Scissors Crisis

The Scissors Crisis is the name for an incident in early Soviet history during the New Economic Policy (NEP), when there was a widening gap between industrial and agricultural prices.

Like the blades of a pair of open scissors, the prices of industrial and agricultural goods diverged, reaching a peak in October 1923 where industrial prices were 276 percent of their 1913 levels, while agricultural prices were only 89 percent (the name was coined by Trotsky after the scissors-shaped price/time graph). This meant that peasants' incomes fell, and it became difficult for them to buy manufactured goods. As a result, peasants began to stop selling their produce and revert to subsistence farming, leading to fears of a famine.

Causes

The crisis happened because agricultural production had rebounded quickly from the famine of 1921-1922 and the civil war. In contrast, the industry took longer to recover, due to the need to rebuild infrastructure. Furthermore, the problem was exacerbated by the government seeking to avoid another famine by keeping the bread grain prices at artificially low levels.

The widening gap in prices also showcased the inelastic nature of trading with the peasants. For example, a peasant did not need to buy a lantern from the state, as they could simply make candles themselves. Whilst on the other hand, peasants were unlikely to respond, according to classic economics, to lower prices by selling more grain to buy more goods; instead farmers would rather either eat more or work less, as they did not require these goods. [ Chris Ward, "Stalin's Russia" (Oxford, 1999) p. 73.] It is worth noting that due to the NEP being implemented in 1921, it had rapid success, and by 1923 (the year of the Scissor Crisis), factory output had a huge increase of 200%, along with cereal output rising by 23%. Due to the success in the countryside, food prices fell, whereas industrial prices remained constant, and therefore the Smychka (union with peasants) was jeopardised.

Actions

To combat the crisis, the government reduced costs of industrial production by cutting staffs, rationalizing production, controlling wages and benefits and reducing the influence of traders and middlemen (NEPmen) by expanding the network of consumer cooperatives (such as the People's Commissariat of Trade).

As a result of these actions, the imbalance started to decrease. By April 1924, the agricultural price index had reach 92 (compared to its 1913 level) and the industrial index had fallen to 131.

The scissors crisis caused many problems in the long term for the NEP--causing tensions seen pre-1917 revolution.

References

External links

* [http://www.soviethistory.org/index.php?action=L2&SubjectID=1924smychka&Year=1924 Smychka and the Scissors Crisis at Seventeen Moments in Soviet History]