The creation of the Soviet economy was a political act that ruthlessly transformed a backward, agrarian economy into a large industrial economy. It was distinctive because decisions were not made by producers and consumers on the basis of market prices and calculations of risk and reward. Instead, prices and the allocation of resources were bureaucratically determined by five-year plans intended to maximize the resources of the state. Janos Kornai (1992) describes the system as a command economy because decisions were centralized in the higher echelons of the party-state rather than distributed throughout a market. The first seven chapters in Kornai's magisterial study of the command economy are about the organization of power.

The officially reported gross domestic product per capita of the Soviet command economy grew by 163 percent between 1950 and 1989. However, by comparison with the least-developed market economies of Europe, the achievement was unimpressive. In the same period, the Greek economy grew by more than 400 percent, the Portuguese economy by more than 350 percent, and the Spanish economy by more than 300 percent (Maddison, 1994: 22, 43). The inefficient allocation of resources to activities in which material costs outweighed benefits led to the gradual slowing down of Soviet economic growth and a widening gap in economic resources between the Soviet Union and its chief Cold War opponent, the United States.