What caused the Soviet Union to collapse? Give a detailed explanation.
The economic calculation problem was the root of it’s disease.
The fact that it was all centrally planned contribuited to it’s collapse.
The economic calculation problem was the cause of the collapse. The Soviets were blood thirsty sociopaths who clinged to their Utopian disaster for 70 years. No matter how much people wish they were as smart as a free or even somewhat free market, they always find the opposite.
And now the USA is entering a phase where it has similar problems with central planning and the knowledge problem. It is just that unlike the Soviets the US Government did not just start all at once but has collected the management of finance and capital, health care delivery, science and development, education, space exploration, aeronautics, old age pensions, energy, protection, adjudication, law enforcement, etc.
It was a combination of various factors.
Economic calculation was surely paramount: Nikita Krushev himself once said “Even if the whole world will become Socialist Switzerland will have to remain Capitalistic to tell us the price of everything”. Krushev was a smart man (albeit with a strong passion for theatrics) and he understood very well economic calculation was the major issue in the USSR. Sometimes I have the suspicion he must have read Mises’ book.
But other factors were at play. One often overlooked cause (in the West) was the fearful carnage the Soviet Union suffered under Stalin: first during the Purges and then during the Great Patriotic War. Russian historians have long maintained the loss of life fell mostly on the most productive folk: young farmers were sent in suicide attacks against the Germans while technicians, professors, engineers and intellectuals were sent in front of the firing squad or to starve in Siberia. Some historians maintain the Soviet Union never fully recovered from these losses.
Another factor, which can also be traced back to Stalin’s times, is the general closing down of Soviet society. Even after the Revolution and the Civil War Moscow maintained a minimum of contacts with the outside world. This was mostly because of a deeply pragmatic attitude: what we cannot come up with ourselves, we’ll buy from abroad. Soviet engineers and designers were sent to study production processes in the US, the UK and Germany and scientists kept their academic contacts. This changed after Beria (or Stalin, take your pick) started using the stock accusations of “capitalistic saboteur” and “foreign spy” to get rid of the unwanted. Being in contact with academics in, say, France was enough for a university professor to be sent to Siberia. Even people sent abroad under Stalin’s direct order (for example the commissions tasked with buying production licenses in the US) looked uneasily over their shoulders after their return. This attitude remained well into the '80s, when the Soviet Union was already melting away.
Finally I maintain Gorbachev’s bumbling attempts at prohibitionism were the final nail in the coffin. Not even Stalin dared to touch the subject. Gorbachev’s short lived attempts caused an enormous uproar from all strata of society and, most dramatically, introduced many Soviet citizens to the principles of free market. VVS (military aviation) ground technicians sold huge quantities of high quality grain alcohol (curiously or tellingly enough nobody ever ordered denaturated alcohol to be used) normally used in aircraft anti-freezing systems. Taxi drivers became apt at smuggling vodka or other ingredients around. Normal people started to understand the mechanism of supply and demand. And Gorbachev finally realized how foolish he was.
How did the USSR last so long as 70 something years if it was a nightmare of central planning? All other socialistic economies (like Nazi Germany and Cuba) lasted much shorter than that.
Foreign trade and the black market allowed for a degree of economic calculation within the USSR. Due to problems of knowledge (i.e. where to allocate resources in relation to people’s wants), however, the Soviet government was still groping in the dark, even if it wasn’t pitch-black.
In fact, the USSR initially attempted full-blown Socialism of the kind critiqued by Mises. For the reasons outlined by the latter, it collapsed and was forced to allow foreign trade. From that time, the USSR was not competely socialist, and it was the existence of the market - however hampered - that allowed the parasitic Soviet government to survive.
My parents told me, that gossiping about the inefficiencies of socialism could get you killed.Everyone was an informant and you could never know who might snitch on you. In Russia, children were turning in their parents. That’s how they were educated in schools.
My guess is fear played a huge factor in keeping the USSR going. No matter how much they starved they would have still continued in their blind faith. Socialist governments had the habit of blaming capitalist countries for their problems. That was a very good excuse, and it kept people in check by reminding them how “good” life is going to become when the capitalists get destroyed. They were also constantly lyeing, propaganda documentaries were showing how “bad” life was in capitalist countries.
I don’t think socialism would have lasted long if they had the technology we have today.
Consider this, many people were listening to capitalist radio stations, like Europa Libera something like that, and these people were slowly realizing that they were being lied too. These realizations could have happened much more faster if their technology was as advanced as ours.
If you’ve ever read 1984, Orwell basically based that Hitler, Stalin, and what he seen becoming of Marxist-Leninism and it’s betrayal of democracy.
Other posters made good points, I would like to add that state-run industry defers costs onto the future, and at some point that catches up with you. Essentially socialism means quitting investment into the future and using all capacity for current consumption. At first that looks as though the system is more efficient (that’s why socialists think they created a free lunch), but after a while productivity falls far behind what it could have been with technological progress. So in part the collapse of the soviet union was that the future which they had defferred their costs to came.
It was the worlds leading oil producer. Russia also has many other valuable resources, it’s probably the most richly endowed country on earth. That’s why the Soviet union lasted for so long. It simply bought western capital equipment with oil money. All the big Soviet industrial plants were built by western companies.
Another reason was that western ruling elites needed the enemy to justify statism in the west. Which is why they helped the Soviet union out all they could, including outright handing over of military technology. The Soviet union was probably the greatest recipient of foreign aid in history. As such, the Soviet union was remarkably successful for a socialist country. Just compare how it worked out in Africa.
Many great points! There’s also an article from Yegor Gaidar “The Soviet Collapse” - Grain and Oil, that maps out the (lacking) food production in the Soviet Union and how it managed to keep itself afloat - first with oil money, then with loans from Western Europe.
Or as some have put it, it was “Bangladesh with missiles”. 
Update: also see this.
"How did the USSR last so long as 70 something years if it was a nightmare of central planning?"
That’s the thing, though. The Soviet Union was never a pure centrally-planned economy for an extended period of time. Except during the War Communism period, the Soviet Union always allowed some sort of limited market to develop within its economy. It’s also important to remember that the USSR was an island of socialism in a world of capitalism. Soviet central planners relied heavily on world prices to try and crudely simulate the free market production process.
If the Bolsheviks went full-on communist for longer than a few years, they probably would’ve gone the way of Khmer Rouge Cambodia.
I thought it was Reagan and the escalation of the arms race…
/sarcasm
It helped to bankrupt the soviet economy. They had to spend ever greater shares of their economic output on arms to keep up. In the end it was up to half of GDP.
I still like Reagan.
What do you mean by collapse?
The immediate cause of economic meltdown were Gorbachev’s reforms. Gorbachev was a Socialist idealist who was trying to make Socialism work where it had been underperforming. To achieve this he tried every trick in the book, except freeing up the markets. The consequences were predictably disastrous.
The breakdown was a consequence of Jeltsin’s rise in stature in the August coup and the power struggle between Jeltsin and Gorbachev that followed. Though most of the populace in all but a few of the union republics supported the continuation (with revisions) of the Union Jeltsin dissolved it since this enhanced his personal strength. It took Gorbachev out of the picture and meant he was now a leader of a country, instead of a mere union republic.
Suggested reading: Armageddon Averted by Stephen Kotkin.
I remember that’s exactly what my Economics teacher told us in high school.
Another factor that led to its collapse was Beatlemania.
The Beatles became a huge underground and illegal to possess success in the USSR and inspired the younger generation to think outside of their state controlled reality.
Maybe because it was not really central planning in the sense that Mises & Hayek conceived it.
In this paper G.R. Steele maintains that the failure of central planning came much earlier in the USSRs history then 1989; during ‘war communism’ & Stalins first five year plans. And that later ‘central planning’ is really a charade. Steele also makes points others in this thread have already made.