The New Economic Policy (AQA A-Level History): Revision Notes

The New Economic Policy

Introduction: the crisis that prompted change

By early 1921, the Bolshevik regime faced mounting economic and political difficulties. The policies of war communism had devastated the economy and provoked widespread discontent among workers and peasants. In March 1921, the Kronstadt naval base rebelled against Communist rule. The rebels' manifesto condemned the regime for replacing workers' democracy with bureaucratic control, responding to popular protests with mass executions, and suppressing freely elected soviets. This uprising demonstrated the urgent need for a change in direction.

At the same time, Gosplan was officially created through a Sovnarkom decree in February 1921. Gosplan served as the State General Planning Commission, with headquarters in Moscow and branches across each Soviet republic. Its role was to coordinate economic development and, from 1925 onwards, to draft comprehensive economic plans. However, it operated alongside Veshenka, which created conflicts over authority and decision-making.

The announcement and content of the NEP

Lenin formally announced the New Economic Policy at the Tenth Party Congress in March 1921. The policy received backing from prominent Bolsheviks including Bukharin and Zinoviev, though many in the leadership viewed it with suspicion. Lenin knew that lower-ranking Bolsheviks would see the NEP as an ideological compromise, so he avoided putting the measures to a vote, instead relying on his personal authority to push them through.

The NEP introduced several measures that relaxed the harsh economic controls of war communism:

Grain requisitioning ended. The state replaced forced seizures with a tax system. Peasants had to give a quota of grain to the state (which became a monetary tax from 1923), but could then sell any remaining produce on the open market for personal profit. The regime also promised not to implement forcible collectivisation of land, sending a clear message that peasants could work their own land for their own benefit. The expectation was that increased production would follow and urban populations would be fed again.

State control of industry continued for large-scale heavy industry, particularly coal, steel, and oil. These sectors were termed the "commanding heights of the economy" and remained under state ownership and management. However, small-scale industry and workshops returned to private ownership, typically operating through cooperatives and trusts. This allowed private trade to resume, though transport and banking stayed under state control.

Rationing was abolished. Industries were required to pay workers from their profits rather than through centrally allocated supplies. Managers could implement payment by piece rates (paying for work completed) rather than adhering to centrally imposed wage controls. This gave factory managers more flexibility but also made workers more vulnerable to exploitation.

Economic impact of the NEP

The NEP successfully revived economic activity, though the Civil War's end also contributed to increased stability and order, making recovery easier. Private businesses quickly reopened. Small manufacturing enterprises and service industries such as shops and restaurants began to flourish in towns and cities. Money circulated more freely and industrial production recovered, although larger state-owned industries expanded more slowly than smaller private businesses.

Agricultural production recovered even faster. Peasants eagerly exploited the opportunity to trade their surplus grain. A kulak class re-emerged in villages, and communities that cooperated with the NEP received goods as rewards from the state.

However, by 1923 an economic imbalance appeared. Large quantities of food entering cities caused agricultural prices to fall sharply. Before spring 1923, agricultural prices had exceeded industrial goods prices. By summer, agricultural prices had dropped below those of industrial goods because factories and workshops were taking longer to rebuild and expand their output. This widening gap was termed the "scissors crisis" by Trotsky, as the diverging price lines resembled scissor blades opening.

The lack of affordable industrial goods for peasants to purchase threatened to make them withhold supplies. The government responded by capping industrial prices and replacing peasants' grain quotas with money taxes in 1923, forcing them to sell produce to obtain cash. This intervention proved effective: the crisis was short-lived, and by 1926 production had reached 1913 levels.

Nepmen played a controversial but substantial role in the recovery. Nepmen were speculative traders who purchased produce from peasants to sell in towns, and bought consumer goods in towns to sell in peasant markets, profiting from both transactions. By 1925, Moscow alone had 25,000 private traders. These Nepmen were responsible for approximately 75% of retail trade by 1923. Some became involved in larger projects such as construction, where opportunities for bribery and corruption could yield substantial profits.

Many Bolsheviks despised the Nepmen as representatives of capitalism. The regime generally tolerated them provided they paid taxes, but hostile attitudes towards them persisted. Bolsheviks were prone to moralistic condemnation of speculation, describing the NEP as the "New Exploitation of the Proletariat" without acknowledging the economic reasons that made such trade necessary. The Nepmen were not always honest in their dealings and often indulged in bribery, corruption, prostitution, and gambling, flaunting their newly acquired wealth openly.

Political impact of the NEP

Many Bolsheviks interpreted the introduction of the NEP as a retreat into capitalism, moving the revolution further from its socialist goals. Lenin employed the argument "one step backwards, two steps forwards" to justify the policy. Zinoviev, a Politburo member who supported the NEP, attempted to reassure discontented Party members by characterizing the NEP as merely a temporary tactical deviation. Lenin drew a comparison with the Treaty of Brest-Litovsk, suggesting that unpleasant compromises were necessary to enable the Party to maintain power.

To prevent a repeat of movements like the Workers' Opposition, Lenin introduced a ban on factions at the 1921 Tenth Party Congress. This measure allowed senior Party figures to discuss policies, but once the Central Committee agreed on a decision, every Party member had to obey it. To disagree and form a separate group would constitute a "faction," resulting in expulsion from the Party. The ban made it extremely difficult to express dissenting views about policies publicly without appearing disloyal.

Lenin ensured that the consequences of the NEP did not include any corresponding relaxation of political control. The regime actually intensified its suppression of rival political viewpoints. The Mensheviks and Socialist Revolutionary organizations were banned. In 1921, several thousand Mensheviks were arrested. Some Social Revolutionaries were subjected to a show trial, which was a propagandist trial held publicly to influence popular opinion rather than to secure justice for the accused. These Social Revolutionaries faced accusations of counter-revolutionary activities, including assassination attempts against Lenin, and were found guilty. Eleven were executed.

Across the country, Lenin maintained the repression and vigilance characteristic of Civil War days. The Cheka, renamed the GPU (Main Political Administration) in 1922, became even more powerful and vigilant. It possessed authority to arrest individuals at will for any reason and to carry out the death penalty. It frequently arrested those accused of speculation, persuading people that the regime was determined to suppress capitalist tendencies.

Censorship became more rigorous. By 1922, criticism of the government was explicitly forbidden. Many prominent writers and intellectuals were deported to other parts of the country. All written material required approval by GLAVIT (the Main Administration for Affairs of Literature and Publishing Houses) before publication.

The regime also renewed its attack on religion. In 1921, the Union of the Militant Godless was established. This group challenged the existence of God, organized talks, and published anti-religious propaganda. It promoted atheism and scientific principles, arguing that "the struggle against religion is a struggle for socialism." From 1922, churches were systematically stripped of their valuable possessions, and thousands of priests were imprisoned and some executed.

In 1923, the nomenklatura system was introduced. A list of over 5000 Party and government posts was compiled. When any of these positions needed filling, only the Central Party bodies could nominate the new post-holder, selecting from a list of approved Party members. This system placed loyalty to the Party above all other considerations, including the skills actually required for positions. Anyone wishing to advance in the Party or government had to demonstrate loyalty and avoid challenging official policy. In return for their loyalty, those in the nomenklatura could expect material rewards, which often meant access to goods and services unavailable to the vast majority of the population and even those in lower Party ranks.

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