IAS - Russian Revolution Research

Research Question - what was the effect of the russian revolution on

the foregoing economy
In Simpler Words - What was the economic situation in the period of
10 years after the russian revolution ?

The New Economic Policy (NEP) was an ​economic policy 

of the ​Soviet Union​ proposed by ​Vladimir Lenin​ in 1921 
as a temporary expedient. Lenin characterized the NEP 
in 1922 as an economic system that would include "a 
free market​ and ​capitalism​, both subject to state 
control," while socialized state enterprises would 
operate on "a profit basis." 
 
The NEP represented a more ​market-oriented 
economic policy​ (deemed necessary after the ​Russian 
Civil War​ of 1918 to 1922) to foster the economy of the 
country, which had suffered severely since 1915. The 
Soviet authorities partially revoked the complete 
nationalization of industry (established during the 
period of ​War Communism​ of 1918 to 1921) and 
introduced a system of ​mixed economy​ which allowed 
private individuals to own small enterprises,​ ​while the 
state continued to control banks, foreign trade, and 
large industries. 
 

​
In addition, the NEP abolished p ​ rodrazvyorstka​ (forced 
grain-requisition)​ ​and introduced ​prodnalog​: a tax on 
farmers, payable in the form of raw agricultural 
product. The Bolshevik government adopted the NEP in 
the course of the ​10th Congress​ of the ​All-Russian 
Communist Party​ (March 1921) and promulgated it by a 
decree on 21 March 1921: "On the Replacement of 
Prodrazvyorstka​ by P ​ rodnalog​". Further decrees 
refined the policy. Other policies included ​monetary 
reform (1922–1924)​ and the ​attraction of foreign capital​. 
In November 1917, the ​Bolsheviks​ seized control of key 
centres in Russia.  
 
This led to the ​Russian Civil War​ of 1917–1922, which 
pitted the Bolsheviks and their allies against the ​Whites 
and other ​counter-revolutionary​ forces. During this 
period the Bolsheviks attempted to administrate 
Russia's economy purely by decree, a policy of the ​War 
Communism​. 
 
Farmers and factory workers were ordered to produce, 
and food and goods were seized and issued by decree. 
While this policy enabled the Bolshevik regime to 
overcome some initial difficulties, it soon caused 
economic disruptions and hardships. Producers who 
were not directly compensated for their labor often 
stopped working, leading to widespread shortages. 
Combined with the devastation of the war, these were 
major hardships for the Russian people and diminished 
popular support for the Bolsheviks. 
 
At the end of the Civil War, the Bolsheviks controlled 
Russian cities, but 80% of the Russian population were 
peasants.​ ​Although almost all the fighting had 
occurred outside urban areas, urban populations 
decreased substantially.​ ​The war disrupted 
transportation (especially railroads), and basic public 
services. Infectious diseases thrived, especially typhus. 
Shipments of food and fuel by railroad and by water 
dramatically decreased. City residents first 
experienced a shortage of heating oil, then coal, until 
they resorted to wood. Populations in northern towns 
(excluding capital cities) declined an average of 24%. 
Northern towns received less food than towns in the 
agricultural south. ​Petrograd​ alone lost 850,000 people, 
half of the urban population declined during the Civil 
War.  
 
Hunger and poor conditions drove residents out of 
cities. Workers migrated south to get peasants' 
surpluses. Recent migrants to cities left because they 
still had ties to villages. 
 
The laws sanctioned the co-existence of private and 
public sectors, which were incorporated in the NEP, 
which was a state oriented "mixed economy". The NEP 
represented a move away from full nationalization of 
certain parts of industries. Some kinds of foreign 
investments were expected by the Soviet Union under 
the NEP, in order to fund industrial and developmental 
projects with foreign exchange or technology 
requirements. 
 
The NEP was primarily a new agricultural policy.​ ​The 
Bolsheviks viewed traditional village life as 
conservative and backward. With the NEP, the state 
only allowed private landholdings because the idea of 
collectivized farming had met strong opposition. 
Lenin understood that economic conditions were dire, 
so he opened up markets to a greater degree of free 
trade, hoping to motivate the population to increase 
production. Under the NEP, not only were "private 
property, private enterprise, and private profit largely 
restored in Lenin's Russia," but Lenin's regime turned to 
international capitalism for assistance, willing to 
provide "generous concessions to foreign capitalism." 
 
Lenin considered the NEP as a strategic retreat from 
socialism. He believed it was capitalism, but justified it 
by insisting that it was a different type of capitalism, 
"​state capitalism​", the last stage of capitalism before 
socialism evolved. 
 
While Stalin seemed receptive towards Lenin's shift in 
policy towards a state capitalist system, he stated in 
the Twelfth Party Congress in April 1923 that it allowed 
the "growth of nationalistic and reactionary thinking..". 
He also states that in the recent Central Committee 
plenum there were speeches made which were 
incompatible with communism, all of which were 
ultimately caused by the NEP. These statements were 
made just after Lenin was incapacitated by strokes. 
 
After the New Economic Policy was instituted, 
agricultural production increased greatly. In order to 
stimulate economic growth, farmers were given the 
opportunity to sell portions of their crops to the 
government in exchange for monetary compensation. 
Farmers now had the option to sell some of their 
produce, giving them a personal economic incentive to 
produce more grain. This incentive, coupled with the 
breakup of the quasi-feudal landed estates, surpassed 
pre-Revolution agricultural production. The 
agricultural sector became increasingly reliant on 
small family farms, while heavy industries, banks, and 
financial institutions remained owned and run by the 
state. 
 
This created an imbalance in the economy where the 
agricultural sector was growing much faster than 
heavy industry. To maintain their income, factories 
raised prices. Due to the rising cost of manufactured 
goods, peasants had to produce much more wheat to 
buy these consumer goods, which increased supply 
and thus lowered the price of these agricultural 
products.  
 
This fall in prices of agricultural goods and sharp rise 
in prices of industrial products was known as the 
Scissors Crisis​ (due to the crossing of graphs of the 
prices of the two types of product). Peasants began 
withholding their surpluses in wait for higher prices, or 
sold them to "​NEPmen​" (traders and middle-men) who 
re-sold them at high prices. Many Communist Party 
members considered this an exploitation of urban 
consumers.  
 
To lower the price of consumer goods, the state took 
measures to decrease inflation and enact reforms on 
the internal practices of the factories. The government 
also ​fixed prices​, in an attempt to halt the scissor 
effect. 
The NEP succeeded in creating an economic recovery 
after the devastation of ​World War I​, the ​Russian 
Revolution​, and the ​Russian Civil War​. By 1925, in the 
wake of Lenin's NEP, a "... major transformation was 
occurring politically, economically, culturally and 
spiritually." Small-scale and light industries were 
largely in the hands of private entrepreneurs or 
cooperatives. By 1928, agricultural and industrial 
production had been restored to the 1913 (pre-World 
War I) level. 
 
By 1924, the year of Lenin's death, ​Nikolai Bukharin​ had 
become the foremost supporter of the New Economic 
Policy. The USSR abandoned NEP in 1928 after ​Joseph 
Stalin​ obtained a position of leadership during the 
Great Break​.  
 
Stalin was initially non committed to the NEP as early 
as 1918 Stalin was quoted calling it "...the beginning of 
the planned reconstruction of the outmoded 
social-economic system in a new socialist 
manner".Stalin then enacted a system of 
collectivization​ during the ​Grain Procurement Crisis of 
1928​ and saw the need to quickly accumulate capital for 
the vast industrialization programme introduced with 
the ​Five Year Plans​ starting in 1928. 
 
The Bolsheviks hoped that the USSR's industrial base 
would reach the level of capitalist countries in the 
West, to avoid losing a future war. (Stalin proclaimed, 
"Either we do it, or we shall be crushed.") Stalin asserted 
that the grain crisis was caused by ​kulaks​ – relatively 
wealthy farmers who allegedly "hoarded'' grain and 
participated in "speculation of agricultural produce".  
 
He also considered peasant farms too small to support 
the massive agricultural demands of the Soviet Union's 
push for rapid industrialization, and Soviet economists 
claimed that only large collective farms could support 
such an expansion. Accordingly, Stalin imposed 
collectivization of agriculture. Land held by the ​kulaks 
was seized and given to agricultural cooperatives 
(​kolkhozes​ and ​sovkhozes​).