The New Economic Policy (NEP) was implemented in 1921 by Vladimir Lenin as an attempt by the Bolsheviks to recover and revive the Russian economy after years of War Communism. War Communism was the economic policy during the Russian Civil War from 1918 to 1921 and its main focus was to enable the Red Army to engage in and win the civil war. According to 17 Moments in Soviet History, Siegelbaum noted that the NEP was dedicated to “reestablishing [the] link (smychka)” between agricultural and industrial production on the basis of market relations. However, the irritability of lower officials along with a limited enthusiasm at the top produced an inconsistent implementation of NEP in various parts of the country, resulting in short-term economic relief for crippling economic crises within the regions.
Gregory Freeze in his book, Russia: A History, noted that in 1921 Russia faced an almost total economic collapse: “gross industrial output had fallen to less than one-fifth of the level before the First World War, production in some industries such as textiles was a mere one-tenth” (322). This scarcity led to famines and epidemics. By 1922 hyper-inflation drove prices (particularly those for agricultural products) to astronomical heights. In response, “the government created a new currency backed by gold, the chervonets. This tight money policy caused difficulties in wage payments at many factories, triggering strikes and disorders” (Freeze, 322).
By 1923, the famous ‘Scissors Crisis’ emerged, as an economic problem, which was a complete reversal of the price relationships the previous year. In essence, “agriculture had now begun to recover more quickly than industry” (Freeze, 322). Food was not abundant but the shortage was no longer a desperate situation. The supply of agricultural products “outstripped the production of manufactured goods; as a result the index for industrial prices in 1923 rose to a level three times higher than agricultural prices” (Freeze, 322). The NEP “pulled the state and society in contradictory and frequently conflicting directions” (Freeze, 326). The Bolsheviks were divided on how to solve the problem. Orlando Figes noted that those on the “left of the party favored keeping agricultural prices low and taking grain by force when necessary to increase industrial production, whereas those on the right advocated paying higher prices to the peasants for their food, even if this entailed slowing down the rate of capital accumulation for industrialization, in order to preserve the market mechanism as the fundamental basis of the state’s relationship with the peasantry.” While the NEP ended outright starvation, it did not eradicate hard times. It also “renewed social antagonisms: most Russians still struggled to subsist, while private traders- the Nepmen- often made exorbitant profits and enjoyed a lifestyle suspicious of consumption” (Freeze, 326).
Historian Geoffrey A. Hosking summarizes the government’s response to the ‘Scissors Crisis’:
“In 1923 the government reacted to the crisis by imposing price controls on urban products commonly consumed by villagers, and in the following year, it resumed grain exports, thus raising food prices. In that way, it restored some equilibrium to rural-urban trade at the cost of urban consumers… But no foundation had been laid for long term growth, while party members were given economic reasons to resent the NEP, to add to the political ones.”
The impact of the ‘Scissors Crisis’ was felt heaviest by ordinary Russians, especially the farmers “who received little in return for their surplus food crops and could not afford to purchase manufactured goods.” The economic ‘Scissors Crisis’ sharpened opposition to the NEP and resulted in further exposing its fragility, which suggested an incompatibility of private agricultural and industrial sectors, and (perhaps of greater long-term significance) reinforced chronic fears of the kulak” (Freeze, 322-323).
Freeze, Gregory L. Russia: a History. Oxford University Press, 2009.