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For the Malaysian policy enacted in 1971, see Malaysian New Economic Policy.
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The New Economic Policy (NEP, Russian новая экономическая политика, НЭП) was an economic policy of Soviet Russia proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism, both subject to state control", while socialized state enterprises would operate on "a profit basis".[1]

The NEP represented a more market-oriented economic policy (deemed necessary after the Russian Civil War of 1918 to 1922) to foster the economy of the country, which had suffered severely since 1914. The Soviet authorities partially revoked the complete nationalization of industry (established during the period of War Communism of 1918 to 1921) and introduced a system of mixed economy which allowed private individuals to own small enterprises,[2] while the state continued to control banks, foreign trade, and large industries.[3] In addition, the NEP abolished prodrazvyorstka (forced grain-requisition)[2] and introduced prodnalog: a tax on farmers, payable in the form of raw agricultural product.[4] The Bolshevik government adopted the NEP in the course of the 10th Congress of the All-Russian Communist Party (March 1921) and promulgated it by a decree on 21 March 1921: "On the Replacement of Prodrazvyorstka by Prodnalog". Further decrees refined the policy.

Other policies included monetary reform (1922–1924) and the attraction of foreign capital. The NEP policy created a new category of people called NEPmen (нэпманы) (nouveau riches). Joseph Stalin abolished the New Economic Policy in 1928.

Beginnings

Praise Nep-Nep, Goddess of Planeptune! May Purple Heart bless you all; for she is beauty and she is truth. She is faith, hope, joy, and most of all, she protects us from all who seek to harm us.

Policies

Reestablishment of a stable currency, the gold-backed chervonets, was an essential policy component of the Soviet state's return to a money-based economy.

The laws sanctioned the co-existence of private and public sectors, which were incorporated in the NEP, which on the other hand was a state oriented "mixed economy".[5] The NEP represented a move away from full nationalization of certain parts of industries. Some kinds of foreign investments were expected by the Soviet Union under the NEP, in order to fund industrial and developmental projects with foreign exchange or technology requirements.[6]

The NEP was primarily a new agricultural policy.[7] The Bolsheviks viewed traditional village life as conservative and backward. With the NEP, the state only allowed private landholdings because the idea of collectivized farming had met strong opposition.[8]

Lenin understood that economic conditions were dire, so he opened up markets to a greater degree of free trade, hoping to motivate the population to increase production. Under the NEP, not only were "private property, private enterprise, and private profit largely restored in Lenin's Russia," but Lenin's regime turned to international capitalism for assistance, willing to provide "generous concessions to foreign capitalism." [9] Lenin took the position that in order to achieve socialism, he had to create "the missing material prerequisites" of modernization and industrial development that made it imperative for Soviet Russia to "fall back on a centrally supervised market-influenced program of state capitalism".[9] Lenin was following Karl Marx's precepts that a nation must first reach "full maturation of capitalism as the precondition for socialist realization."[10] Future years would use the term Marxism-Leninism to describe Lenin's approach to economic policies which were seen to favor policies that moved the country toward communism.[11] The main policy Lenin used was an end to grain requisitions and instead instituted a tax on the peasants, thereby allowing them to keep and trade part of their produce. At first, this tax was paid in kind, but as the currency became more stable in 1924, it was changed to a cash payment.[2] This increased the peasants' incentive to produce, and in response production jumped by 40% after the drought and famine of 1921–22.[12]

NEP economic reforms aimed to take a step back from central planning and allow the economy to become more independent. NEP labor reforms tied labor to productivity, incentivizing the reduction of costs and the redoubled efforts of labor. Labor unions became independent civic organizations.[2] NEP reforms also opened up government positions to the most qualified workers. The NEP gave opportunities for the government to use engineers, specialists, and intelligentsia for cost accounting, equipment purchasing, efficiency procedures, railway construction, and industrial administration. A new class of "NEPmen" thrived. These private traders opened up urban firms hiring up to 20 workers. NEPmen also included rural artisan craftsmen selling their wares on the private market.[13]

Disagreements in leadership

Lenin considered the NEP as a strategic retreat from socialism.[14] He believed it was capitalism, but justified it by insisting that it was a different type of capitalism, "state capitalism", the last stage of capitalism before socialism evolved. [8] While Stalin seemed receptive towards Lenin's shift in policy towards a state capitalist system, he stated in the Twelfth Party Congress in April 1923 that it allowed the "growth of nationalistic and reactionary thinking..". He also states that in the recent Central Committee plenum there were speeches made which were incompatible with communism, all of which were ultimately caused by the NEP. These statements were made just after Lenin was incapacitated by strokes.[15]

Leon Trotsky and Joseph Stalin disagreed over how to develop the Soviet economy after World War I and the Russian Civil War. Trotsky, supported by radical members of the Communist Party, believed that socialism in Russia would only survive if the state controlled the allocation of all output. Trotsky believed that the state should repossess all output to invest in capital formation. On the other hand, Stalin supported the more moderate members of the Communist Party and advocated for a state-run capitalist economy. Stalin managed to wrest control of the Communist Party from Trotsky. After defeating the Trotsky faction, Stalin reversed his opinions about economic policy and implemented the first five-year plan.[16]

Results

After the NEP was instituted, agricultural production increased greatly. In order to stimulate economic growth, farmers were given the opportunity to sell portions of their crops to the government in exchange for monetary compensation. Farmers now had the option to sell some of their produce, giving them a personal economic incentive to produce more grain.[8] This incentive, coupled with the breakup of the quasi-feudal landed estates, surpassed pre-Revolution agricultural production. The agricultural sector became increasingly reliant on small family farms, while heavy industries, banks, and financial institutions remained owned and run by the state. This created an imbalance in the economy where the agricultural sector was growing much faster than heavy industry. To maintain their income, factories raised prices. Due to the rising cost of manufactured goods, peasants had to produce much more wheat to buy these consumer goods, which increased supply and thus lowered the price of these agricultural products. This fall in prices of agricultural goods and sharp rise in prices of industrial products was known as the Scissors Crisis (due to the crossing of graphs of the prices of the two types of product). Peasants began withholding their surpluses in wait for higher prices, or sold them to "NEPmen" (traders and middle-men) who re-sold them at high prices. Many Communist Party members considered this an exploitation of urban consumers. To lower the price of consumer goods, the state took measures to decrease inflation and enact reforms on the internal practices of the factories. The government also fixed prices, in an attempt to halt the scissor effect.[citation needed]

The NEP succeeded in creating an economic recovery after the devastation of World War I, the Russian Revolution, and the Russian Civil War. By 1925, in the wake of Lenin's NEP, a "... major transformation was occurring politically, economically, culturally and spiritually." Small-scale and light industries were largely in the hands of private entrepreneurs or cooperatives. By 1928, agricultural and industrial production had been restored to the 1913 (pre-World War I) level.[4]

End of NEP

Starved citizens in Kharkiv, 1933

By 1924, the year of Lenin's death, Nikolai Bukharin had become the foremost supporter of the New Economic Policy. The USSR abandoned NEP in 1928 after Joseph Stalin obtained a position of leadership during the Great Break. Stalin was initially noncommittal to the NEP,[17] as early as 1918 Stalin was quoted "...the beginning of the planned reconstruction of the outmoded social-economic system in a new socialist manner.".[15] Stalin then enacted a system of collectivization during the Grain Procurement Crisis of 1928 and saw the need to quickly accumulate capital for the vast industrialization programme introduced with the Five Year Plans starting in 1928. The Bolsheviks hoped that the USSR's industrial base would reach the level of capitalist countries in the West, to avoid losing a future war. (Stalin proclaimed, "Either we do it, or we shall be crushed.") Stalin proposed that the grain crisis was caused by kulaks - relatively wealthy farmers who hoarded grain and participated in speculation of agricultural produce. The peasant farms were too small to support the massive agricultural demands of the Soviet Union's push for rapid industrialization, and Soviet economists[which?] claimed that only a collectivization of farms could support such an expansion. Accordingly, Stalin imposed collectivization to replace private farms. Collectivization included stripping of land from the kulaks to distribute it among agricultural cooperatives (kolkhozes and sovkhozes).[18]

Lenin and his followers saw the NEP as an interim measure. However, it proved highly unpopular with the Left Opposition in the Bolshevik Party because of its compromise with some capitalist elements and the relinquishment of state control.[4] The Left saw the NEP as a betrayal of Communist principles, and believed it would have a negative long-term economic effect, so they wanted a fully planned economy instead. In particular, the NEP fostered a class of traders ("NEPmen") whom the Communists regarded as "class enemies" of the working class. On the other hand, Vladimir Lenin is quoted to have said "The NEP is in earnest and long-term" (НЭП – это всерьез и надолго), "Speech In Closing The Conference May 28") which has been used[by whom?] to surmise that if Lenin had lived, the NEP would have continued beyond 1929. Lenin had also been known to say about NEP, "We are taking one step backward, to take two steps forward later",[19] suggesting that, though the NEP pointed in another direction, it would provide the economic conditions necessary for socialism eventually to evolve.

Despite Lenin's opinion that the NEP should last several decades at least, until universal literacy was accomplished,[citation needed] in 1928, after only seven years of NEP, Lenin's successor Stalin introduced full central planning, re-nationalized much of the economy, and from the late 1920s onwards introduced a policy of rapid industrialization. Stalin's collectivization of agriculture was his most notable departure from the NEP approach.

Influence

Pantsov and Levine see many of the post-Mao Zedong economic reforms of CCP leader Deng Xiaoping in the People's Republic of China during the 1980s as influenced by the NEP. "It will be recalled that Deng Xiaoping himself had studied Marxism from the works of the Bolshevik leaders who had propounded NEP. He drew on ideas from NEP when he spoke of his own reforms. In 1985, he openly acknowledged that 'perhaps' the most correct model of socialism was the New Economic Policy of the USSR."[20]

See also

Multimedia

Footnotes

  1. ^ Lenin, V.I. "The Role and Functions of the Trade Unions under the New Economic Policy", LCW, 33, p. 184., Decision Of The C.C., R.C.P.(B.), January 12, 1922. Published in Pravda No. 12, January 17, 1922; Lenin's Collected Works, 2nd English Edition, Progress Publishers, Moscow, 1973, first printed 1965, Volume 33, pp. 186–196 [1]
  2. ^ a b c d Kenez, Peter (2006). A History of the Soviet Union from the Beginning to the End. Cambridge: Cambridge University Press. pp. 47–48.
  3. ^ Ellis, Elisabeth Gaynor; Anthony Esler (2007). "Revolution and Civil War in Russia". World History; The Modern Era. Boston: Pearson Prentice Hall. p. 483. ISBN 0-13-129973-5.
  4. ^ a b c Service, Robert (1997). A History of Twentieth-Century Russia. Cambridge, MA: Harvard University Press. pp. 124–125. ISBN 0674403487.
  5. ^ V N. Bandera "New Economic Policy (NEP) as an Economic Policy." Journal of Political Economy 71, no. 3 (1963): https://www.jstor.org/stable/1828984 (accessed Mar 4, 2009), 268.
  6. ^ Fitzpatrick, The Russian Revolution, p. 96.
  7. ^ Vladimir P. Timoshenko, Agricultural Russia and the Wheat Problem. Stanford, CA: Food Research Institute, Stanford University, 1932; p. 86.
  8. ^ a b c Richman, Sheldon (1981). "War Communism to NEP: the road from serfdom" (PDF). Journal of Libertarian Studies: 93–94. Retrieved 12 July 2017.
  9. ^ a b A. James Gregor, Marxism, Fascism & Totalitarianism: Chapters in the Intellectual History of Radicalism, Stanford: CA, Stanford University Press, 2008, p. 55-56
  10. ^ A. James Gregor, Italian Fascism and Developmental Dictatorship, Princeton: NJ, Princeton University Press, 1979, p. 59
  11. ^ Zickel, Raymond E (1991). Soviet Union a Country Study. 2nd ed. Washington D.C.: Library of Congress. Federal Research Division. p. 64. ISBN 978-0844407272.
  12. ^ Siegelbaum, p. 90
  13. ^ Siegelbaum, pp. 97–116
  14. ^ Lenin, V. I. "New economic policy and the politprosvet's goals." Collected Works, v. 44. p. 159
  15. ^ a b Himmer, Robert (October 1994). "The Transition from War Communism to the New Economic Policy: An Analysis of Stalin's Views". Russian Review. 53 (4): 515. doi:10.2307/130963. ISSN 0036-0341.
  16. ^ Sheila Fitzpatrick, The Russian Revolution. New York: Oxford University Press, 1984. p. 115
  17. ^ "The New Economic Policy (NEP)", Resources for Teaching History : 14–16, Bloomsbury Education, ISBN 9781472926647, retrieved 25 February 2019
  18. ^ Kagan, Donald (2010). The Western Heritage. Pearson Prentice Hall.
  19. ^ Figes, Orlando (2014). Revolutionary Russia, 1891–1991: A History. Metropolitan Books.
  20. ^ Pantsov, Alexander; Levine, Steven I. (2015). Deng Xiaoping: A Revolutionary Life. New York: Oxford University Press. p. 373. ISBN 9780199392032. Retrieved 5 February 2016.

Bibliography

  • Kenez, Peter. A History of the Soviet Union from the Beginning to the End. (Cambridge: Cambridge University Press), 2006.
  • Richman, Sheldon L. "War Communism to NEP: The Road from Serfdom." The Journal of Libertarian Studies V, no. 1, 1981.
  • Siegelbaum, Lewis H. Soviet State and Society: Between Revolutions, 1918–1929. (Cambridge: Cambridge University Press), 1992.
  • Timoshenko, Vladimir P. Agricultural Russia and the Wheat Problem. (Stanford, CA: Food Research Institute, Stanford University), 1932

Further reading

  • Ball, Alan M. (1987). Russia's Last Capitalists: The NEPmen, 1921–1929. Berkeley, CA: University of California Press.
  • Davies, R. W. (ed.) (1991). From Tsarism to the New Economic Policy: Continuity and Change in the Economy of the USSR. Ithaca, NY: Cornell University Press.
  • Fitzpatrick, Sheila, et al. (ed.) (1991). Russia in the Era of NEP. Bloomington, IN: Indiana University Press.
  • Nenovsky. N,(2006). "Lenin and the Currency Competition: Reflections on the NEP Experience (1922–1924).“ Turin, Italy: International Center of Economic Research Working Paper No. 22, 2006

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