It's difficult to see how the leaders could have kept track of such a complex system, in such a big country as the Soviet Union (USSR), without recognizing the existence of capital relations, the profit motive, and so on.

Each organization and factory certainly possessed some capital, if at least temporarily, must have generated some profit (or loss), and must have maintained relations with other Soviet organizations that involved transfer of capital, wages, profits, etc...

For example, to build a missile destroyer, strategic bomber, nuclear submarine, etc., thousands of factories must have been working to produce all the subcomponents and assemblies. From the propellors to the flagpoles. It doesn't seem plausible that even the most powerful central committee could have coordinated all this without keeping track of who owns what.

Since everything was theoretically owned by everyone, how was this system set up so that it gave the appearance of a society on the way to communism?

Or did they keep it secret and not bother with disguises when only party elites would be able to examine the details?

(Computerization and ideological-political changes may have affected the inner workings so an answer limited to a certain time period would be fine)

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    Removing the profit motive is not the same as removing all concept of ownership. Even the Communist Manifesto affirms that people will continue to own stuff. It's how they get the stuff that they wanted to change
    – Ne Mo
    Commented Aug 4, 2022 at 22:29
  • The details of the cause and effect is complicated, but its striking that, historically, ideological communism has not correlated strongly with economic efficiency.
    – Mark Olson
    Commented Aug 5, 2022 at 0:40
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    A big question, but without going into 'proper' scientific analysis, I recommend Spufford's Red Plenty. Excellent read and very much on this topic.
    – Zeus
    Commented Aug 5, 2022 at 1:08
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    All Non-Profit organizations account for Accumulated Net Income much the same as profit-driven organizations account for growth in Ownership Equity. I doubt there's need of any substantial adjustment to the underlying double-entry bookkeeping just because the ruling ideology is communism. Even reimbursement to the State from Accumulated Net Income is indistinguishable in practice from a dividend paid to shareholders (or, depending on calculation, an Income Tax levy). Commented Aug 5, 2022 at 6:11
  • @NeMo, The profit motive is something that must have been apparent in the accounting system, or at least of any system I can plausibly think of. Given the extremely large number of organizations, individuals, and interlinkages. The calculation of accounts would otherwise be simply impossible. Which is why I am asking the question. How did they disguise it, if they bothered to? (Also the Manifesto only affirms individual ownership of non capital goods, certainly all propellor factories or flagpole factories must be commonly owned by everyone according to communist orthodoxy.)
    – M. Y. Zuo
    Commented Aug 5, 2022 at 19:49

3 Answers 3


The Soviet Union had a continuously functioning value-form ("capitalism") society, using state ownership and conflicting sub-state ("bureaucratic") competitive control of state owned instruments to co-ordinate a generalised "commodity bundle" simulation plan for the economy. In addition in areas of direct state control ("tractor" production ie: tanks; "war industry" post 1945) the state conducted a control more analogous with the military industrial complex.

  1. Wage labour existed in the soviet union, this was acknowledged by the state and party apparatus as to be "not capitalist" in nature because there was generalised state control from "a certain point." Other marxists, anarchists, etc. disputed this.

  2. Wage labour was coordinated by banks, bonds, firms, contracts, delivery windows, etc. Another poster has talked about accounting in the soviet union, which unfortunately I know too little about because it is interesting as all get up. But the point being that the Soviet Union's firms and instrumentalities ("companies") accounted for themselves as if money was changing hands. Because money did change hands between firms. See Coatse 1937.

  3. The state attempted to control the economy. They did this in multiple ways: the state conducted state economic planning of broad expenditures. State institutions conducted commodity bundle ('micro') economic planning. State banks conducted bond issues. The state used the party to embed state minded persons throughout every low level firm to achieve state outcomes.

  4. The state failed to control the economy. Capital as a social relationship found ways to subvert control. Often this was quality minimisation due to lack of inspection or partly closed markets. Labour conducted traditional tactics against employers "they pretend to pay us we pretend to work."

  5. Why didn't the nomenklatura just declare themselves to be bosses before 1991? Because their power depended on it, its why they killed themselves off to maintain power in the 1930s, Sheila Fitzpatrick is the dead set go to historian on this point.

The Soviet Union was capitalism which denied that it was capitalism, which used techniques which the US State used in the military industrial complex, and which often had better firm level control. However in the anti-fordist crisis of the 1970s the Soviet Union could not simply liquidate social democracy: they feared they would be murdered by workers, and social democracy was baked into firms in the soviet union, not into the state. In the West destroying social democracy at the state level was much easier, and the fear of being murdered was much less.

  • LOL I can't disagree n the inherent interest level of bookkeeping. However, note that without the "matching principle" inherent in accrual accounting there is simply no meaningful data from which to construct budgets. Simply, all revenue and expense data is suspect, and usually grossly incorrect. Throwing darts would be more useful. My guess at why China is doing better than the USSR economically is: accrual accounting instead of cash accounting. At least their petty bureaucrats have meaningful data to project from and budget with. Commented Aug 7, 2022 at 0:56
  • No, it wasn't capitalism (let alone 'social democracy'). I can't say it was due to the intricacies of the type of accounting as @Pieter says; in my understanding, the more fundamental reason was that prices didn't carry any meaningful market information. All prices (even in the industry) were 'set on the basis of social engineering principles' and carried no feedback information for the producers (which is arguably their main purpose). Instead of 'capital' there were 'funds', which were 'allocated' according to the similar principles; money were merely abstract units of accounting.
    – Zeus
    Commented Aug 7, 2022 at 7:00
  • Paid wages. Money paid for commodities. Capital circulated as profit reinvested. YMMV but according to Engels that's capitalism. Commented Aug 7, 2022 at 8:17
  • @PieterGeerkens Dump and run with "bank run" equivalents was the rule for the 5-in-4 and 5 year plans, which left accrual as not necessary for state survival. China had a surviving proletarian underground much later than the Soviet Union, thus more sophisticated techniques. But compare 5-in-4 to the run on the British banks which Rothschild stopped: to the state firm stability does not matter if the tractor factories exist. Commented Aug 7, 2022 at 9:00
  • @SamuelRussell Can you expand on this point 'State institutions conducted commodity bundle ('micro') economic planning'. For example, did the Agriculture Ministry plan out the demand for tractors, plows, sprayers, etc... down to the individual farm level and then place the appropriate orders? Did they have separate plans for each type of crop, for each climactic region? How was farm expansion, or shrinkage, handled?
    – M. Y. Zuo
    Commented Aug 7, 2022 at 13:58

The economy of Soviet union was not based on relations which you mention, in particular the word "capital" makes no real sense when we are talking about Soviet economy.

It was a "planned economy". There was a state institution called Gosplan which determined what and how many of goods had to be produced, and how the resources had to be allocated, and how the product had to be distributed. The factory managers did not care so much about "profit" as for "fulfillment of the plan", that is achievement of certain production goals. Everyone, including managers were receiving salary, and this salary depended on the fulfilment of the state plan. Necessary resources had also to be obtained by non-economic means (by lobbying with Gosplan).

It is true, in this economy money existed, but emission of money and workers salary were decided by another state planning agency (Minfin). So some enterprises could be unprofitable for a long time.

Of course it did not work well, or as intended, and there were multiple attempts to reform the system, or introduce some means to measure profit, and to allow some limited economic exchange, especially on the later stages of existence of this state.

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    There certainly was capital, according to present day definitions, they just didn't it call it that in the ideological context, at least not publicly.
    – M. Y. Zuo
    Commented Aug 5, 2022 at 20:08
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    @M.Y.Zuo: Exactly. Terming Capital Assets instead as Long-Lived Assets, for example, has no bearing on the accounting methods, and could even be argued as a more descriptive term. Commented Aug 6, 2022 at 1:51
  • @PieterGeerkens Huh? Exactly of what?
    – M. Y. Zuo
    Commented Aug 6, 2022 at 3:12
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    @M.Y.Zuo, yes! Generally, a factory wouldn't be allowed to 'accumulate metal cutting machines' that were deemed 'excessive' by the planning office in the first place. (Of course, creative accounting, numbers juggling and even outright sabotage could and did see it happen IRL). But if it did happen and then caught in an audit, there could be a punishment for wasting the funds (which are always needed elsewhere). Despite the propagandist rhetoric, 'overfulfilling' the Plan was a pain for everyone. That extra machines could only realistically be used as a spare capacity: they couldn't be sold.
    – Zeus
    Commented Aug 7, 2022 at 14:30
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    @M.Y.Zuo Just as much as democracy existed 'existed everywhere within the USSR'.
    – Zeus
    Commented Aug 8, 2022 at 0:27

The Soviet Union used cash accounting instead of accrual accounting, and with a uniform Chart of Accounts developed (probably by GOSPLAN) in Moscow. In consequence there was no matching of revenues against expenditures against revenues by accounting period (typically either a calendar month or fiscal month of exactly 4 weeks).

Cash accounting is done without many of the usual Balance Sheet control accounts such as Accounts Receivable, Accounts Payable, Prepaid Assets, Accrued Expenses, Accumulated Depreciation, Accumulated Amortization, Current Portion of Long Term Debt, and Deferred Revenues. I can't even begin to imagine what pretended significance Cost of Goods Sold is without employing the matching principle - but it's almost unrelated to actual cost of goods sold. Book learning (of accounting) in USSR would simply not have covered such unused topics.

Therefore there was no (natural, at least) distinction between long-lived assets requiring amortization and short-lived assets (such as inventory, accounts receivable, and cash) that don'; and no concept of amortization because that is an accrual accounting term that doesn't exist in cash accounting.

The closest one finds in Western economies is perhaps in the tax ledgers of Canadian corporations, as Revenue Canada requires income tax to be calculated on a cash accounting basis. However this is not strictly true: Capital Assets are entitled to tax relief in the amount of a Capital Cost Allowance calculated annually. Unfortunately this amount is set on the basis of social engineering principles rather than sound business practice, which is not so different but simply lesser in significance from the Soviet Union.

As an example of the absurdity of cash accounting in the modern world, consider the construction of a new factory over a two year span. That entire capital expense must be recognized in the (24 monthly) periods in which it is incurred - long before any revenue flows from the new factory.

In contrast, under accrual accounting those expenditures sit in a Capital Asset account until production begins. Then an amortization formula is applied to that asset each period, expensing a portion deemed to have been "consumed" in the period to generate an associated revenue. (The amortization formula attempts to spread the entire Capital Cost over the anticipated life of the asset.)

Note that the above is a very simplistic look at a complex topic. Proper justice would require me to advance my accounting background much further than I am interested in doing; and to re-open books I haven't looked at in nearly two decades.

  • Interesting answer, though the book linked seems to make some far-fetched assertions. Such as: "The accrual system was not recognized or understood in the early 1990s." How could the thousands of KGB, Foreign Ministry, and Economic analysts focusing on the U.S. alone, have done their work without understanding the basis of accrual accounting? Not to mention the tens of thousands covering other countries, the GATT, IMF/World Bank, managing party funds overseas, etc... It simply doesn't seem credible to suggest everyone forgot all this, or fled from the post-Soviet sphere.
    – M. Y. Zuo
    Commented Aug 6, 2022 at 3:25
  • Cash accounting is done without many of the usual Balance Sheet control accounts such as Accounts Receivable, Accounts Payable, Prepaid Assets, Accrued Expenses, Accumulated Depreciation, Accumulated Amortization, Current Portion of Long Term Debt, and Deferred Revenues. I can't even begin to imagine what pretended significance Cost of Goods Sold is without employing the matching principle - but it's almost unrelated to actual cost of goods sold. Book learning (of accounting) in USSR would simply not have covered such useless topics. Commented Aug 6, 2022 at 8:53
  • Did you intend to extend your answer or reply to my comment?
    – M. Y. Zuo
    Commented Aug 6, 2022 at 14:02
  • @M.Y.Zuo: Good point; I have copied it into my answer. Thank you for the reminder. Commented Aug 6, 2022 at 21:11
  • Ah I see, in the context of your answer it makes more sense. It seemed like a non-sequitur in response to my comment.
    – M. Y. Zuo
    Commented Aug 6, 2022 at 21:48

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