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For decades after the revolution of 1917, Communist Party leaders claimed that the socialist economic system was superior to the capitalist system on both moral and economic grounds. By 1985, when Mikhail Gorbachev became general secretary of the Communist Party of the Soviet Union, the economic claim had been increasingly contradicted by the facts. Soviet per-capita income remained significantly below western levels, and Soviet growth rates had declined steadily since the 1960s. Gorbachev searched for a way out of this economic deterioration announcing a policy of perestroika and glasnost. Had Gorbachev misdiagnosed the problem? Should other options have been pursued? This case outlines the starting conditions for any attempts at economic reform of a socialist system. Describes the economic strategy of allocating resources by command channels rather than allowing resources to be allocated by markets and firms. This clear example of planning leads to deeper understanding of the forms of planning seen in other countries. Successes and failures of this system are noted, with particular attention to the information aggregation and processing demands made on central planners.