New Economic Policy

• The need for change was clear following the events of 1921, Lenin again subverted ideology for pragmatism.
• Gosplan suggested a New Economic Policy allowing private ownership, private trade and profit.

  • Companies had to pay workers out of their profits.
• The NEP led to the end of rationing and requisitioning, farmers gave a proportion of their harvest to the state as a tax and were free to sell the rest.

  • Agricultural production rose and food prices fell dramatically.
• The "scissors crisis" was a term used by Trotsky to describe the economic situation in 1923.

  • Industrial production had not increased in the same way food production had so although the farmers were making money and food was more plentiful there were no industrial goods for the peasants to buy.
• The government capped industrial prices and brought in money taxes instead of quotas, the crisis was over by 1926.
• Nepmen were traders who did well out of the NEP, they bought grain from the peasants to sell in the cities and industrial goods in the cities to sell to the peasants who made profits on both.
• By 1923, the Nepmen ran 75% of all retail trade.
• The kulak class returned in the countryside.