The period of the early Planned Economy was linked to the disaster of the collectivisation of agriculture. By 1927-1928, the towns in Soviet Russia were facing an acute problem of grain supplies. The government fixed prices at which grain must be sold, but the peasants refused to sell their grain to government buyers at these prices .
Stallin believed that rich peasants and traders in the country side were holding stocks in the hope of higher prices. Speculation had to be stopped and supplies confiscated. In 1928, Party members toured the grain producing areas, supervising enforced grain collection, and raiding "kulaks" the name for well to do peasants. As shortage continued, the decision was taken to collectivise farms. After 1917, land had been given over to peasants. These small sized peasant farm could not be modernised. To develop modern farms, and run them along industrial lines with machinery, it was necessary to 'eliminate kulaks', take away land from peasants, and establish state-controlled large farms.
From 1929,the party forced all peasants to cultivate in collective farms(kolkhoz). The bulk of land and implement were transferred to the ownership of collective farms. Peasants worked on the land, and the kolkhoz profit was shared. Enraged peasants resisted the authorities and destroyed their livestock.