Back in the 1920s the effectiveness of socialism (in the sense of a planned economy - "collective ownership of the means of production") was a topic of live debate, with Ludwig von Mises and later Frederick Hayek arguing that a command economy couldn't work out what goods and services needed to be produced due to the knowledge problem - planners wouldn't know what opportunity costs producers faced, or what end consumers wanted.

To illustrate, say there's a big fire at an aluminium plant, and thus total aluminium output falls. Under a market economy prices rise. So every aluminium user starts looking for ways to reduce their aluminium use. Perhaps it's easy to convert to using wood for window frames instead of aluminium, while aluminium is very useful in food and drink containers. Under a market economy, the higher prices would lead the substitution to mostly be made by window frames, not food. (I have no idea about the relative value of the two uses in actuality, the point of von Mises' argument is that I don't need to know.)

Against that, Oskar Lange and others argued that a central planning board could bring production in line with that of a market system by 'trial and error'. I don't have the quote to hand but I recall once Hayek noting in a book I was reading that the socialist economists had gone from arguing that socialism could beat market outcomes to arguing that socialism could equal them.

From the free-market side, however, Bryan Caplan has pointed out that history hasn't proved it was the calculation problem that made socialism (remember I'm defining it as a centrally planned economy) impossible, after all the USSR and Eastern Europe did function for several decades under communism, and socialism has a number of other problems (eg motivation).

So the topic isn't finally settled, but there are theoretical reasons to think that a centrally planned economy has fundamental problems.

As for the importance of Western sanctions, when I hear this argument I always wonder what the proponents mean by it. If trade is so important that Western sanctions wrecked a country's economy, doesn't that imply that trade with Western countries is pretty vital for growth?

Sources:

Moss, Laurence, The Economics of Ludwig von Mises: Toward a Critical Reappraisal, [Chapter 5, Ludwig von Mises and Economic Calculation Under Socialism](http://www.econlib.org/library/NPDBooks/Moss/mslLvM5.html#Essay 5) by Murray N. Rothbard, 1976 Murray N. Rothbard

[Len Brewster on "Towards a new Socialism? by W. Paul Cockshott and Allin F. Cottrell, Nottingham, U.K.: Spokesman Books, 1993", Review Essay] (https://mises.org/sites/default/files/qjae7_1_6.pdf), The Quarterly Journal of Austrian Economics, Vol.7, No.1 (Spring 2004): 65-77. (Note this has a succinct summary of the calculation debate.)

Bryan Caplan, Why I Am Not an Austrian Economist

The economic historian Robert Allen wrote an interesting reassessment of the Soviet economy's performance in Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution, which is summarised in this paper. He argues that the Soviet economy performed fairly well until about 1960-70, and its economic growth was faster than most other countries starting at a similar point; in 1917 Russia's economy was not comparable to countries in western Europe. During the 1930s he says that the command economy was effectively able to move workers from rural to urban areas, where they were more productive, and create capital to increase productivity, with the result that consumption increased along with output in heavy industry. But by the 1960s the plans made did not support high growth any more, and led to stagnation. The easy part of development was over as there wasn't a lot of surplus labour in rural areas that could be put to more productive use, and the planners failed to adapt to new industries, instead putting resources into renovating old plants. Military spending during the Cold War also diverted resources from civilian economic development.

General lessons - I think China's development performance shows something similar, though I don't know as much detail about that - are that (a) command economies can outperform capitalist economies in the early stages of development if the planners have the right ideas, but if the planners are misguided they can underperform capitalist economies (compare China under Mao to China under Deng), so in a sense capitalist development might be more reliable, and (b) it's much harder for command economies to outperform capitalist economies in the later stages of development where growth is more about innovation than just accumulating capital.

Let me try and get your question right. If Russian Empire hadn't been poorer than the West before the revolution and if the USSR hadn't had to spend so much on military (it actively traded with Western nations even during the Cold War) and its satellites, would its economy have kept up with the West?

That's two very big ifs for a history question. I doubt you'll get a definite answer.

If you really want a clean slate comparison between market and planned economies, history won't give you that.

[meta] Is this history related? Shouldn't go to r/politics or r/economy?