The New Economic Policy (NEP)

new economic policy
A village market in Soviet Russia during the NEP period

The New Economic Policy (NEP) was a revised economic strategy, introduced by Lenin and the Soviet government in 1921. It was introduced to provide “breathing space” for Russia’s depleted and war-ravaged economy. The main feature of the NEP was to relax the severe restrictions and grain requisitioning imposed on Russia by war communism. The NEP also permitted capitalist activity in the lower levels of the economy. Russian farmers were once again permitted to buy and sell at market, while a new group of merchants, retailers and profiteers, dubbed the Nepmen, began to emerge. Under war communism, these activities would have been punishable by death but the NEP allowed them, and in some respects encouraged them. The NEP’s radical shift in economic policy and reintroduction of petty capitalism was welcomed by many Russians – but it caused ideological tension and divisions in the ranks of the Communist Party, with hardliners interpreting it as a step backwards.

Lenin’s decision to introduce the NEP followed three years of opposition, attempted counter-revolution and civil war. By early 1921 the Soviet regime was rattled by the Kronstadt uprising, continuing peasant revolts, angry food queues in the cities, strikes by hungry workers and factional criticism within the Communist Party. If conditions did not improve rapidly, Lenin and his party were at significant risk of a revolution. Lenin responded by winding back war communism and relaxing Soviet economic policy. He unveiled the NEP at the 10th Party Congress in March 1921. The formal decree that introduced the NEP was called “On the replacement of prodrazvyorstka [grain requisitioning] with prodnalog [a fixed tax]”. Under war communism and prodrazvyorstka, the amount of grain requisitioned was decided on-the-spot by unit commanders. The amount of prodnalog was fixed by the state, allowing peasants to retain whatever surplus they had produced. The Soviet government also lifted a ban on agricultural and town markets to re-open and allowed peasants to buy and sell their surplus produce. The economic system that replaced war communism can best be described as a mixed or blended economy, with elements of both socialism and capitalism.

new economic policy
A Soviet poster depicting one of the capitalistic Nepmen (left)

The replacement of requisitioning with a fixed tax, along with the return of market trading and a revived currency, provided peasant farmers with an incentive to work harder and produce more. As a consequence, the level of agricultural production began to rise significantly. Peasants who produced more began to acquire surplus goods and cash, which they used to buy more land or hire labour. A new class of kulak peasants, a group long demonised in Bolshevik propaganda and persecuted by the Red Army and CHEKA, began to re-appear. Another group of opportunistic middle-men and retailers also emerged during the NEP period. Dubbed the Nepmen, they were mostly shopkeepers, salesmen and market stall holders who obtained items wholesale or secondhand and then sold them for a profit, a capitalistic activity that was strictly forbidden before 1921.

new economic policy
An American press report on the release of the New Economic Policy

In comparative terms, the NEP was a success. It did not solve all of Russia’s economic problems, however, nor did not produce immediate results. Russia’s agricultural production remained stagnant through 1921, the worst year of the Great Famine, before production began to increase significantly in 1922 and in subsequent years. By the mid-1920s, Russia’s agricultural output had been restored to pre-World War I levels. In 1913 Russia produced around 80 million tons of grain. By 1921 this had fallen to less than 50 million tons – but four years of the NEP saw it increase to 72.5 million tons. There were knock-on improvements in industrial production and the wages of industrial workers, which doubled between 1921 and 1924. In November 1921 the Soviet regime introduced currency reforms that would back inflation and restored trust in the rouble. Most importantly, the availability of food in the cities was restored.

“The terms in which Lenin defined the relationship between the old economic policy (war communism) and the new (NEP) were of offensive and retreat, construction and pause, leaving no room for a positive acceptance of the NEP in Bolshevik minds. NEP was never conceived of as a path to socialism but as a detour, as a temporary obstacle to overcome. The Bolshevik Party desperately needed a role to play; it needed a reaffirmation that it was leading Russia and not simply waiting for the conditions to arise when the socialist offensive could resume.”
Vladimir Brovkin, historian

Because the NEP allowed elements of capitalism to return to Russia, some in the Communist Party hierarchy viewed it as a retreat or an acknowledgement that socialist policies had failed. Lenin responded by justifying the NEP as a temporary measure; it was intended to provide “breathing space” for the Russian people and their economy, which was on the brink of collapse after seven years of war. Lenin staved off criticism from within his own party by declaring that while elements of petty capitalism would return, the Soviet government retained control of the “commanding heights” of the economy: industry, mining, heavy manufacture and banking. Nevertheless, the NEP did seem like a concession that earlier policies had failed. Much like chief minister Peter Stolypin’s land reforms of 1906-7, the NEP encouraged and increased class divisions by allowing some peasants to enrich themselves. The NEP did not solve all of Russia’s economic ills either. Despite improved wages and conditions, it became difficult to attract workers back to the cities. As a consequence, Russia’s industrial recovery in the early 1920s was much slower than its agricultural recovery.

new economic policy

1. The New Economic Policy, or NEP, was a revised economic strategy, developed and introduced by Lenin in early 1921 – a time when the Bolsheviks faced rising opposition and rebellion.

2. The NEP replaced war communism as the Soviet regime’s official economic policy. It ended grain requisitioning, replacing it with a fixed tax to be paid in kind, and allowed private ownership of small business, the return of markets and the sale of surplus goods.

3. The NEP allowed the return of capitalist behaviours, such as buying and selling for profit, and produced the emergence of new kulak and Nepmen classes.

4. In comparative terms it was a success, allowing Russia’s agricultural production to quickly recover and, by 1925, reach similar levels to before World War I.

5. Some in the Communist Party considered the NEP a betrayal or abandonment of socialist economic principles. Lenin justified it as a temporary “breathing space” for the Russian economy, which had been exhausted by years of World War I, the Civil War and war communism.

© Alpha History 2014. Content on this page may not be republished or distributed without permission. For more information please refer to our Terms of Use.
This page was written by Jennifer Llewellyn, John Rae and Steve Thompson. To reference this page, use the following citation:
J. Llewellyn et al, “The New Economic Policy (NEP)” at Alpha History,, 2014, accessed [date of last access].