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Within the planned economy, Soviet industrial enterprises operated on an independent economic accounting system called khozraschet. In principle, enterprises were to operate according to the principle of self-finance, which meant they were to cover their production costs from sales revenue, as well as earn a planned profit. A designated portion of the planned profit was turned over to the industrial ministry to which the firm was subordinate. However, prices paid by firms for input as well as prices earned by firms from the sales of their output were centrally determined and not based upon scarcity or efficiency considerations. Consequently, calculations of costs, revenues, and profit had little practical significance in evaluations of the need to adjust present or future activities of the firm. For example, firms operating with persistent losses were not subject to bankruptcy or closure; firms earning profits did not willingly offer to increase production. Under khozraschet, profits and losses did not serve either a signaling role or disciplinary role, as they tend to do for firms in a market economy.

The khozraschet system enabled Soviet enterprise managers to monitor their operations and overall plan performance, and to have financial relations with the State bank, Gosbank. Funds earned by the enterprise were deposited at Gosbank; enterprises applied to Gosbank for working capital loans. Given the enterprise autonomy granted by the khozraschet system, financial relations with other external administrative units, such as the industrial ministry to which the firm was subordinate, also occurred when conditions warranted. Under the khozraschet system, enterprise managers were able to exercise some degree of flexibility and initiative in fulfilling plan targets.

The khozraschet system was applied to work brigades in the construction industry in the early 1970s and expanded to work brigades introduced in other industries in the mid-1970s and early 1980s. State farms, called sovkhozy, operated under the khozraschet system of independent financial management, as did the Foreign Trade Organizations (FTOs) operating under the supervision of the Ministry of Foreign Trade. The khozraschet system vanished with the end of central planning.

See also: command administrative economy; gosbank


Conyngham, William J. (1982). The Modernization of Soviet Industrial Management. New York: Cambridge University Press.

Gregory, Paul R., and Stuart, Robert C. (2001). Russian and Soviet Economic Performance and Structure, 7th ed. New York: Addison Wesley.

Susan J. Linz