Lenin's New Economic Policy: What it Was and How it Changed the Soviet Union

By Helene M. Glaza
2009, Vol. 1 No. 11 | pg. 1/2 |

By the time 1921 came around, Russia’s economy had been maimed by the effects of War . Socialism had not begun on a good note, and Vladimir Lenin was becoming concerned with the unfortunate state of the economy. His response to the poor economy he adopted and how he planned to improve it was called the New Economic Policy, or the N.E.P., which got its name from the fact that it was “new,” in comparison to the “old” Czarist economic “policy.”

The N.E.P. was masterfully designed to bring capital into the state, which it did, and to help it prosper economically. However, some socialists believe it may have gone too far with its free-market economic style and possibly could have lead the into permanently possessing a capitalist economy, which would have destroyed the socialist priority. The original plan, however, was to have capitalism in place until the economy was strong enough to achieve socialism.

After the Bolshevik R in 1917,  Vladimir Lenin and his party found themselves contemplating what would be appropriate for Russia’s economy which, at this time, was suffering from social challenges. Before the Revolution, there were basically only three classes of people: Peasants, Nobles, and Romanovs. Although certain reforms had been made, the peasants were still treated poorly and taken advantage of by the nobles. At the same time, World War One was taking place which not only negatively effected Russia’s economy but also had a great effect on Russian society as well. 

The first thing that was put into place was something called “War Communism.” The reason it was called this was because it was meant to be an economic method utilized during the , but in reality began before the war and remained in effect after the war until 1921. Right away, when the Bolsheviks seized power, Lenin underestimated the problems within the country, not only economically but socially as well. Within the first few months following the Revolution, all that could be changed was changed (Lenin, 5). The most profound of the changes to be made in those first months of the Soviet Union was the taking of private property from the capitalists: farmland, factories, mills, railroads, banks, and other properties with no compensation (Lenin, 5).

Lenin's New economic policy

Lenin made the mistake of taking what was the current government and its people and diving right into full-blown Communism, not realizing that they all were economically unequipped for such a conversion just yet (Caplan). Along with this, the unemployment rate sky-rocketed. Almost all manufacturing and retail was nationalized and peasants’ harvests were forcibly requisitioned by the state, with the idea that it would all go to the State whereupon it would be evenly distributed. Forced-labor policies were also set into place forcing both civilian and military persons to provide service to the state.

As Lenin said when addressing the problems, as well as the obvious solution of reversion to capitalism, he talks about how the “ unprecedentedly dislocated country is just barely beginning to recover, is only just realizing the full depth of its ruin, is suffering the most terrible hardships-stoppage of industry, crop failures, famine, epidemics” (Lenin). Eventually the Bolsheviks came to realize that was beginning to drown underneath this War Communism from a whole host of circumstances, such as famine, lack of resources, and disease due to malnutrition. With this Lenin admits that “We have risen to the highest and at the same time the most difficult stage of our historic struggle.”

On April 25, 1921 Lenin introduced the Tax In Kind policy, which would replace the “surplus-food appropriation,” or the policy which assigned a certain amount of the peasants’ produce which the State was entitled to. The produce which was collected would go directly to the State and then be distributed to the rest of the country, in order to ensure that everyone had food. It seemed like a valid system, theoretically. However, once it was put into practice, the country soon faced a famine due to the fact that there were too many people and not enough food. The government was helpless to fix this.

The Tax In Kind policy, which would replace the surplus-food appropriation system with a fixed tax (which the peasants would be informed of ahead of time), however, was meant to ease the burdens which War Communism had placed on the peasants and, therefore, improve their motivation to work. As Lenin put it, “The peasants will now set to work on their farms  with greater confidence and with a will, and that is the main thing.” The Tax In Kind would not only give the peasants incentive to increase production, but it also gave them the freedom to sell what they produced on the market for profit, something that would not have been allowed under War Communism.

Coincidentally Lenin realized, as Russia’s economy was falling through under the weight of instant Communism, that the peasants made up a majority of the population and although the government had been set up for the Proletariat, the fact of the matter was that only a small percentage of the population (not even 10%) made up an actual population of factory workers and most of the rest were peasantry. Therefore, they would have to be considered in this New Economic Policy because if they weren’t, just as with War Communism, the economy would continue to suffer.

During the 2nd Congress of the Political Departments in October 1921 Vladimir Lenin began discussing the New Economic Policy and the need for its immediate application, due to the devastating effects of War Communism. It was concluded that the mistake was made when the Bolsheviks decided to resort right to Communism within the first months of victory, although the goal was to use capitalism as a kind of bridge between the petty bourgeoisie economic policy and the Communist economic policy.

However, that was not the case and as a result Russia experienced acute food shortages, which lead to malnutrition, disease, and death; therefore effecting the working class and peasantry, therefore having a dire effect on Russia altogether. It was decided that the New Economic Policy was more of a “strategical retreat” than anything else. It definitely would not be a permanent thing, but just a way of relieving Russia from the burdens which War Communism had produced and, instead, replacing the procedures of food requisitioning and nationalization of agricultural land with a sort of free-market economy with the allowance of private business.

As stated by Lenin, “economically and politically speaking the New Economic Policy completely ensures to us the possibility of building the foundation of a socialist economy.” It was meant to be based off of the existence of capitalism. Basically it would be a combination of the capitalist economy and the communist . Large businesses would still be nationalized, in order to ensure that the “petty bourgeoisie,” or the capitalist Imperialists, would not gain too much power over or get in the way of the growing Socialist society. Lenin believed that capitalism would lead to Imperialism, which is the entity which they had only just eliminated.

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