The Revolution Betrayed - Chapter 1: The New Economic Policy (NEP)

The New Economic Policy (NEP) introduced in 1921 represented a strategic retreat by the Bolsheviks in the face of economic and social collapse precipitated by the failures of War Communism. War Communism, emerging as a pragmatic response to the needs of the Russian Civil War (1918–1921), sought to centralise distribution to supply the Red Army and urban centres with food and materials. However, it lacked the infrastructure or economic conditions necessary to transition into sustained centralised production. The devastating material dislocation it wrought was broadly acknowledged within the Communist Party, particularly in the context of the failed German Revolution and the absence of international proletarian support that the Soviet Union had initially counted on.

In Russia, where peasant industries remained isolated and largely pre-capitalist, economic life continued to revolve around localised trade networks. Grain requisitioning during War Communism alienated the peasantry, undermining the proletariat-peasant alliance crucial for the survival of the democratic revolution. Recognising that coercion alone could not sustain the economy, the Bolsheviks introduced the NEP as a market corrective to cease peasant alienation and revive production.

Initially, the NEP was highly effective: agricultural and industrial production doubled in 1922 and 1923 and by 1926 had reached pre-war levels, expanding to five times their 1921 output. As Trotsky noted, a "country which had completely exhausted its stores and reserves" had little choice but to "borrow grain and raw material from the peasants" if it was to rebuild. Foreign reserves, crucial for defending against domestic economic instability, were almost nonexistent, compelling reliance on internal agrarian production to sustain recovery.

However, the question remained: how much should the state extract from the peasantry to sustain urban industry without provoking further sowing strikes or creating incentives for the peasants to revert to small-scale home industries? An excessive burden on the villages could lead to economic stagnation, but leniency risked the entrenchment of a consumptive, non-productive peasant economy.

Indeed, the number of independent farms rose sharply from 16 million to 25 million between 1917 and 1927, reinforcing the primarily subsistence nature of the peasant economy. The proliferation of independent farms and the limited supply of surplus grain threatened the fragile Soviet economy, with the emerging Kulak class—wealthier peasants—beginning to exploit the poorer peasantry and accumulate grain for speculation rather than for the market.

By 1923, members of the Left Opposition began to argue that the NEP had run its course. Trotsky employed the "scissors crisis" analogy to describe the widening gap between industrial and agricultural prices, a manifestation of the increasing separation between the proletariat and the peasantry. While the agrarian revolution had succeeded in breaking up the landlord estates, it had not led to an organic capitalist class capable of industrial dynamism as seen in Western Europe. The former landlord class had been more bureaucratic than entrepreneurial, and the Stolypin reforms of 1907 had failed to fundamentally restructure Russian agriculture toward capitalist development.

The problem was structural: without a developed industry, manufactured goods remained expensive, forcing the peasantry to sell disproportionately large quantities of grain to obtain them, further disincentivising production. Meanwhile, the growth of the Kulak strata, alongside urban "Nepmen" who profited from trading peasant goods, created new exploitative relations that the Bolsheviks had sought to eliminate in the first place.

By 1925, the Soviet leadership permitted the hiring of labour and leasing of land, further entrenching capitalist tendencies within the countryside. Stalin even hinted at possible denationalisation of land to accelerate growth through Kulak prosperity. Middlemen speculators grew powerful, exploiting the gap between the state's need for raw materials and its weak industrial base, forcing the state to negotiate with them for essential goods.

This situation became increasingly untenable. By 1926, 60% of grain intended for sale was controlled by only 6% of the peasantry. The state lacked sufficient grain both for internal consumption and foreign trade, imperilling industrialisation plans by restricting the import of machinery and raw materials. The Soviet state, attempting to balance between expedient toleration of capitalist elements and maintaining proletarian political hegemony, found itself squeezed between economic stagnation and social disintegration.

As rural capitalism intensified, the bureaucracy grew increasingly powerful, while Soviet democracy within the party and the Soviets was suppressed. Alarmed by these developments, leaders such as Zinoviev and Kamenev began to express concern about the growing strength of the petty bourgeoisie in both town and village. Yet the provinces, dominated by bureaucratic structures, remained steadfastly supportive of Stalin’s cautious approach.

Peasant grain strikes became common, as they refused to sell at state-fixed prices. The Right Opposition (Bukharin, Rykov, Tomsky) advocated a relaxation of state control, proposing higher grain prices and acceptance of a slower industrial tempo. But this risked integrating the kulaks into the international capitalist market, a betrayal of the October Revolution's goals.

The Left Opposition had offered an alternative: accelerated industrialisation funded by taxing the kulaks and supplying the villages with industrial goods, linking socialist industry to peasant consumption rather than the world capitalist market. Yet, Stalin's vacillation in the mid-1920s led to political manoeuvres that ultimately defeated both left and right oppositions, culminating in an abrupt, bureaucratic pivot toward forced collectivisation by 1928.

As Trotsky observed, by the end of the NEP period, the restoration era—where agriculture and industry depended on pre-revolutionary tools—was exhausted. The state could not advance further without large-scale, planned industrial construction.

Thus, collectivisation was eventually framed not just as a means to destroy the kulaks but also to restructure rural production fundamentally, integrating it with industrialisation in a way that the NEP had failed to accomplish.