Why NEP was needed (1921)
By early 1921 the country was exhausted. Factories made only a small part of what they made in 1913, and under war communism peasants had cut the area they sowed because the state took their grain. A drought made it worse and a famine hit the Volga region in 1921–22. Peasants rose in revolt (for example in Tambov), and in March 1921 the sailors of Kronstadt demanded change. At the Tenth Party Congress in March 1921, Lenin proposed a turn. He called it a retreat, a temporary one, to rebuild the economy and keep the peasants' support.
What NEP changed
- Tax in kind: the grain requisition was replaced with a fixed tax in kind (a share of the harvest). After paying it, the peasant could sell the surplus in the market. In 1924 it became a money tax.
- Private trade: small shops, workshops and traders (nicknamed Nepmen) were allowed again.
- Commanding heights: the state kept big industry, banks, railways and foreign trade. State factories were grouped into trusts that had to balance their own books.
- Concessions: some enterprises were leased to foreign firms.
- Money reform: a new, gold-backed currency, the chervonets, was introduced in 1922–24 so that prices became stable again.
The party kept all political power. NEP was an economic opening, not a political one.
Results: recovery
Trade between village and town revived. Farm output grew each year from 1922, and light industry grew fast. By 1926–27 industry and farming were about back to their 1913 level. Shops were full and city life returned. Many peasants prospered; the better-off were called kulaks by the party, which watched them with suspicion.
Problems and the end of NEP
- Scissors crisis (1923): prices of factory goods were very high and of farm goods low. On a graph the two lines opened like scissors, so peasants could not afford to buy. The state cut factory prices and the gap closed.
- Unemployment in towns, and anger at the wealth of Nepmen.
- Grain crisis of 1927–28: state prices were low, so peasants held back their grain. Cities ran short.
- Party debate: some leaders (like Bukharin) wanted to go on with NEP; others (like Stalin) wanted rapid industrialisation. Stalin's side won. From 1928 the first Five-Year Plan and forced grain collection ended NEP in practice. The next stage is in Revolution and Dictatorship: Russia and Stalin's Soviet Union.
Key formulas and definitions
- War communism (1918–21): requisition + banned trade + all industry nationalised → NEP (1921–28): tax + market + mixed economy
- Tax in kind (1921) → money tax (1924); currency: chervonets (1922–24)
- State keeps the commanding heights: big industry, banks, railways, foreign trade
- Scissors crisis (1923): industrial prices ↑ and farm prices ↓; grain crisis (1927–28); ended in practice by 1928–29
Worked examples
1. Why did Lenin introduce NEP?
War communism had caused famine, ruined output and set the peasants against the state (Tambov, Kronstadt). To save the economy and win back the peasants, Lenin allowed a fixed tax and a free market in the surplus, calling it a temporary retreat.
2. How was NEP different from war communism? Give three differences.
Requisition became a fixed tax; private trade was allowed again; small business was private while the state kept big industry. (Also: a stable currency replaced rations and goods payment.)
3. What was the scissors crisis?
In 1923 factory goods cost a lot and farm goods cost little, so on a graph the lines opened like scissors. Peasants could not afford factory goods and stopped selling grain to the city. The state cut industrial prices to close the gap.
4. Why did NEP end?
It rebuilt the economy by 1926–27, but grain hold-backs in 1927–28 showed the state could not count on peasants for cheap grain for fast industrialisation. The leadership chose the Five-Year Plans and forced grain collection instead.
Common mistakes
- Saying NEP gave Russia democracy or free politics. The party kept all political power; only the economy opened up.
- Writing that NEP made everything private. The state kept big industry, banks, railways and foreign trade.
- Mixing up war communism and NEP. War communism = forced requisition; NEP = tax and market.
- Giving 1917 as the start. NEP began in March 1921.