Why was the Soviet Union unable to keep up with the market economies of the West?
1 Answer
This is probably a question for the economics/finance section but I'll try to give my point of view here and see what you think of it.
Explanation:
Soviet Union wasn't a market economy at all so basically it was like to have a Formula 1 race competition where one of the competitors drove a bicycle...he was not going to have a lot of chances!
A market economy is, in its basic form, based upon the balance between demand and offer. So if you sell, say, umbrellas in a place where there is a lot of demand you prosper (meaning that your business grows, you have more people employed, you use a lot of raw material or products giving work to other firms/factories, you move money around and the more it moves the more the economy grows, etc.). If nobody wants umbrellas then...you have to close down (at least after a while).
In the Soviet Union the difference was that you could keep on producing umbrellas regardless of the demand. This is good because now you'll never be out of business BUT your umbrellas are basically governmentally managed...meaning that their price is fixed and is set so that everybody can and MUST afford them (remember, basically, everybody MUST buy your umbrellas)! This is bad, because regardless of the quality or efficiency of your umbrellas you'll ever get the same money! There is no impulse to get better and no drive to improve (even if you create the ultimate umbrella you'll get the same money as if you were offering the crappiest one!).
To see the situation in a more understandable perspective it is like to have 2 lions. One is out in the wild; it is tough out there and not always easy to survive but the guy is the king of the savanna! The other is in a cage of the zoo; he is there sleeping most of the day and waiting for the wardens to give him food. Probably out in the wild wouldn't survive 10 minutes!
