The NEP is the so-called New Economic Policy pursued in the Russian SFSR (since 1922 in the USSR) in the 1920s, that allowed certain elements of the market and private property.

 

The introduction of NEP resulted from a deep economic crisis caused by the policy of War Communism during the Civil War. Due to numerous uprisings (West Siberian, Tambov, Kronstadt, etc.), by the beginning of 1921, the Bolsheviks saw that it was necessary to abolish the Prodrazvyorstka [food requisition] and replace it with prodnalog [Tax in Kind].

 

By the Decree of the All-Russian Central Executive Committee (VTsIK) “On the Replacement of Food and Forage Apportionment by Tax in Kind” of March 21, 1921, adopted on the basis of the decisions of the 10th Congress of the Russian Communist Party (Bolsheviks), the Prodrazvyorstka was abolished and replaced by a tax in kind. The peasants gained the right to dispose of the products that remained with them after paying taxes at their discretion. This resulted in a significant reduction of the share of grain seized from producers.

 

The authorities lifted the War Communism restrictions on trade and also allowed private ownership of the means of production. The course towards the use of the market and various forms of ownership was continued and enshrined in several decrees. Thus, the decree of the Council of People's Commissars (SNK) "On Consumer Cooperation" dated April 7, 1921, restored the economic independence of cooperatives, which contributed to the development of all types of cooperation. Decree of SNK "On the Abolition, Suspension and Revision of Certain Resolutions on Small and Artisanal Industry and Small-scale Agricultural Cooperation" of May 17, 1921, and the Decree of VTsIK and SNK “On Agricultural Cooperation” of August 16, 1921, allowed the transfer of industrial enterprises from the state to private ownership. According to the Order of the implementing the principles of the New Economic Policy (NEP), of August 9, 1921, most state large-scale industry mills were made self-accounting to ensure the profitability of production.

The authorities took steps to attract foreign concessions. In 1922–1924, a monetary reform was carried out, which turned the ruble into a freely convertible currency.

 

At the same time, the state retained its “commanding heights in the economy,” i.e. it owned all strategically important economic sectors, including heavy industry. Thus, during the 1920s, the USSR’s system of economy was mixed, combining both planned and market mechanisms, while the state had great opportunities for regulation. In general, NEP ensured rapid restoration of the country’s national economy, destroyed during World War I and the Civil War. However, this achievement was mainly due to the return to operation of pre-war industrial capacities.

 

NEP did not meet the goals of accelerated development and transformation of an agrarian country into an industrial one. During the crises, which regularly occurred, peasants refused to sell grain at prices too low, compared with the cost of industrial goods. As a result, state grain procurements were disrupted. 1928–1929 saw the USSR leadership, headed by Joseph Stalin, curtail the NEP and embark on a course of forced industrialization and complete collectivization of agriculture.