State Grain Purchases, Relative Prices, and the Soviet Grain Procurement Crisis

Abstract

This paper reexamines the Soviet grain procurement crises that preceded the collectivization decision. It uses regional cross-section data to study the effects of extraordinary measures and of relative state/private purchase prices on the "private grain surplus"-the amount of grain retained by peasants or sold to private markets. We find that the peasant economy was extremely sensitive to relative state/private grain prices as long as marketing decisions were relatively free. This price sensitivity rendered the system of private agriculture, private markets, and administrative state pricing incompatible. The state could not set arbitrary grain prices below market without resorting to administrative resource allocation. The model identifies the growing force of administrative measures, which, by 1927/1928, dominated the agricultural economy. The evidence in this paper clearly supports the view that the grain collection crisis was induced by state pricing policy. It therefore questions Stalin′s rationales for forced collectivization. In fact, very strong administrative measures were applied before 1927/1928 to prevent the decline in official procurement from being even greater. The experience of the late 1920s underscores the difficulties inherent in combining private market decision making with the planners′ desire to administratively control the flow of resources. When private markets are asked to coexist with administrative resource direction, the private sector typically is able to divert resources away from planned activities.