New Economic Policy

The New Economic Policy (NEP) was the official economic reconstruction program of the USSR from 1921 to 1928. It replaced the economic policies of war communism, an emergency program established by Vladimir Lenin during the Russian Civil War. War Communism had included forced requisition of grain, nationalization of all trade and industry, strict control of labor, payment in kind, and confiscation of financial capital. As a result of this program and of the ravages of the war, industrial and agricultural production declined sharply, and the population suffered severe deprivation. General unrest erupted in an insurrection in the Kronstadt naval base. At this time (March 1921) Lenin introduced the NEP in order to revive the economy. It was viewed by the Soviet government as a temporary measure that allowed the Communists to solidify their hold on power before returning to socialist construction. By 1925 Nikolai Bukharin had become the foremost supporter of the NEP, while Leon Trotsky was opposed to it and Joseph Stalin was noncommittal.

This new program signified a return to a limited capitalist system. Most agriculture, retail trade, and small-scale light industry was returned to private ownership, while the state retained control of heavy industry, transport, banking, and foreign trade. Money was reintroduced into the economy in 1922. Forced requisition of grain was replaced by a specific tax in kind, and peasants could retain excess produce and sell it for a profit. Smaller businesses were permitted to operate as private enterprises. Large industries remained under state control. They operated on the open market, but the state controlled the fixing of prices and the appointment of boards of directors. Private trade and wages were restored, and compulsory labor service was abolished. By 1928, the NEP had raised the Soviet national income above its prewar level. However, the NEP policies were deemed inadequate by Stalin for the coming war effort against bourgeois forces, and were thus reversed in the same year in what was known as the "Great Break", being replaced with the first five-year plan.

Criticism

The NEP was implemented as a measure to develop the productive forces before central economic planning could be introduced. However, though it raised the Soviet national income certain groupings of socialists have argued that it created a couple of problems. Chief among them were the preservation and empowering of a capitalist class within the country, which was comprised of Nepmen and kulaks who would later revolt against socialization of the means of production by refusing to cooperate with state plans and by destroying their crops and livestock. At the time in which the capitalist class existed, it gave the government much trouble in procuring adequate grain supplies in order to feed the growing urban work force, which was necessary in rapidly industrializing the country so as to be able to fare against the capitalist world. Opponents to the NEP have argued that collectivization of farms was also very troublesome in comparison to have possible programs, as it then had to be wrestled away from the bourgeoisie which began to entrench its position, and which also began to feel entitled to such. Converting to a fully socialist mode of production was made harder by the NEP, and thus it ultimately exacerbated the shortages and famines that came later.^{[tendency-based slant]}