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Socialism with a Mixed Economy

The NEP was announced at the Tenth Party Congress in March 1921. It replaced food requisitioning with a relatively lenient tax in kind and legalized the return of small-scale private trade and manufacturing.

The NEP was conceived as a temporary retreat. 'We are making economic concessions in order to avoid political ones', Bukharin explained.

As Lenin saw it, the NEP was a necessary concession to the market to get the country on its feet again. The survival of the Revolution depended on the smychka, the union of the peasants and the proletariat, which could only be sustained by increasing the exchange of food for manufactured goods.

How long the NEP should last was left unclear, although this would be the crucial question dividing party leaders during the 1920s. Lenin talked of 'not less than a decade and probably more' - suggesting that the NEP was not 'a form of political trickery that is only being carried out for the moment' but had to be adopted 'seriously and for a long time.'

Lenin saw the NEP as a serious attempt to build socialism on the basis of a mixed economy. As long as the state retained control of the 'commanding heights of the economy' (e.g. steel, coal, the railways), he argued that there was no serious risk in allowing small-scale private farming, trade and handicrafts to grow and create wealth as a tax-base for socialist industrialization.

To prevent the country sliding back towards capitalism the state could employ regulation, fiscal measures and agronomic aid to encourage the development of a socialist economic sector through cooperatives and collective farms.

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