Answer:
Mostly, it tends to kill individual ambition. If all are giving to the collective, there is no recognition of individual effort. So slackers float along like a sea anchor. Drag down the progress. The Chinese had an old proverb, "the peg that sticks out, gets hammered in". Now, and in the name of economic progress, the peg sticking out, gets the funding.
Engels, Marx and Lenin assumed the human condition would naturally strive to the middle of the pile. Possibly from personal experience. Possibly a conclusion based on their times. A chicken in every pot begot a happy camper, until they grew tired of chicken.
Frankly, putting a man on the moon, was the ultimate test of societies. Presidential commitment confirmed it. Both social organizations certainly had the resources, the science and the talent to make it happen. But then the "West" lost interest. The Soyuz space capsule recently celebrated its 40th birthday. After Shuttle retires, it will be the only delivery system to ISS. But reliable, is not always progressive.
Any Collective system suffers from two issues. One, a five year program, gives procrastinators 4 and 3/4 years to achieve. Suddenly quantity, not quality is the main objective. Which tends to retard free thought. A Free Market economy rewards effort with, rewards. Some donkeys do not always choose to chase the carrot.
And two, when given a choice of 45 different shades of red, some prefer green. Just human nature. As much as a government ban on a radio station guarantees that stations success, people are always more interested in the forbidden or frowned on than they are on the accepted.
Thank you for an excellent question. Expect more comment on it.
Further comment: " putting a man on the moon, was the ultimate test of societies". Hardly. It was an example of Kennedy's self-agrandisement and a response to the humiliation of being beaten in the "space-race" by the USSR, who succeeded with Sputnik and Gagarin. It was not even the ultimate engineering challenge. Even NASA scientists agree that building the Anglo-French Concorde was the greater technical achievement. But this rocket science chat is a digression from the issue of socialism!
Back on track: Trotskyists used to argue that Socialism was a halfway stage to true Communism; but that sort of argument is as dated as glam-rock. Recent history has shown that the world has rejected Communism; and only the crazy regime of North Korea holds to that creed. Albania was the only European Maoist state; and when visitors were allowed in after the Enver Hoxha regime crumbled, they discovered a level of squalor and poverty to mach the world's most underdeveloped states.
The rejection of Communism is not to say that its opposite, unbridled Capitalism, is the best path. The excesses of capitalism in USA under George W Bush and in the UK under Bush's poodle, Tony Blair, have left both economies in a dire state with high unemployment, low growth, discredited banks and weak currencies.
Of course, the economies of India and China are shooting ahead; but whether there are lessons to be learned from them is another matter.
Arguably, for Western societies, the European Union has "got it right" with its longstanding commitment to the "Social Market economy". That is, a version of Capitalism that appreciates that occasional state intervention is often desirable or necessary. While recognising the importance of individual ambition and incentive, the EU also acknowledges that a society will be happier and more prosperous if the gap between rich and poor is not excessive, and if the provision of decent services is available to all citizens.