Scissors Crisis

Last updated
The Scissors: retail and wholesale prices of agricultural and industrial goods in the Soviet Union July 1922 to November 1923 Graph illustrating the Scissors Crisis.png
The Scissors: retail and wholesale prices of agricultural and industrial goods in the Soviet Union July 1922 to November 1923

The Scissors Crisis was an incident in early 1923 Soviet history during the New Economic Policy (NEP), when there was a widening gap ("price scissors") between industrial and agricultural prices. The term is now used to describe this economic circumstance in many periods of history.

Contents

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. [1] The name was coined by Leon Trotsky after the scissors-shaped price/time graph. [2] 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

A similar crisis had occurred in 1916, when for example the price of rye rose by 47% whereas that of a pair of boots rose by 334%. [3] The crisis happened because agricultural production had rebounded quickly from the famine of 1921–22 and the Russian Civil War. In contrast, 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.

Actions

By August 1923 a wave of strikes spread across Russian industrial centres, sparked off by the crisis. [4] Within the Communist Party, The Declaration of 46 was produced as a signed protest sent to the Central Committee of the RCP. To combat the crisis, the government reduced costs of industrial production by cutting staff, 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 reached 92 (compared to its 1913 level) and the industrial index had fallen to 131.

See also

Related Research Articles

<span class="mw-page-title-main">Stalinism</span> Political and economic policies implemented by Joseph Stalin

Stalinism is the means of governing and Marxist–Leninist policies implemented in the Soviet Union (USSR) from 1927 to 1953 by Joseph Stalin. It included the creation of a one-party totalitarian police state, rapid industrialization, the theory of socialism in one country, collectivization of agriculture, intensification of class conflict, a cult of personality, and subordination of the interests of foreign communist parties to those of the Communist Party of the Soviet Union, which Stalinism deemed the leading vanguard party of communist revolution at the time. After Stalin's death and the Khrushchev Thaw, a period of de-Stalinization began in the 1950s and 1960s, which caused the influence of Stalin's ideology to begin to wane in the USSR.

<span class="mw-page-title-main">History of Soviet Russia and the Soviet Union (1917–1927)</span> Period of history of Russia

The ten years 1917–1927 saw a radical transformation of the Russian Empire into a socialist state, the Soviet Union. Soviet Russia covers 1917–1922 and Soviet Union covers the years 1922 to 1991. After the Russian Civil War (1917–1923), the Bolsheviks took control. They were dedicated to a version of Marxism developed by Vladimir Lenin. It promised the workers would rise, destroy capitalism, and create a socialist society under the leadership of the Communist Party of the Soviet Union. The awkward problem, regarding Marxist revolutionary theory, was the small proletariat, in an overwhelmingly peasant society with limited industry and a very small middle class. Following the February Revolution in 1917 that deposed Nicholas II of Russia, a short-lived provisional government gave way to Bolsheviks in the October Revolution. The Bolshevik Party was renamed the Russian Communist Party (RCP).

<span class="mw-page-title-main">Five-year plans of the Soviet Union</span> Series of nation-wide centralized economic plans in the Soviet Union

The five-year plans for the development of the national economy of the Union of Soviet Socialist Republics (USSR) consisted of a series of nationwide centralized economic plans in the Soviet Union, beginning in the late 1920s. The Soviet state planning committee Gosplan developed these plans based on the theory of the productive forces that formed part of the ideology of the Communist Party for development of the Soviet economy. Fulfilling the current plan became the watchword of Soviet bureaucracy.

<span class="mw-page-title-main">Collectivization in the Soviet Union</span> Forced economic reforms of collective ownership of the means of production

The Soviet Union introduced the collectivization of its agricultural sector between 1928 and 1940 during the ascension of Joseph Stalin. It began during and was part of the first five-year plan. The policy aimed to integrate individual landholdings and labour into nominally collectively-controlled and openly or directly state-controlled farms: Kolkhozes and Sovkhozes accordingly. The Soviet leadership confidently expected that the replacement of individual peasant farms by collective ones would immediately increase the food supply for the urban population, the supply of raw materials for the processing industry, and agricultural exports via state-imposed quotas on individuals working on collective farms. Planners regarded collectivization as the solution to the crisis of agricultural distribution that had developed from 1927. This problem became more acute as the Soviet Union pressed ahead with its ambitious industrialization program, meaning that more food needed to be produced to keep up with urban demand.

<span class="mw-page-title-main">Nikolai Kondratiev</span> Russian Soviet economist (1892–1938)

Nikolai Dmitriyevich Kondratiev was a Russian Soviet economist and proponent of the New Economic Policy (NEP) best known for the business cycle theory known as Kondratiev waves.

<span class="mw-page-title-main">Agriculture in the Soviet Union</span> Overview of agriculture in the Soviet Union

Agriculture in the Soviet Union was mostly collectivized, with some limited cultivation of private plots. It is often viewed as one of the more inefficient sectors of the economy of the Soviet Union. A number of food taxes were introduced in the early Soviet period despite the Decree on Land that immediately followed the October Revolution. The forced collectivization and class war against "kulaks" under Stalinism greatly disrupted farm output in the 1920s and 1930s, contributing to the Soviet famine of 1932–33. A system of state and collective farms, known as sovkhozes and kolkhozes, respectively, placed the rural population in a system intended to be unprecedentedly productive and fair but which turned out to be chronically inefficient and lacking in fairness. Under the administrations of Nikita Khrushchev, Leonid Brezhnev, and Mikhail Gorbachev, many reforms were enacted as attempts to defray the inefficiencies of the Stalinist agricultural system. However, Marxist–Leninist ideology did not allow for any substantial amount of market mechanism to coexist alongside central planning, so the private plot fraction of Soviet agriculture, which was its most productive, remained confined to a limited role. Throughout its later decades the Soviet Union never stopped using substantial portions of the precious metals mined each year in Siberia to pay for grain imports, which has been taken by various authors as an economic indicator showing that the country's agriculture was never as successful as it ought to have been. The real numbers, however, were treated as state secrets at the time, so accurate analysis of the sector's performance was limited outside the USSR and nearly impossible to assemble within its borders. However, Soviet citizens as consumers were familiar with the fact that foods, especially meats, were often noticeably scarce, to the point that not lack of money so much as lack of things to buy with it was the limiting factor in their standard of living.

<span class="mw-page-title-main">First five-year plan</span> Economic policy of the Soviet Union from 1928 to 1932

The first five-year plan of the Union of Soviet Socialist Republics (USSR) was a list of economic goals, implemented by Communist Party General Secretary Joseph Stalin, based on his policy of socialism in one country. Leon Trotsky had delivered a joint report to the April Plenum of the Central Committee in 1926 which proposed a program for national industrialisation and the replacement of annual plans with five-year plans. His proposals were rejected by the Central Committee majority which was controlled by the troika and derided by Stalin at the time. Stalin's version of the five-year plan was implemented in 1928 and took effect until 1932.

<span class="mw-page-title-main">Price scissors</span>

"Price scissors" refers to an economic phenomenon when for a certain group or sector of productive population, the overall valuation from their production for sale outside this group drops below the valuation of the demand of this group for goods produced outside the group after a period of reasonable equilibrium. A typical example is when changing world price levels cause a country’s exports to plummet in value, while the valuation of its imports remains relatively stable.

The Council of Labor and Defense, first established as the Council of Workers' and Peasants' Defense in November 1918, was an agency responsible for the central management of the economy and production of military materiel in the Russian Socialist Federative Soviet Republic and later in the Soviet Union. During the Russian Civil War of 1917-1922 the council served as an emergency "national economic cabinet", issuing emergency decrees in an effort to sustain industrial production for the Red Army amidst economic collapse. In 1920–23 it existed on the rights of the commission of the Russian Sovnarkom and after 1923 of the Soviet Council of People's Commissariats. The Central Executive Committee of the Soviet Union abolished the council on 28 April 1937. Its functions were split between the Economic Council of the Council of People's Commissars of the Soviet Union and the Defense Committee of the Council of People's Commissars of the Soviet Union.

<span class="mw-page-title-main">Industrialization in the Soviet Union</span>

Industrialization in the Soviet Union was a process of accelerated building-up of the industrial potential of the Soviet Union to reduce the economy's lag behind the developed capitalist states, which was carried out from May 1929 to June 1941.

Primitive socialist accumulation, sometimes referred to as the socialist accumulation, was a concept put forth in the early Soviet Union during the period of the New Economic Policy. It was developed as a counterpart to the process of the primitive accumulation of capital that took place during the early stages and development of capitalist economies. Because the Soviet economy was underdeveloped and largely agrarian in nature, the Soviet Union would have to be the agent of primitive capital accumulation to rapidly develop the economy. The concept was proposed originally as a means to industrialize the Russian economy through extracting surplus from the peasantry to finance the industrial sector.

<span class="mw-page-title-main">Hyperinflation in early Soviet Russia</span>

Hyperinflation in early Soviet Russia connotes a seven-year period of uncontrollable spiraling inflation in the early Soviet Union, running from the earliest days of the Bolshevik Revolution in November 1917 to the reestablishment of the gold standard with the introduction of the chervonets as part of the New Economic Policy. The inflationary crisis effectively ended in March 1924 with the introduction of the so-called "gold ruble" as the country's standard currency.

<i>Workers Truth</i> 1921–1923 faction of the Russian Communist Party

The Workers' Truth was a Russian socialist opposition group founded in 1921. They published a newspaper with the same name, Workers' Truth, which first appeared in September 1921.

<span class="mw-page-title-main">Yevgeni Preobrazhensky</span> Russian-Soviet revolutionary, economist and sociologist

Yevgeni Alekseyevich Preobrazhensky was a Russian revolutionary, Soviet economist and sociologist. A member of the governing Central Committee of the Bolshevik faction and its successor, the All-Union Communist Party, Preobrazhensky is remembered as a leading voice for the rapid industrialisation of peasant Russia through a concentration on state-owned heavy industry.

<span class="mw-page-title-main">New Economic Policy</span> 1921–28 Soviet economic policy theorized by Lenin

The New Economic Policy (NEP) was an economic policy of the Soviet Union proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism, both subject to state control", while socialized state enterprises would operate on "a profit basis".

<span class="mw-page-title-main">War communism</span> 1918–1921 economic and political system in Soviet Russia

War communism or military communism was the economic and political system that existed in Soviet Russia during the Russian Civil War from 1918 to 1921. War communism began in June 1918, enforced by the Supreme Economic Council, known as the Vesenkha. It ended on 21 March 1921, with the beginning of the New Economic Policy, which lasted until 1928. The system has often been described as simple authoritarian control by the ruling and military castes to maintain power and control in the Soviet regions, rather than any coherent political ideology. The Soviet propaganda justified it by claiming that the Bolsheviks adopted this policy with the goal of keeping towns and the Red Army stocked with food and weapons since circumstances dictated new economic measures. The deadly Russian famine of 1921–22, which killed about five million people, was in large part triggered by Vladimir Lenin's war communism policies, especially food requisitioning.

The Left Opposition was a faction within the Russian Communist Party (b) from 1923 to 1927 headed de facto by Leon Trotsky. The Left Opposition was formed by Trotsky to mount a struggle against the bureaucratic degeneration that began within the party leadership headed by Stalin during the serious illness of the Bolshevik founder Vladimir Lenin. The degeneration intensified after Lenin's death in January 1924. Originally, the battle lines were drawn between Trotsky and his supporters who signed The Declaration of 46 in October 1923 on the one hand and a Triumvirate of Comintern chairman Grigory Zinoviev, Communist Party General Secretary Joseph Stalin and Politburo chairman Lev Kamenev on the other hand.

<span class="mw-page-title-main">Economy of the Soviet Union</span>

The economy of the Soviet Union was based on state ownership of the means of production, collective farming, and industrial manufacturing. An administrative-command system managed a distinctive form of central planning. The Soviet economy was characterized by state control of investment, prices, a dependence on natural resources, lack of consumer goods, little foreign trade, public ownership of industrial assets, macroeconomic stability, low unemployment and high job security.

The Soviet grain procurement crisis of 1928, sometimes referred to as "the crisis of NEP," was a pivotal economic event which took place in the Soviet Union beginning in January 1928 during which the quantities of wheat, rye, and other cereal crops made available for purchase by the state fell to levels regarded by planners as inadequate to support the needs of the country's urban population. Failure of the state to make successful use of the price system to generate sufficient grain sales was met with a regimen of increasingly harsh administrative sanctions against the Soviet peasantry. The state of national emergency which followed led to the termination of the New Economic Policy and spurred a move towards the collectivization of agriculture in 1929.

<span class="mw-page-title-main">Russian-American Industrial Corporation</span> Economic development venture

The Russian-American Industrial Corporation (RAIC) was an international economic development venture launched in 1922 by the Amalgamated Clothing Workers of America in conjunction with the government of Soviet Russia. The corporation, mostly funded measure by small donations from sympathetic American union members, was conceived as a mechanism for the launch of new clothing factories to help alleviate the economic distress which had wracked the Soviet republic during the recently terminated era of Civil War and War Communism.

References

  1. Nove, Alec (1993). An Economic History of the USSR: 1917-1991. Penguin Books. p. 90. ISBN   9780140157741.
  2. Robert Service. Trotsky: A Biography. Belknap Press. 2009 p. 304.
  3. Figes, Orlando (1997). A people's tragedy : the Russian Revolution, 1891-1924. London: Pimlico. ISBN   978-0712673273.
  4. When dissident communist groups, such as Workers' Truth and the Workers Group of the Russian Communist Party, tried to build support around these strikes, they were suppressed.Avrich, Paul (1984), "Bolshevik Opposition to Lenin: G. T. Miasnikov and the Workers' Group", Russian Review, 43 (1): 1–29, doi:10.2307/129715, JSTOR   129715