Price scissors - what is it? Price scissors of 1923: causes, essence and ways out

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:45

The economy of the Soviet Union went through many difficult periods, which led to both positive and negative results. For example, during the New Economic Policy, such a thing as price scissors appeared. Its essence lies in the imbalance of pricing between the products of the industrial sector and the agricultural sector. Let's take a closer look at what the essence of this term is and what are the reasons for its appearance, as well as what are the ways out of this situation.

What does it mean?

Everyone who has studied economics and international economic development is familiar with the expression "price scissors". What it is? In general, this term means the difference in prices for various groups of goods in markets of international importance. The difference in cost is due to the fact that there are different economic benefits that are obtained from the production and sale of certain goods. Despite the fact that it is impossible to compare prices for different types of goods, there is an opinion that the price of manufactured products is much more profitable for the seller than for fuel and raw materials. Price scissors are often used to explain the unjustified exchange of goods between the countryside andcities, as well as between economically developed and developing powers.

The appearance of the term in the USSR

Under the Soviet Union, the term "price scissors" was introduced by Leon Davidovich Trotsky specifically to characterize the situation prevailing at that time with prices for industrial and agricultural goods. The marketing crisis, which became already evident in the autumn of 1923, showed that the population did not have the opportunity to purchase industrial products of dubious quality. Although people were just packed with it in order to quickly sell the goods and make a profit. All this was done in order to bring the industry to a new level and at the same time raise the rating of the state as a whole. According to economists, this method does not always bring positive results, but it takes place in many countries around the world.

The Essence of the Crisis of 1923

Back in 1923, industrial products began to be sold at an inflated price, despite the fact that the quality left much to be desired. Thus, in October of the 23rd year of the last century, prices for manufactured goods amounted to more than 270 percent of the established value for the same products in 1913. Simultaneously with this colossal rise in prices, agricultural prices increased by only 89 percent. Trotsky appropriated a new term for this phenomenon of imbalance - "price scissors". The situation turned out to be unpredictable, as the state faced a real threat - another food crisis. It was unprofitable for the peasants to sell their goods in large quantities. Sell only the volume that allowedpay taxes. In addition, the authorities raised the market price for grain, although the purchase price for the purchase of grain in the villages remained the same and sometimes decreased.

Causes of crisis phenomena

To understand such a phenomenon as the “price scissors” of 1923, the causes, the essence of the outbreak of the crisis, it is necessary to study its prerequisites in more detail. In the Soviet Union, during the period described, the process of industrialization began, in particular agriculture. In addition, the country was at the stage of initial accumulation of capital, and the main share of the total national income fell on the agricultural sector. And in order to increase the level of industrial production, funds were needed, which were “pumped out” from agriculture.

In other words, there was a redistribution of the financial flow, and the price scissors just widened at that time. There was a trend in the movement of prices for products sold by agricultural business executives, on the one hand, and for goods that they buy from industrialists for one consumption or another, on the other.

Ways to solve

The authorities made every effort to solve the problems in the economy, which led to price scissors (1923). The reasons and ways out that the Soviet government proposed included several points. First, it was decided to reduce costs in the industrial production sector. This was achieved in several ways, the most basic of which are the reduction of staff, optimizationproduction process, control of wages of workers in the industrial sector, reducing the role of intermediaries. The last moment was achieved by creating a large network of consumer cooperatives. How was she useful? Its main tasks were to reduce the cost of manufactured goods for ordinary consumers, simplify the supply of markets, and also speed up trade.

Results of efforts

All anti-crisis actions of the government led to a positive result: literally a year later, namely in April 1924, prices for agricultural goods rose slightly, and industrial products fell by up to 130 percent. The price scissors of 1923 lost their strength (that is, they narrowed), and balanced pricing began to be observed in both areas. In particular, a positive impact was made on industrial production. Compared to previous years, when the agricultural sector was the most important financial source in the country, industry has grown into an independent source of accumulation. This made it possible to narrow the price scissors, thereby increasing the purchase price for farmers' products.

Western price scissors

Not only in the USSR, but also in the countries of Western Europe and the USA, price scissors were used. This phenomenon has largely contributed to the displacement of small farms from production. For example, after the Second World War, in some capitalist powers (Great Britain, France, the USA, etc.), a large trade, financial andindustrial capital gradually penetrated into the agricultural sphere. They began to create agro-industrial associations, in which it was decided to apply the latest scientific and technical developments. In addition, farmers were subjected to strict state control and regulation. All this led to the fact that small farms, many of which were family businesses, simply could not stand the competition and went bankrupt. These small farms, despite state support, were unable to purchase expensive agricultural equipment produced by industrial monopolies.

Thus, farmers had to choose: either go into complete submission to influential industrial organizations and lose their independence, or give up agriculture altogether. At the same time, large farms, thanks to the formation of the agro-industrial complex, were reorganized and acquired features similar to modern corporations. This kind of farm-factory, due to price scissors, found themselves in the usual competition for a buyer.