New Economic Policy

The New Economic Policy was an economic policy formed by Vladimir Lenin in 1921. The NEP consists of a state capitalist economy that is led by the dictatorship of the proletariat. This state capitalist economy has a peasant sector which operated in market to exchange commodities. This 'state capitalism' was theorized by Lenin to be useful to develop the industrial proletariat and developing the productive forces. This was later phased out by Stalin, even though the productive forces were not yet fully developed, due to the pressures of increasing foreign hostility coming from the Western imperialists. However, future AES countries would follow the NEP's example to implement a market-based socialist economy as a first step in the development of socialism. Today, all AES have similar market socialist policies.

Lenin's "State Capitalism"

According to Lenin, the State Capitalism of the USSR differed greatly to the State Capitalism of the West, saying that:

"The state capitalism, which is one of the principal aspects of the New Economic Policy, is, under Soviet power, a form of capitalism that is deliberately permitted and restricted by the working class. Our state capitalism differs essentially from the state capitalism in countries that have bourgeois governments in that the state with us is represented not by the bourgeoisie, but by the proletariat, who has succeeded in winning the full confidence of the peasantry. Unfortunately, the introduction of state capitalism with us is not proceeding as quickly as we would like it."

The previous statement from Lenin (“Unfortunately, the introduction of state capitalism with us is not proceeding as quickly as we would like it”) perfectly emphasizes the importance of transition between capitalism and socialism through the use of state capitalism.

Justification

In the text, The Tax in Kind, Lenin goes onto explain the necessity of the State Capitalist period of the New Economic Policy, even going as far to say that State Capitalism was on the side of Socialism. It is necessary to understand the socio-economic elements within a society that exist even after revolution, it is necessary to understand all their interactions in order to fully transition to socialism proper.

"Firstly, we must examine the nature of the transition from capitalism to socialism that gives us the right and the grounds to call our country a Socialist Republic of Soviets...

But what does the word “transition” mean? Does it not mean, as applied to an economy, that the present system contains elements, particles, fragments of both capitalism and socialism? Everyone will admit that it does. But not all who admit this take the trouble to consider what elements actually constitute the various socio-economic structures that exist in Russia at the present time. And this is the crux of the question.

Let us enumerate these elements:

(1)patriarchal, i.e., to a considerable extent natural, peasant farming;

(2)small commodity production (this includcs the majority of those peasants who sell their grain);

(3)private capitalism;

(4)state capitalism;

(5)socialism.

Russia is so vast and so varied that all these different types of socio-economic structures are intermingled. This is what constitutes the specific feature of the situation."

Lenin goes on to say in the same text, that State Capitalism itself lends itself to Socialism, an ally, fighting against Private Capitalism and the petty bourgeoisie

"Between what elements is this struggle being waged if we are to speak in terms of economic categories such as “state capitalism”? Between the fourth and fifth in the order in which I have just enumerated them? Of course not. It is not state capitalism that is at war with socialism, but the petty bourgeoisie plus private capitalism fighting together against state capitalism and socialism. The petty bourgeoisie oppose every kind of state interference, accounting and control, whether it be state-capitalist or state-socialist. This is an unquestionable fact of reality whose misunderstanding lies at the root of many economic mistakes."

Capitalists despise interference. This is why many may find “state capitalism” to be an oxymoronic claim. Capitalists do not want any restrictions or control from higher powers, especially the government ran by workers. Capitalists want unlimited exploitation to reap the rewards, wealth, and resources for themselves to either reinvest or enjoy. State interference obstructs capitalists from enjoying their exploitation. Lenin emphasizes this more by saying

"The petty bourgeois who hoards his thousands is an enemy of state capitalism. He wants to employ these thousands just for himself, against the poor, in opposition to any kind of state control. And the sum total of these thousands, amounting to many thousands of millions, forms the base for profiteering, which undermines our socialist construction."

Lenin goes on to say that State Capitalism will inevitably be the surest road towards reaching Socialism,

“This simple illustration in figures, which I have deliberately simplified to the utmost in order to make it absolutely clear, explains the present correlation of state capitalism and socialism. The workers hold state power and have every legal opportunity of “taking” the whole thousand, without giving up a single [penny], except for socialist purposes. This legal opportunity, which rests upon the actual transition of power to the workers, is an element of socialism. But in many ways, the small-proprietary and private-capitalist element undermines this legal position, drags in profiteering and hinders the execution of Soviet decrees. State capitalism would be a gigantic step forward even if we paid more than we are paying at present, because it is worth paying for “tuition”, because it is useful for the workers, because victory over disorder, economic ruin and laxity is the most important thing, because the continuation of the anarchy of small ownership is the greatest, the most serious danger, and it will certainly be our ruin (unless we overcome it), whereas not only will the payment of a heavier tribute to state capitalism not ruin us, it will lead us to socialism by the surest road. When the working class has learned how to defend the state system against the anarchy of small ownership, when it has learned to organise large-scale production on a national scale along state-capitalist lines, it will hold, if I may use the expression, all the trump cards, and the consolidation of socialism will be assured. In the first place economically state capitalism is immeasurably superior to our present [fragmented] economic system.”

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