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New Economic Policy: 1921-28


The NEP brought with it a major reversal of the original tenets of Bolshevism, including the utopian idea of doing away with money. The government was compelled to reverse to a market economy, or money economy, and to the economic patterns that were acceptable and familiar to the masses. In 1925 the old, worthless rouble was withdrawn and exchanged for a new rouble, based partially on gold. The growth of a money economy increased the demand for credit. From 1922 on, a network of state banks for financing commercial and industrial enterprises was set up. 

In the countryside, the food appropriation detachments were disbanded, and the surplus-appropriation system was replaced by a tax in kind. The introduction of a tax in kind meant that the peasants were now free to sell surplus produce on the market. The reestablishment of freedom of trade resulted in a rapid revival of small traders and of thousands of marketplaces and traditional fairs. The middlemen, who under war communism had a precarious existence as “speculators” and “profiteers” or “enemies of the people,” could now openly apply their entrepreneurial skills.


The new economic system affected property relations both in agriculture and in industry. If the peasants were to produce more food, they had to be granted a measure of security in the form of reasonably long land tenure. This was done by a series of concessions to the peasants embodied in the Land Code of 1922. Although the principle of land nationalization was reaffirmed, peasants were declared long-term tenants. Leasing of the land was allowed; later, even the hiring of additional labor (previously condemned as an evil capitalistic practice) was permitted under certain conditions. These measures led to the rapid increase in the food supply that permitted the abolition of food rationing. 

Soon the liberalization of agriculture began to have beneficial effects on industry. To induce peasants to sell their surpluses to the cities, industries had to have something to offer in return. Development of consumer industry, commercial enterprises, and service shops was soon tolerated and even encouraged. Licenses were granted for private enterprise; many small industrial enterprises, previously nationalized, were now returned to their previous owners or leased on certain strictly defined conditions to private entrepreneurs, who became known as Nepmen. As a result, the industries rapidly revived.

On the whole, the NEP remained a mixed economy of a dual market-administrative character. Although the money-commodity relations were allowed to revive, the so-called commanding heights—political power, the financial system, large-scale industry, transport, and foreign trade—remained in the hands of the Soviet state. The ultimate goal of creating a nonmarket socialist economy was not abandoned. The NEP envisaged a relatively long-term coexistence of socialist patterns alongside nonsocialist ones (i.e., capitalist and peasant economies), with the gradual displacement of nonsocialist structures from the national economy.

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The Socialist Experiment


Soviet Russia

Understanding the Soviet Period
Russian Political Culture
Soviet Ideology
The Soviet System
Soviet Nationalities
The Economic Structure
The Socialist Experiment
"Great Leap" to Socialism
The USSR in World War II
Stalin's Legacy
Brezhnev's Stagnation
The Economy in Crisis
Political Reform
The USSR's Collapse

Models of Soviet Power

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