Russia had gone through terribly troubled, bloody years even after overcoming a revolution and a civil war. With disappointing economic data, it was imperative to implement an economic policy that would allow the country to resurface.
The First World War, the Russian Revolution and the Civil War had made Russia a veritable economic wasteland. Proof of this was the economic outlook of 1921, where agricultural production had fallen by as much as a third compared to 1913 (the year immediately prior to Russia’s entry into the First World War). The industry reflected even worse data, since its production was 13% compared to 1913.
With pressing social and economic problems and communists in power, it was urgent to focus on economic reconstruction. For this, the NEP or New Economic Policy was designed, which advocated a mixed economy model in which the State had a very important weight, but in which certain free market elements were also allowed.
Agriculture and industry
To win over the peasantry, they were allowed to sell their surpluses and even free trade was authorized throughout the country. Furthermore, even peasant private property was allowed. With the peasants having the freedom to sell their surpluses, it was intended to enable economic growth and avoid the shortages that had plagued the large cities.
However, the agricultural world was not without tension. And it is that, the differences between farmers were very great. Thus, it was possible to find wealthy peasants, known as kulaks, while on the opposite side were the so-called landless peasants. Despite efforts to restore agricultural production, shortages continued to occur in large cities.
In relation to shortages and the relationship between agriculture and industry, the crisis of the scissors of 1923 should be noted. Thus, the prices of the industry were much higher than the prices of agricultural products. With the incomes of the peasants falling, it was much more difficult for them to acquire manufactures. All this meant that many farmers turned to subsistence agriculture, ceasing to market their products, which led to shortages.
At the industrial level, it was decided to grant a certain degree of self-management, although it is true that the State continued to have the reins of large industries and vital sectors such as railways or banks. On the other hand, smaller farms were no longer in the hands of the state. In this way, the state assumed a leading role in the economy, but offering some quotas of economic freedom.
Another factor that had wreaked havoc on the Russian economy was the extremely high level of inflation. Trying to answer this problem, it was decided to eliminate the old rubles. With the old coin out of circulation, a new coin called “chevrotsa” was issued. These new currency issues were much more reasonable, taking into account the effects they could have on inflation.
At the international level, the USSR or Union of Soviet Socialist Republics sought to seek recognition from the great powers. Thanks to trade agreements with countries such as Germany, Japan and the United Kingdom, the resurgence of the Russian economy was possible.
Although the recovery was proceeding apace, it took until 1927 for Russia to recover the production figures prior to its entry into the First World War.
The end of the New Economic Policy
However, there were significant dissensions among the Communists. There were those who saw in the NEP or New Economic Policy a way to restore capitalism in Russia. Many sectors of communism felt betrayed by the free market elements that the NEP incorporated, among them Josef Stalin stood out.
After Lenin’s death in 1924 a ruthless power struggle broke out in the Soviet Union. Stalin emerged victorious from the struggle and took the reins of the USSR, establishing a fierce dictatorship in which any discrepancy would be harshly repressed.
As early as 1929 the NEP was withdrawn and a centrally planned economy was established. The State, through an important bureaucratic system, had total control of the economy, which was organized in five-year plans.