The Necessity of the New Economic Policy

Nikolai Milosevic, Dickson College, 2013

This essay was written as part of the Revolutions in the Modern World unit at Dickson College, Semester 1, 2013. It was written in response to the following question: 'Was the New Economic Policy (NEP) a betrayal of the October Revolution?'

The New Economic Policy (NEP) was not a betrayal of the October Revolution; it was a necessary step taken by the Bolsheviks to rebuild the infrastructure of the country and to reach pre-war production rates. In the October Revolution, the Bolsheviks gained power of a feudal land impoverished by the First World War, and further burdened by the civil war. Marxist ideology, which the Bolsheviks adhered to, dictates that feudal societies must progress through capitalism in order to accumulate wealth. Only by promoting limited state capitalism within the Soviet Union could the Bolsheviks rebuild the nation’s industry and eventually achieve the socialist state they desired. The peasantry, already agitated and unwilling to cooperate with the Bolshevik government, had no incentive to produce their goods due to the lack of market to trade in. To avoid another potential widespread famine and further alienation from the peasantry, the Bolsheviks had to allow free trade amongst the peasants as an incentive for them to work the land. With capitalism being considered an inherent evil amongst the Bolshevik party, the NEP was never considered to be a permanent policy for the nation. The NEP was considered a necessary but temporary evil by the Bolsheviks in order to allow economic growth within the Russian republics, and to prepare the Soviet people for socialism and international communist revolution.

Karl Marx’s theory of history outlines that society progresses through various stages in both social and economic respects; Marx claims that naturally capitalism will follow from the ‘ruins’ of feudal society, which will in turn be brought down by a proletariat to make way for a new, communist society (Marx & Engels, 1848). Living in the age of the industrial revolution, Marx and Engels witnessed the use of the steam engine in factories to mass-produce goods. Marx reasoned that for the first time since prehistoric days, mankind now possessed the production capacity to satisfy the needs of everyone on the planet if the produce of the factories were equally distributed amongst the population (Raymond, 1968). Russian society before the February and October Revolutions was not considered to be a capitalist society; the tsar maintained ownership over all the land and a vast majority of the nations industry, while Western European countries such as Great Britain and France had begun to exercise capitalism many years beforehand (Malone, 2009). As a result, Russian industry was comparatively small to Western Europe, and its proletariat was also much smaller. Thus, in Marxist theory, Russia was not yet ready for a proletariat revolution for the proletariat was not large enough, and capitalism had not yet generated enough wealth to sustain the country (Raymond, 1968). Whilst already considered a backward nation in comparison to the capitalist countries of Western Europe, the devastation to the society and economy of Russia as a result of both the First World War and the Civil War meant that in order for the nation to survive and for the economy to begin growing again, the Bolsheviks had to institute state capitalism and allow some form of private property. Despite the introduction of the NEP demoralizing many party cadres, Lenin defended its implementation by saying that the “Strategic Retreat” of the NEP was “...forced on the Bolsheviks by desperate economic circumstances, and by the need to consolidate the victories that the revolution had already won” (Fitzpatrick, 1994). The effects of implementing the NEP had notable effects on the Party itself; in order to save money the Bolsheviks had to abandon various projects that were started for ideological reasons, and many of the factories that had operated under any cost during the civil war had to be shut down to maintain a profit (Kenez, 1999). By allowing certain industries to be privatised the Bolsheviks were able start economic growth again which was necessary to rebuild Russian infrastructure within the urban environment. Production capacity was beginning to return to its pre-war level, and some foreign investment took place within the country (Malone, 2009). The private enterprises allowed by the NEP enabled the economy of Russia to begin growing after many years of steep decline, which was the ‘strategic retreat’ that Lenin and the Bolshevik Party required.

Although the NEP had a considerable effect on the industrial aspect of the Russian economy, its main focus was on promoting productivity amongst the peasantry, which was by far the largest class in Russia. The historian Ronald Suny argues that even industrial production was geared towards peasants, and that the “NEP was dedicated to restoring and expanding industry in order to produce the consumer goods necessary to satisfy the vast majority of the Soviet population, the peasantry” (Suny, 1998). As a result of the ‘War Communism’ policy instigated by the Bolsheviks at the onset of the Civil War, where all goods produced by the peasants was confiscated and sent to the army and urban areas, the peasants had no real incentive to produce; they had no market to sell their produce due to Bolshevik restrictions, and even if they did all of their surplus produce was being taken from them by the Red Army (Malone, 2009). Lenin in particular saw the dire need to allow a free market for the peasants, for not only were the peasantry losing incentive to produce, but severe drought had hit the farming lands causing a severe family that cost the lives of approximately five million people (Suny, 1998). He stressed the importance of allowing capitalism in the agricultural sector in a speech to the All-Russian congress:
The New Economic Policy means substituting a tax for the requisitioning of food; it means reverting to capitalism to a considerable extent—to what extent we do not know... for the abolition of the surplus-food appropriation system means allowing the peasants to trade freely in their surplus agricultural produce, in whatever is left over after the tax is collected—and the tax~ takes only a small share of that produce. The peasants constitute a huge section of our population and of our entire economy, and that is why capitalism must grow out of this soil of free trading.” (Lenin, 1921)
This excerpt from Lenin’s speech shows a dichotomy within Bolshevik theory; on the one hand, as a communist party, they are supposed to represent the interests and ideals of the proletariat. On the other, Lenin is forced to accept the vast importance of the peasant class within Russia, and as a result is forced to gear the economy so that it can be beneficial to the peasantry. The Bolsheviks initially planned to be supported by revolutionary proletariat from the advanced European countries, but due to the lack of any successful revolution in Europe the Bolsheviks were forced to obtain support from the hostile Russian peasantry, which was an important factor of the NEP (Fitzpatrick, 1994). Allowing a free market for the peasantry was necessary, for without any incentive to produce the already starving urban proletariat would continue to diminish, thus losing the entire support base for the Bolshevik Party.

The introduction of the NEP in March 1921 was a radical turning point in Bolshevik history. The Bolshevik Party espoused the ideals and principles of Marxism-Leninism, and adopting a policy that actively promoted free market and private enterprise was something that many party elites felt strongly uncomfortable about. However, for many in the party the NEP was solely a ‘temporary solution to a difficult economic situation, not the straight road toward the building of socialism” (Suny, 1998). It was no surprise to Party members that the consequences of allowing state capitalism to function in Russia were immediate; the standards of living for the urban proletariat dropped, and many became unemployed as private enterprises attempted to maintain profits. Despite the immediate detrimental effects of the NEP, after the first three years improvements within the economy became evident. Private enterprises produced more than 50% of the national income, and agriculture was almost entirely in private hands, along with small scale industry (Kenez, 1999). The state still maintained control over the nation’s heavy industry, mines, foreign trade and banking system, giving the government a decisive influence in running the economy (ibid.). Lenin had to emphasise the fact that NEP was a temporary solution to other members of the party through a number of speeches and writings:
...The great bulk of the means of production in industry and the transport system remains in the hands of the proletarian state. This, together with the nationalisation of the land, shows that the New Economic Policy does not change the nature of the workers’ state, although it does substantially alter the methods and forms of socialist development for it permits of economic rivalry between socialism, which is now being built, and capitalism, which is trying to revive by supplying the needs of the vast masses of the peasantry through the medium of the market...” (Lenin, 1922)
Aside from economic effects, the NEP also had political ones, for it began to create a bureaucracy in the government. This benefited the proletariat, however, for many of the intelligent and ambitious proletariat were granted positions of office within the government, and their counterparts who remained in the factories felt closer to the Party as a result of their workmates being promoted (Suny, 1998). These new party members also agreed with Lenin that the NEP was a necessary step to take for the reconstruction of the economy, and they maintained the belief that it should remain as a temporary policy. However, as a result of Stalinist industrialization after Lenin’s death, state capitalism in the Soviet Union remained for much longer than it was originally intended (Nove, 1975).

The New Economic Policy was not a betrayal of the October Revolution. Moreover, it was a necessary step backwards in order to protect the ideals and values of the revolution. The state of the economy after two brutal wars was not able to survive on the egalitarian principles of socialism that the Bolsheviks had; capitalism was needed to rebuild the destroyed economy before socialism could be implemented properly in Russian society. The lack of any successful revolutions in Western Europe deprived the Bolsheviks of the proletariat support they were hoping for from those advanced nations, which made it essential for them to make severe concessions to the peasantry not only to maintain power, but to prevent the urban proletariat from starving. All of these steps towards capitalism were taken out of necessity, and nobody in the Party saw it as anything more than a temporary evil in order to continue along the road of socialism and a true dictatorship of the proletariat. The Bolshevik Party had no other option but to implement state capitalism under their Marxist guidance and to make sure that the ideals and values of the October Revolution remained in the Party and government even though their egalitarian values could not be implemented in the Russian economy.


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Primary Sources:

Lenin, Vladimir (1917), State and Revolution, Unknown, Petrograd

Marx, Karl & Engels, Freidrich (1848), The Communist Manifesto, Unknown, London

Lenin, Vladimir (1921), 'The New Economic Policy and the Tasks of the Political Education Departments', Accessed 27/03/2013, <>

Lenin, Vladimir (1922), 'Role and Functions of the Trade Unions under the New Economic Policy', Accessed 27/03/2013, <>

Secondary Sources:

Fitzpatrick, Sheila (1994), The Russian Revolution, Oxford University Press, Oxford

Kenez, Peter (1999), A History of the Soviet Union from the Beginning to the End, Cambridge University Press, Cambridge

Malone, Richard (2009), Analysing the Russian Revolution, Cambridge University Press, Cambridge

Nove, Alec (1975), Stalinism and After, George Allen & Unwin Ltd., Guilldford

Raymond, Ellsworth (1968), The Soviet State, The Macmillan Company, New York

Suny, Ronald (1998), The Soviet Experiment, Oxford University Press, New York