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THE ROLE OF COLLECTIVE ACTION, SOCIAL CAPITAL AND INSTITUTION TO

REINFORCE INDIVIDUAL AND COLLECTIVE CAPABILITIES: THE CASE OF


VIETNAM

Proposed paper for the 2007 HDCA Conference


IDEAS CHANGING HISTORY
16-20 September - The New School New York City

Dao, Mai Thi Hoang


Vietnam Institute of Economics
Vietnamese Academy of Social Sciences.
PhD Student at the University of Versailles, France.
hoangmaidao@yahoo.com

INTRODUCTION

Vietnam is in the period of transition from a central-planned economy into a market-


oriented economy. Replacing the former system of self-subsidized production by a new economic
system driven by the market is the key reform in the course of agriculture and rural development.
Some studies showed that 60% of households in the North and 40% of households in the South of
Vietnam do not have access to the market (Dao The Tuan 1995, Jesus F. & Bourgeois R. 2003).
The majority of these households are poor farmers. Clearly, poor farmers face difficulties in
participating in the market.

Although developing the market is necessary, sufficient conditions for bringing those
market opportunities fully into play are that the poor should gain enough capabilities. Capabilities
that would result from sufficient forms of capital, appropriate technologies and/or information,
knowledge and so on… These are still seriously absent, especially among the poor. Hence, it is
quite obvious that in order to attack poverty completely, both the empowerment of the poor and
the access to adequate means should be considered first and foremost. According to the capability
approach formulated by A. Sen (1981), the essential cause of poverty is the lack of capability. Of
which, “the capability represents the various combinations of functioning (beings and doings)
that a person can achieve. The capability is, therefore, a set of vectors of functioning, which
expresses to what extent an individual is able to live a way of life or another.” The capability
approach connects freedom to the capacity and power of doing and being.

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The key question is therefore how to empower the poor farmers? This paper argues that
collective action could play an important role in the access of the farmers (and poor farmers in
particular) to the market by encourage their empowerment (through their capability and agency).
Indeed, poor farmers are often disadvantaged in all negotiations because of their lack of power.
Therefore, this matter might be solved by encouraging the farmers to unite on specific objectives.
This is at the basis of the idea of generating a collective capability through collective action.

DEFINITION AND IMPORTANCE OF COLLECTIVE ACTION

What is collective action?

Collective action is defined as the “coordination of agents sharing a goal or a common set
of goals. Organizations are economic units formed by collective action” (Ménard, 1990).

The objective of collective action is to obtain the common interests of majority members
of the group and the provision of public goods (and other collective consumption) through the
collaboration of different individuals. Of which, public or collective goods are goods from which
it is impossible or highly costly to exclude members of consumption even if they do not pay for
it. We can quote some examples of public goods, such as roads, education, healthcare, and
collective goods, such as irrigations, insurances, and reputations for quality.

Why is the collective action necessary for poor farmers?

This paper argues that collective action has influences in changing collective capability.

Although at the beginning, Sen’s Capability Approach is concerned mainly with


individual capability; in the literature of his successors, we find more often the notion of
collective capability. While individuals need social relationships within the society, and their
agency rely on structures, individual agency is not brought by individuals acting alone, but also
by their collective action (Deneulin and Stewart, 2001). The act of choosing (a functioning) may
have value in instantiating friendship, exercising sociability or consolidating a sense of
community, and cooperation among group (Alkire, 2002). Due to their lack of education, their
limited access to political institutions, social networks, financial resources, information and
markets, the poor can best enhance their living conditions collectively. The potential benefits of
collective action for individual and collective capability are undeniable (Solava, 2006). The role
of collective action is to guide the people and to make them more strong and competitive in their
economic (e.g. access to resources, markets, insurance...), social (e.g. education, leisure...) or
political (e.g. lobbying...) activities.

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In general, collective action can create economies of scale by pooling resources and
generate collective or public goods. So, through collective action, transaction costs or market
imperfections can be reduced (e.g., the risks that linked with production and marketing have no
private insurance mechanisms).

Collective action makes meet the needs of all individual in the community, so that it is
useful to produce the cooperative outcomes (Anand, 2007).

There is also a closed linkage between collective action and value chain. Value chain
refers to a full range of activities that are required to bring a product (or a service) from
conception, through the different phases of production, to deliver to final consumers and disposal
after use (Kaplinsky, 1999). In a more strict sense, it relates to the chain of participants’ financial
returns in relation with their investments, innovations and power relationships. A successful
participation in value chain also requires collective action between the farmers to expand the
scale of the operation and increase their bargaining power. Research is yet still lacking of
practical examples of successful participation of the poor into value chain through the recourse to
human capital and specific coordination mechanisms.

Naturally, the collective structure of capability for the whole chain is related to the
structures of capability of each level within this chain. In fact, we have a double structure of
capability. At the first stage, each firm or actor has his own structure. At the second stage, the
combination of the individual structures constitutes an integrated whole, which forms the chain’s
collective structure.

- At the horizontal level, collective action between farmers enables and increases the scale
of operation and the bargaining power of the poor in the value chain.
- At the vertical level, collective action between farmers and purchasers of their products
(traders, processors, consumers) enables poor farmers to have more security in the sale of
outputs and access to inputs (interlinked transactions, contractual arrangements).

In the case of smallholders and poor farmers, it seems that the only effective way for them
to become actively involved in an increasingly commercialized value chain for their products is
to become organized and coordinated, increasing the attractiveness of their products in terms of
the “3 As” : affordability, access and availability (Lazonick, O’Sullivan, 2000).

Affordability: Collective action is a potential way that poor producers can overcome the
disadvantages of poor economies of scale and low-quality infrastructure. By working together,

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rather than individually, productivity gains can be made and unit costs can be reduced for both
inputs and outputs.

Access: Poor farmers produce relatively low quality goods and services for a number of
reasons, including lack of knowledge of quality standards, lack of adequate incentives to upgrade
quality, and lack of credit to purchase improved inputs and means of production. Additionally,
even if poor farmers are able to produce quality goods and services, they are often unable to
access the means to certify this quality, or to promote their goods and services to a wider
audience.

Availability: Increased scale of production, through collective action, and increased


certainty of demand, through effectively functioning contract systems, are two possible methods
of increasing the availability of goods and services sold to and bought from the poor, and
increasing their involvement in value chain.

Collective action may not improve all the capabilities of each individual, because
individual and collective capabilities are not always the same. But according to participatory
approaches, even if there is no best choice, with collectivity and discussion, one may reach
anyway the better from worse choices (Alkire, 2002).

In integrating at the market, the requirements in collective action still increase. It is clear
that the organizations for farmers are not out of the rural society. The organizations constitute an
interface between the local society and the economic environment. Their objectives are to
improve the conditions of the insertion of farmers at the market and the global society. Their
roles are often to defend the interests of farmers and to organize the agriculture services.
Admittedly, the collective action cannot mobilize all individuals: there is often a minority
voluntary at the beginning, with an open possibility for people to join in order to improve the
capacity of negotiation.

Collective action and economic freedom

In order to make a successful collective action, voluntary of the member is the first
principle to respect. Collective action must base on the values of self-help, self-responsibility,
democracy, equality, equity, and solidarity.

Olson (2000) call the “right-to-work” is that comes from those who are most ardent in
support of a system based on the profit motive. He argues that a rational worker will not
voluntarily contribute to a union providing collective benefit if his-own benefit is not the same or

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if he can get benefit without the support of the union. Hence, the same profit motive is the best
linkage between members of an organization. The development of collective bargaining for large
groups must normally restrict economic freedom in that it implies that those who do not join the
union must be deprived of the right to work.

On the other hand, there is meaning to the idea of freedom of choice in the disposal of
one’s income, and also the freedom from any coercive control, such as the political implications
or political arrangements.

According to the capability approach, the freedom is a key argument. The development is
nothing other than a process of expanding the real freedoms that people enjoy (Sen, 1999). The
economic freedom generates income for the poor while widening their social opportunities,
enhancing their bargaining powers and also helping them to arrange the unequal relations in their
communities.

Co-operatives in Vietnam: Lessons from History

In Vietnam, since the market-oriented reforms, known locally as doi moi (renovation),
formally introduced in 1986, the economy has completely changed. While all economic activities
were planned by the government in the collective system of economy, in the market-oriented
economy, the enterprise can decide of its own activities but competition is an important criterion
to evaluate these economic activities.

Before, the co-operative was considered as the core component of the economy, and a
majority of the farmers was member of co-operatives. Nowadays, the farmers are warned against
the co-operative.

This change in the farmers’ attitude is the result of the history of co-operative creation in
the past.

The collective system of the economy was officially established when the North of
Vietnam liberated from French colonial regime in 1954. It was widely expanded to the whole
country after the reunification in 1975.

From 1954 to 1957, many groups of labor exchange and some co-operatives appeared and
the first positive results were observed. New co-operatives were created in 1958. The planning
objective given by the Government was to reach 234 co-operatives but, in reality, 4,723 co-
operatives were created at this time.

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The 16th Central Meeting (2nd session) of the Party in 1959 marked an important date for
the collectivization process, by adopting the decision that co-operatives were a key element of the
socialist reform. After that, in the 3rd National Congress of the Party in 1960, the leaders
confirmed that North Vietnam has to build a “socialist economy, based on public and collective
ownership”.

After this decision, the creation of co-operatives became a mass activity. At local level,
the authorities did everything to put all farmer households into co-operatives. In some cases, the
achievement of the local authorities was evaluated by counting the number of co-operatives
created. It is the reason why so many co-operatives were created day after day. Under such high
pressure to join the co-operative movement, the households that were still hesitating, faced the
risk of being excluded from their community. Therefore, by the end of 1960, about 86% of
farmer households have become members of co-operatives.

In 1962, the 5th Central Meeting (3rd session) judged that “the collectivization was mainly
fulfilled”. At that time, nearly all the farmer households of North of Vietnam were included in co-
operatives. The few remainders were in other forms of collective institutions, such as the state-
managed farms.

Table 1: The collectivization process in the North of Vietnam

Number of co- % of co-operative members/ Number of farmer households/


operatives total farmer households co-operative
1955 18 13
1956 37 14
1957 45 16
1958 4,823 17.7 26
1959 27,831 45.4 45
1960 40,422 85.8 68
1965 31,651 90.1 85

Source: Statistical Data of Vietnam

At the time of Reunification of Vietnam in spring 1975, there were about 16,872 co-
operatives in the North. From these, the collectivization process continued to expand in the whole
country. The co-operative installation in the South became a hasty process too. At the end of
1975, 12,246 corporations (another form of co-operative with lower level of collectivity) were

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created. But more than 4,000 of which were collapsed just in the year after. In 1980, there were
1,518 co-operatives and 9,350 corporations. At that time, 35.6% of farmer households in the
South were collectivized.

Hence, since the beginning of this co-operative establishing process, both in the Northern
and Southern part of Vietnam, the principles of freedom and democracy were not respected. By
rushing into the installation of co-operatives, policy makers forgot that they couldn’t be
successful without the voluntary participation of the farmers. Many farmers agreed to join the co-
operative because they were obliged to, but they did not really wanted to. There are many
examples that can be found everywhere showing that some farmers sold their equipment and
assets before they had to be collectivized.

As a logical result, a few years later in 1980s, the co-operative model fall into crisis. As
farmers have no motivations in working for co-operatives, each tried to cheat on their co-
operatives’ leaders. Therefore productivity of co-operative decreased even though it had received
lots of support from the Government.

The Resolution No10 in 1988 “released” the farmers from the co-operative. With this
decision, some forms of private ownership were recognized. The Government gave to the farmers
the right of cultivating their own field so that they have more motivation to work.

Due to this reform, the number of co-operatives decreased strongly in the period. But this
collapse of the co-operatives caused, once again, a serious shock for the agriculture and the
farmers. A part of the farmers became poor, due to their difficulty to adjust to the market
economy.

In 1996, the Law of Co-operative was approved. Up to this date, there were a total of
13,782 co-operatives but once the Law issued, 6,853 co-operatives disintegrated in the whole
country. The remainders were changed to adapt to the Law.

In 2005, there were still 8,086 co-operatives all over the country. In which, 25% were in
debt.

Due to this collapse of the co-operatives, the co-operative model of development has been
much criticized. Many farmers thought that this model is wrong and must not be applied again.
Co-operatives were considered as one of reasons, which lead Vietnamese economy to the
economic crisis. However, this paper argues that the problem is not to be found in the model
itself, but rather in the way it was carried out, and, therefore, it emphasizes the idea that freedom

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and democracy may be part of certain forms of collective spirit. These reasons are key issues to
decide on the success of collective action.

In addition, the level of collectivization also influences the farmers motivation. As before,
private ownership was completely denied, the participation of the farmers into the co-operative
system became unwillingly.

On the other hand, while each farmer has only a too small part of land to cultivate, the co-
operative may provide a lot of services that the household can not easily cover, such as irrigation,
plough and technical equipment, seeds, … These are among the reasons that explain why the co-
operative idea still remain available after such incidences. Traditionally, even before the massive
collectivization process, various forms of labor exchange activities were existed in Vietnam. In
fact, the co-operative model was unsuccessful because of its too impatient implementation.

COLLECTIVE ACTION, SOCIAL CAPITAL AND INSTITUTIONS

The question that remains now is how can the farmers be encouraged in participating on a
voluntary basis into collective action?

In practice, all members have to pay for the cost of provisioning the collective goods.
Because in large groups, an individual member gets a low proportion of the benefits of collective
action, if they do not pay, it can be unnoticed. Hence, they have low incentives to contribute to
the operation of the group.

Can poor farmers pay the member participative cost? One often worries that capital
requirements can exclude the poor from collective action. In reality, we observed some examples
of organization known as pro-poor, but without the poor.

But in some cases, contributions can be made, not only in monetary, but also in other
forms, such as social capital. Defined generally as a set of social relations, the social capital plays
the role of connecting people in the society. To some extents, social capital may facilitate the
affiliation of poor farmers into collective action.

Solava (2006) shows that social capital is a lubricant for collective capabilities for many
reasons, which are namely: it nurtures the trust and reciprocity among the poor; it helps the poor
to have their voices in collective decisions; it allows information sharing and coordination of
activities, etc… In the case of Vietnam, we argue, through this paper, that social capital is, at
first, the needed condition for the participation of the poor in collective action.

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In fact, Vietnam has a long tradition of social capital based on trust. In general, the social
capital has a special role in the Confucius societies of Asia. Mayfair Mei-hui Yang (1994), used
an example of Chinese society, described what one calls “the art of relationships” in political and
economic lives. One can get relationships through different activities of the community. Even
that relation is vertical or horizontal, one still can benefit from it. Thanks to a rather large
relationship network, people can exchange favors with one another. In addition, the children can
get benefits from their parents’ positions and relationships. They also use them to enrich
themselves.

The relationships are not simple as a connection between two individuals, but rather a
network with many levels. You ask a friend for a favor. If he cannot do it, he will ask someone
else. In this way, the connection may be made not only in one level, but also between different
levels. Therefore, for those who want to join a collective action, social capital is useful; and while
taking part in a collective action, one’s social capital can be improved. As relationships may
bring favors without a financial cost, it can be a solution for the poor.

Finally, in addition to social capital, an adequate institutional structure is also needed to


support the realization of collective action. Institutions are structures with rules and constraints
defining which actions are required, prohibited or permitted (North, 1990). While many
institutions are organizations, many organizations are not institutions (de Janvry and al, 1993).

Institutions may be official (e.g. the Union of Farmers), unofficial (e.g. Association for
Consumer Protection), marketed (e.g. Association of Litchi Producers), or non-marketed (e.g.
Association for Education Promotion). Since official institutions are often organized as large
groups, they need more times to create, to change, or to improve. Unofficial institutions, with
small sizes and simple structures, may be more suitable in the role of supporting the poor in
collective action. Moreover, in Vietnam, official institutions assume too many purposes, such as
propaganda, and poverty reduction represents only one of its purposes.

In the context of developing a market-oriented economy in Vietnam, most economic


policies focus on state and marketed institutions. Policy makers thought that a “perfect” market
and state intervention could bring opportunities and then, capabilities for all people. But it may
not enough. People, poor people in particular, always need the helps from social institutions. In
fact, the problem of inequality due to the economic growth will never be solved by state and
marketed institutions, but rather by social institutions. In emphasizing the importance of social
capital for collective action and collective capabilities, this paper also stress the role of social
institutions in poverty and inequality reduction.

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EXAMPLE FROM VEGETABLE VALUE CHAINS IN MOC CHAU ∗

Currently, Vietnam is facing the problem of fresh vegetable quality. In the market, there
are two kinds of vegetables: ordinary and organic (or “safe”) vegetables. The later represents
more or less 10% of total quantity and are sold in organic vegetable shops or supermarkets. Being
not sure of the quality of ordinary vegetable, consumers accept to pay more (sometimes in double
price) for organic vegetable.

What is the role of collective action?

To become “safe,” the vegetable must respect a process of production, certified by a


specialized institution. Of course, this institution cannot send their staffs to control producers at
all times. So, they give certificates rather to collective productions, while producers can establish
self-control and inter-control systems.

As an individual production, there are two risks:

- For consumer: product, which is sold, as “safe” vegetable may not always respect the
safety process, because the control is not regular.
- For producer: a product without certificate cannot be sold as “safe” vegetable price, even
if it respected the safety process. In this case, the producer is the disadvantaged, because
in comparison to ordinary vegetable production, a safety production is more costly.

Hence, collective action plays two roles:

- Consumer protection: control the safety and quality of the product.


- Producer protection: all products can be sold at right prices.

Collective productions are often organized in form of co-operative. In this case, the
collective action is not for helping the poor. Certainly, it is not a question of charity groups. It has
a precise economic purpose. However, it is also opened for the poor if they have a closed
relationship.

Moc Chau, in the Northern highlands of Vietnam, is an area where the nature condition is
suitable for vegetable productions. Due to its cool climate (the average temperature is 280C); Moc
Chau has a clear comparative advantage in the possibility of supplying off-season vegetables


Thanks to P. Moustier and MALICA, I got this example through my participation in the survey of the project
“Assessing the participation of the poor in off-season vegetable value chains” in Hanoi and Moc Chau.

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(from April to October) to Hanoi. In 2003, from July to August, Moc Chau was supplying 13-
20% of the tomatoes in Hanoi (almost the rest of the supply in this season originated from
China). Indeed, vegetable productions are the main activity for the livelihood of the people in
Moc Chau.

From the producer to the market, there are 2 types of channel:

- Co-operative-driven chain:

Producer → Agricultural Service Co-operative → Safe Vegetable Co-operative ↓

Supermarket / Retailer

- Market-driven chain: Producer → Collector → Wholesaler → Retailer

Of which, in the first chain, there are less category of vegetables (only safe vegetables)
and the main market to sell is Hanoi (safe vegetable shops and supermarkets). Whereas, there are
all kind of vegetables (safe and ordinary) in the second chain and these products are to sell in
both of local and Hanoi market.

The distribution of costs, prices and profits between actors along the 2 chains is not the
same: see example of the tomato chains in Table 2.

Table 2: Distribution of costs, prices and profits for the 2 tomato chains (VND/kg)

Co-operative-driven chain Market-driven chain


Producer
Total costs 251 303
Net profit margin 949 881
Farm-gate price 1200 1184
Collector
Total costs 581
Net profit margin 319
Collector’s sale price 2084
Agricultural Service Co-operative
Total costs 317
Net profit margin 143
Co-operative’s sale price 1660

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Safe Vegetable Co-operative
Total costs 525
Net profit margin 695
Co-operative’s sale price 2880
Wholesaler
Total costs 71
Net profit margin 379
Wholesaler’s price 2534
Retailer
Total costs 261 182
Net profit margin 359 784
Retailer’s price 3500 3500
Supermarket
Net profit margin 700
Retail price 4200

Source: VASI survey, MALICA/M4P, 2004.

Agricultural Service Co-operative in Moc Chau was re-created in 2000, based on some
members of the old Agricultural Co-operative that was collapsed in the time of economic
reforms. This co-operative collects the products from members and contracted farmers and resells
to Hanoi safe vegetable shops or supermarkets, through the Safe Vegetable Co-operative. Each
year, Moc Chau co-operative supplies approximately 500 tons of vegetables. In which, tomato,
cabbage and green beans account for 50% of total.

The function of the co-operative is: transportation, wholesale and quality control. The
relationships between members (and contracted farmers included) are based in the neighborhood.
The trust is an important key to joint to co-operative activities.

How poor producers can participate to the co-operative? And which advantage for the
poor?

Members have to share the investment in cash or in land. At the beginning, there is no
possibility for the poor to be member of the co-operative, because of both capital and material
facilities. (According to the 2005 official poverty rate, the income of a poor people in rural areas
is 270,000 VND/month). See the followed table.

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Table 3: Conditions for producers to participate in the 2 chains

Co-operative-driven chain Market-driven chain


Operation Capital 2-3 million VND 1.7-2.5 million VND
Relation Having relation with Agricultural Be acquainted with the collector
Service Co-operative
Experience Having experience in agricultural Having experience in vegetable
production* production
Other conditions - Large area (up to 5 sao) for - Having experience in selling
vegetable growing (1 sao = product at local market.
360m2) - Growing many categories of
- Having trust of Agricultural vegetables at the same time
Service Co-operative

* The farmer in Moc Chau involved in the supply of the Agricultural Service Co-
operative, either in the form of employees, or in the form of contracted farmers, was previously
involved in rice and maize production for self-consumption.

Source: VASI survey, MALICA/M4P, 2004.

But the poor can become hired laborers or contracted farmers. Between them, hired
laborers are poorer. 90% of hired laborers are farmers. They are hired to work in the co-
operative’s land (to produce vegetables, fruits and maize) and earn about 500,000 VND/month.
Whereas, contracted farmers may be poor, but they have their own land to produce.

The contracts between co-operative and farmers stipulate the following for one season:

- Input supply by co-operative (seeds, fertilizers, pesticides).


- Technical advice by co-operative, which allows co-operative to exert control on
production protocols.
- Purchase of all output by co-operative
- Stable prices for one season (with some possible changes)
- Risk sharing: co-operative participates in the risk of production by not asking for input
credit refunding in the case of product losses.
- Payment at the end of the season: the co-operative balances the cost of seeds and other
inputs provided at credit for the producers at the beginning of the crop and the vegetable
value they collect from these farmers.

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Poor farmers present advantages for the participation in the co-operative. The
commitment of the co-operative can endorse the risks in case of production losses. Also, the
purchase of all the outputs is guaranteed by the co-operative. Through the involvement in value
chain, they may get out of poverty.

Some contracted farmers of Moc Chau Agricultural Service Co-operative belong to the
Thai ethnic group. Before, these households were only growing one rice crop a year. The rest of
time, they let the land lay fallow or grew sweet potatoes. Growing vegetables was using local
traditional cultivating habits for self-consumption. Thanks to the support of the co-operative in
terms of training for vegetable planting, providing breeds and materials on credit, and marketing
their product, they are now active people with experience in farming production, especially in
commercial vegetable production. They have a fairly good economic condition in comparison
with other farm households in the village. Signs of moving out from poverty include the
extension and improvement of their house and investment (TV, motorbike, etc.).

In brief, the contractual arrangements with small-scale farmers developed by the Moc
Chau Agricultural Service Co-operative are innovative institutional arrangements that are worth
promoting.

CONCLUSION

Collective action is necessary for farmers in general and for poor farmers in particular to
reach common objectives that neither the market nor the state can achieve. By using capability
approach, collective action is seen as a key element to strengthen the collective capabilities.

In Vietnam, the traditional collective action of such as groups of labor exchange, tontines,
and professional guilds… already existed. Therefore, we can take advantage of this tradition for
the development of new forms of collective action such as marketing producer groups, micro
credit groups, industrial and agricultural clusters, value chain management, etc. Within this
framework, we must diversify the forms of collective action to enrich institutionally the fabric of
the society. The capability approach can help us build the corresponding conceptual and
analytical framework, once it integrates within its human development vision the issue of
collective capability and its relation to collective action.

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