the number of landless to about 150,000, and created an independent peasantry, landholdings were neither equalized nor made economic. When Tito and his colleagues assumed power in 1945, they were confronted not only with the tremendous task of rebuilding the war-devastated agricultural sector but also numerous endemic social and economic problems, such as the small size of holdings, rural over population, and a low level of agricultural technology. The initial solution was to adopt the Soviet economic model, which included collectivization of agriculture. In 1945 an agrarian reform law began the process of establishing a socialized agricultural sector, which was to be the principal vehicle for the expansion of output and the improvement of agricultural technology. The 1945 land reform provided for expropriation, in many circumstances without compensation, of all land exceeding the varying limits set for different kinds of owners. The upper limit of private holdings was twenty-five to thirty-five hectares, depending on region. By 1946 some 1.2 million hectares of farmland and several hundred thousand hectares of forests had entered the public land pool, over 40 percent of which came from confiscation of property belonging to German nationals who had fled or had been forced to leave the country. Just over half the land expropriated was distributed without charge to landless or land-poor peasants, many of whom had been Partisans (see Glossary) during World War II. Of the remaining public land, nearly half was turned over to state forestry agencies and the rest used to create state farms on the Soviet pattern. In 1946 the government moved a step further toward collectivized agriculture through a law governing cooperatives. The peasants were receptive to cooperatives partly because of a long tradition in Croatia and Serbia of ownership, farming, and profit sharing on a communal basis. Cooperatives had been established during the late 1800s, and the number increased rapidly during the 1920s and 1930s. Most were credit cooperatives, but others were formed for such activities as marketing or distribution of inputs. The destruction and disruptions of World War II broke up many of the existing cooperatives. The 1946 law and subsequent legislation established essentially two forms of cooperatives. The general cooperative, which older cooperatives became, were basically agencies of the government in the purchase of agricultural produce through a system of compulsory deliveries at low, government-set prices and the distribution of inputs and other goods needed by rural households. The other major form of cooperative contained the features of the general cooperative, but land and equipment were pooled and fields worked collectively. The government favored the latter type; general cooperatives were usually associations for credit and marketing and perhaps included some joint activities such as in the use of machinery, but few involved collective efforts in farm operations. Some cooperatives held title to the land, which by law could not be returned to private ownership. Although joining cooperatives was legally voluntary, considerable pressures were exerted on farmers to join. Nonetheless cooperatives expanded slowly until the government launched an intensive collectivization drive after the break with the Soviet Union in 1948. In 1950 the number of cooperatives peaked at about 16,000, and socialized agriculture held just over one-third of the agricultural land. The momentum of the collectivization drive slackened in 1950, mainly because of strong peasant resistance. Farmers slaughtered livestock and endured privations in preference to joining cooperatives and, particularly, the collective farms. Moreover many existing cooperatives had problems of varying severity. The situation in the countryside became chaotic in 1950 when one of the worst droughts in the country's history occurred. In the early 1950s officials reviewed collectivization of agriculture while beginning the introduction of workers' self-management in the economy. Modifications affecting farmers included dissolving machine tractor stations, distributing equipment to cooperatives, abolishing compulsory deliveries of farm produce, and fixing more realistic prices for such commodities. An increasing volume of applications to resign from cooperatives led to a 1953 law governing cooperatives. Members were allowed to withdraw and disband many collective farms, and most did except in Vojvodina, where a number remained because a substantial part of their land had come from public holdings and could not be turned over to withdrawing members. In 1953 the legal ceiling for private landholdings, which was still in effect in 1981, was reduced to ten hectares (in special cases to fifteen hectares), partly because many members withdrawing from cooperatives had relatively large holdings. Some 276,000 hectares were taken under this reform measure; the land was not distributed to private farmers but became part of the public land pool to endow state and collective farms. The legal concept of social property reflected an attempt to reconcile the legal right of socialized agricultural institutions to use the land without actually owning it. By 1953 officials were implicitly acknowledging the error of wholesale adoption of Soviet collectivization but not abandoning the goal of socialized agriculture. They shifted to more voluntary and flexible methods and organizations. Meanwhile they conceded to the peasants' desire to remain independent by permitting withdrawal from collective farms and accepting a large private sector in agriculture. The normal ten-hectare limit on private ownership, however, largely precluded the use of hired labor or large machinery except under cooperative arrangements. Yugoslav agriculture became even more dominated by many small-scale farmers. Since the early 1950s official policy has accepted the two-sector approach but strongly favored socialized agriculture. The bulk of investments, inputs, and technical personnel have been channeled to state farms and cooperatives. In the late 1970s socialized farming employed about 5 percent of the agricultural labor force, controlled 16 percent of the cultivated land, but accounted for 27 percent of the country's agricultural output and about half of the marketed supplies of staple commodities. Because of its favored position and substantial holdings of the most fertile land, socialized agricultural production increased an average of 10.9 percent a year between 1954 and 1972 compared with an average increase of 2.9 percent a year by private farming over the same period. At the beginning of 1978 there were 2,704 socially owned farms. They controlled nearly 1.6 million hectares compared with 921,000 hectares in 1954. Socialized agriculture consisted primarily of reorganized state farms along with a few collective farms, research institutes, and numerous cooperative associations. In the 1960s and 1970s state farms were encouraged to branch out into processing and marketing, becoming agrobusinesses, or in Yugoslav terms-agrokombinats. In the late 1970s about 100 of these agroindustrial complexes, all of which had over 5,000 hectares (and some over 100,000 hectares), farmed over 60 percent of the cultivated land in the socialized sector. One of the large combines, which started out in farming, employed 2,700 workers; but farming accounted for only 25 percent of its activities by 1980; about 70 percent of its activity was food processing, and 5 percent was trade. The agrobusinesses were responsible for all or nearly all of the processing of agricultural commodities. During the 1970s the forms of agricultural organization changed, and their number increased along with the constitutional and legal changes made in self-management organizations in other sectors of the economy. The agrobusinesses, being vertically integrated enterprises, consisted of several BOALs plus additional intermediate organizations. Agrobusinesses were encouraged and expected to form relationships with farms in their vicinity. The relationship might be simple, short-term contracts with individuals for purchase or sale of commodities; more complex arrangements with a group of farmers could entail the supply of such services as credit and machinery time and, often, long-term contracts for purchase and sale of commodities needed by each other; or even a partial integration with a group of farmers organized into a cooperative whereby the members had a voice in management of the agrobusiness. In the 1970s under the Law on Associated Labor, the forms and status of cooperatives changed. Individuals, including farmers, who owned a means of production were encouraged to form cooperatives or singly or as a group to arrange cooperation agreements with social enterprises such as agrobusiness. The intent was two-fold; to permit workers in the private sector to form self-management associations and to link the private and socialized sectors more closely. In 1976 basic cooperatives achieved status as a legal person for the first time, securing rights comparable with those of social enterprises. The various forms of cooperation arrangements contained inducements for peasants to join-such as farmers retaining title to their land, gaining access to credit, inputs, and technical services from agrobusinesses to which they usually sold their produce under prices set about planting time, and by the late 1970s participating in social sector health and pension programs. The disadvantages included reduced flexibility compared with individual farmers and some reduction of prices paid for farmers' produce because of overhead costs of the cooperation organizations. The independent peasants appeared cautious about joining the various cooperative associations. Critics also claimed that the agrobusinesses often did little to stimulate cooperation organizations, preferring instead to rely on short-term purchase and sale contracts with individuals rather than becoming involved in profit sharing and management arrangements. Moreover, standardization of terminology appeared to be lacking, and sharp shifts appeared in statistics in the late 1970s, making it difficult to discern the changes taking place. At the beginning of 1980 there were just over 2,000 agricultural cooperation organizations of all kinds (525 of which were listed as cooperatives) with perhaps 250,000 to 300,000 members participating. The bulk of the associated farmers formed cooperation organizations based on long-term contractual arrangements with agrobusinesses rather than the more restrictive farm cooperatives. During the 1970s official policy acknowledged the considerable potential in the private sector and the need to raise its productivity. In fact the ability of the independent small farmer to increase yields over the years (although much more slowly than the socialized sector) in spite of being starved for inputs, credit, and technical services was remarkable and saved agriculture from becoming a problem in earlier years. By the late 1970s the number of private farmers was variously estimated at between 2.2 to 2.6 million, controlling 84 percent of the cultivated land, accounting for 73 percent of the gross social product produced by agriculture in 1979, and constituting 95 percent of the agricultural labor force. In the 1980s private farming remained the dominant sector by many measures. The task of upgrading the technology and productivity of private farming was difficult. In the late 1970s the average private farm was about 3.5 hectares (or slightly less) and consisted of several separate plots. The extreme fragmentation as well as the small average size of farms greatly inhabited the application of modern techniques; moreover just developing the organizations and infrastructure to reach the widely dispersed farming communities was a task of substantial magnitude. More than half of the income of private farm households came from nonfarm activities. The size of farms varied in different parts of the country. Private farms in Vojvodina and Croatia tended to be larger, and many achieved yields nearing those of state farms. In more isolated and particularly upland areas, private farms tended toward the subsistence level. Farmers' incomes in the less developed regions were low, near the poverty level of the equivalent of about US $430 a year in 1980. Low incomes and the lack of amenities caused many farmers to seek nonfarm employment, particularly the young. The exodus has been substantial over the years, amounting to more than 1 million people between 1968 and 1978. The remaining private farm population grew older. By 1980 over 600,000 hectares of farmland was not being cultivated, presumably, because the owners had become too old or had left for employment in urban areas. Socialized agriculture did lease and purchase some land from private farmers but was restricted in such activities by inadequate funds. In the 1970s encouraging results were achieved in the linking of socialized and private farming through the various forms of cooperation. Between 1973 and 1978, for example, the private farm area devoted to such major crops as corn, wheat, and sugar beets, grown under cooperation arrangements with the socialized sector, increased by 37 percent, and much greater cooperation was accomplished in livestock. In another example labor productivity on private farms increased by nearly 7 percent a year between 1973 and 1978 as a result of a substantial increase in the use of machinery, fertilizers, and improved seeds obtained in part through cooperative arrangements with the socialized sector. In 1980 and 1981, however, criticism mounted that agriculture was not achieving the plan goals, particularly in private farming. Unfavorable weather was partly to blame, but low levels of investment, slow organization of private farmers, and reluctance of agrobusinesses to expand cooperation with peasants were cited as major problems to be solved. In mid-1981 it remained to be seen whether the self-management and cooperation organizations would be sufficient to raise yields and productivity in the private sector toward those achieved on state farms, but it was clear that private farm productivity had to be increased if the country's agricultural potential was to be realized.