The ‘Scissors Crisis’ was the name given to an economic problem that confronted Soviet Russia in the early to mid-1920s. It was caused to a large extent by the New Economic Policy (NEP), which stimulated a rapid recovery in Russian agricultural production. Industrial production failed to match this growth, however, which resulted in significant shortages of manufactured goods.
Under the NEP, which ended requisitioning and allowed Russians to buy and sell surplus produce, thousands of peasants returned to work the land. Improved weather conditions also helped, as the catastrophic droughts of 1920-21 were followed by a period of more consistent rainfall.
As a consequence, Russia’s 1922 and 1923 harvests were extremely successful. With much more food available and able to reaching markets, prices more than halved between August 1922 and February 1923.
Agrarian recovery, industrial problems
By 1925, Russian agricultural production was in its best shape for more than a decade, with grain production and livestock numbers approaching pre-World War I levels.
The Soviet government helped by becoming the monopoly purchaser and distributor of grain. The government also set price levels at a reasonably low mark to prevent gouging and profiteering.
There were several reasons for this, including shortages of capital, labour and resources. Industrialisation required capital, technical and managerial expertise, freight transport and infrastructure, all of which were in short supply in post-revolutionary Russia.
Factories required a large amount of labour, however, seven years of war and miserable conditions had depleted the nation’s urban workforce. Many factories and manufacturing centres lacked both experts and unskilled workers; they still utilised inefficient practices that limited production and drove up costs.
Inadequate supplies of essential raw materials such as oil, coal and steel also hampered production. This was a consequence of slow recovery in mining and metallurgy, as well as ongoing disruptions in Russia’s transport network.
Because of these factors, the nation’s industrial and manufacturing sectors recovered at a much slower rate than agriculture. Many manufactured commodities were short in supply and hard to locate. This scarcity was exploited by the Nepmen (merchants, traders and retailers who sold manufactured goods at a profit).
As the demand for industrial and manufactured items increased, so did their prices. By late 1923, the cost of manufactured items had increased to almost three times their 1913 prices. In contrast, food prices were around 90 per cent of their 1913 levels.
When shown on a line graph, this widening gap between rising agricultural production and stagnant industrial output resembled a pair of scissors with the blades open. As a consequence, the problem became known as the ‘Scissors Crisis’.
The Scissors Crisis was not just an economic theory or an observation, however. It was a real problem in the Soviet economy that affected the lives of ordinary Russians.
Low food prices meant farmers going to market received smaller sums for their crops; high commodity prices meant they could not afford to purchase manufactured goods. Without enough surplus cash to purchase equipment, machinery or building materials, Russian farmers could not embrace new methods or increase their productivity.
Low crop prices were also a disincentive to production. Under war communism, many farmers saw no need to labour intensively when surplus grain was seized by the state. As the Scissors Crisis unfolded, many saw no need to work hard when surplus grain brought miserable prices at market.
Soviet responses to the crisis
The Soviet regime sought to alleviate the crisis by introducing policies to help force down the price of manufactured goods.
First, in 1923, the Soviets resumed exports of grain. This not only provided the regime with funds for infrastructure, it also reduced surplus grain levels in Russia, causing food prices to slowly rise.
Moscow also tightened its grip on under-performing industries by setting ambitious production targets, cutting staff numbers in labour-intensive sectors and making production more cost-efficient. Stores and market holders who sold commodities at inflated prices were forcibly closed (more than 250,000 were shut down in 1923-24).
Government enters the market
Meanwhile, the Commissariat of Trade was given an expanded role as a distributor and retailer of consumer goods, in order to reduce the impact of profiteering Nepmen. In other words, the Soviet government involved itself in buying and selling manufactured items at more reasonable prices.
These measures produced a gradual improvement in the situation. By April 1924, industrial prices had begun to fall and the blades of the ‘scissors’ were slowly closing. The crisis was never finally resolved, however. Shortages of industrial and manufactured goods remained a constant problem under the NEP.
A historian’s quote
“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.”
Geoffrey A. Hosking
1. The Scissors Crisis was an economic problem, triggered by the New Economic Policy (NEP), that appeared in Soviet Russia in the mid-1920s.
2. As agricultural production rapidly increased, food prices fell. In contrast, shortages of industrial and manufactured goods caused their prices to rise.
3. The growing disparity between food and commodity prices, when drawn on a line graph, represented a pair of open scissors, hence the name of the crisis.
4. The real impact of the Scissors Crisis was felt by ordinary Russians, particularly the farmers, who received little in return for their surplus food crops and could not afford to purchase manufactured goods.
5. The Soviet government partially resolved the Scissors Crisis by introducing price controls, forcing down industrial costs, cracking down on profiteering traders and allowing the Commissariat of Trade to establish trading cooperatives.