The formation and demise of market socialism under the Soviet New Economic Policy, 1921-1929

The Soviet economy under the New Economic Policy (1921-1929) (NEP) was an attempt to combine elements of a centrally administered state economy with those of a free market economy. For this reason the NEP has been referred to as an experiment in market socialism.; The purpose of this dissertation is to investigate the viability of the policy of market socialism under the New Economic Policy in the USSR from 1921 to 1929 through an analysis of the stability of its institutions both inside and outside of the state industrial sector. The industrial administration designed to implement market socialism in state industry at this time was not viable or stable, since state enterprise managers did not have the incentives to carry out the objectives of the central authorities.; The opening of the price scissors and the consequent sales crisis of 1923 highlighted the limited control central authorities held over trusts and convinced them that added controls were needed in order to administer effectively.; But the introduction of price controls over 90 percent of manufactured goods production created a bureaucratic dynamic which led to the spread of discretionary controls throughout the NEP economy. The results of these controls were the gradual elimination of most markets based on flexible prices by 1926; the widespread use of quantity targets for ad hoc procurement and distribution of manufactured and agricultural goods; reductions in procurement prices for a growing portion of manufactured goods as well as grains, thereby causing the grain procurement crises of 1928 and 1929; and, finally, the resort to coercion by both local and central authorities to enforce quantity targets for both manufactured and agricultural goods.; The new view of the NEP economy presented in this thesis is significant both for our understanding of why NEP ended and of the viability of reform in socialist economies today. The present work casts serious doubt on the common presumption that the market aspects of NEP survived through 1928 or 1929. Moreover, as long as state-owned industry enjoys the overwhelming position that it does in the Soviet economy today, the bureaucratic dynamic which emasculated the market in the 1920s will continue to do so, despite market reforms introduced.