By 1921 Soviet production had slumped to about one-seventh of pre-war levels. Due to the ravages of war, factories had closed and the transport system had broken down. At a time of widespread famine, especially in Ukraine, millions died and many townspeople fled to the countryside. An emergency relief committee, which included non Communists was set up, while aid from the American Relief Administration saved numerous lives. The economy had been ruined by Revolution, War, Civil War and the concomitant effects of War Communism, whereby the state assumed control of virtually every branch of national life. Private trade was abolished, and the government directed labour to wherever it was most needed.

In March 1921 Lenin introduced the New Economic Policy (NEP) as a compromise and a modification of communist economic doctrine and practice. NEP implied a mixed economy with a limited system of private enterprise, whereby the state virtually monopolized industrial life, leaving agriculture largely in private hands. This conciliated the peasant majority. Requisitioning was replaced by a food tax and, once this had been satisfied, peasants were left to dispose of their surpluses as they wished. Foreign investment was encouraged and a new monetary unit was introduced in an attempt to stabilize the economy. Small-scale private manufacture was allowed to develop; petty craftsmen and artisans could carry on their own trade legally, leaving the state to control heavy industry, banking and foreign trade. The NEP brought substantial recovery, and by 1926 industry and agriculture had almost reached the levels of 1913.

Yet Lenin would not live to see this marked recovery. In May 1922, Lenin suffered a stroke; a second stroke in December permanently paralysed an arm and a leg. Lenin was incapacitated by a third stroke in March 1923 which ended his political career and he died after a final stroke on 21 January 1924.