1921: The New Economic Policy

Lenin Introduces NEP

Subject essay: Lewis Siegelbaum

The New Economic Policy (NEP), introduced by Lenin at the Tenth Party Congress in March 1921, represented a major departure from the party's previous approach to running the country. During the civil war, the Soviet state had assumed responsibility for acquiring and redistributing grain and other foodstuffs from the countryside, administering both small- and large-scale industry, and a myriad of other economic activities. Subsequently dubbed (by Lenin) "War Communism," this approach actually was extended in the course of 1920, even after the defeat of the last of the Whites. Many have claimed that War Communism reflected a "great leap forward" mentality among the Bolsheviks, but desperation to overcome shortages of all kinds, and particularly food, seems a more likely motive. In any case, in the context of continuing urban depopulation, strikes by disgruntled workers, peasant unrest, and open rebellion among the soldiers and sailors stationed on Kronstadt Island, Lenin resolved to reverse direction.

The linchpin of NEP was the introduction of a tax-in-kind, set at levels considerably below those of previous requisition quotas, which permitted peasants to dispose of their food surpluses on the open market. This concession to market forces soon led to the denationalization of small-scale industry and services; the establishment of trusts for supplying, financing, and marketing the products of large-scale industry; the stabilization of the currency; and other measures, including the granting of concessions to foreign investors, all of which were designed to reestablish the link (smychka) between town and country. Referring to NEP as a retreat of the state to the "commanding heights of the economy" (large-scale industry, banking, foreign commerce), Lenin insisted that it had to be pursued "seriously and for a long time."

Under NEP the Soviet economy revived. By 1926-27, most economic indices were at or near pre-war levels. But recovery via market forces was accompanied by the re-emergence of a "capitalist" class in both the countryside (the kulaks) and the towns (NEPmen), persistent unemployment among workers (some of whom referred to NEP as the "new exploitation of the proletariat"), and anxieties within the party about bourgeois degeneracy and the loss of revolutionary dynamism. The triumph of Stalin over his political rivals, the adoption of the First Five-Year Plan for industrialization, and the decision to launch a "Socialist Offensive" against the kulaks effectively marked the abandonment of NEP by 1929.