As expressed by one of the conferees, the search was on for a hybrid solution that would ensure full employment of the redundant labor force despite the process of farm modernization—a policy that inevitably leads to the maintenance of low earnings on many farms because the available work must be spread among an excessive number of members. In this context, foreign observers adopted a wait-and-see attitude toward the changes in collective farm organization and in the method of payment to farmers introduced in January 1971 (see Organization, this ch.). They nevertheless expressed doubt about the ultimate efficacy of these measures because the income of farmers would still remain far below that of industrial workers.
INVESTMENT AND CREDIT
Investment
Investment in agriculture has been rising steadily, reaching an annual volume of almost 13 billion lei in 1970. The share of agriculture in total investment, however, declined from 19.5 percent in the 1961-65 period to 15.8 percent in the years 1966 through 1969. In relation to industrial investment during the same periods, investment in agriculture declined from 40 to 30 percent. Under the Five-Year Plan (1971-75), agriculture is to receive investments of at least 100 billion lei—an amount that is twice as large as the actual investment in the years 1966 through 1970 and that represents a somewhat larger share of total investment than was allocated to agriculture in that period.
No information is readily available on the proportion of the total investment used for the replacement of wornout assets and for the expansion of productive facilities. In the 1966-69 period replacement capital constituted about 30 percent of investments; in 1969 alone the proportion was as high as 46 percent.
The largest part—and a rising proportion—of the agricultural investment has been financed by the state; collective farms supplied the balance out of their own income. The share of state funds in the total agricultural investment increased steadily from about 66 percent in 1963 to 80 percent in 1969; this proportion is to be maintained during the Five-Year Plan (1971-75). Investment in collective farms has also been increasingly financed by the state through long-term credits; the share of government credits rose from 13 percent in 1965 to 35 percent in 1969. Investment out of the collectives' own funds remained stable during this period, at from 2.2 billion lei to 2.4 billion lei per year.
State farms have received a disproportionate amount of investment—38 percent in the 1965-69 period, as against 34 percent for collective farms. The investment share of collective farms during this period declined from about 38 to 30 percent of the total. On the basis of farmland acreage, investment in collective farms in 1969 amounted to only 18 percent of the funds invested in state farms. If the state investment in agricultural mechanization enterprises is included as investment for the benefit of the collective farms, the ratio of collective to state farm investment per acre was still only 25 percent.
Collective farm statutes require the farms to devote from 18 to 25 percent of their annual gross income to investment. Some Romanian economists consider net income to be a more equitable base; under such a system more of the farms' income would remain for distribution to members. In calculating gross income, amortization of fixed assets is generally not included as an expense, which further raises the base used for the computation of the compulsory investment fund. An official of the Agricultural Bank reported that, in the last few years of the 1960s, one-fourth of all collective farms set aside for investment up to 10 percent more than the maximum legal requirement.
Only partial information is available on the use of investment funds. Roughly 40 percent of the investment in the 1962-69 period was devoted to construction and assembly work, and 33 percent was used to increase farm mechanization. It has not been made clear whether land improvement and irrigation are included in construction, but it seems likely that this is the case. Substantial funds were also invested in the expansion of orchards, vineyards, and livestock. Although significant advances were made in most of these areas, the level of farm mechanization and of irrigation remained low. In 1969 the equivalent of one fifteen-horsepower tractor was available for every 136 acres of arable land, and irrigated acreage constituted 6 percent of the arable area. The use of fertilizers lagged by comparison with other Eastern European countries.
Credit