Structural Change and Economic Dynamics 11 2000 13 – 24
Scissor crises, value-prices, and the movement of value-prices under technical change
Francis Seton
Emeritus Fellow Nuffield College,
3
Sta6erton Road, Oxford OX
2 6
XH, UK Accepted 5 October 1999
Abstract
The paper defines and exemplifies scissor crises as untoward price movements and their social effects and looks for possible causes in historical developments and for the effects of
differential movements in sectoral efficiencies on an important type of ‘rational’ prices. It establishes the parallelism of these price movements with what might be expected to occur in
the realm of market prices in the same conditions and investigates the relative speed of causes and effects. The emphasis throughout is on the link between efficiencies and changes
in values and thus on the link between physical phenomena and their social effects as mediated by values and prices, effects which in extreme cases could result in the trauma of
scissor crises. © 2000 Elsevier Science B.V. All rights reserved.
JEL classification
:
B14; B24; C67 Keywords
:
Scissor crises; Shadow prices; Value prices www.elsevier.nllocateeconbase
1. The Russian experience
The world suffered the most telling impact of a scissor crisis in the Soviet Union during Lenin’s New Economic Policy in the mid-twenties of this century. Agricul-
tural prices had fallen precipitously from their post-war high to a woefully inadequate level, while industrial prices had cut this declining curve in a powerful
upward trend from below at a point corresponding to what was considered traditionally acceptable, thus producing a time-graph in the shape of the scissors
which had given the crisis its name. Why crisis? With the terms of trade having
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turned radically against agricultural producers, the peasants, so disastrously disad- vantaged by the market, were sorely tempted to turn away from it and retreat into
a primitive form of self-sufficiency, to which, after all, they had long been accustomed under serfdom and even during the subsequent emancipation. If they
could not obtain their clothes, shoes, blankets, and other industrial goods on reasonable terms with money obtained from selling their food to the towns at
acceptable prices, they would refuse to sell any food at all, consume it all themselves, and make these other products by hand in their own cottages, leaving
the towns to starve. In more developed countries this would not be a threat since agricultural producers, long removed from self-sufficiency, would be too dependent
on the market ever to contemplate ‘withdrawing from it’. But in a still underdevel- oped economy, such as the Soviet Union was at the time, it was a dire threat
indeed, a threat to the urban population and with it to the regime itself and to the success of the Revolution.
The concept of a ‘scissor crisis’ and the term itself probably had their origin in Trotsky’s report to the twelfth party congress in April 1923 in which he produced
a diagram showing two ‘blades’ of the price scissors representing industrial and agricultural price levels, respectively, intersecting at the fulcrum of the scissors
whose nature was not explained in any detail beyond the fact that it represented the conventional or traditional relative level which had proved acceptable for a
historical period. Extensive though the subsequent debate proved to be, the nature of the phenomenon has never to my knowledge been analysed in general terms,
probably being too country- and time-specific to arouse the interest of economists as opposed to historians or political analysts.
The cause of the particular Soviet scissor-like movements in market prices, however, was not far to seek. The high post-war agricultural prices induced by
war-time scarcities were quickly brought down by recovering agricultural produc- tion as returning soldiers swelled the rural labour force, and neglected, but still
fertile land was retaken into cultivation. By contrast industrial prices, at first kept low by what was known as ‘razbazarovanie’ or ‘squandering’, the competitive
scramble to obtain industrial working capital by cut-price sales of raw material and even equipment experienced a rapid rise as industrial managers realised their
mistake and formed enterprise trusts and syndicates with monopolistic intent and effect
1
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2. Potential scissor crises
