Theme 2 (New economic policy (The consequences of the NEP (Industry (The…
New economic policy
Lenin introduced the NEP for a variety of reasons
To revive the economy: Lenin needed a policy that would stimulate grain production in order to end the famine.
To build socialism: Lenin hoped that the NEP would generate wealth that could be used to industrialize and modernize the Soviet economy.
To retain political power: Lenin described the NEP as an economic retreat, which was designed to stop a political defeat - in that sense Lenin made economic compromises in order to retain political power.
Compromise with capitalism:
Small factories and workshops were denationalized and allowed to trade freely - many were returned to their former capitalist owners.
Large factories and major industries remained nationalized
Faming was left to the free market - peasants could buy, sell and produce freely. Grain requisitioning ended and was replace by tax in kind.
Money was reintroduced
The NEP ended war communism by creating a mixed economy.
The consequences of the NEP
The NEP led to political and economic stability. However, it did not lead to rapid industrial growth. Nor was it wholly popular within the Party as it was a compromise with capitalism.
The NEP also led to industrial growth. Lenin authorized a major electrification campaign, which revived an industry that had effectively been destroyed by the Civil War. However, industrial recovery was slow.
Ending grain reuqisitioning was extremely popular among the peasants. Free trade also encouraged peasants to grow more food. Therefore , the famine ended, and farming revived.
The 'scissors crisis'
Agriculture recovered quickly; industry much more slowly. This imbalance led to a fallen the price of food and a rise in the price of industrial goods. A gap opened up between farmers' incomes and industrial prices. Trotsky nicknamed the 'scissors crisis' as the lines on the graph illustrating the problem looked was forced to step in and impose price cuts on industrial goods.
The NEP led to the re-emergence of inequality. Large farms prospered, whereas small farms did less well. 'NEPmen" traders who travelled the country selling highly desirable goods, grew rich. Communists viewed NEPmen as parasites, as they made money without producing anything. From time to time NEPmen were arrested by the Cheka for profiteering. Many Communists were horrified by the re-emergence of inequality.
Gambling, prostitution and drug dealing all took place under the NEP. Prostitution was the result of wider social and economic problems, which led to widespread poverty among women in the 1920s
Ending grain requisitioning was extremely popular among the peasants.Therefore, peasants began to support the regime. This was a deliberate part of Lenin's policy. Indeed, he argued that the Communist government was based on an alliance, or 'smychka' between the workers and the peasants, which was made possible by the NEP
Divisions in the party
Left wing opposed NEP - allowing problems of capitalism to re-emerge
Centre supported NEP - rebuilding communism
Right wing supported the NEP - necessary transitional stage
Nationalisation of industry:
State capitalism was always intended to be temporary -the start of the Civil War in the summer of 1918 led to the introduction of a series of emergency economic measures. Their goal was to ensure Communist victory in the civil war.
War communism entailed the following measures:
Food dictatorship: the free market in food was abolished - grain was forcibly requisitioned from the peasants - and food was rationed by the Supply Commissariat.
-Workers and soldiers got the largest rations - the smallest rations were given to members of the bourgeoise.
Labour discipline: Lenin introduced an 11 hour working day, and compulsory work for all able bodied managed 16-50
The nationalization of industry.
The abolition of the market: money became worthless due to hyperinflation, and was then formally abolished. Private trade was made illegal
Consequences of War Communism:
War communism destroyed incentives to work as peasants and workers were not rewarded for their labour . - Consequently there was an economic catastrophe.
By 1920 there was famine in the countryside. The 1921 harvest led to the deaths of around 6 million people.
War communism led to military victory but economic ruin.
Workers fled the cities in search of food. In total the industrial workforce declined from 2.6 million workers declined from 2.6 million workers in 1917 to 1.2 million in early 1921.
The economic crisis of 1921 led to major economic reform: the New Economic Policy.
Introduced in March 1918 - this was argued to be the economic phase between capitalism and socialism.
-Based on the nationalization of large-scale industry.
-Ended capitalism by passing the ownership of industry from capitalist to new states.
Lenin hoped that nationalism would lead to greater efficiency as the government could employ experts to run the economy . -Control of the nationalised industries would then be centralized by the
Ensure factories were properly managed by placing them under the control of well-paid specialism
Co-ordiante economic production to meet the needs of a new society.
Re-establish worker discipline by offering higher pay to productive workers
Building socialism- a variety of economic objectives:
Consolidation: he needed economic stability to help retain his hold on power.
Military victory: he needed the economy to supply the Red Army during the civil war
Modernisation: he believed socialism required the construction of a highly advanced economy
Destroy capitalism: Lenin wanted to create an economy that was more efficient than capitalism and ended inequality
Lenin often put pragmatic goals above long-term ideological goals.
Stalin:recovery from war after 1945
The Second World War devastated the Soviet economy. Using the techniques developed in the 1930s economic planners set about rebuilding Soviet industry and reviving Soviet agriculture.
The postwar plans focused on heavy industry and rearmament. Almost 90% of economic investment was devoted to developing heavy industry. By 1950 the Soviet economy was producing more coal, oil, electricity, iron and steel then it was in 1940. The economy was also the fastest growing in the world.
Economic consequences of the war:
The Second World War set the Soviet economy back significantly by 1945:
25 million people homeless
Soviet industry was producing around 1/3 of what it had produced in 1940
Soviet agriculture was producing around 1/2 of the grain it had in 1940
Soviet industry grew rapidly but agriculture grew more slowly. Consumer goods and housing remained in short supply as the government prioritised industrial reconstruction and rearmament over consumption or house building