>> they kill all incentive to work hard and to innovate

At that time, the USSR was pretty advanced technologically. And it's citizens we're and still are pretty advanced academically.

One explanation why the soviet system failed was due to inefficiency in investing in oil production(which led to a mini soviet peak oil), because the wrong incentives at the institutional level.

But wrong incentives at the institutional levels are pretty common in capitalistic countries: the 2008 crisis is one example.