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Resolving the Scissor Crisis
People's Commissar for Foreign Affairs Georgy Chicherin
The Soviets were able achieve significant success in diplomacy in 1928-1929. First of all, the the Soviets were able to obtain a significant long term loan from Germany in exchange for promises of future deliveries of grain, oil and other natural resources. [1] The Soviets also offered significant concessions to the French, including assumption of the Tsarist debts to be paid in negotiated installments [2], which brought in French loans as well. The French loaned money to the Soviets partially to counter-weigh German influences in the USSR.
Perhaps most significantly, in June 1929 the Labor party returned to power in the UK. In 1924 the Labor government had being ready to extend significant loans to the USSR in return for the UK being granted "most favored nation" trade status by the Soviets and for the end to Comintern agitation in the British Empire. However, an agreement never took place due to Labor's loss in the 1924 General election. [3] With Ramsay McDonald back at 10 Downing, a belated signing took place in July of 1929 in London with Mikoyan and Chicherin attending.
Finally the Soviet Union had access to significant foreign capital as well as access to western goods, expertise and technology as a way to advance the "productive forces of society". German engineers were soon working to improve Soviet factories and educate their Soviet counter-parts on modern industrial techniques using western machines. However, this did not work out completely as planned. For one, the west was still reluctant to sell their most advanced technologies to Communists, not to mention even with loans the Soviets still had trouble paying for it. While productivity did increase: it would take time for new technologies and capital to be integrated into the Soviet industrial process. Much of the loans also had to go to directly purchase western consumer goods and, ironically for a state containing the Ukrainian breadbasket, grain to feed the cities. [4]
In the midst of all this the food situation in the cities was growing worse, Sokolnikov was forced to adopt the same measures he did in the early 1920s: which is to ruthlessly control monetary emissions (printing money) to ensure inflation is under control so peasants would accept payment for their grain. [8] In material terms, this was effectively a means of decreasing industrial investment in favor of focusing on maximizing production of consumer goods by tightening up credit for investment [5]. When industrial managers complained to the finance commissariat, Sokolnikov taunted them with the quote "Printing Money is the opium of the economy!". However, obviously the longer term impact of this is that Soviet industry was growing slower: which meant the crisis continued.
For all the wizardry of the Bolshevik technocrats in foreign policy and economics, the measures taken to combat the "scissor crisis" still wasn't enough, and by mid 1929 the Soviet leadership which had fought so hard against coercing the peasantry barely two years ago found itself forced to send in OGPU [6] to combat what amounted to tax riots against grain requisition. Soon tens of thousands have being arrested in the Urals and Siberia for "anti-Soviet agitation" and "economic crimes". Trotsky gleefully penned from his Kazakh exile that he had being correct all along about the need to coerce peasants into giving up their grain to fuel industrialization. [7]
However right as Soviet Communism seems to be unraveling due to its own internal contradictions, it was thrown a lifeline by what Marx had prophesied: the inherent contradictions of American Capitalism.
On October 31, 1929, the New York stock market crashed, losing 15% of its value within a few hours. This would mark the start of the greatest economic catastrophe capitalism had ever known....
-Sheila Fitzpatrick, A History of the Soviet Union (2003), Cambridge University Press.
[1] Stalin did try to negotiate for this in 1928, the Germans and Soviets saw each other as partners in dismantling the Versailles order in the Rapello era
[2] Stalin also offered this to the French OTL
[3] This happened OTL. The possibility for Detente between the Soviets and the west was there in the 1920s, it fell apart otl due to several factors. A more determined Soviet leadership who cared less about not being temporarily dependent on foreign capital could have made it work.
[4] The Soviets actually did import grain in the late 1920s, Bukharin wanted to import more than the Soviets actually did well Stalin wanted more coercive requisitions precisely because he did not want to be dependent on foreign imports from capitalists
[5] An obvious means of tightening monetary supply is to tighten up credit issued to industry
[6] The secret police predecessor of the NKVD and KGB
[7] He did the same thing otl and it was this which caused his deportation from the USSR by Stalin
[8] This effectively raised the real price of grain, thus the peasants are somewhat more willing to hand over their produce
People's Commissar for Foreign Affairs Georgy Chicherin
The Soviets were able achieve significant success in diplomacy in 1928-1929. First of all, the the Soviets were able to obtain a significant long term loan from Germany in exchange for promises of future deliveries of grain, oil and other natural resources. [1] The Soviets also offered significant concessions to the French, including assumption of the Tsarist debts to be paid in negotiated installments [2], which brought in French loans as well. The French loaned money to the Soviets partially to counter-weigh German influences in the USSR.
Perhaps most significantly, in June 1929 the Labor party returned to power in the UK. In 1924 the Labor government had being ready to extend significant loans to the USSR in return for the UK being granted "most favored nation" trade status by the Soviets and for the end to Comintern agitation in the British Empire. However, an agreement never took place due to Labor's loss in the 1924 General election. [3] With Ramsay McDonald back at 10 Downing, a belated signing took place in July of 1929 in London with Mikoyan and Chicherin attending.
Finally the Soviet Union had access to significant foreign capital as well as access to western goods, expertise and technology as a way to advance the "productive forces of society". German engineers were soon working to improve Soviet factories and educate their Soviet counter-parts on modern industrial techniques using western machines. However, this did not work out completely as planned. For one, the west was still reluctant to sell their most advanced technologies to Communists, not to mention even with loans the Soviets still had trouble paying for it. While productivity did increase: it would take time for new technologies and capital to be integrated into the Soviet industrial process. Much of the loans also had to go to directly purchase western consumer goods and, ironically for a state containing the Ukrainian breadbasket, grain to feed the cities. [4]
In the midst of all this the food situation in the cities was growing worse, Sokolnikov was forced to adopt the same measures he did in the early 1920s: which is to ruthlessly control monetary emissions (printing money) to ensure inflation is under control so peasants would accept payment for their grain. [8] In material terms, this was effectively a means of decreasing industrial investment in favor of focusing on maximizing production of consumer goods by tightening up credit for investment [5]. When industrial managers complained to the finance commissariat, Sokolnikov taunted them with the quote "Printing Money is the opium of the economy!". However, obviously the longer term impact of this is that Soviet industry was growing slower: which meant the crisis continued.
For all the wizardry of the Bolshevik technocrats in foreign policy and economics, the measures taken to combat the "scissor crisis" still wasn't enough, and by mid 1929 the Soviet leadership which had fought so hard against coercing the peasantry barely two years ago found itself forced to send in OGPU [6] to combat what amounted to tax riots against grain requisition. Soon tens of thousands have being arrested in the Urals and Siberia for "anti-Soviet agitation" and "economic crimes". Trotsky gleefully penned from his Kazakh exile that he had being correct all along about the need to coerce peasants into giving up their grain to fuel industrialization. [7]
However right as Soviet Communism seems to be unraveling due to its own internal contradictions, it was thrown a lifeline by what Marx had prophesied: the inherent contradictions of American Capitalism.
On October 31, 1929, the New York stock market crashed, losing 15% of its value within a few hours. This would mark the start of the greatest economic catastrophe capitalism had ever known....
-Sheila Fitzpatrick, A History of the Soviet Union (2003), Cambridge University Press.
[1] Stalin did try to negotiate for this in 1928, the Germans and Soviets saw each other as partners in dismantling the Versailles order in the Rapello era
[2] Stalin also offered this to the French OTL
[3] This happened OTL. The possibility for Detente between the Soviets and the west was there in the 1920s, it fell apart otl due to several factors. A more determined Soviet leadership who cared less about not being temporarily dependent on foreign capital could have made it work.
[4] The Soviets actually did import grain in the late 1920s, Bukharin wanted to import more than the Soviets actually did well Stalin wanted more coercive requisitions precisely because he did not want to be dependent on foreign imports from capitalists
[5] An obvious means of tightening monetary supply is to tighten up credit issued to industry
[6] The secret police predecessor of the NKVD and KGB
[7] He did the same thing otl and it was this which caused his deportation from the USSR by Stalin
[8] This effectively raised the real price of grain, thus the peasants are somewhat more willing to hand over their produce
- RousseauX
- Word Count: 830