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The USSR didn't tend to go in for economic competition, but it made good use of intellectual competition and competition for prestige. It was also relatively good at creating organisations that did a specific thing, and kept on doing that.

The competition between the MiG and Sukhoi fighter design offices, for example, was quite significant, driven by rivalry and prestige. They designed pretty good aircraft for far less money than the Western aircraft companies, and kept on doing it until the fall of the USSR meant that the money supply dried up.

In the same way, the OKB-1, OKB-52 and OKB-586 design offices competed fiercely, with different ideas of how the space and missile programmes should be organised. Political influence was important in these rivalries, but it wasn't measured on a single scale, and the virtues of designs were also significant.

The heads of design bureaus were engineers themselves - that was how you achieved distinction as an engineer in the Soviet system, by getting to start your own design bureau - and the politics inside a bureau seems to have been more restrained.

The system had some definite flaws. One of them came when one ministry's organisation needed something that the relevant ministry did not produce.

For example, one of the problems with the unsuccessful N-1 moon rocket was the excessive weight of the first stage. That was because the USSR did not make aircraft-grade aluminium in thicknesses greater than 13mm. That wasn't thick enough to make a first stage whose outer skin was also the wall of the propellant tanks. So the tanks had to be spherical to make them stronger, and the rocket needed a separate outer skin for streamlining. That weight disadvantage meant that all kinds of other things had to be pared to the bone, the rocket needed extra stages, and things got harder and harder from there.

Another flaw was that the system was pretty top-down. If the government wanted a better version of something that already existed, or knew it wanted something new and had a reasonable idea of what it wanted, that need could be met. Discoveries and entirely new inventions coming up from the bottom had a harder time than in less controlling systems, and political acceptability mattered a lot there. Lysenkoism was an extreme example. It was entirely wrong, but so politically acceptable that it became official doctrine for over thirty years.

The USSR did do some science for its own sake, but this worked best in mathematics and mathematical physics, which are fairly cheap to run. Talented people in those fields also tend to be quite dedicated.

Genuinely like John Dallman's answer, but I'll add some to it:

• Outside of Party political games, one way to live a better life in the USSR was to hold a position prized by the Party. And something that was very much rewarded was anything that allowed the Communist system to get ahead of their enemies in fields that could lead to military advances. So it tended to attract bright people.




• WW2 probably did an excellent job of weeding out excessive political criteria in judging which design bureaus were worthy of backing. Pretty much any tank that was not T34-based at the start of the war wasn't getting made much later on, so there was some ruthless pruning. If anything, they were much more disciplined at cutting off flakey systems than the Nazis. Later on, new tank families got added, but they never went back to the menagerie of weird tanks that they had in 41. The AK-47 was designed by a "random tank guy", for example, so they had mechanisms to recognize good work.




• Russian scientists and engineers could be brilliant. Given resources they could get pretty good results. And remember that they could access Western publications too - https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/vol1no4/html/v01i4a05p_0001.htm , which also mentions some things about internal Soviet science publications.




• At the end of the day, whatever the USSR managed to have as spare resources (after essentials and corruption) tended to be assigned to technical fields allowing scientific, industrial and military competition against the West. So they could throw lots of capacity at these type of problems. Including nurturing an education system that pushed clever people into these fields instead of say, becoming lawyers or doctors.

It wasn't always rosy. I seem to remember that Stalin didn't believe in those new-fangled electric computers but recognized the potential of machine-based calculator engines. So he pushed pneumatic logic gates (this is similar to his rejection of Mendel's work). They never quite recovered from that.

Edit In my opinion, this answer, and the question itself, is rather bounded in time. Say from 45 to 80. Past that, I believe the USSR was encountering gradually increasing headwinds in maintaining its technological and scientific competitiveness, for a number of systemic reasons and would have been unable to keep up:

• Traditionally, R&D was top-driven, by the government and military-industrial complex. But by 1980 or so, an increasing proportion of technology innovation flowed from civilian and consumer work to the military. Cell phones, to give an example, can be used to build microsats and have reached a level of sensor and CPU miniaturization that is wholly novel.




• Information Technology became more and more important and the military and government isn't all that good at either innovation or implementation in that field, despite occasional breakthroughs.




• Leading edge semiconductor chips require huge investments in "fab" plants that would be hard to sustain without a vibrant consumer and civilian demand. It's not just a question of knowledge, which can be stolen, it's a question of having the supplier industrial ecosystem to actually build stuff.




• Ditto the automotive industry that "bleeds into" better manufacturing capacity being available for state-driven endeavours. Or take a look at SpaceX nowadays.

You can "force" technology, as the USSR did for a while. But, in many fields, you will find it harder and harder to keep up with states that expand similar efforts but can also piggyback on civilian innovation and demand (that also strengthens the economy).

How was such criticism handled?

Example

According to https://en.wikipedia.org/wiki/Petr_Ufimtsev, the scientist gained permission to publish his research results internationally because they were considered by his administration of no significant military or economic value.

"It was as follows," said Ufimtsev in decent English, "I wrote an algorithm. I ran it. I made experiments. The results matched. I went to the boss. He ordered me to stop producing rubbish and to develop the radar station more intensively. I insisted. The boss did not yield. The discussion turned to increased tonality. In the end, he grabbed me by the collar and, with a kick of a professional attacker, kicked my ass, throwing me out of the office. I was offended and wrote a monograph."

USSR innovation seems to have been rather field-specific. To contrast with the efforts and results in space engineering would be, for example, much less effective innovation in the fields of pharmaceuticals and other medical sciences. They had legal provision for titles such as "Honoured inventor of the Soviet Union" but perhaps these were rather weak incentives in the absence of a strong push from top leadership.

One of the aspects you shouldn't underestimate is the effect of cheap labor, which can compensate the lack of concurrence and freedom of expression, even in engineering and science. A typical soviet engineer earned around 150p * 12 months = 1800p, or $1152 per year with 1980 exchange rate. This is almost two orders of magnitude less than NASA paid their engineers. As a result, soviet projects whose main expenses are in research and development (like those feats you mention) were done on an apparently small budget, while actually being a huge expense.

I haven't seen "industrial espionage" yet. Soviet Union may have made aircraft, but that's about it; most of the technology was built locally with stolen components. They were stolen both through espionage in the west, ant through extortion from their satellite states, some of which had been much more advanced before the USSR occupied them (Czechoslovakia being the prime example).

Example: Soviet computer scientists took MS-DOS and changed the commands to Russian, but didn't touch the copyright string. Cars built right after WW2 were build on plans stolen from Opel in Germany, and so on.

There was quite a bit of innovation in Chess as well, and to many of the chess players, the politics was secondary to the chess, so they played the political game and then got to play the board game at the top levels. And this happened in an environment where the best had to travel outside the USSR where they could escape and still remain famous (Victor Korchnoi, as an example), so there was plenty of political pressure to be a party member and be trustworthy (perhaps more so than in the areas under discussion).

I wonder if the same attitude, that the science or engineering is more important than the politics, allowed the innovators to play the political game well enough to make it no more of a factor than it is in the western world, thus putting both sides on equal footing?

There was no interference into actual creative process of solving the problem.

USSR heads just gave a target for the companies to beat and how they solved that issue was up to them. Only when it came to government tests - that is where the bureaucracy started. Many projects were rejected for this or that bureaucratic reason.

There was interference on the level of state heads / military. Whichever OKB had the ear of the state representative or the military general, they had a preferential treatment.

USSR heads had no idea of the research or the knowledge required for the issue at hand. They just cared if it was done on time and if the solution solved the problem and if it was better than the solution in the west.

PS: many of the inventors who "hey i found a solution to this problem" were rejected because development of science and military were planned by the party.
Unplanned "projects" were seen as sapping the power away from planned projects. That is why many of the unplanned projects were only presented in the final stage - at government testing(if that was possible), rather than in the planning stages.