The Scissors Crisis

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).

The graph illustrates the price increase and decrease of agricultural and industrial products. As agricultural production rapidly increased, food prices fell. In contrast, shortages of industrial and manufactured goods caused their prices to rise. When plotted on a graph, “these prices -indicated industrial prices rising, agricultural prices falling- resembled scissors, hence the name” (Freeze, 322). This widening gap between agricultural and industrial prices led to urban fears of a ‘grain strike’.

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).

 

Other References:

Freeze, Gregory L. Russia: a History. Oxford University Press, 2009.

33 Replies to “The Scissors Crisis”

  1. Hey Natalie, I enjoyed your post. It seems like Soviet leadership was actually no leadership at all. I didn’t know how poor the economy was at the time. It makes me wonder why there wasn’t another revolution.

    1. Thanks for the comment Chris! I agree, I had no idea the economy was so poor at the time let alone the widening gap between agricultural and industrial prices! I would have thought agricultural prices would have been higher rather than industrial prices.

  2. I think this post highlights perfectly the weakness of the NEP. While the NEP was once of Lenin’s most brilliant plans and saved the countries economy from complete collapsed it still did not and could not address critical shortcomings in the Soviet economy. The NEP was a short term solution until true socialist construction could begin. This is where the importance of Joseph Stalin comes in, his refutation of the NEP and his Five Year plans ultimately saved the USSR from complete collapse.

    1. Thank you for commenting De’Vonte! I agree that the NEP was a good plan developed by Lenin but it was not executed well enough to alleviate the economic crises and turned into short-term relief.

    2. That is certainly what Stalin and the other critics of NEP argued! Of course there were also voices (Bukharin, among others), who advocated less radical adjustments to the pricing policies of NEP that would have facilitated economic growth, gradual collectivization, and the closing of the “price scissors.” We’ll never know if they were right!

  3. I briefly touched on the agricultural production and how a famine arose during this time period in my post but never really dove into more since it wasn’t my main focus. It is crazy to see how bad this really got for the society and how the leadership did little to nothing about it. I would definitely agree with Chris and am shocked how another revolution didn’t occur.

    1. I agree Josh, the economic situation was worse than I had thought as well. It is a shock to see that there was not another revolution in response to the poor execution of the NEP.

  4. I think that looking back on how the new Soviet government decided to deal with this crisis is a very revealing part of what made it what it was. What it clearly shows to me was that the NEP was a highly flawed policy that could work in the short-term but would ultimately be harmful to the Soviet Union in the long-term. Thank you for the post Natalie, I thought it was well done.

    1. Thanks Isaiah! It definitely would have been interesting to see the damage the NEP would have done in the long-term if Stalin did not step in.

  5. I have to agree with the other comments about how this really does highlight the issues of the NEP but it is ironic to me that with the strikes and short-term economic gains that would not help the long run they would still continue with it and still treat the poor very badly and the higher ups still wanted nothing with the betterment of everyone else.

    1. You bring up a good point Chase. It would make sense for the benefits of the short-term recoveries to lead to the overall long-term recovery. However, I think the divisions between the Bolsheviks on how to address the issues influenced the effectiveness of recovery.

  6. What a great post on a topic that is dear to my heart! (And hardly anyone wants to write about, which is odd, because what could be more interesting than a “scissors crisis”? Pandemic, you say??????
    Ok….
    Seriously, your post brings up so many important issues and I’m glad you’ve got such good comments here. I’ll just note that there were no easy answers. No one liked NEP — except the peasants — and there were a LOT of them, so keeping them happy was important. The challenge of closing the “price scissors” just shows how difficult it was (is) to manage a complex and recovering economy. I have a feeling we might be seeing more “bargains with the devil” ourselves in the coming months and years (but I hope not!)

    1. Thank you! I didn’t give much thought to how the “Scissors Crisis” was solved in my blog post due to all its complexities but I am eager to learn about it as we continue with class!

      1. Sure! The first five year plans and the abandonment of the NEP are Stalin’s answer to the price scissors — and the feeling that the peasants were holding the regime hostage. It seems counter intuitive at first, but from Stalin’s perspective it does make sense.

  7. Hi Natalie, hope all is well! I really enjoyed your post and how well thought out it was. I think you did an excellent incorporating the graph, which really helped to understand the Scissor Crisis. So far, it is pretty apparent that the Bolsheviks always contradict themselves or their policies, but are somehow able to overcome every challenge.

    1. Hey Tanner, I’m glad you enjoyed my post! I thought the graph would visually help my fellow bloggers understand the “Scissors Crisis” so I’m glad to hear that you liked it and found it helpful! I also agree that it seemed that the Bolsheviks were able to overcome many challenges even though they contradicted themselves.

  8. You do a good job of explaining the fluctuations of the economy and the governments failed attempts to fix it. I think your note at the end about the economic crisis being used to reinforce resentment/fear of the kulaks is really interesting. I can see how the Bolsheviks would have latched on to that idea to strengthen their campaign against the kulaks in following years.

    1. Thanks for the comment Kayt! Having the Bolsheviks use the “Scissors Crisis” as a way to reinforce resentment of the Kulaks connects political and economic aspects to the NEP.

  9. Hi Natalie, I really liked your post! I agree with Chris that I’m surprised that another revolution didn’t happen, and it’s also crazy to me that one of the solutions was actually to take the grain by force to increase industrial productivity, because I feel like that would lead to another revolution. I also really liked the use of the graph, I think it illustrates what was happening very well.

  10. Hey Lauren, thanks for the comment! I agree, some of the solutions proposed by the Bolsheviks seemed a bit extreme but they probably believed that these solutions would lead to the quickest recovery method. I’m also glad you liked the graph!

  11. Andrew Grant – I can see many comparisons between the scissors crisis in Russia in the 1920’s and the Great Depression in America. America, starting the 20’s, had issues in their own agricultural sector, no different from Russia. They were producing excess amounts, because they needed to supply food for the warring powers in the Great War where there was massive shortages so America farmers had to produce far far more, after demand declined as the war ended, they started producing food in excess and prices went way down. Eventually in the 30’s, to deal with the poverty farmers experienced, the Agricultural Adjustment Act was put into place, and farmers were paid to produce less, ensuring that they produced enough to meet demand, but didn’t go over, allowing for farmers to accumulate more for their goods and earn money from the government for doing so. It greatly helped farmers, and revitalized the ailing agricultural sector.

  12. Andrew Grant – I can see many comparisons between the scissors crisis in Russia in the 1920’s and the Great Depression in America. America, starting the 20’s, had issues in their own agricultural sector, no different from Russia. They were producing excess amounts, because they needed to supply food for the warring powers in the Great War where there was massive shortages so America farmers had to produce far far more, after demand declined as the war ended, they started producing food in excess and prices went way down. Eventually in the 30’s, to deal with the poverty farmers experienced, the Agricultural Adjustment Act was put into place, and farmers were paid to produce less, ensuring that they produced enough to meet demand, but didn’t go over, allowing for farmers to accumulate more for their goods and earn money from the government for doing so. It greatly helped farmers, and revitalized the ailing agricultural sector.

  13. Andrew, you make a great comparison to America’s Great Depression. I had not thought of comparing the Scissors Crisis to another event, however both economic crises were extreme.

  14. Wow. it really seems like the Bolsheviks during this time had no idea how to properly handle such crisis. Do you think that was due to in fighting within the party or something else?

    1. I think the poorly handled crisis was due to the inability to agree on one solution and the fact that they were trying to solve the crisis as quickly as possible. Trying to find and implement quick-fixes seems to not have lasting effects.

  15. Hi Natalie! You had such an insightful blog post. It was very interesting to read how such a big economic collapse lead to horrible famines and epidemics. I always wonder what is the right way for a government to go about an economic collapse to not make their economy worse!

  16. Thanks Siria! I agree with you, it’s hard to imagine how much pressure rides on the government to come up with quick AND effective plans to help their country recover from a crisis!

  17. Hey Natalie, great article about such a weird economic predicament the early Soviet Union were faced with. It would be interesting to know how industrial workers felt during this time seeing that farmers were doing, at least on a production level, marginally better than them and conversely with the farmers, knowing that they were undervalued as workers compared to the industrialists.

    1. Thanks Landry! You bring up a good point to think about how the industrial workers felt during the scissors crisis in relation to the farmers’ feelings.

  18. Great post! This just goes to show you the downsides of a fully planned economy. There will be shortages galore. it is amazing though how incompetent large government can be when only a few people are trying to find solutions to every problem.

    1. Thanks Andrew! I agree that not enough options were probably discussed and the inability of the party to agree on one solution kept them divided and occupied with debates over the few solutions proposed.

  19. Great post Natalie! The weaknesses of the NEP, which in essence was state capitalism, again highlights the inability of a country such as Russia to implement and work with economic reform unless drastic industrialization measures are taken in order to jumpstart the Russian economy.

    1. Thank you! I agree that the instability of the Russian economy was highlighted due in part to the weaknesses of the NEP.

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