New Economic Policy

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The New Economic Policy was initiated in 1921 to replace the policy of War Communism, which had prevailed during the Russian civil war and led to declines in agricultural and (non-military) industrial production. To revive the economy after the civil war, the New Economic Policy (NEP) was adopted as a temporary measure allowing a limited revival of capitalism inside the R.S.F.S.R. and foreign concessions alongside the nationalized and state-controlled sectors of the economy. Nepmen were those people who used the economic system for extreme profiteering. The NEP was succeeded in 1928 by the first five-year plan and subsequent collectivization of the land, although until 1930 the NEP policy was officially still in effect.

This policy was adopted, on Lenin's initiative, by the Tenth Congress of the Communist Party of Russia, early in 1921, and reinforced at the Tenth Party Conference in May of the same year. Not only had the post-war revolutionary wave in Europe subsided, especially after the failure of the Red Army March on Warsaw, but relations between urban and rural Russia had become strained to the breaking point.

The Tenth Congress met during the Kronstadt rebellion. The Kronstadt rebellion made the party feel that they could no longer simply confiscate grain from peasants as they had before. During the Congress, Lenin proposed a policy of substituting a tax instead of requisitions; of allowing the peasantry to dispose of their surplus within the limits of "local trade"; of allowing the development of capitalist concessions to a delimited extent, and of state capitalism. This state capitalism, in industry and agriculture, was allowed a considerable field of possibilities in which to develop, while the proletarian government retained control of the key industries, such as state banking - the "commanding heights" of production; that nationalization of the land remained and that the state held a monopoly of foreign trade.

The policy was created to mend ties between the workers and peasants, and was deemed necessary for the Russia people to survive after the ravages of two destructive wars had decimated the country. Socialist economics were impossible to maintain in such conditions, though for a limited period the Socialist state could still exist, holding over in wait for the European revolutions.