New Economic Policy

New Economic Policy (NEP). A policy, announced by the 10th Congress of the Russian Communist Party (Bolshevik) (see Communist Party of the Soviet Union) in March 1921, aimed at reinstating a market system. It replaced the system of War Communism, which had brought the economy to ruin. The Kronstadt rebellion, peasant uprisings in Ukraine, and other threats to Bolshevik dictatorship forced Vladimir Lenin to reconsider his economic policy. The NEP established a mixed socialist market economy, in which industry was largely nationalized, but private enterprises with up to 25 workers were allowed; agriculture was predominantly private, but large estates were connected to state farms; and retail trade and wholesale trade was predominantly co-operative.

Economic and social rights and obligations were codified. In Ukraine the system accommodated geographic and national peculiarities. The Union government monopolized the ‘commanding heights’ of the economy—that is, heavy industry, transportation, banking and the allocation of capital, taxes, government spending, foreign trade, and natural resources. In Ukraine co-operatives under local control and private farming grew rapidly. The budgetary system and other policy instruments, however, were used by the center to exploit the republic. In 1928 the economist Mykhailo Volobuiev argued that Moscow's fiscal and other policies returned Ukraine to its former colonial status.

Consolidating its political control, the regime allowed socioeconomic and cultural innovation. The policy of Ukrainization promoted the Ukrainian language in administration, education, and business. Overall the NEP elicited support from the peasantry and the technical and administrative cadres. Historians generally agree that the NEP period was favorable to the formation of modern Ukrainian nationhood.

In his quest for power Joseph Stalin aligned himself with the Left Opposition in claiming that the NEP encouraged capitalist elements, and that it would impede rapid industrialization. Beginning in 1927 the legal guarantees of private ownership and private enterprise (see Private property) were increasingly violated. A campaign was launched to eliminate private businessmen, known as nepmen, and successful farmers, known as kulaks. Ukrainian Communist leaders, such as Mykola Khvylovy, Oleksander Shumsky, and Mykola Skrypnyk, protested strongly against the violations of Ukraine's autonomy. Forced collectivization and grain requisitions (see Grain procurement) resulted in the Famine-Genocide of 1932–3. The NEP market system was replaced by the Stalinist planned command economy.

Some Western economists regard the NEP system as a viable mixed economy, similar to that of Yugoslavia and Hungary in the 1980s. In official Soviet historiography the NEP period was treated as a tactical retreat from communist principles and a transitional phase in the establishment of a planned Soviet model.

Dmytryshyn, B. Moscow and the Ukraine, 1918–1953: A Study of Russian Bolshevik Nationality Policy (New York 1956)
Kononenko, K. Ukraïna i Rosiia: Sotsiial’no-ekonomichni pidstavy ukraïns’koï natsional’noï ideï, 1917–1960 (Munich 1965)
Dereviankin, T. (ed). Istoriia narodnoho hospodarstva Ukraïns’koï RSR, vol 2, Stvorennia sotsialistychnoï ekonomiky (1917–1937 rr .) (Kyiv 1984)

Volodymyr Bandera

[This article originally appeared in the Encyclopedia of Ukraine, vol. 3 (1993).]

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