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Early Soviet Economy. Was the New Economic Policy (NEP) effective in promoting recovery from war and revolution?

Дата публикации: 20 сентября 2007
Публикатор: Научная библиотека Порталус
Рубрика: RUSSIA (TOPICS) - Soviet Russia (1917-53) →
Источник: (c) http://russia.by
Номер публикации: №1190294037


Was the New Economic Policy (NEP) effective in promoting recovery from war and revolution?

Viewpoint: Yes. NEP allowed industry, agriculture, and other economic sectors to make impressive recoveries.

Viewpoint: No. NEP fell short of restoring economic prosperity and failed to solve long-term problems.

_______________________________

In the wake of the carnage and chaos caused by revolution and civil war, the Bolsheviks took control of Russia and looked toward economic reform to foster national recovery. Approved by the Tenth Congress of the Soviet Communist Party in March 1921, the New Economic Policy (NEP) allowed for a light private industry, a free service sector, limited consumer industry, and free domestic trade in agricultural products. The idea behind NEP was to promote economic recovery so that Russia's evolution to socialism and communism could rest on firm material foundations.
This chapter evaluates NEP's successes and failures. Many scholars suggest that its reforms ushered in a time of prosperity that matched the popular mood of the Soviet 1920s. NEP businesses flourished, pre-1914 industrial production levels were restored, and grain grew in bounteous harvests. Yet, on the other hand, recovery appeared limited, state economic controls continued and hindered growth, markets were small and unstable, and supreme state authority loomed over economic freedom.



Viewpoint: Yes. NEP allowed industry, agriculture, and other economic sectors to make impressive recoveries.

The New Economic Policy (NEP) was a key factor in the Bolshevik leaders' success in consolidating Soviet rule after years of war, civil conflict, and economic chaos. Faced with broad dissatisfaction in most of the countryside and among many of those urban elements who had managed to survive the earlier terror of War Communism (the policy of seizing surplus product from the existing rural and urban "bourgeoisie" and placing most economic activity under dictatorial state control), the leaders of the new Soviet regime were forced to make substantial revisions to their policies. The March 1921 NEP proposals of Vladimir Lenin and economic theorist Nikolai Bukharin reinstated the rights of citizens engaged in agriculture, handicrafts, light industry, and the service sector to work according to market principles. This situation helped to pave the way for domestic quiet, productive labor, and a stable currency, all of which were keystones of economic success that had been lacking during the previous years. The leadership further hoped that these developments would stimulate increased foreign trade, particularly of grain to foreign markets. Finally, Lenin and the Bolsheviks ceased propaganda against entrepreneurs as "speculators" and "class enemies" who would exploit Russia. Although the regime continued to maintain tight state controls over heavy industry, foreign trade, transport, and utilities, the NEP reforms were all popularly received, and support for the Soviet regime increased. Most importantly, the Soviet economy was able to make substantial gains in light industry, agriculture, and other economic sectors to levels that equaled or surpassed Russia's development prior to World War I. Despite the views of Bukharin and other leaders who believed that NEP needed to continue its economic and public-relations successes for the foreseeable future, most Soviet leaders came to believe that the groundwork had been set for heavy industrialization.

The underlying factor proving NEP's success was recovery from an economy totally devastated by World War I, the Civil War, and War Communism. In 1913 the Russian peasantry had produced approximately 80 million tons of excess grain, which fed them, supplied burgeoning urban communities, and was available for export. By 1920 agricultural production was nearly halved, as Moscow and Petrograd starved and nearly all ties to outside markets were cut. Industrial production suffered even greater losses, falling in 1920 to just 20 percent of the 1913 levels. The steel, coal, and textile industries were among the heaviest hit, falling in some cases to barely 5 percent of their pre-World War I levels. Key to this dramatic decline was the loss or destruction of more than two-thirds of Russia's coal reserves, electrical supply, and rail transport, as well as the absence of an effective monetary economy.

The Soviet leadership had no choice but to deal with the political ramifications of this economic crisis. Although the Bolsheviks had just won the Civil War, their earlier policies of seizing surplus grain through requisitions, which were often violent, had alienated much of Russia's peasantry. Lenin grew acutely aware of the Communist Party's impending political isolation: "the peasants will say: 'you are splendid fellows; you defended our country. That is why we obeyed you. But if you cannot run the show, get out!'" Lenin and Bukharin, the architects of NEP, felt that it was especially crucial to reach out to those peasants who were able to produce grain and other agricultural products beyond their own immediate needs. Most were happy with the Bolsheviks' legitimizing their seizure of gentry, church, and dynastic lands in 1917. Yet, they still needed to be convinced that their standard of living would improve under a communist regime that had treated them badly thereafter. Lenin was convinced that this support could only develop after the peasantry's material life improved. Examples of these improvements included providing the farmers with electricity and modern farm equipment, in addition to a laissez-faire approach that allowed the most productive to enrich themselves through hard work and judicious trade. The key lesson from this reconnection between the state and the peasant was, as Lenin grudgingly acknowledged, that Russian society had to develop a modern capitalist economy before the state could launch a full-fledged proletarian revolution and achieve pure communism. Vital to this task was a practical education in capitalist economic principles and management techniques for individual party members, themselves unprepared for administering Russia. The Bolsheviks, however, could reassure themselves that their encouragement of capitalism was limited. Indeed, NEP kept most of the Soviet Union's productive and foreign trade capacity--the "commanding heights" of the economy, as Lenin called them--under strict state control. The government also leased workshops and small factories to private parties, thus ensuring its control over their long-term futures. Its plan was to wait until the rural and urban sectors were ready for productive state control.

By 1923 the Soviet agrarian economy had improved substantially. Its grain harvest still lagged at approximately 70 percent of its 1913 levels, but the available surplus prevented starvation and represented a substantial improvement over the poor 1920 harvests. Although Soviet industrial production did not recover as quickly, producing an unhealthy gap between agrarian products and available industrial goods, continued encouragement and further reform eventually helped it as well. By 1926 industrial production had recovered to its 1913 levels. Among basic industries, including steel, coal, and textiles--all of which had virtually stopped producing by 1920 and were now operated by the state--the production figures were higher than they had ever been. They, along with state- operated utilities (also not part of NEP's privatizations and semiprivatizations) benefited from relaxed government attitudes toward employing "bourgeois specialists"--technicians, engineers, and other well-qualified experts trained before the revolution.

Nevertheless, there was a growing sense of frustration among the Soviet leadership that they were not industrializing the country at a sufficient pace. Leaders such as Evgenii Preobrazhenskii, Lev Trotsky, and, later, Josef Stalin argued that NEP simply encouraged personal consumption at the expense of the Soviet Union's modernization. This consumption, in their opinion, demoralized the masses and would inevitably lead to the return of exploitative economic and social conditions. They were aided by mass opinion in the rank and file of the Communist Party, which began to feel that government economic policies had betrayed the revolution and its ideals.

From this dilemma arose the solution of seizing surplus agricultural product to finance the development of the Soviet Union's heavy industries. Achieving this end rested on putting all private lands under state control and organizing rural communities into state-directed collective farms, each of which would act as a kind of "rural factory." The extension of state control would not only consolidate Soviet power in the countryside but would also resolve the issues of "class conflict" and moral degeneration that supposedly had developed during the NEP years.

Once Stalin effectively secured power in the late 1920s, he soon embraced collectivization and in 1928 embarked on Russia's first Five Year Plan, an ambitious program of industrial development. From this point onward, the Soviet state largely ended the limited concessions of NEP, the measures of which had restored enough economic prosperity for the government to look into other avenues of development and modernization without having to worry about its survival. Lenin and Bukharin's calls for the Bolsheviks to lead a "limited retreat" in the face of popular disapproval had bought the necessary time. But after Lenin's death in 1924 and with Stalin's establishment of firm control over the leadership and decision-making organs of the Communist Party, a new course could credibly be undertaken. Despite the modesty of its aims, NEP had succeeded in securing Soviet power long enough for this transformation to become practical. It also laid the foundations of a totalitarian state that would one day become one of the world's two leading powers.

-- York Norman, Georgetown University


Viewpoint: No. NEP fell short of restoring economic prosperity and failed to solve long-term problems.

The New Economic Policy (NEP), approved by the Tenth Congress of the Soviet Communist Party in March 1921, failed to address the needs of the Russian people and their economic life in a manner that offered long-term stability, success, and prosperity. Although it restored a limited market economy, which did lead to growth and recovery in some sectors, the overall economic picture remained distorted and unstable.

To begin with, only the lightest and arguably least significant sectors of the Soviet Union's urban economy returned to private hands. NEP's privatization laws limited privately owned "factories" to workshops of fewer than ten employees in cases where steam power was not used and fewer than five employees when it was. Growth in craft industries, artisanal production, and small-scale manufacture did occur, but the shops that engaged in these activities did not add greatly to Russia's industrial output. The great industrial enterprises built in the decades before the revolution--an impressive body of productive capacity--remained firmly under state ownership and the control of party-appointed administrators who usually had no idea about the economics of production or industrial management. Technical experts remained in place, but the administrative talent and entrepreneurial initiative that had made urban factory life blossom in the decades before 1917 were gone forever.

Many studies cite the Soviet economy's restoration of 1913 industrial production levels by 1926 as a major achievement, but its practical implications are suspect. First, it should be stated that the Soviet government typically lied about its achievements in almost every field of endeavor, including not only economics but also education, health care, science, technology, infrastructural development, housing, the arts, and so on. Statistics about industrial production, which was almost entirely in state hands even during the NEP era, and for which no other authoritative figures are available, were thus among the easiest to manipulate. Second, even if heavy industry experienced substantial growth in the 1920s, its product did not necessarily translate into quality or practicality. The absence of a free or semifree market in heavy industry, in which consumers could choose among competing products according to price, quality, and suitability, meant that state-run concerns could (and did) produce low-grade material and poorly engineered products without the consequence of losing ground to competitors. While the utility and longevity of Soviet industrial products were limited, they nevertheless factored into official economic statistics. Third, even if the 1926 statistic were true, the suggestion that the NEP economy was a success because it took only five years to reach 1913 production levels is deceptive. Departing from the convention of using the last year before World War I as a benchmark of growth offers more instructive points of comparison, for Imperial Russia's economy expanded dramatically during the conflict. Its overall growth rate in 1916 was 21.5 percent higher than it had been three years earlier. Russian businessmen founded an average of 379 new companies per year during the war years, compared to 241 in 1913, an increase of 64 percent. The Soviet economy in 1926 would thus still have been measurably smaller and weaker than the tsarist economy of ten years earlier. In 1913, moreover, Russia had faced serious labor unrest in connection with government repression carried out in the Lena mining region the previous year, trouble that kept its productive capacity underutilized and economic prowess understated. Yet, although organized labor activity had been legal at that time and at all other times between 1906 and 1917, it was thoroughly repressed by the Soviet regime. During the revolutionary era and subsequent civil war, strikes and other forms of insubordination among workers were punished with violent repression, as were incidental hindrances to labor performance such as absence, inefficiency, and even lateness. Communist Party leaders and rank-and-file members who advocated greater rights for workers (the so-called Workers' Opposition) were forced to recant their views or face punishment. Even with firm state control and near-total compliance among the industrial workforce, however, the Soviets were still incapable of surpassing the prewar production levels of the tsarist economy--to say nothing of its higher wartime figures that did not enjoy those advantages.

In addition to the small workshops permitted to function in the 1920s, the rest of the private urban economy revolved around consumer and service industries that made life a bit more comfortable but did little to add to national wealth. The Soviet 1920s offered restaurants, retail shops, personal services, and some privately operated entertainment venues, but despite the "vulgar" displays and conspicuous consumption of the so-called Nepmen, their contribution to national economic growth and stability overall was negligible. Indeed, the return of "bourgeois indulgences" and those who enjoyed them only angered many ardent supporters of the revolution, who began to agitate for economic policies that were purer in the Marxist sense.

The economic effects of NEP were even less impressive in the countryside. Although peasant communes were permitted to sell grain, their production levels remained low relative to prerevolutionary yields. Small plots, communal tenure, and the middlemen who dealt in grain failed to replace the large surpluses produced by gentry estates and the prosperous private farmsteads established between 1906 and 1914. The seizure of these lands and their incorporation or reincorporation into communes added only marginal acreage to the individual small farms that dominated the Soviet countryside, which for the most part only continued to produce at the subsistence level. The division of livestock, farm machinery, and other agricultural capital formerly possessed by the expropriated gentry and prosperous peasant farmers diminished the contributions that they could make when concentrated and coordinated by one owner. More- specialized rural industries such as dairy and cattle farming, mills and distilleries, curing and rendering, and processing and foresting lost their organization and receded in importance. The peasants had the right to profit domestically from the sale of their produce during NEP, but the government exacted heavy taxes from those revenues. Moreover, even before NEP came to an end, the state resorted to price controls on grain because the industrial sector remained too poor to balance agriculture and correct the internal trade imbalance that had developed between the two economic sectors. Russia's traditional dependence on profitable grain exports compromised peasant interests to an even greater degree since both wholesale commerce and foreign trade remained nationalized by the Soviet regime. Only one buyer--the state--purchased goods for export, likewise at an artificially controlled price, and received the greatest benefit from the profits. In these circumstances the Russian countryside, once the breadbasket of Europe, not only failed to reach its 1913 production levels during NEP, but in fact also lagged behind them until the 1960s. The Soviet Union ended its days as a net importer of food.

NEP also failed to provide the sense of long-term psychological stability necessary for real economic recovery. Framed as an "economic Brest-Litovsk," in reference to the extremely harsh and, as the Soviet regime hoped, short-lived and expedient peace treaty concluded with Germany in March 1918, the policy was envisioned as a temporary compromise with market forces that the political leadership openly detested. No Soviet leader ever departed from the party's firm conviction that socialism and communism were Russia's inevitable fate and radiant future.

For the rest of the population, part and parcel of the Soviet 1920s was a sense of the ephemeral. Intelligent people looking at the government's official ideology and frank statements of its future goals could not reconcile them with the realities of their lives or expect that the obvious discord between the ruling philosophy and market economics could last long. Few thus planned their businesses for a long-term future. In a real disincentive to market initiative, the government, regardless of what commercial activities it legalized, never allowed the restoration of private property ownership in town or country. Urban light manufacturing and service industries inhabited government-owned buildings on a leasing basis that could be cancelled at any time. All agricultural land had been formally nationalized in 1917, a measure that was never reversed. Independent peasant use of that land was tolerated and encouraged by the regime during NEP, but no individual farmer could rightly claim to own the property he worked. Nor, despite their historic role in Russian rural life, could peasant communes claim legal ownership of farmland. Everyone participating in the NEP economy who was not a complete fool knew that the government could end its concessions at a stroke, as indeed Josef Stalin did in the late 1920s, and replace it with the same command economy that they had experienced during the revolutionary and civil war eras.

The end came quickly in any case. Sensing that just enough stability had been restored to the country by the time he consolidated power in the late 1920s, Stalin moved quickly to replace the limited market economy and uncontrolled peasantry with command economics and agricultural collectivization. Clearly neither he, his acolytes, nor his predecessors who failed to install a permanent, viable program of economic recovery were convinced of the market's long-term virtues, nor were those who had known and expected that the state would one day crack down on economic freedom. Stalin enjoyed the support of a rising generation of Soviet communists who believed in the superiority of command economics, shed no tears for NEP, and anticipated a utopian future. In reality it was their children's generation who, seeing the stagnation of the late Soviet economy, embraced reforms that were strikingly similar to those of 1921. A limited market economy emerged in the late 1980s, while the government continued to control what Lenin had called its "commanding heights." Yet, rather than create a new breathing space for the regime's orthodox communists to maintain and consolidate power, the economic aspects of this "restructuring" (perestroika) and the nation's simultaneous political liberalization (glasnost) merely produced fevered demands for further reform. These upheavals led in short order to the Soviet Union's complete collapse and to the discrediting of its founding ideology. The economic results were aggressive market reforms (sometimes described as "shock therapy"), rapid privatization in virtually every sector of the economy, and the quick adoption of a burgeoning capitalist system. These developments did not occur without problems, disappointments, injustices, and the occasional threat of backslide into state control. However, they have produced a steadily growing economy, a rising middle class, and the return of many important industries--including heavy manufacturing, mining, oil and natural gas, travel and tourism, book publishing, and entertainment, among many others--to private hands for the first time since the tsarist era. At this writing, less than fifteen years after the collapse of the Soviet Union, Russia has been transformed from a moribund superpower into one of the world's leading emerging markets. It now stands as the second-largest oil exporter, and Moscow is home to more billionaires than any other city in the world.

-- Paul du Quenoy, American University in Cairo


PRAVDA ON THE GRAIN PROBLEM

Question: What should be considered as the basic cause of our difficulties in the matter of the grain supply? What is the way out of these difficulties? What, in connection with these difficulties, are the conclusions that must be drawn as regards the rate of development of our industry, particularly from the point of view of the relation between the light and heavy industries?

Answer: At first sight it may appear that our grain difficulties are an accident, the result merely of faulty planning, the result merely of a number of mistakes committed in the sphere of economic co-ordination.

But it may appear so only at first sight. Actually the causes of the difficulties lie much deeper. That faulty planning and mistakes in economic co-ordination have played a considerable part--of that there cannot be any doubt. But to attribute everything to faulty planning and chance mistakes would be a gross error. It would be an error to belittle the role and importance of planning. But it would be a still greater error to exaggerate the part played by the planning principle, in the belief that we have already reached a stage of development when it is possible to plan and regulate everything.

It must not be forgotten that in addition to elements which lend themselves to our planning activities there are also other elements in our national economy which do not as yet lend themselves to planning; and that, lastly, there are classes hostile to us which cannot be overcome simply by the planning of the State Planning Commission.

That is why I think that we must not reduce everything to a mere accident, to mistakes in planning, etc.

And so, what is the basis of our difficulties on the grain front?

The basis of our grain difficulties lies in the fact that the increase in the production of marketable grain is not keeping pace with the increase in the demand for grain.

Industry is growing. The number of workers is growing. Towns are growing. And, lastly, the areas producing industrial crops (cotton, flax, sugar beet, etc.) are growing, creating a demand for grain. All this leads to a rapid increase in the demand for grain--grain available for the market. But the production of marketable grain is increasing at a disastrously slow rate.

It cannot be said that the grain stocks at the disposal of the state have been smaller this year than last, or the year before. On the contrary, we have had far more grain in the hands of the state this year than in previous years. Nevertheless, we are faced with difficulties as regards the grain supply.

Here are a few figures. In 1925-26 we managed to procure 434 million poods of grain by April 1. Of this amount, 123 million poods were exported. Thus, there remained in the country 311 million poods of the grain procured. In 1926-27 we had procured 596 million poods of grain by April 1. Of this amount, 153 million poods were exported. There remained in the country 443 million poods. In 1927-28 we had procured 576 million poods of grain by April 1. Of this amount, 27 million poods were exported. There remained in the country 549 million poods.

In other words, this year, by April 1, the grain supplies available to meet the requirements of the country amounted to 100 million poods more than last year, and 230 million poods more than the year before last. Nevertheless, we are experiencing difficulties on the grain front this year.

I have already said in one of my reports that the capitalist elements in the countryside, and primarily the kulaks, took advantage of these difficulties in order to disrupt Soviet economic policy. You know that the Soviet government adopted a number of measures aimed at putting a stop to the anti-Soviet action of the kulaks. I shall not therefore dwell on this matter here. In the present case it is another question that interests me. I have in mind the reasons for the slow increase in the production of marketable grain, the question why the increase in the production of marketable grain in our country is slower than the increase in the demand for grain, in spite of the fact that our crop area and the gross production of grain have already reached the pre-war level.

Indeed, is it not a fact that our grain crop area has already reached the pre-war mark? Yes, it is a fact. Is it not a fact that already last year the gross production of grain was equal to the pre-war output, i.e., 5,000 million poods? Yes, it is a fact. How, then, is it to be explained that, in spite of these circumstances, the amount of marketable grain we are producing is only one half, and the amount we are exporting is only about one-twentieth, of the pre-war figure?

The reason is primarily and chiefly the change in the structure of our agriculture brought about by the October Revolution, the passing from large-scale landlord and large-scale kulak farming, which provided the largest amount of marketable grain, to small- and middle-peasant farming, which provides the smallest amount of marketable grain. The mere fact that before the war there were 15-16 million individual peasant farms, whereas at present there are 24-25 million peasant farms, shows that now the basis of our agriculture is essentially small-peasant farming, which provides the least amount of marketable grain.

The strength of large-scale farming, irrespective of whether it is landlord, kulak or collective farming, lies in the fact that large farms are able to employ machines, scientific methods, fertilizers, to increase the productivity of labor, and thus to produce the maximum quantity of marketable grain. On the other hand, the weakness of small-peasant farming lies in the fact that it lacks, or almost lacks, these opportunities, and as a result it is semi-consuming farming, yielding little marketable grain.

Take, for instance, the collective farms and the state farms. They market 47.2 per cent of their gross output of grain. In other words, they yield relatively more marketable grain than did landlord farming in pre-war days. But what about the small- and middle-peasant farms? They market only 11.2 per cent of their total output of grain. The difference, as you see, is quite striking. . . .

Source: "On the Grain Front," Pravda, 2 June 1928, in Josef Stalin, Problems of Leninism (Peking: Foreign Languages Press, 1976).

FURTHER READINGS


References


A. M. Ball, Russia's Last Capitalists: The Nepmen, 1921-1929 (Berkeley: University of California Press, 1987).

Vladimir Brovkin, Russia After Lenin (London & New York: Routledge, 1998).

Alec Nove, An Economic History of the USSR, 1917-1991 (London & New York: Penguin, 1992).

Ronald G. Suny, The Soviet Experiment: Russia, the USSR, and the Successor States (New York: Oxford University Press, 1998).

Опубликовано на Порталусе 20 сентября 2007 года

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