Part 1

This is going to be somewhat difficult to answer since the definition of terms themselves are hotly debated. It is important to understand all these definitions and the conditions under which Soviet Union found itself to understand the policies that were implemented. It is the real economic basis that determines policies and not the personal views of leaders in any country. Economic 'laws' are objective and independent of man made laws. This was the point that was emphasized by Soviet leaders and this will come in important later. Another thing is that the policies pursued by the Soviet leadership varied considerably between different periods.

For the purpose of this answer let me first define the terms. I would define Capitalism as an economic system which is characterized by large scale wage labour, economy is based on exchange value (i.e goods and services are created for exchange and not directly for use) and universalisation of commodity production. In essence, the means of production are Capitalized (be it State owned property, Private Property or even Cooperative) and goods and services are converted into a commodity which can be bought and sold freely on an open market as per the laws of supply and demand. The growth of bureaucracy in both the private and public sector was because of increasing rationalization and scientific nature of production. Thus bureaucracy became necessary to manage this vast means of production.

The Industrial Revolution transformed the means of production from being scattered and being petty tools in the hands of a self employed labour into large centralized and gigantic machinery situated in a factory that was operated by wage labourers. . Initially, most of the tools were made by workers themselves and much of the products created were consumed by them and their families leading to relatively little for exchange. The transformation and rapid advancement of means of production led to dramatic sophistication of commodity exchange and the creation of joint stock companies (i.e corporation).The organization of enterprises is nothing but a superficial expression of commodity expression and it took the form it did because it was the most convenient and efficient way for expansion of Capital.Most of the workers who formerly owned their simple tools can no longer employ them for gainful employment and are thus forced to become wage labourers and work for some one else. This is owned by shareholders and managed by managers and not by workers.

When you have a wage payer (and wage earner) and enterprises are separated from each other then the primary aim of each productive unit would be to maximize surplus value and accumulate a series of exchange values instead of use values, whereby production becomes an abstract means to an end quite outside of itself.

S0ocialism is an economic system that seeks to end non commodity economy and collective ownership of means of production with promotion of localized production and negation of (to use a Marxian phrase) law of value. It is also opposed to domination of bureaucratic/technocratic method in government and managerialism in enterprise. In theory, there is no difference between Socialism and Communism in terms of social relations but in the level of economic development. Communism was considered a higher stage of Socialism with the productive forces of the economy have developed to such an extent that the problem of allocation of goods would not exist.

New Economic Policy

After the end of War Communism which proved disastrous for the economy, there was a need recognized by the Party for a strategic retreat' and allow for the resumption of small scale commodity production between peasants to encourage agricultural output and make pragmatic concessions to foreign and domestic Capital.There was a stable currency that was introduced, banking system was restored and it was a combination of commercial banks, municipal banks, cooperative mutual banks, savings banks etc. The Soviet trade with Western countries notably the United States was increasing rapidly with much of that carried out through joint stock companies with State as a shareholder, mixed companies, foreign firms, small private firms and State syndicates and the Soviet Union had even created a law for recognizing patents that was copied from Germany. The Soviet Union returned to almost full Capitalism and the Party was being increasingly dominated by the middle class (technicians, engineers, mangers) and the functioning was mostly being carried out by the bureaucracy rather than revolutionaries. This laid the basis for the strengthening of the bureaucracy under Stalin. Meanwhile, the control of managers over the Industry was becoming stronger day by day and trade unions were losing ground.

One of the key notions was that Soviet Union had to undertake the Industrial Revolution if it had to catch up with the advanced Capitalist countries. The presence of kulaks, wealthy mangers and technicians and private businessman was considered to be a major threat by the State primarily because it was the surplus savings from agricultural revenue through which the Industry (which was collectivized and therefore considered "Socialist") was to be expanded. When the farmers refused to give grain at a prize fixed by the State as the price they could obtain on the free market was higher, there was panic in the Party that Capitalism was strengthening in the countryside and could then increase in urban areas too which would ultimately lead towards the weakening of the Party from the outside or even from within. Thus bringing control of agriculture under collective control along with Industry and elimination of Capitalist class and kulaks was considered necessary.