The sundering of economic relations between town and country during the civil war continued to threaten the viability of the Soviet state after the Reds had achieved military victory. With little food and other agricultural produce reaching the cities, the urban population had dwindled. Correspondingly, the production of manufactured goods such as clothing and farm implements which might have induced peasants to produce surpluses for urban consumption plummeted. The New Economic Policy inaugurated in 1921 was dedicated essentially to reestablishing this link (smychka) on the basis of market relations. The state would regulate the exchange of commodities, and, via the Land Code issued in 1922, provide a legal framework for peasants' land use. The smychka also had an important cultural and educational dimensions which were represented by the establishment of reading huts (izbachi) and other measures to promote literacy, the circulation of silent films in the villages, and the dispatch of agronomists to promote scientific farming and educate peasants in the advantages of soviet power.
Like the blades of a pair of scissors, the terms of trade between town and country began to diverge in1923 in favor of the mainly state-run industrial economy and at the expense of rural consumers. Basically, the reason for the "scissors crisis" of that year was that while agricultural production had rebounded quickly from the devastating famine of 1921-22, industrial infrastructure was relatively slow to recover from civil war-era neglect and destruction. Thus, whereas textile production -- essential to providing cloth to mass consumers -- was only 26 percent of the pre-war level in 1922, agriculture reached 75 percent. The problem was exacerbated by the syndicates, government disposal agencies, that demanded high prices for the manufactured goods over which they exercised near monopolistic control, and the fact that the state, as principal purchaser of bread grain, sought to buy at low prices.
By October 1923 when the crisis reached its peak, industrial prices were 276 percent of 1913 levels, while agricultural prices were only 89 percent. Put another way, industrial prices were three times higher, relative to agricultural prices, than they had been before the war. At this point, the state took vigorous action to force down prices of manufactures. Costs were reduced by cutting staffs in industry and the trade networks, the network of consumer cooperatives was expanded, and industrial trusts were compelled to unload warehoused stocks before obtaining credits. As a result of these measures as well as the success of the newly established People's Commissariat of Trade in making inroads into areas previously dependent on NEPmen, the scissors began to close. By April 1924 the agricultural price index had risen slightly to 92 (1913=100) and the industrial index had fallen to 131.
At this point, the issue became one of finding the optimum balance between industrial and agricultural prices. This fed into the state's rationalization and economization campaigns in industry, and contributed to the struggle over workers' employment, wages, and benefits.