Price Scissors

a term used to describe the results of a comparative analysis of the movement of prices for goods sold and purchased by commodity producers during a certain period when a gap (“scissors”) is revealed between these prices. The term is frequently used in studying the movement of prices in the exchange of output between industry and agriculture, generally in order to demonstrate a lack of equivalence in exchange between the city and the countryside. The price scissors can “open” or “close” depending on specific trends in the movement of prices for food and raw materials sold by agricultural producers on the one hand and prices for goods purchased by them from industrial manufacturers for production and nonproduction use on the other.

The problem of the price scissors becomes most acute during the period of the primitive accumulation of capital, during industrialization (especially industrialization of agriculture), and at times of crisis or war. The higher the share of agriculture in a country’s national income, the greater and more urgent the problem of the price scissors will be, both economically and socially.

The price scissors, which is an especially common effect in capitalist economies, is usually measured in terms of the agricultural parity ratio, which represents the index of prices received for agricultural products divided by the index of prices paid by farmers for goods and services. The base for comparison is a certain past year or period when this ratio of prices was relatively equivalent; in the United States, for example, the years 1910–14 are used as the base period. Thus, in 1920 the parity ratio of incomes and expenditures for US farmers (1910–14 = 100) was 99 percent; in 1930, 83 percent; in 1940, 81 percent; in 1950, 101 percent; in 1960, 80 percent; and in 1970, 72 percent. Therefore, during the period between 1910 and 1970 as a whole, the price scissors in US agriculture tended to open. Only during the years 1916–19 and 1942–52 did the scissors close to the 1910 level.

In the years after World War II (1939–45), with the growing influence of agribusiness in such developed capitalist countries as the United States, the Federal Republic of Germany, France, and Great Britain, the price scissors became one of the chief methods of forcing small and medium-sized farmers out of agriculture. Agrarian and industrial conglomerates became predominant. They are controlled by large-scale industrial, commercial, and financial capital, which is taking advantage of the achievements of the scientific and technological revolution and the mechanisms for state regulation of agriculture and is increasingly destroying supposedly “nonviable” family farms. Such farms cannot usually withstand an opening of the price scissors, that is, an increase in the separation between prices for agricultural products (even if these prices rise slightly and are guaranteed by the state) and the prices for the increasingly powerful, diverse, and expensive machinery and equipment produced by the industrial monopolies. Either the farmers are forced to leave the land, or they become dependents of the industrial firms which are taking over the farms.

As agriculture’s contribution to national income drops and the agricultural sector is increasingly integrated with industry and commerce, the price-scissors effect may decrease at certain times. As the agrarian and industrial complex takes shape and the concentration of production becomes a continuous and widespread process, the owners of large and very large farms reorganize their farms on the model of industrial firms. The reorganized agricultural enterprises increasingly take on the characteristics of modern monopolies. For such factory farms, industrial corporations, and conglomerates the problem of the price scissors is gradually altered into a typical problem of business competition.

The problem of the price scissors may also become acute during the period of transition from capitalism to socialism. In the USSR, for example, a price scissors formed during the period of reconstruction, with high prices for industrial goods and low ones for agricultural products. At that time agriculture was the major source of savings for the development of industry. However, as industry grew, it became an independent source of accumulation, making it possible for the Soviet state to close the price scissors significantly. The rise in state purchase prices for agricultural products finally eliminated the problem of the price scissors.