Introduced by Vladimir Lenin in 1921, the New Economic Policy (or NEP) was a radical shift in Bolshevik economic strategy. It eased the harsh restrictions of war communism, the Bolshevik economic policy during the Civil War, and allowed the return of markets and petty trade. The NEP was controversial within the Bolshevik party, where some saw it as a backdown or retreat from socialism.
The NEP ended the policy of grain requisitioning and introduced elements of capitalism and free trade into the Soviet economy. This was done, in Lenin’s words, to provide “breathing space” for the Russian people.
Under the NEP, Russian farmers were once again permitted to buy and sell their surplus goods at markets. This led to the emergence of merchants, retailers and profiteers dubbed “Nepmen”. During the Civil War, these activities would have been punishable by death.
The NEP was welcomed by many Russians, who had endured years of requisitioning, shortages, hoarding and restrictions on free trade – but it created ideological tension and divisions in the ranks of the Communist Party. Many Bolsheviks interpreted it as a surrender or retreat towards capitalism.
Lenin’s decision to introduce the NEP followed three years of civil war, social disruption, economic deprivation and famine. This only increased opposition to the Bolshevik regime which, in turn, increased the risk of rebellion or counter-revolution.
By early 1921, the Soviet regime had been rattled by the Kronstadt rebellion, peasant revolts in the provinces, angry food queues in the cities, strikes by hungry workers and factionalism within the Communist Party. If conditions did not improve, the Bolshevik regime faced the possibility of another revolution.
Lenin responded by winding back war communism and relaxing Soviet economic policy. He unveiled the NEP at the Tenth 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 would instead be fixed by the state, allowing peasants to retain whatever surplus they had produced.
The NEP also lifted a ban on agricultural and town markets, allowing peasants to buy and sell their surplus produce. The Soviet government would retain control of the “commanding heights” of the economy, such as banking, finance and heavy industry.
The system introduced by the NEP can best be described as a mixed or blended economy. It contained elements of both socialism and capitalism.
Kulaks and Nepmen
The replacement of requisitioning with a fixed tax and free markets gave Russian farmers an incentive to work harder and produce more. Helped by the end of the Civil War and stabilisation in conditions, agricultural production began to rise significantly.
Those peasants who produced more began to acquire surplus goods, bought more land and hired labour. A new group of affluent peasants or kulaks, a group long demonised in Bolshevik propaganda and persecuted by the Red Army and the Cheka, began to emerge.
Another group of opportunistic middle-men and retailers also emerged under the NEP. Dubbed the Nepmen, these shopkeepers, salesmen and market stall holders obtained items wholesale or secondhand and sold them with a markup. This capitalistic profiteering was strictly forbidden before 1921.
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, but production began to increase significantly in 1922 and beyond.
By the mid-1920s, Russia’s agricultural output had been restored to pre-World War I levels. Back in 1913, Russia had 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 also 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.
Trouble in the party
Because the NEP allowed elements of capitalism, hardliners in the Communist Party hierarchy viewed it as a retreat towards capitalism – or at least an acknowledgement that socialist policies had failed.
Lenin responded by justifying the NEP as a temporary measure. The NEP, he argued, 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 industry, mining, heavy manufacture and banking.
Whatever his justifications, the NEP did seem like a concession that earlier policies had failed. Much like Pyotr Stolypin’s land reforms of 1906-7, the NEP encouraged and increased class divisions by allowing some peasants to enrich themselves.
The NEP disillusioned many young Bolsheviks who were eagerly awaiting the transition to socialism. Writing in 1921, Alexandre Barmine said:
“We felt as though the revolution had been betrayed and it was time to quit the Party… If money was reappearing, wouldn’t rich people reappear too? Weren’t we on the slippery slope that led back to capitalism? We put these questions to ourselves with feelings of anxiety.”
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, an inequality that led to the ‘Scissors Crisis‘.
A historian’s view:
“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.”
1. The New Economic Policy, or NEP, was a revised economic strategy, developed and introduced by Lenin in early 1921. This was a period 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 businesses, 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, the NEP was a success. It allowed 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.