State Control of the Economy: From the NEP to the Command Economy (AQA A Level History: Component 1: Breadth study): Revision Note

Summary

• The Vesenkha, set up in December 1917, was the first body to manage Soviet industry centrally

• By the mid-1920s, the state had the institutions to plan and direct the economy

  • Vesenkha managed industry

  • Gosplan planned the economy from 1921

• The Great Industrialisation Debate split the Party over how quickly the USSR should industrialise

  • The Left wanted rapid state-led industry

  • The Right wanted to keep the NEP and avoid alienating the peasants

• The 1927-28 grain procurement crisis exposed the failure of the NEP to feed the towns reliably

• Historians debate whether the command economy was a practical response to crisis or a choice shaped by ideology and politics

The Vesenkha: central economic planning

• Soviet leaders began building central economic control soon after taking power

  • The Vesenkha was the first major body created for this purpose

  • It set the pattern for the planned economy that later developed

The creation of the Vesenkha

• The Vesenkha, or Supreme Council of the National Economy, was set up in December 1917

  • Its job was to manage industry and finance

  • It was designed to bring order to a chaotic economy

• It marked a shift away from workers' control

  • Economic power moved towards central state planning

  • Vesenkha became the most important institution of economic management

The powers of the Vesenkha

• The Vesenkha took wide powers over the economy

  • It reorganised the industry to make it more efficient

  • It nationalised banks, transport and large-scale industry

  • It set production targets and directed resources to key sectors

The growth of central planning in the 1920s

• By the 1920s, its role had expanded further

  • It supervised state-run businesses

  • It helped coordinate long-term economic planning

• Gosplan was created in 1921 to plan the economy

  • From 1925, it drew up the targets that later shaped the Five-Year Plans

• By the mid-1920s, the state had both the institutions and the habit of central direction

  • This existed even while the NEP still allowed private trade

Party opinions on the economy: left vs right opposition

• After Lenin's death, the Party was divided over how to develop the economy

  • This became known as the Great Industrialisation Debate

  • It grew out of weaknesses in the NEP

The roots of the debate: the Scissors Crisis

• Under the NEP, agriculture recovered faster than industry

  • Peasants quickly grew more once they could sell their surplus harvest for profit

  • Industry stayed under state control

  • Industrial recovery was slower because investment remained limited

• This created the Scissors Crisis in 1923

  • Industrial prices rose

  • Farm prices fell

  • Trotsky compared the widening price gap to the blades of a pair of scissors

• The crisis damaged trade between the town and the countryside

  • Manufactured goods became expensive and scarce

  • Peasants had little reason to sell grain for overpriced goods

  • Many held grain back

• By 1928, production had recovered to around its 1913 levels, but the recovery was uneven

  • The NEP could not satisfy peasants and townspeople at the same time

  • Many on the Left argued that socialism could not be built “with capitalist hands”

The Left: the case for rapid industrialisation

• The Left wanted rapid, state-led industrialisation

  • Heavy industry should come first

    • This would build socialism quickly

• The state should use farm profits to fund industry

  • This was a process of capital accumulation

  • It meant squeezing the peasantry

  • The Left accepted that this would cause anger

• Its supporters included:

  • Trotsky

  • Zinoviev

  • Kamenev

The Right: the case for continuing the NEP

• The Right wanted to keep the NEP going

  • Private trade and small-scale capitalism would help the economy recover first

  • The peasants were seen as essential allies

• The Right wanted to avoid alienating the peasantry

  • Its approach is often summed up as building socialism "with capitalist hands"

• It was supported by:

  • Bukharin

  • Rykov

  • Tomsky

The Centre: pragmatism

• The Centre adopted a flexible strategy

  • It argued that policy should follow the country's needs, not be a fixed ideology

  • It backed the NEP until 1927, when growth slowed

• Stalin was one of the key supporters of the Centre

Why the debate mattered

• The Right won most Congress debates through the mid-1920s

  • This blocked the Left

  • It was one reason the Party turned against Trotsky

• As economic problems worsened, Stalin's Centre shifted towards the Left

  • This shift laid the groundwork for the command economy

Why did the USSR adopt a command economy?

• By the late 1920s, the NEP was widely seen as inadequate

  • The Party turned decisively towards full-scale control

The trigger: the grain procurement crisis

• By the late 1920s, the NEP was judged as unable to meet the USSR's needs

  • In agriculture, the state could not get enough grain

  • Peasants were reluctant to sell grain at the low, fixed state prices

• In 1927-28, this caused a grain procurement crisis

  • Peasants hoarded grain instead of selling it

  • This created food shortages in the towns

  • The state could no longer guarantee food for the growing urban workforce

• In industry, recovery under the NEP was too slow

  • The price gap left peasants with little incentive to trade grain for scarce, expensive goods

  • Many Bolsheviks became convinced that the NEP could not deliver the rapid industrialisation that socialism needed

• The Party adopted a command economy

  • The state would direct all major economic decisions

  • The shift from the NEP to planning and collectivisation from 1928 is known as the Great Turn

  • It set the stage for the First Five-Year Plan in 1928

The debate

• Historians debate why the command economy was adopted

  • Was it a practical response to the failing NEP?

  • Or was it driven by ideology and the power struggle of the late 1920s?

The command economy was a pragmatic response to the failures of the NEP

• The turn towards central control was driven by real economic problems

  • The 1927–28 procurement crisis showed that the NEP could not feed the towns reliably

  • Only the state could direct resources on the scale needed for rapid industrialisation

• From this view, any leader would have faced similar pressures

  • Supporters of this argument stress crisis and necessity more than ideology

The command economy was a choice driven by ideology and the power struggle

• The command economy reflected Bolshevik beliefs as well as economic need

  • Most Bolsheviks had always disliked the private trade of the NEP

  • Many also disliked the rise of Nepmen and kulaks

• The Left’s victory in the economic debate was closely tied to Stalin’s defeat of his rivals

  • On this reading, the turn was about politics and ideology as well as economics

  • Those who take this view see the command economy as avoidable rather than inevitable