Price Scissors

Do not run with these.

Come near the fire, kids, and learn about the Scissors Crisis in the Soviet Union, 1920s. The government implemented a New Economic Policy. This policy caused agricultural goods to drop substantially in price, and industrial goods to rise substantially in price. On a graph, the lines drop and cross paths, looking like a pair of scissors. This set is a domino effect…a series of unfortunate events.

The farmers couldn’t afford manufactured goods anymore with the price drops. Instead, they started farming just for themselves to survive. Then everyone started worrying there wouldn’t be enough farmers farming, causing famine.

Price scissors can be found elsewhere too. In the modern world, it’s where prices go topsy-turvy, some things getting unusually expensive (like gas), and some things getting unusually cheap (like fruits).

Donations can cause price scissors as well. For instance, when Haiti needed help, the U.S. tried to step in and help…with U.S. rice. The huge influx of cheap rice created a huge supply of rice, tanking the price of rice. Trying to help just destroyed Haitian farmers’ livelihoods, via price scissoring.