Question

Why did inequality in the Soviet Union fail to provide incentives for increased efficiency and innovation?

Answer 1

The lack of incentives was the major reason for the poor performance of the eastern European economies. Communism failed to provide incentives to workers and citizens to work hard and be productive. There was less incentive for the employees to work hard as they were paid the same regardless of their efficiency at work. There was no difference in pay for the skilled workers or even have incentives to gain other skills at work. As there was unemployment, there was no threat of firing which means people got work irrespective of their skills with no credible threat or reward and this led to stagnation of output.