Apiary Fund Blog

Trading History: 98 Years Ago - NEP

[fa icon="calendar"] Mar 21, 2019 5:38:00 AM / by Lukas MacMacKen

Back in 1921, the Soviet economy was failing. Hardships from internal and external war was running a toll on all aspects of the economy. Vladimir Lenin proposed a plan 98 years ago today, called the “New Economic Policy” (NEP). This was proposed near the end of the Russian Revolution where the leading Bolshevik party was running the country on the economic principal of “war communism”, or basically, anything that was more than the bare minimum for citizens was to be given to the government for the war. This War Communism was not an exceptionally popular economic method and when the New Economic Policy was proposed, it was widely more popular, especially with the farming towns in the South.

 

One reason the NEP was a welcome change in Southern Russia, was because now, instead of having to surrender surplus food to the government, farmers could sell what they wanted to the government. This caused the farming industry to grow as farmers now had incentive to produce more crops. Previously, any extra work was surrendered, now extra work was compensated. And at first, this surge aided in the economy and development of the farming industry. With the development, however, factories had to raise their prices to maintain profits since they weren’t developing as fast. Rising factory prices caused farmers to produce more food to sell to afford factory made goods; the increase in supply of farmed goods caused the value to drop and farmers getting paid less due to surplus which caused a supply and demand shift resulting in what is now known as the “scissor crisis”.

 

Eventually, the economic issues of the scissor crisis were worked out for the most part and all production was restored to where it was before World War 1. Not long after NEP was dissolved by Stalin once he took power of the USSR due to the capitalist mocking that the NEP possessed.

Topics: World Economy, Trading History

Lukas MacMacKen

Written by Lukas MacMacKen

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