In the beginning of 20th century, the terms 'socialism' and 'communism', although already denoting different political ideology, were often used interchangeably, especially among people not involved in the activism of either kind (much like 'anarchism' was sometimes used to describe any form of anti-monarchic sentiment). In Marxist theory socialism was considered an intermediate step between capitalism and communism (the latter was sometimes refereed to as 'real socialism', especially in the Stalin's era). It is worth noting that the 'Communist Party' (Communist Party of the Soviet Union, bearing its name since 1952) was initially founded in 1903 under the name of 'Russian Social-Democratic Workers Party' and only after its more radical wing (later known as Bolsheviks) rose to prominence, it has been renamed 'Russian Communist Party' in 1918 and 'All-Union Communist (Bolshevik) Party' in 1925. Shortly following the revolution and the resulting change of government, the country was renamed in 1917 to 'Russian Federal Socialist Soviet Republic', which name was also reflected in other 'soviet republics' that were later united in the Union of Soviet Socialist Republics.

When speaking of the history of USSR it is worth mentioning that the approach to economy in the early years of the country's existence was hardly uniform. In the beginning, right after the October Revolution and resulting civil war (and, by extension, also Polish-Bolshevik war) the dominating ideology was 'wartime communism', involving almost total nationalisation of industry, intensive requisitions of the agricultural production and lackluster use of financial system with the aim of complete abolishing it after the cessation of hostilities. It is worth mentioning that this was contrary to the Lenin's views on economy defined as 'state capitalism' that was more corporationist that communist and allowed for the existence of free enterprise and currency-based exchange of goods and services with state control over key resources, syndicalisation and an extensive system of taxation and redistribution. But in the session held in April 1918 Lenin got defeated by the more radical communist fraction led by Bucharin and had to withdraw. This decision allowed the introduction of wartime communism that quickly led to heavy collapse of Russian economy, at least partially vindicating Lenin.

In the time of war, new government was printing massive amounts of new 'Soviet' money, generally not caring for the rampant inflation it might cause, especially in the face of significant decrease in production output due to wars and revolution itself (in 1922 the industrial production was equal to roughly 10% of that from 1913 and the agricultural production fell to 15% of that of 1913). This not only impacted domestic market but also threatened with decrease or even complete severance of trade relations with other countries. This is when People's Finance Committee, including Deputy Commissar of Finances, Grigori and several coworkers of Sergei Witte, an Imperial Minister of Finances who developed ruble gold standard in late 1890's decided to create new financial system based on two parallel currencies: one used in domestic economy and separate one for foreign trade. This was one of the elements of the New Economic Policy that also meant ending of the 'war communism', restituted use of currency and wage system, allowed free enterprised with large of strategic industry branches (mining, energy etc.) remaining largely under state control and replaced mandatory productions quotas in agriculture with a taxation system. These reforms allowed for quick economic growth and restoration of the foreign trade.

The new policy did not lasted long. After the death of Lenin in 1924, the discussion concerning the future of the country's economy re-emerged with two central characters: Trotski, representing the communist fraction and supporting the return to the communist methods and Stalin, who expressed support for continuation of Lenin's mixed approach to economy. The power struggle withing the Communist Party was won by Stalin who quickly abandoned his declared policy and worked towards dismantling the NEP and replacing it with planned economy. Starting in 1929, Stalins reforms included collectivisation, forced requisition of private property and nationalisation of all industry branches, marking the return to a communist economy that, although slowly modified after Stalin's death, was finally abolished only after collapse of the USSR. Concurrently, the Western countries saw the progress of socialist movements that aimed not at opposition towards the capitalist system, but at empowering workers so they could take part in such system on better conditions (right to assembly, better wages, more favourable labour law etc.), further differentiating 'socialism' from 'communism'.