New Economic Policy

New Economic Policy

The New Economic Policy (NEP) was based around a tax called prodnalog, which was a tax on food. By introducing a tax, Lenin was essentially admitting that he was taxing something people owned. Requisition had forcibly taken food under War Communism. Prodnalog taxed people at a lower level than the level set for requisition and allowed them to keep the rest of what they produced. Food that was left could be sold – hence, the peasants had an incentive to grow as much as they could knowing that they could keep what was not taxed. The amount of grain taxed in 1922 was half of the grain taken by force in 1920-21. The same was true for the tax on potatoes. The tax on food allowed the cities to be fed and gave the farmers an incentive to produce as much as was humanly possibly.

In 1924, the food tax prodnalog was replaced by a tax on money. This was a natural move. The peasants still had a very good incentive to grow as much as was possible. They were allowed to travel to the towns/cities to sell their produce. The process needed a middle man and as a result private enterprise developed. In theory there were restrictions on private trade but they were not enforced. Those in power knew that the cities needed feeding and the system that had developed after War Communism allowed for this.

In October 1921, Lenin admitted that there could be no going back to the limitations imposed by the dogmas of War Communism.  

“We are in desperate straights. We must buy from whom we can and we must sell to whom we can. The party would have to learn to trade.”

The economic freedom that the NEP introduced restored Lenin and the Bolsheviks to political power – but it also expanded Russia’s economic base. Lenin admitted that War Communism had been “a grievous error”.

The NEP was discussed at the 10th Party Congress. The Congress recognised that drastic measures were needed in the face of rebellions by both peasants and workers. The Congress supported the abolition of requisition and the introduction of a food tax. Lenin forced through change by threatening to resign if his ideas were not adopted.

The NEP represented a radical break with the party’s doctrine. There were those who were fundamentally opposed to it. The main opponent initially was Bukharin but even he ended up supporting it after Lenin’s threat of resignation.

There were two reasons why some objected to the NEP:

1)   The planned economy that the Bolsheviks had so desired was being sacrificed. Those who most benefited from the NEP would be the peasant smallholder – the natural enemy of socialism.

2)   Marx believed that the political superstructure of every society was based on its economic base. If the economic base was to become a free market, it seemed inevitable that sooner or later the political superstructure would have to conform with the economic base. Alongside of revived capitalism, the political features of the bourgeois state would replace the socialism believed to have been won in the November 1917 revolution.

Lenin argued that the only way the revolution could be saved was with the support and agreement of the peasants. Lenin argued that the direct transition to communism had been a mistake and that the first stage to communism had to be the acceptance of small-scale production with state capitalism. Lenin then believed that Russia would then proceed to socialism and then to communism. Lenin claimed that the peasants could not be converted overnight. It would take “generations but not centuries”. (Lenin)

By 1922, with a tax limited to just 10%, the success of the NEP was obvious. In 1921, Russia had faced famine. By May 1922, this fear had subsided and by 1923, agricultural production was at a healthy 75% of the 1913 level. Light industry also benefited from the healthy situation found in agriculture. They had to produce goods for the peasants and the success of the peasants stimulated production in light industry. However, heavy industry did not benefit from the success in agriculture. In 1922, 500,000 were unemployed in the heavy industry sector.






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