In 1921, as the Civil War was drawing to a close, Lenin proposed the New Economic Policy (NEP), a system of state capitalism that started the process of industrialization and post-war recovery. The NEP ended a brief period of intense rationing called "war communism" and began a period of a market economy under Communist dictation. The Bolsheviks believed at this time that Russia, being among the most economically undeveloped and socially backward countries in Europe, had not yet reached the necessary conditions of development for socialism to become a practical pursuit and that this would have to wait for such conditions to arrive under capitalist development as had been achieved in more advanced countries such as England and Germany. 

The NEP represented a more market-oriented economic policy (deemed necessary after the Russian Civil War of 1918 to 1922) to foster the economy of the country, which had suffered severely since 1915. The Soviet authorities partially revoked the complete nationalization of industry (established during the period of war communism of 1918 to 1921) and introduced a mixed economy which allowed private individuals to own small and medium sized enterprises, while the state continued to control large industries, banks and foreign trade.