@Ramafuchs,
It is a complex subject. Again, I recommend Thomas Sewell's 627 page book (including test questions and references to where in the book to find the answers),
Basic Economics, Third Edition. But I will nevertheless attempt to give a simple explanation of how it works.
A central government manager whose effectiveness is measured by obedience and is not measured by profit, is not motivated to seek efficient use of resources in getting done what s/he is directed to do. S/He is instead motivated to seek greater control over what s/he does. Yet efficient use of resources is essential to achieving a viable economy. Increased control of resources independent of profit does not lead to a viable economy. It leads only to increasing dictatorial practices to maintain management survival. That, of course, leads to even more inefficient use of resources (e.g., Chavez in Venezuela).
Now it is also true that some companies in private economies will also fail to make efficient use of resources. However, thanks to competition, when such companies fail in doing that, those companies to which they lose will have used their resources more efficiently and consequently will prosper.