The New Economic Policy (NEP)

The New Economic Policy (NEP)

Seven years of war, revolutions and civil fights in Russia inevitably had a disastrous impact on the economy. The following figures depict this quite clearly: by 1921 Russian industrial output was one fifth of the output in 1913, iron production had fallen to only two per cent of the pre-war level. The harvest production was 37 per cent of the normal output; 10 million horses and 20 million cattle had died. By 1920 the US dollar brought 1,200 roubles. In February 1921 the Soviet regime faced an uprising of workers and sailors. This event is remembered as the Kronstadt rebellion, but the mutiny was crushed by Red Army Troops under Trotsky’s command.

Although the Bolsheviks managed to put down the Kronstadt revolution, the people in Russia were sick of Lenin’s War Communism and the appalling economic condition in Russia, leading to increased hunger crisis. The people were no longer willing to suffer and military force or mass terror weren’t able to control them anymore. This was why Lenin needed a different, longer-term solution. He had already realised before that a change of policy was need if the Bolsheviks wanted to stay in control, and the Kronstadt risings reminded the Communists that their rule was not popular. Therefore Lenin introduced his New Economic Policy (NEP) in March 1921 at the Tenth Congress of the Communist Party.

The NEP meant that the government stopped stealing food from the peasants and permitted them to sell their products to private traders who became know as ‘Nepmen’. Unsurprisingly, harvest yields were increasing rapidly. Due to peasants being allowed to sell the parts of their produce, this meant that the ‘Black Market’, which during the Civil War had handled 60% of the food that reached Russia’s towns and cities, was legalised. The NEP also meant a return in money. The old currency was replaced by a new rouble. Lenin permitted private businessmen to own and run medium-sized profit-making factories. Only vital heavy enterprises (coal, oil, iron and steel industries) – ‘the commanding heights of the economy’, as Lenin called them – remained in government ownership. Private owners had to obey government rules about wages and working conditions and, like the state-owned factories, had to produce whatever the government directed at a price fixed by the government.

The NEP shocked many Communists because it seemed like a step back towards capitalism. It softened the dictatorial control of the state, and reintroduced some elements of capitalism to try to improve the nation’s disastrous economic conditions. ‘The New Economic Policy we are introducing today is a substantial one. It will last for a long time’, Lenin famously promised.

Despite opposition from within the Bolsheviks, the NEP turned out to be a great success. Within a few years, agriculture and industry were back to their pre-war levels, with improved living standards, that softened much of the popular anger against the regime. Limited private enterprise encouraged the Russian people to work harder for their personal benefit. The peasants produced more food, because they knew it was in their own interest to do so.

The NEP managed to turn away the threat of a counter-revolution and consolidate the Bolsheviks’ hold on power. Lenin however never really liked it. For him it was a strategic retreat, a necessary trick to preserve Communism rule on the way to true socialism. He undoubtedly sympathised with the uncompromising Bolsheviks who felt offended by the capitalist methods as they regarded the NEP as a betrayal of Communism. But he also knew that he had to push it through, as he knew that in order to sustain political dictatorship he had to offer economic relaxations.