New Economic Policy (NEP), 1921 (Edexcel A Level History): Revision Note

Summary

• This note will examine the causes and impacts of the New Economic Policy (NEP)

• The NEP was introduced in 1921 to recover from the economic and political crises caused by War Communism

• It reintroduced elements of private trade and small-scale capitalism while keeping state control of the economy

• The policy revived production and living standards

• However, it created tensions within the Party, especially during the Scissors Crisis (1923)

• Historians debate whether the NEP was a pragmatic compromise or a betrayal of communist ideology

Why was the NEP introduced?

Political unrest

• Grain requisitioning and repression had sparked widespread uprisings

• The Bolsheviks risked losing workers’ and peasants’ backing if harsh policies continued

Economic collapse

• War Communism and the Russian Civil War had devastated the economy

  • By 1921, agricultural and industrial output had fallen dramatically

  • Famine caused millions of deaths

• Lenin needed an economic policy which:

  • End food shortages

  • Increase productivity

Build socialism

• By 1921, it was clear that a European communist revolution would not happen

• Lenin needed to strengthen socialism in Russia without needing foreign aid

Key features of the NEP

Agriculture

• Grain requisitioning ended

  • It was replaced with a tax in kind

    • Peasants paid the state a portion of produce but could keep the rest

• Peasants could sell surplus grain on the market for profit

Industry

• Businesses with fewer than 20 workers were returned to private ownership

• Larger industries, banking, transport, and foreign trade remained under state control

  • The government expected nationalised businesses to make a profit

  • People had to pay for public transport again

• Money was reintroduced

Private trade

• Private trade was legalised once more, allowing markets to reopen

• The government allowed small-scale entrepreneurship

Impacts of the NEP

Economic recovery

• Industrial output quickly improved

  • By 1926, production levels had almost returned to those of 1913

• Lenin used money raised by taxing the peasants to improve industry

  • He funded a mass electrification programme

  • Factories closed or damaged during the Civil War were re-opened or re-built

    • However, taxes did not raise enough money to build large-scale factories like those in the West

• The NEP ended famine

  • Free trade encouraged peasants to grow more food

  • People in towns and villages could access a wider variety of, and more, food than during War Communism

The Scissors Crisis (1923)

• Agricultural recovery under the NEP was rapid

  • Peasants eagerly produced more food now that they could sell it for profit

• Industrial recovery was much slower

  • Heavy industry remained under state control and struggled with low investment and inefficiency

• This imbalance meant agricultural prices fell while industrial goods remained expensive and scarce

• This caused an effect known as the 'scissors crisis'

• The 'scissors crisis' caused:

  • Peasants being unable to buy industrial goods

  • Peasants to stockpile grain rather than sell it

    • This eventually caused shortages in towns and cities

  • The state intervened by cutting the prices of industrial goods

• The crisis exposed the fragility of the NEP

  • It shoed that it could not fully satisfy both peasants and workers at the same time

  • It convinced radicals like Trotsky that the NEP could not 'build socialism with capitalist hands', like Lenin had argued

Political stability

• Ending grain requisitioning was a popular measure

  • The peasants stopped revolting

  • The workers, being better fed, were more content with the government

Peasants

• Peasants benefited from the end of requisitioning and the ability to sell surplus produce

• However, richer peasants (kulaks) benefited most, increasing inequality

Workers

• Living standards improved as food became more available and wages rose slightly

• Unemployment reappeared as small businesses cut inefficient workers

Inequality in society

Nepmen

• The NEP allowed private trade and small businesses

  • This created a new class of traders and entrepreneurs known as Nepmen

• Nepmen often became wealthy by:

  • Running shops, restaurants, and services

  • Transporting and selling desirable goods across Russia

• To ordinary Russians, Nepmen were visible symbols of new inequality

  • They lived more comfortably than workers and peasants and worked less

Government reaction to Nepmen

• The Bolsheviks saw Nepmen as a disgrace

  • They went against communist principles

  • They were not workers who 'produced' for their income

• The government tolerated them but also:

  • Heavily taxed them

  • Criticised them in propaganda as 'parasites' and 'class enemies'

  • Occasionally arrested them for profiteering

Corruption in society

• With private trade came a surge in gambling, prostitution, and drug dealing, especially in large cities like Moscow and Petrograd

  • These activities were viewed as signs of “capitalist corruption” returning under the NEP

• Many Party members were horrified, believing the NEP betrayed the revolution’s moral as well as economic ideals

How successful was the NEP?

• Historians debate whether the NEP saved the Soviet regime or betrayed socialist principles

Pragmatic compromise

• Some historians believe that the NEP was a necessary “breathing space” to recover from the devastation caused by the Russian Civil War

Key historians

“The anti-Soviet revolts ceased...  There were initial signs of recovery in industry...  The New Economic Policy strengthened the alliance between the workers and peasants and secured the victory of the socialist elements over the capitalist ones.  And yet to this day many bourgeois historians continue to portray the New Economic Policy as a departure of the Communist Party and Soviet power from the ‘direct road leading to communism’.” - Yu Kukushkin, History of the USSR (1981)

"As Lenin saw it, the NEP was a necessary concession to the market to get the country on its feet again. The survival of the Revolution depended on the smychka, the union of the peasants and the proletariat, which could only be sustained by increasing the exchange of food for manufactured goods. How long the NEP should last was left unclear, although this would be the crucial question dividing party leaders during the 1920s. Lenin talked of 'not less than a decade and probably more' - suggesting that the NEP was not 'a form of political trickery that is only being carried out for the moment' but had to be adopted 'seriously and for a long time.' Lenin saw the NEP as a serious attempt to build socialism on the basis of a mixed economy. As long as the state retained control of the 'commanding heights of the economy' (e.g. steel, coal, the railways), he argued that there was no serious risk in allowing small-scale private farming, trade and handicrafts to grow and create wealth as a tax-base for socialist industrialization." - Orlando Figes, A People’s Tragedy (1996)

Betrayal of socialism

• Other historians argue that the NEP was a retreat from socialist principles, showing Bolshevik ideology had failed

Key historians

"Yet, once the danger was over and memories of the privatisations of war communism receded into the past, the mood of relief and acquiescence slowly faded and was overtaken by a sense of uneasiness at so radical a departure from the hopes and expectations of an advance into socialism which had inspired the earlier triumphs of the revolution. In the long run someone carried the cost of concessions made to the peasant; and some consequences of NEP, direct or indirect, were unlooked for and unwelcome. In little more than two years, the country was in the throes of a fresh crisis which, though less dramatic than the crisis preceding the introduction of NEP, deeply affected every sector of a now-expanding economy." - E.H. Carr, The Russian Revolution: From Lenin to Stalin (1979)

"The NEP had saved the regime from destruction, but it had introduced its own grave instabilities into the compound of the Soviet order... Not even Lenin saw the NEP as permanently acceptable... Most Bolshevik leaders had never liked the NEP, regarding it at best as an excrescent boil on the body politic, and at worst a malignant cancer. They detested the reintroduction of capitalism and feared the rise of a new urban and rural bourgeoisie. They resented the corrupt, inefficient administration they headed. They disliked such national, religious and cultural concessions as they had had to make. They were embarrassed that they had not yet eliminated the poverty in Soviet towns and villages. They yearned to accelerate educational expansion and indoctrinate the working class with their ideas. They wanted a society wholly industrialised and equipped with technological dynamism. They desired to match the military preparedness of capitalist powers. What is more, Lenin's NEP had always disconcerted many central and local party leaders." - Robert Service, A History of Modern Russia from Nicholas II to Vladimir Putin (2005)