It is with much anticipation that one of the major world highlights of transitional economies be examined in detail – that of the Soviet Economy.

Throughout this research the evaluation of the Soviet Economy before and after the implementation of the New Economic Policy is the major focus. This entails the transition of the Soviet economy from a capitalist to more centralized socialist structured system. The Soviet Union being a centralized economic system recorded high growth rates in the initial stages but the sudden demise of this recognized economy remains somewhat a mystery.

The Soviet Economy also referred to the Union of Soviet Socialist Republics (U.S.S.R), was formed in late 1922 after the 1917 Russian Revolution which was led by an inexperienced leadership team since this was the first successful socialist revolution in history (Ward, 1979, p. 67).

The revolution was led by then Soviet leader Vladimir Lenin, whose leadership was succeeded by Joseph Stalin. In the 1920’s Lenin was able to successfully make what seemed to be worthwhile decisions regarding the Soviet Economy: that of transforming the economy into a centrally planned system and the collectivization of agriculture (Gregory & Stuart, 1999, p. 194).

After the revolution the economy was not at a good performance level. This led to the introduction of the NEP in 1921 through 1928 by Lenin. The NEP, the pre and post eras which are the major focus in this research, tolerated some amount of private ownership, a minimum level of market-based system and a taxation system on agriculture to stabilize the economy after these were to an extent eliminated in the preceding War communist years.

This research provides a wide range of substantial information regarding detailed historical facts of the Soviet Union and also statistical analytical data and information that attempts to carefully outline the prevailing economic situations during the pre and post era of the Soviet Union.

During the Soviet years much emphasis was paid to the period 1928 – 1991 which were the years that Joseph Stalin implemented the Five-Year plans. These planning years involved different sectorial aims and objectives all of which had a common long term goal – economic growth. Some primary sectors were that of Soviet agriculture and industrial sectors.

Initial growth of the Soviet socialist society can be attributed to the focus which was made on the areas of the economy which had the highest potential of bringing “instant” growth. However, since other minors sectors were of less concern to the authorities, these sectors suffered great declines and were lagging far behind.

The failure by the authorities at that time to implement recovering economic policies led to a slow decline of the Soviet economy hence its demise in late 1991.

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AIMS AND OBJECTIVES

With regards to the Soviet Economy the aims of this research seeks to thoroughly examine the following:

The creation of the Soviet Union.

The factors that led to the implementation of the NEP.

The impacts of the NEP on the economy – whether good or bad.

Contribution factors that led to the creation of the five year plans.

The performance of the Economy in different sectors.

To provide a detailed overall performance of the economy so as to allow for meaningful economic decisions in the future.

The goals of this research will be achieved by the following criterion;

Gathering sufficient data regarding the creation of the Soviet Economy after which a detailed analysis will be done to determine the causes and impacts of the NEP on the economy.

Evaluation of statistical data to determine the effects of the Five year plans in different phases of the economy.

Assessing data to determine the performance of the economy in different sectors.

JUSTIFICATION OF THE RESEARCH

The Soviet Economy though viewed as successful, was one that implemented varying opportunity costs to achieve economic growth and development.

This research seeks to provide the reader with substantial knowledge of the Soviet Economy through the thorough analysis of the economy from different perspectives. Insights on the following will be of key importance;

The origin of the Soviet Union.

Assessing the Soviet Economy’s performance before the implementation of the five year plans (the years of the NEP).

Determining principal decisions that led to the implementation of the Five-year plans.

Analyzing the impacts of the Five-year plans on the economy.

Understanding the strategies that the different Five-year plans implemented.

Assessing the contributing factors that led to the breakdown of the economy.

BACKGROUND

The Soviet Economy during the time of its existence was a major highlight of economic development. The Soviet Economy also referred to as the Union of Soviet Socialist Republics (U.S.S.R) consisted of Russia and fourteen Republics namely Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan; Russia being the largest. The geographical scope of the Soviet Economy occupied 8.6 million square miles with vast ethnic, cultural and historical diversity (Gregory & Stuart, 1999, pg.195). The main economic activities of members of the Soviet Union were inclusive of the industrial and agricultural sectors, the production of steel, coal, military necessities and also the provision of services among many others of which 80 to 90 percent of industries were nationalized and funded by the state finances.

The U.S.S.R was formed in late 1922 under the leadership of Vladimir Lenin and the Communist Party five years after the 1917 destructive revolution and civil war. The revolution however saw the Bolsheviks rise to power destroying the imperial government as they sought to build a strong socialist society through the formation of the Soviet Union. The then struggling economy was introduced to two economic “experiments” (Gregory & Stuart, 1999, pg. 195), War Communism (1917-1920) and the New Economic Policy (1921-1929). These policies aimed to control the economy which was enduring low output levels, decreased industrial output among other sectors with declining growth. The policies of War Communism and the New Economic Policy (NEP) which were implemented by Lenin sought to remove all forms of capitalism such as that of private farmlands, factories, mills and banks and to create a partnership between weak Bolshevik Government and peasantry where the peasants were a major part of the population. War communism aimed to overcome leadership by the Whites and shortages such as food. The NEP was a formal form of some level of private ownership, taxation and a minimum level of a market based system in that peasants were able to dispose of their extra food on the open market. This step led towards the establishment of better market interactions, financial concessions and new business opportunities as well as foreign investments.