A new economic policy was adopted in 1921 with a view to safeguard internal political stability and to encourage economic recovery so that a new drive for the attainment of Communist economic goals might be safely undertaken. The new policy laid greater emphasis on increase of production. It restored economic freedom within the framework of the socialist economy.
The farmers were no more compelled to join the collective farms and were permitted to dispose off their produce as they liked. The government merely collected a fixed tax in kind from the peasants and left them free to dispose of the surplus produce as they liked.
The taxt to be collected from the peasants was to be announced in advance so that the peasant could plan in advance the disposal of his surplus yield. These changes were introduced primarily to win back the peasant who had been antagonized as a result of policy of ‘war communism’. Under the new policy the private trade was legalized because the farmers were permitted to dispose off their surplus produce as they desired. This also meant return of the money economy in place of exchange.
The new policy provided great stimulus to agriculture because the peasants were encouraged to produce maximum so that they could make maximum profit after paying the requisite taxes. In 1922 the farmers were permitted to lease their lands to other peasants for short periods. In 1925 they were even permitted to hire workers. As a result of this new economic policy the agricultural production greatly increased.
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In the field of industry also important changes were introduced under the new economic policy. The central unified management of industry was replaced by the system of ‘trusts’ in which the state retained control over large-scale establishments while the smaller units were handed over to the private individuals. All the industrial units with less than twenty workers were restored to their former owners of leased out to private operators. Labour conscription was abolished and trade unions were given freedom to protect the interests of workers.
Effors were made to attract foreign capital by leasing out certain industrial enterprises to the foreign capitalists. These leases were generally granted for a period of 25 years. Contracts were also concluded with foreign arms for technical assistance.
Improvements were also effected in nationalized industry. Greater decentralization was introduced and they were encouraged to operate on purely business lines. However, in the field of domestic and foreign trade the states till continued to play dominant role.
It retained major share in wholesale trade even though the retail trade was permitted to go into private hands. Restriction on hoarding of cash and functioning of private banks were no more strictly enforced and private trade was encouraged. Even individual’s right to property was acknowledged even though the individuals could leave property for their heirs only to the tune of five thousand dollars.
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It has been alleged that the New Economic Policy marked an activity and individual business. It was alleged by staunch communists that this policy gave a serious setback to the cause of proletariat. Lenin admitted that the new economic policy went against the communist principles but he asserted that it was an organized retreat for the purpose of preparing a new attack on the citadel of capitalism and establishing socialism in all phases of economic life in Russia.
Lenin adopted the new economic policy primarily to win the support of the peasants who had turned against the government during the period of war communism. In this objective the new economic policy fully succeeded. As a result of new economic policy the lot of the peasants greatly improved. The new economy showed remarkable recovery.