Institutional Changes in the New Economic Policy

Abstract

The paper discusses the reasons and conditions for making decisions to introduce the New Economic Policy (NEP) in Russia. The eventual rejection of the Policy and institutions of the War Communism was a forced political decision, and it was temporary. Having implemented the NEP, the Communist Party and Soviet authorities were forced to make further decisions to develop market institutions without giving up a strict party-state control and class-motivated policy. To justify such a policy, the theory of a multi-layered economy was developed. Along with market institutions, the institutions of state regulation and suppression of non-socialist sectors of the economy were improved. The top-down regulatory approach resulted in periodic sales crises and/or deficiency of goods. The fear of the Communist Party concerning the revival of capitalism and possible restraints on its power inevitably reduced the effectiveness of market institutions and finally led to a complete rejection of them.