One hundred years ago, Vladimir Lenin announced the introduction of a “New Economic Policy,” which, in his own words, meant “reverting to capitalism to a considerable extent.” This proved that his socialist experiment had failed.
In February and March 1921, workers downed tools and went on strike across Russia. One of the centers of this industrial action was Petrograd. Special units of the Cheka opened fire on demonstrating workers. Panic broke out among Bolsheviks as workers and soldiers fraternized. Kronstadt, a naval base and port city on an island off St. Petersburg, was the site of a mutiny by marines from two armored cruisers.
On March 1, more than 15,000 people gathered, representing a quarter of the civilian and military population of the naval base. The strikes and demonstrations were violently suppressed, and the death toll was in the thousands. Some 8,000 insurrectionists fled to Finland and later returned to Russia, having been promised amnesty. Despite the pledge of leniency, they were immediately arrested and transported to a concentration camp, where many died.
Historian Gerd Koenen provides the following assessment: “The triumph and dictatorship of the Bolsheviks rested not least on the complete annihilation of the Russian workers’ movement.”
Lenin had no choice but to recognize that continuing a radical economic policy would have threatened the foundations of Soviet power. Industrial production had already fallen to a tenth of its 1913 level, and people all across Russia were starving.
In response, Lenin initiated a U-turn and proposed the NEP, which was adopted at the 10th Congress of the Russian Communist Party in March 1921. Lenin conceded that “we have sustained a very severe defeat on the economic front.” The economic policy of the Bolsheviks, he euphemistically put it, had “hindered the growth of the productive forces and proved to be the main cause of the profound economic and political crisis that we experienced in the spring of 1921.”
In clearer terms: The socialist planned economy had failed as soon as it was introduced. After all, Lenin was clever enough to realize that the only solution lay in “reverting to capitalism to a considerable extent,” the very words he used to formulate his policy shift.
The NEP legalized profit-oriented production, private ownership in the production of consumer goods, and the acquisition of wealth. It also incorporated peasants into the economic system through the introduction of a “natural tax.” The Communists allowed state-owned enterprises to lease their factories to private individuals and to place the financing and logistics of entrepreneurial activities in private hands. In July 1921, freedom of trade was even restored for craftsmen and small industrial enterprises.
The new guidelines adopted in the fall of 1921 resolutely opposed “equal treatment for workers with different qualifications.” Free distribution of food, mass-produced consumer goods, and state services, having just been celebrated as great socialist “achievements,” were canceled, and rents were reinstated. There was no longer any talk of abolishing money. Historian Helmut Altrichter writes: “The state had retained control of the ‘command heights of the economy’: banking, currency, the transport system, foreign trade, large and medium-sized industry. Below this threshold, however, it strove for greater productivity and efficiency, for more competition, for less dominance from above and more initiative from below.”
What happened next was what always happens when even a small dose of capitalism is added to a state-run economy: The economy recovered. In 1921 and 1922, at least five million of 29 million hungry people died of starvation. Some estimates cite as many as 14 million deaths from starvation. Then, hunger declined between 1923 and 1928, productivity rose, and, by 1925 to 1926, production had been restored to pre-war levels in many major industries. The NEP was the communists’ admission that the official narrative, which blamed “foreign saboteurs and agents” and other external factors for crop failures, starvation, and declines in production, did not correspond to the facts. The main causes of Russia’s woes lay in socialist economic policies.
But for the communists, the NEP represented nothing more than a tactical retreat. In December 1926, Stalin declared that “we introduced NEP, permitted private capital, and have to some extent retreated in order to regroup our forces and later on pass to the offensive.” The consequences of the renewed “offensive” are well known: widespread famine and abject terror under the policy that Stalin called “the liquidation of the kulaks.”
Rainer Zitelmann is a German historian and the author of The Power of Capitalism.
