New Economic Policy (NEP), official economic reconstruction program of the USSR from 1921 to 1928. It replaced the economic policies of "war Communism" (1918–21), an emergency program established by Lenin during the civil war. War Communism had included forced requisition of grain, nationalization of all trade and industry, strict control of labor, payment in kind, and confiscation of financial capital. As a result of this program and of the ravages of the war, industrial and agricultural production declined sharply, and the population suffered severe deprivation. General unrest erupted in an insurrection in the Kronstadt naval base. At this time (Mar., 1921) Lenin introduced the NEP in order to revive the economy. The new program signified a return to a limited capitalist system. Forced requisition of grain was replaced by a specific tax in kind; peasants could retain excess produce and sell it for a profit. Smaller businesses were permitted to operate as private enterprises. Large industries remained under state control. They operated on the open market, but the state controlled the fixing of prices and the appointment of boards of directors. Private trade and wages were restored, and compulsory labor service was abolished. By 1928, the NEP had raised the Soviet national income above its prewar level. However, the NEP policies proved inadequate for the expansionist aims of Stalin and were reversed (1928) by the first Five-Year Plan.
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