As the Soviet leader Mikhail Gorbachev admitted in the late 1980s, central planning simply failed to create the efficiency necessary for the Soviet Union to compete economically with its Western counterparts. It had been taboo for Communists to address this fact since the end of the New Economic Policy of Lenin, and so the Soviet economy had stagnated unnecessarily for most of its existence. If you want to know about the economy in the 1980s, you have to start with Stalin's destruction of the NEP.

A central tenet of Communist faith throughout the twentieth-century was that the state could create faster economic growth by redirecting all profits into the development of capital goods, i.e., things like factories and machinery that can create other goods (the "means of production" that Marx had called upon the workers of the world control). The theory seemed sound even to many in the West in the early twentieth-century, as it seemed that profits were at least partially wasted in capitalist societies on the extravagances of the super-wealthy. If all of this waste was instead redirected into making things that are used to make other things (in creating steel mills, factories, railroads, etc.), then a positive feedback loop would accelerate the economy.

After the creation of the Soviet Union, however, Lenin recognized that the destruction caused by the Russian Civil War (1917-1922) had destroyed the economy. In order to jump start the economy, he instituted the New Economic Policy (NEP), which allowed for small-scale business ownership while the state controlled massive industries such as transport, communication, steel production, etc. A businessman could create a shoe shop, for example, for profit. Some businessmen from the West who worked in the Soviet Union at the time famously noted that these Soviets "weren't so bad after all." Moreover, farmland at this time was privately owned by former peasants. Indeed, private land ownership had been one of the major reasons that the countryside had originally supported the Communist movement (early, all land was owned by the aristocracy). Under the NEP, the major driving force of economic growth was the exchange of products developed in the cities for grain grown in the countryside (the hammer and the sickle in full bloom).

After Lenin's death, Stalin originally supported the continuation of the NEP (and in fact used this point to marginalize some of his opponents within the Party). After a grain shortage in 1928 and the threat of a major recession, however, Stalin violently turned against the NEP and initiated the period of Collectivization. This meant seizing all farmland from the peasants, forcing the richest of them into work camps (they were the "bourgeoisie"), and the development of large-scale farms that were operated by whole "collectives" of farmers forced to live together. This plan succeeded in staving off a recession, providing cheap grain to the cities, and in creating surplus grain controlled by the state that it could sell on international markets in order to fund industry, but it also limited the overall grain production possible in the Soviet Union. Western economists have in particular pointed to the imprisonment of the richest farmers, since they were, by definition, the "most productive" farmers.

This process of complete centralization of all aspects of the Soviet economy had very extreme effects on the Soviet people. Because grain was seized from the peasants for the cities (and for sale on international markets) and because the peasants were forced to collectivize, a massive famine killed millions of people in Ukraine in 1932-1933. At the same time, however, the over-investment in industry also allowed the Soviet Union to fight off the German invasion of 1941. This is part of the reason Stalin's legacy is complicated in Russia today: he may have committed genocide in Ukraine, but he also may have saved Europe from fascism. But that's another story.

Central control of the economy remained in place after the Second World War and was the primary cause of Soviet and Eastern Bloc stagnation in comparison to the West. Here are some of the problems that economic historians point to in regards to central control of the Soviet economy:

1. Too little investment in consumer goods. As the West revealed after the Second World War, the driving force behind a healthy economy (during the period) was the ability of an economy to adapt to and meet consumer demand. This was one cause of massive shortages of certain products.
2. Surpluses and shortages caused by price controls. In a free market economy, prices change, and so in times of excess prices drop and in times of too little prices go up. This allows quantity demanded and quantity supplied to reach some equilibrium. In the Soviet Union, however, if a consumer good did not sell, it simply wasted away in inventory. Even worse, however, when there was not enough of a good, it sold out too quickly, leaving some who may have been willing to pay more without the good.
3. Too much investment in low-quality capital goods. When the Soviet Union wanted a factory built, it contracted someone to do it and refused to yield on the timing or the price of that factory. This meant that unexpected problems in development had to be overcome at the cost of the developer. Thus while the Soviets were able to reinvest profits into capital goods, the capital goods that they developed were sub-par to their Western counterparts--even when they contracted companies from the West to build them.
4. Merit-based system, where it did exist, was based on quotas instead of sales. Similar to the problem with low-quality capital goods, consumer goods were produced on a quota system, which meant that a manager of a factory was judged not on how well his products sold, but whether he could produce enough of the product to meet his quota. There was, therefore, an incentive to produce goods that nobody actually wanted or which would fall apart in short order. Neither of these are good things for an economy.
5. Lack of profit motive. What makes engineers, workers, managers, and professionals so productive in the West is that they get paid more when they outperform their competitors. All profits in the Soviet Union, however, were turned over to the state. Combine this with the fact that good work might only increase ones quota, and there was no incentive for managers in the Soviet Union to do more than meet their quota.
6. Trade restrictions. On ideological grounds, the Soviet Union limited trade between its empire and the West.

What makes all of this strange in the postwar era is that the Soviets recognized these problems but could not address them without undermining the ideology that allowed them to dominate this sphere. Stalin's successor Nikita Khrushchev met with then Vice President Richard Nixon at an American exhibition in Moscow that showed off American consumer good technologies. With television cameras fixed on them, the two debated (the "Kitchen Debate") the merits of the two system. It was awkward for the Soviet leader, because, right before him, were things like dish-washing machines and other appliances that the Soviet Union simply could not produce. Nevertheless, Khrushchev declared that the Soviets would soon have all this and more--that their system would prove better than the American when the Soviet Union surpassed the United States in short order.

Of course, not only did the Soviet Union fail to catch up to the United States, but it became quite obvious by the mid-1960s that the West would even continue to outpace Soviet economic growth. This came to a head in Czechoslovakia, the richest per capita nation in the Eastern Bloc and, prior to the war, once one of the richest per capita nations on earth (Czechoslovakia held 4/5 of the industry of the former Austria-Hungarian empire upon its creation). The very economic minded Czechs refused to allow their economy to stagnate, and so they created a complicated plan that would re-introduce a profit motive, allow for pseudo-private ownership, remove price controls, and re-open trade with the West. When economic changes did not occur fast enough, the Czechoslovaks overthrew their Stalinist leader Novotny and replaced him with the relatively young Communist Alexander Dubcek, who sought to push through these economic reforms more rapidly. Contrary to popular opinion in the United States today, the Soviet Union (then led by Brezhnev) in fact supported these economic reforms and hoped that Soviet interest would be served by a rejuvenated Czechoslovak economy. The problem, however, was that these economic reforms coincided with other major political reforms, most notably the freeing of the Czech press. These other reforms, which came to define the so-called "Prague Spring," unleashed a wave of anti-Soviet activity in Czechoslovakia that eventually compelled Brezhnev to support an invasion of Czechoslovakia to put an end to the reform movement. The Czechoslovak economic reforms, which very well could have saved the Soviet empire if they had worked without the negative side-effects of a full-blown counter-revolution, were in any substantial form thrown aside with the entire Prague Spring.

This leads us to the period in question: the 1960s-80s. The answer to your questions lies in all that came before. The Soviet Union had created a command economy that stifled economic growth, both in the fields and in the factories. Any hint at reform undermined a Soviet ideology that legitimized domination of their sphere by declaring that it was better in every way than the ideologies guiding economic activity in the West. Indeed, once Gorbachev came to power and instituted a new age of Soviet domination by allowing for open discussion ("Glasnost") and reforms the economy ("Perestroika"), the Soviet empire collapsed.