The New Economic Policy and the Power Struggle 1921–1928

The period from 1921 to 1928 was one of the most pivotal in Soviet history. The introduction of the New Economic Policy (NEP) represented a dramatic retreat from the radical economics of War Communism, while the power struggle following Lenin's death in 1924 determined the future direction of the Soviet Union. Stalin's eventual triumph over his rivals was not inevitable — it depended on political skill, institutional control, and the mistakes of his opponents.

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The New Economic Policy

Why Was the NEP Introduced?

By early 1921, the Bolshevik regime faced an existential crisis:

• The economy had collapsed — industrial output was at 20% of 1913 levels
• The 1921 famine killed an estimated 5 million people
• Peasant revolts were spreading across the countryside
• The Kronstadt Rebellion demonstrated that even the Bolsheviks' core supporters were alienated
• Workers were leaving the cities; strikes were increasing

Lenin recognised that War Communism had failed. At the Tenth Party Congress in March 1921, he introduced the NEP as a strategic retreat — 'one step back in order to take two steps forward'.

Key Features of the NEP

Feature	Detail
End of grain requisitioning	Replaced by a tax in kind — peasants paid a fixed proportion of their harvest and could sell the surplus on the open market
Private trade legalised	Small-scale private trade and small businesses (employing fewer than 20 workers) were permitted
'Commanding heights'	The state retained control of large-scale industry, banking, foreign trade, and transport
Money reintroduced	The rouble was stabilised with the introduction of the gold-backed chervonets in 1922
Concessions to foreign capital	Limited foreign investment was encouraged
Market mechanisms	Supply and demand were allowed to operate in agriculture and small-scale industry

Key Definition: NEP (New Economic Policy) — Lenin's economic policy introduced in 1921, which allowed limited private enterprise and market mechanisms while maintaining state control of major industries. It was a pragmatic retreat from War Communism designed to revive the economy and maintain Bolshevik power.

The NEP in Practice

The NEP produced a mixed but largely positive economic recovery:

Successes:

• Agricultural production recovered to pre-war levels by 1926
• Industrial production also recovered, reaching 1913 levels by 1926–27
• The famine ended; food shortages eased
• A class of prosperous peasants and small traders (the Nepmen) emerged
• Social stability improved; living standards rose

Problems:

• The Scissors Crisis (1923) — industrial prices rose sharply while agricultural prices fell, threatening the exchange between town and countryside (named by Trotsky because the price curves resembled an open pair of scissors)
• Unemployment remained high — by 1926–27, approximately 1.5 million were registered unemployed
• Housing shortages in the cities were acute
• Many Bolsheviks saw the NEP as a betrayal of socialist principles — the enrichment of 'Nepmen' and 'kulaks' seemed to contradict everything the revolution stood for
• Industrial growth was insufficient to close the gap with Western powers

Historiographical Debate: Was the NEP Viable?

• E.H. Carr argues that the NEP was always a temporary measure — a 'breathing space' that could not resolve the fundamental tensions between a socialist state and a market economy
• Stephen Cohen contends that the NEP offered a viable alternative to Stalinist forced industrialisation — a gradualist path to socialism that was cut short for political rather than economic reasons
• Isaac Deutscher suggests that the NEP created an inherently unstable situation in which capitalist market forces coexisted uneasily with communist political control

Exam Tip: The viability of the NEP is a critical analytical question. If the NEP could have continued successfully, then Stalin's forced industrialisation was an unnecessary and destructive choice. If the NEP was inherently unsustainable, then some form of radical change was inevitable. The strongest answers will consider both economic and political dimensions of this debate.

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Lenin's Final Years and the 'Testament'

Lenin suffered a series of strokes from May 1922 onwards. By March 1923, a final stroke left him unable to speak. He died on 21 January 1924.

Lenin's Testament (December 1922 – January 1923)

In his last writings, Lenin assessed the leading members of the party:

Leader	Lenin's Assessment
Stalin	'Has concentrated enormous power in his hands, and I am not certain he will always use that power with sufficient caution'
Trotsky	'The most able man in the present Central Committee' but suffered from 'excessive self-confidence' and 'too far-reaching a preoccupation with the purely administrative side'
Zinoviev and Kamenev	Their opposition to the October Revolution 'was not accidental' — implying they lacked revolutionary courage
Bukharin	'The most valuable and biggest theoretician in the party' but his views were 'scholastic' and he had 'never fully understood dialectics'