To take the step towards invention and capital accumulation, government policies were necessary. Some countries, such as China and the USSR used a direct government-forced industrialization policy, while others, such as Japan, which also used government control to put in place all factors necessary for economic growth, applied more indirect government policies. The strategy of the USSR and China was one of catch-up: Forced industrialization, with a neglect of consumer production and wage development. This led to a rapid increase in physical capital, enabling relatively fast capital-based growth. Yet three factors contributed to stagnation and decline in gross domestic product per capita growth in this period for both China and the USSR: First, institution, second, policy, and third, resource curse. Why did state-socialist countries focus on physical capital accumulation while they must have been aware of the negative effect of institutions, policy, and the resource curse? We show here that, from a socialist perspective, it was economically rational for these economies to maximize material output. In addition, this course of action was thought of as a means to withstand the outer capitalist world and win a war that was perceived as highly probable.