Why did inefficiency in the command economy contribute to the collapse of the Soviet Union?

The inefficiency of the command economy was a primary factor in the collapse of the Soviet Union, as the centralized system struggled to manage a complex, modern economy without the signals provided by a market economy.12

Key drivers of this economic failure included:

• Lack of Coordination: Without market mechanisms, the Gosplan agency could not effectively coordinate economic activity. This led to chronic shortages of consumer goods, widespread hoarding, and the emergence of a pervasive black market.134
• Distorted Incentives: The system paralyzed initiative and discouraged innovation. Because managers were not driven by profit or competition, they often resisted change, leading to stagnation and a decline in labor productivity.35
• Resource Misallocation: The military-industrial complex received priority for resources and talent, leaving the civilian and consumer sectors underfunded and inefficient.34
• Failed Reforms: Attempts at restructuring, such as perestroika, were undermined by the retention of bureaucratic structures and the printing of money to cover budget deficits, which fueled inflation and further destabilized the economy.54

Ultimately, the inability to transition from a rigid, state-controlled model to a functional market system led to near-paralysis by 1990, contributing directly to the dissolution of the Soviet state.14