Under the Czar Russian farmers were taxed by their being required to sell their products to the government at prices below the market prices. The prices at which the farmers had to sell were sufficient to provide profit incentives for production.

When the Bolshevik came to power they maintained the same system of required sales at government set ruble prices. The problem was that the Bolsheviks were printing money at an enormous rate. This led to hyperinflation. Some of the Bolsheviks said that the printing presses for money were like machine guns which would destroy capitalism. Bolsheviks adjusted the prices paid to the farmers for their output but not enough to keep up with inflation. Soon the prices paid to the farmers was effectively zero. The farmers rebelled against giving away their crops.

When food shortages began to develop in the cities the Bolsheviks began to send squads of soldiers to the farms to confiscate their surplus production. The soldiers were instructed to leave the farmers with enough for their own subsistence plus seed for the next years crop. After a season or two of this policy some farmers began to plant only enough to take care of their own subsistence. In a country that was living on the bare edge of subsistence the loss of some of the output resulted in famines. The Bolsheviks made it worse by continuing to export grain to earn foreign trade credits. Thus in 1920 and 1921 widespread famine conditions prevailed, especially in the Ukraine which had been the bread basket of Russia.

Vladimir Lenin looked at the situation and realize that he and his party could not survive if the food situation was not improved. He then announced a New Economic Policy (NEP) which was a return to a market economy for agriculture and small businesses. When his decision was criticizes as a retreat from socialism he announced that socialism still prevailed because the commanding heights of the economy had be retained under Bolshevik control. The commanding heights were the large scale enterprises, the transportation system and international trade.

Initially NEP required the farmers to sell their own produce in the towns and villages. However this involved the farmers being away from their farms and their livestock. Consequently traders were allowed to buy up the farm products from the farmers. These middle men were known as NEP men or NEPPERS.

Under NEP Russian agriculture in the 1920s recovered. Output from the farms was growing faster than the output from the commanding heights under Bolshevik control. The graph of agricultural production was rising more sharply than the graph of production from the industries under Bolshevik control. The pattern of the line for agriculture crossing the line for the socialized industries struck some Bolshevik as looking like a pair of scissors. The Bolsheviks talked about a scissors crisis.

NEP in agriculture was a success, but Lenin died in 1924. After a power struggle of a few years Joseph Dugashvili emerged as the undisputed power among the Bolsheviks. History knows Joseph Dugashvili as Joseph Stalin, Stalin being the Russian word for steel. The power struggle involved on one side those, such as Leon Trotsky, who believed that Marxism taught that socialism could only emerge in the advanced industrial economies and hence Russia should devote its energies to promoting a world revolution of the proletariat. On the other side was those like Joseph Stalin who believed that socialism could be created in one country.

In about 1928 Stalin initiated the first five year plan for the Soviet Union. When in the early 1930s that plan appeared to be a success Stalin emerged as the all powerful dictator of the Soviet Union. He was not going to let the decisions of the peasants thwart the carrying out of his further industrial development plans so he called for the collectivization of the farmers.