ABSTRACT
In a classic Soviet type economy, wages and prices are fixed by central plan bureau, through which production and wholesale trade are directly regulated. The socialism experience brought is downfall by setting up an artificial pricing system without regard to supply and demand functions in the markets and by imposing a central allocation of resources. Allocation of resources and the valuation of labor were plagued with problems; accounting was ineffective and money was never allowed to play its full role. Huge external debts and large debt service payments have exposed the weaknesses of the Soviet-type socialist system, and thereby helped to bring about its downfall. Reasons for the break-up of the Soviet Union include unsatisfactory social conditions, the spiritual vacuum left by official ideology, economic decline, hypocrisy and cynicism which characterized the preperestroika Soviet Union, corruption, the local mafias and the narcotics trade.
