The main reason for the decline, and ultimate collapse, of the Soviet Union was the failure of the economic system. The need to improve economic performance led to wide-ranging changes in the economy and politics. The failure of the economic system was due to inherent weaknesses that were escalated by external factors. In particular the Cold War (1945-1989) led to enormous spending on the arms race and the space race. This hastened the demise of the Soviet Union.
A Command Economy.
The collapse of the USSR came from the poor performance of the country's economy. Unlike the western democratic nations with free markets, the Soviet Union operated an economy that was completely centralized. The State Planning Committee (GOSPLAN) set quotas to farmers and manufacturers telling than what to produce. This stopped the market mechanism of changing prices determining demand, thus supply. .
Workers in most areas of production were required to meet huge output objectives. There was very little incentive and few rewards for these workers. The system was inefficient because without private ownership there were no profits to encourage business to work better or faster. Workers would go home to houses in which approximately 25 percent were without hot water and about 15 percent were without baths. Due to this lack of efficiency the Soviet Union never developed any substantial consumer industries or exports. Exports help countries develop economic stability and without them the Soviet economy struggled. .
By the 1980s there was no economic growth in the Soviet Economy. The black market flourished as a result of chronic shortages of domestic goods. This established a criminal class that the people accepted as necessary. The failure of the USSR's economic system, like the Volstead Act (prohibition) in the USA, set the foundation for organized crime to flourish. Alcoholism was rife, as people sought solace in the time honoured Russian tradition of drinking vodka.