Khozraschet

Formulation under NEP

Khozraschet is a contraction of economic accounting and names the principle of running a state enterprise so that it covers its costs from its own revenues and balances its books. Under War Communism the enterprise had been a unit that drew resources from the budget and delivered its output without charge. With the introduction of NEP that arrangement was scrapped and the enterprise recast as an independent accounting subject.

A series of decisions in 1921 and 1922 gave enterprises their own balance sheets and had them buy inputs on the market and sell output to pay wages and costs. Trusts and syndicates were formed as managing tiers above them, and State Bank credit supplied working capital. A stable money, the chervonets, was the precondition that made the calculation possible.

Contraction and revival under the plan

As planning hardened into a directive system through the 1930s, the substance of khozraschet contracted. Where prices were set centrally and inputs allocated, an enterprise's balance was not the outcome of its own decisions but a by-product of the indicators assigned to it. In this period khozraschet survived as the name of cost-reduction campaigns and accounting discipline.

The Kosygin reform of 1965 put the concept back at the centre. Its substance was to give enterprises profit and sales indicators, let them fund bonuses and investment from retained funds, and cut the number of directive indicators. But so long as prices were still set centrally and supply allocated, enterprise profit could not function as a measure of performance, and the reform receded through the 1970s.

Extension under perestroika

The Law on the State Enterprise of 1987 extended khozraschet into full accounting and self-financing and introduced the election of managers by the work collective along with elements of workplace self-management. Contractual relations and a partial freeing of wholesale trade came with it.

The result was double-edged. Enterprises gained authority over their own decisions while remaining inside allocated supply and controlled prices, and as freedom over wages widened, shortages and budget deficits deepened together. In Soviet economic history khozraschet remains the name of the point at which every attempt to graft market rationality onto the plan ran aground.