New Economic Policy

The New Economic Policy (NEP) (Russian: новая экономическая политика (НЭП), romanized: novaya ekonomicheskaya politika) was an economic policy of the Soviet Union proposed by 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". Nouveau riche people who took an advantage of the NEP were called NEPmen (нэпманы).

The NEP represented an early form of market socialism to foster economic growth for the country, which had suffered severely since World War I and the Russian Civil War. The Soviet authorities partially revoked the complete nationalization of industry (established during the period of war communism of 1918 to 1921) and introduced a mixed economy which allowed private individuals to own small and medium-sized enterprises, while the state continued to control large industries, banks and foreign trade. The Bolshevik government adopted the NEP in the course of the 10th Congress of the All-Russian Communist Party (March 1921). The decree on 21 March 1921: "On the Replacement of Prodrazvyorstka by Prodnalog" abolished forced grain-requisition (prodrazvyorstka) and introduced a tax on farmers, payable in the form of raw agricultural product (prodnalog). Further decrees refined the policy. Other policies included monetary reform (1922–1924) and the attraction of foreign capital.

NEP was abandoned in 1928 with Joseph Stalin's "Great Break" and gradually phased out during 1928–1931.

In November 1917, the Bolsheviks seized control of key centres in Russia. This led to the Russian Civil War of 1917–1922, which pitted the Bolsheviks and their allies against the Whites and other counter-revolutionary forces. During this period the Bolsheviks attempted to administer Russia's economy purely by decree, a policy of the War Communism. Farmers and factory workers were ordered to produce, and food and goods were seized and issued by decree. While this policy enabled the Bolshevik regime to overcome some initial difficulties, it soon caused economic disruptions and hardships. Producers who were not directly compensated for their labor often stopped working, leading to widespread shortages. Combined with the devastation of the war, these were major hardships for the Russian people and diminished popular support for the Bolsheviks.

At the end of the Civil War, the Bolsheviks controlled Russian cities, but 80% of the Russian population were peasants. Although almost all the fighting had occurred outside urban areas, urban populations decreased substantially. The war disrupted transportation (especially railroads), and basic public services. Infectious diseases thrived, especially typhus. Shipments of food and fuel by railroad and by water dramatically decreased. City residents first experienced a shortage of heating oil, then coal, until they resorted to wood. Populations in northern towns (excluding capital cities) declined an average of 24%. Northern towns received less food than towns in the agricultural south. Petrograd alone lost 850,000 people, half of the urban population decline during the Civil War. Hunger and poor conditions drove residents out of cities. Workers migrated south to get peasants' surpluses. Recent migrants to cities left because they still had ties to villages.

Urban workers formed the core of Bolshevik support, so the exodus posed a serious problem. Factory production severely slowed or halted. Factories lacked 30,000 workers in 1919. To survive, city dwellers sold personal valuables, made artisan craft-goods for sale or barter, and planted gardens. The acute need for food drove them to obtain 50–60% of food through illegal trading (see meshochnik). The shortage of cash caused the black market to use a barter system, which was inefficient. Drought and frost led to the Russian famine of 1921, in which millions starved to death, especially in the Volga region, and urban support for the Bolshevik party eroded. When no bread arrived in Moscow in 1921, workers became hungry and disillusioned. They organised demonstrations against the Bolshevik Party's policy of privileged rations, in which the Red Army, Party members, and students received rations first. The Kronstadt rebellion of soldiers and sailors broke out in March 1921, fueled by anarchism and populism.

In 1921 Lenin replaced the food requisitioning policy with a tax, signaling the inauguration of the New Economic Policy. Leon Trotsky had also proposed the principles which would underlie the NEP in 1920 to the Politbureau in an effort to mitigate urgent economic matters arising from war communism. He would later reproach Lenin privately about the delayed government response in 1921–1922.

The famine of 1921–1922 epitomized the adverse effects of war communism, and to mitigate those effects, Lenin instituted the NEP, which encouraged private buying and selling. However, many Bolsheviks saw the policy as "a step backwards". That included Lenin himself, who defended the measure as "taking one step backward to take two steps forward later on".