Nikolai Bukharin and the New Economic Policy: A Middle Way?
Bean, Jonathan J., Independent Review
Socialists have long searched for a "middle way" between the free markets of capitalism and the hypercentralization of a Soviet-style command economy. In the late 1980s Soviet reformers returned to the New Economic Policy (NEP) of the 1920s and the ideas of Bolshevik leader Nikolai Bukharin, chief apologist for the NEP. The reformers argued that Bukharin's NEP, with its mixed economy, was a viable model for "market socialism." The NEP alternative, however, was a failure. Bukharin had hoped the NEP would demonstrate the superiority of socialist enterprise, but after its implementation capitalist entrepreneurs prevailed in open competition with state-owned firms. Bolshevik price controls distorted market relations and led to the demise of the NEP. Various attempts to revive the NEP occurred in the ensuing years, most markedly when Soviet leader Mikhail Gorbachev described his perestroika as a return to NEP-like policies, but the NEP model could not meet the crisis that plagued the Soviet Union. By rejecting socialism and committing himself to the principle of private property, Boris Yeltsin moved beyond Bukharin and the NEP.
Origins of the New Economic Policy
When the Bolsheviks seized power in 1917 they had no economic plan. Lenin first introduced "state capitalism" to regulate big business, but stopped short of nationalization. In 1918, wartime emergency, coupled with ideological fervor, led to more extreme measures. The state nationalized all industry, banking, and trade. The Bolsheviks forcibly requisitioned grain from the peasants, abolished money, and paid workers in kind. The new government established a Supreme Council of the National Economy (VSNKh) to supervise industry and plan the entire economy (Ball 1987, 28, 6-8).(1)
The results were disastrous: industrial production declined to one-fifth the prewar level, and real income per capita dropped by 60 percent (Ball 1987, 6-8; Volin 1970, 163). The collapse of the economy contributed to the social unrest and uprisings of 1921. Consequently, at the Tenth Party Congress (March 1921), Lenin abandoned "War Communism" in favor of his "New Economic Policy" (NEP). He conceded that the NEP was a "retreat" and a "turning back toward capitalism"; however, he regarded "special transitional measures" as necessary to build socialism in a peasant country (Lenin  1960a, 188-89;  1960b, 214-18;  1960c, 429-30;  1960d, 329-36).
The party now sought a smychka (alliance) with the peasantry. The Bolsheviks replaced arbitrary grain requisitions with a tax in kind, thereby reducing the burden on the peasants. They abolished private property in land, but allowed free use of the land as long as it was cultivated. The government continued to control the "commanding heights" of the economy (large industry, foreign trade, banking, and transport), but created a private sector by denationalizing small industry and leasing factories to cooperatives and capitalist entrepreneurs. State factories were authorized to buy and sell goods on the open market and to do business with "Nepmen" (private merchants). By 1926, the private sector handled 75 percent of retail trade and produced 90 percent of agricultural output. Nepmen industrialists produced one-third of all consumer goods and played an important role in the service sector by opening restaurants, inns, and publishing houses (Nove 1982, 84-89, 98-100; Zaleski 1971, 28-29; Bandera 1963, 266-69; Ball 1987, 21-22, 140-47).
As the architect of the NEP, Lenin sought a technological solution to the problem of low productivity in Soviet industry. He appointed "bourgeois specialists" (non-Bolshevik engineers and economists) to positions on GOELRO (the state electrification commission) and GOSPLAN (the state planning agency). The Soviets acquired additional technical assistance through the granting of foreign concessions (Guroff 1983, 211-17; Bailes 1978, 48-62; Sutton 1968-73, 1:5). …