New Economic Policy

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New Economic Policy (NEP), official economic reconstruction program of the USSR from 1921 to 1928. It replaced the economic policies of "war Communism" (1918–21), an emergency program established by Lenin during the civil war. War Communism had included forced requisition of grain, nationalization of all trade and industry, strict control of labor, payment in kind, and confiscation of financial capital. As a result of this program and of the ravages of the war, industrial and agricultural production declined sharply, and the population suffered severe deprivation. General unrest erupted in an insurrection in the Kronstadt naval base. At this time (Mar., 1921) Lenin introduced the NEP in order to revive the economy. The new program signified a return to a limited capitalist system. Forced requisition of grain was replaced by a specific tax in kind; peasants could retain excess produce and sell it for a profit. Smaller businesses were permitted to operate as private enterprises. Large industries remained under state control. They operated on the open market, but the state controlled the fixing of prices and the appointment of boards of directors. Private trade and wages were restored, and compulsory labor service was abolished. By 1928, the NEP had raised the Soviet national income above its prewar level. However, the NEP policies proved inadequate for the expansionist aims of Stalin and were reversed (1928) by the first Five-Year Plan .

New Economic Policy (NEP) A policy introduced in the USSR in 1921 which proposed to end widespread peasant hostility to the regime and terminate the chaos of the Russian economy, weakened by the Russian Civil War and Lenin's new Communist regime with arbitrary expropriations, confiscations of food stuffs, etc. A lighter and fairer food tax was introduced, while many economic controls were lifted in order to allow private initiative. It was an instant success, restoring agricultural and industrial production to its 1913 levels within five years. By the mid-1920s, it had run into problems such as growing prices relative to income (‘scissors effect’) and unemployment. Much more important, however, was that it ran completely counter to Stalin's idea of creating a proletarian society free of ‘bourgeois’ enterprise (Stalinism), so that the policy was reversed in 1928 with a dramatic programme of collectivization.

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New Economic Policy A policy introduced into the Soviet Union by LENIN in 1921. It represented a shift from his former “War Communism” policy, which had been adopted during the RUSSIAN CIVIL WAR to supply the Red Army and the cities but had alienated the peasants. The NEP permitted private enterprise in agriculture, trade, and industry, encouraged foreign capitalists, and virtually recognized the previously abolished rights of private property. It met with success which Lenin did not live to see, but was ended (1929) by STALIN's policy of five-year plans.