The Soviet's government's policy of War Communism during the Civil War created social distress and led to riots, strikes and demonstrations. The Kronstadt Uprising reinforced the idea that the government was unpopular and accepted and had made a mistake "of deciding upon an immediate transition to communist production and distribution."
Vladimir Lenin came to the conclusion that "only by coming to an agreement with the peasants can we save the socialist revolution". In March, 1921, Vladimir Lenin announced details of his New Economic Policy (NEP). Farmers were now allowed to sell food on the open market and could employ people to work for them. Those farmers who expanded the size of their farms became known as kulaks.
Victor Serge recorded: "The New Economic Policy was, in the space of a few months, already giving marvellous results. From one week to the next, the famine and the speculation were diminishing perceptibly. Restaurants were opening again and, wonder of wonders, pastries which were actually edible were on sale as a rouble apiece. The public was beginning to recover its breath, and people were apt to talk about the return of capitalism, which was synonymous with prosperity."
Raymond Gram Swing of the Chicago Daily News, who visited the countryside, had a different interpretation of events: "Before boarding our boat (at Samara), we visited the market, where, under the so-called New Economic Policy recently adopted by Lenin, we watched the peasants selling food for their personal profit, food they had grown on their small private garden plots. But the peasants had little food to sell, and they themselves were haggard and undernourished. We bought some black bread and goat cheese to eat on the boat... I have never seen a more harrowing sight than people starving to death. After an overnight ride from Samara, we stopped at an encampment of refugees, several hundred of them, who had come to the river from the interior in the hope of being taken away by the government to regions where they could obtain food and lodging. They had built shelters of leafless branches, but they had little to eat but grass. The state had done nothing to save them."
The NEP also allowed some freedom of internal trade, permitted some private commerce and re-established state banks. Factories employing less than twenty people were denationalized and could be claimed back by former owners. Eugene Lyons, the author of Assignment in Utopia (1937) has pointed out: "A new middle class of Nepmen - private merchants, artisans, small-scale manufacturers, professional men, bureaucrats in comfortable berths, more prosperous peasants, the criminal elements which are the excrescence of private initiative-had come into being. Some of them were resuscitated middle-class people of the pre-revolutionary era, others were tasting affluence and the sweets of privilege for the first time."
The NEP did improve the efficiency of food distribution and especially benefited the peasants. However, many urban workers resented the profits made by private traders. Joseph Stalin announced the abolition of the NEP in January, 1929 and replaced it with the first of his Five Year Plans.
The New Economic Policy was, in the space of a few months, already giving marvellous results. From one week to the next, the famine and the speculation were diminishing perceptibly. Restaurants were opening again and, wonder of wonders, pastries which were actually edible were on sale as a rouble apiece. The public was beginning to recover its breath, and people were apt to talk about the return of capitalism, which was synonymous with prosperity. On the other hand, the confusion among the party rank-and-file was staggering. For what did we fight, spill so much blood, agree to so many sacrifices? asked the Civil War veterans bitterly.
Samara was even more desolate than Moscow. Before boarding our boat, we visited the market, where, under the so-called New Economic Policy recently adopted by Lenin, we watched the peasants selling food for their personal profit, food they had grown on their small private garden plots. But the peasants had little food to sell, and they themselves were haggard and undernourished. We bought some black bread and goat cheese to eat on the boat.
I have never seen a more harrowing sight than people starving to death. After an overnight ride from Samara, we stopped at an encampment of refugees, several hundred of them, who had come to the river from the interior in the hope of being taken away by the government to regions where they could obtain food and lodging. They had built shelters of leafless branches, but they had little to eat but grass. The state had done nothing to save them. When we arrived at the encampment, it was obvious that the refugees thought we constituted an expedition of rescue. They were greatly excited and swarmed about us with pitiful expressions of delight. But these passed when our interpreter explained who we were, and that rescue, while it might later become possible, was a long time away.
This group of refugees had a leader, an old, gaunt, tall, and white-bearded figure right out of a Tolstoy novel. He told us how long they had been waiting there on the banks of the Volga, and how many had died waiting. He took us to the adjoining field where the dead were buried, each tomb decently identified with some primitive wooden marker. About as many in that community had died as now survived, and the death rate was increasing. In a short time all would be dead. The children were the most heart-rending, with their pallid faces and swollen bellies. It needed no expert eye to know that they were doomed to die. The adults were little more vigorous. The old white-bearded patriarch with whom we talked stood erect and carried himself with dignity, but he did it from spiritual, not physical, stamina. All in all, it was a terrible spectacle, the like of which I expect never to see again.
What made the plight of these people both tragic and - if I may use the word - beautiful was the fact that in a field within plain view of the little community was a great mound of sacks filled with grain and guarded by a single soldier, who marched back and forth with a rifle at his shoulder. This was seed grain for the spring. I asked the patriarch why he and his hungry people did not overpower the soldier and bring their fast to an end. He replied, "That is seed grain. We do not steal from the future." I was profoundly moved by his answer. These might be the most wretched peasants to be seen anywhere in the world. But they had a sense of right for which, as they themselves knew, they might have to die, and would do so without question.
We went back to the boat, got the bread and cheese we had purchased at the Samara market, and handed them over to the patriarch. The courtesy with which lie thanked us was exemplary. His refugees started stampeding him, and he ordered them back with a word. Mothers kneeled to express their blessing to us. It was almost unbearable, for the amount of food we gave them was negligible; it would not change the death rate by a fraction.
The essential feature of N.E.P. was that it allowed the free buying and selling of goods by any individual, that is to say, private trade, which had been almost wholly suppressed during the Communist period. In consequence it offered a great stimulus to production. It brought other important changes such as the introduction of piece-work, a sealed system of wages, income and other taxes, and of course payment for public services like street-cars, trains, theatres, and so forth, which had been nominally free before. Finally it allowed a limited traffic in money by individual groups, and unlimited individual production of goods, even small-scale factory production. N.E.P. was thus definitely a reversion to Capitalism, at least to the outward forms of Capitalism. Nevertheless, Lenin from the outset intended it to be only a temporary reversion and, what is more, it was only a partial reversion, inasmuch as control of the main sources of production and means of production, transportation, big finance and big industry, and of mines and other natural resources was retained in the hands of the Stare.
In short, N.E.P. was an expedient to stimulate paralysed initiative initiative moribund commerce, to renew the confidence and loyalty of the peasants, and to set turning again the motionless wheels of industry. It had also important social effects in restoring the influence and power of Money for the benefit of private managers, traders, middlemen and producers to the detriment of Communist officials, soldiers, policemen and the working masses.
"NEP," the New Economic Policy of socialist-capitalist compromise introduced by Lenin in 1921, was in process of "liquidation." Without actually decreeing the end of that period, the Kremlin was effectively choking it to death. Confiscatory "tax arrears" were imposed which automatically wiped out one private enterprise after another. The Nepmen, the private traders of this compromise period, were arrested for real or imaginary infractions of zeal or imaginary laws and hustled to Siberia or the North. The tolerance under which the more industrious or shrewder peasants expanded their holdings in land, livestock and other property was abruptly reversed...
At the time of my arrival I did not quite grasp the meaning of Moscow's "Main Street," where Nep was having its last hysterical fling. The Nep period was an armed truce at best. The resumption of hostilities was inevitable. But the truce had lasted seven years and the nation had come to regard it as more or less permanent.
A new middle class of Nepmen - private merchants, artisans, small-scale manufacturers, professional men, bureaucrats in comfortable berths, more prosperous peasants, the criminal elements which are the excrescence of private initiative-had come into being. Some of them were resuscitated middle-class people of the pre-revolutionary era, others were tasting affluence and the sweets of privilege for the first time.
No more extraordinary class has ever been called into being and blown into oblivion in the memory of humankind. Because it was young, born in chaos and in some measure outside the law, because it was at bottom uncertain of its tenure and therefore desperately eager to make the most of its advantages immediately, it was exceptionally vulgar, profiteering, crude, and noisy. Under capitalism the bourgeoisie has the poise and self-assurance that come with power. It has a culture of its own and an ideology of self-justification. In Nep Russia, for the first time, there was the anomaly of a large bourgeoisie without political power, without culture, without respect for its own class.
It was a class existing by sufferance, despised and insulted by the population and oppressed by the government. It became a curious burlesque on capitalism, self-conscious, shifty, intimidated, and ludicrous. It had money, comforts and other physical advantages, yet remained a pariah element, the butt of popular humor and the target of official discrimination.
And the stamp of this strange middle class was everywhere on Moscow. Its fitting sign, it seemed, was the prostitution that thrived on the sidewalks of the Tverskaya and in front of the leading public baths. Its desperation was mirrored in the Casino, a gambling hell run by the government. Every night until late dawn the Casino was filled with the newly rich, embezzling officials, underworld characters, and foreigners with money to throw away. The Soviet regime took a heavy rake-off on roulette, chernin-de-fer and other games, the G.P.U. marked off its future victims by watching who had more money than he could comfortably explain, and everyone suspected that the games were not quite on the level. But that did not affect attendance.
N.E.P. (New Economic Policy) was introduced by Lenin in the summer of 1921. The formal decree inaugurating the new policy was not published until August 9th, but its most important feature, that of `free' or unrestricted trade, had been tacitly admitted since the spring. Both in Russia and abroad N.E.P. was regarded as a reversal of policy, which indeed it was, but it was also a reversion to policy. It reversed the policy of Militant Communism which had been enforced since the early part of 1918, but it also reverted to the original principles by which Lenin was guided when the Bolsheviks seized power in November, 1917. This sounds paradoxical, but it can be explained by a brief historical retrospect.
In point of fact, the very phrase "when the Bolsheviks seized power" is misleading. It would be more correct to say `when the Bolsheviks picked up from the ash-heap the neglected sceptre which had fallen there', so complete was the anarchy which had followed the downfall of the Tsar. The period from the Tsar's abdication in March to Lenin's advent in November was hailed abroad as the dawn of liberty and democracy in Russia. In reality it was a time of growing chaos. When the Tsarist Empire broke under the strain of the War and by its own incompetence and the corruption of its core, there was nothing left to take the place of its highly centralised authority. The efforts of would-be Liberals like Prince Lvov and Professor Miliukof to create a democratic regime overnight were no more successful than those of their more revolutionary successors, Cheidze and Kerensky. The truth of the matter is that Russia was unfitted, or at least unready, for a democratic system, as Kerensky sourly acknowledged on the eve of his flight from the country he had tried to rule. "No self-government is possible," he said, "for a nation of newly-liberated slaves."
There was, however, a curious anomaly in the Tsarist Empire in that, although highly centralised politically, it had little economic centralisation. An undeveloped, industrially backward and mainly agricultural country, Russia was subject to foreign influence in finance and mechanised industry. The War threw both into confusion, especially after the German advance cut off from the Empire the industrial centres of Poland and the Baltic States. It is not generally realised abroad how intensely local were production and commerce under the Tsars, but it is safe to say that more than two-thirds of the food and goods produced and consumed by the Tsarist population were of local origin. More than ninety per cent of the population lived in villages and small towns. The food they ate was produced on tiny peasant holdings which would not be dignified by the name of farms in the United States, and the goods they consumed were mainly the product of homecraft, of individual artisans or small co-operative groups. The result was that the political paralysis which followed the downfall of Tsarism did not have its economic counterpart, at least not with the same degree of rapidity and acuteness. To a greater extent than in any other European country the villages and towns of Russia were self-supporting economic units.