Current systems don't have a 1:1 with "hard work" and success/comp but its about as close as you can get, IMO.

Actually, no, it’s still not fine, because whole heaps of people will pretend to be unable to do much.

Perhaps the disconnect between effort and outcome was a factor, though as discussed above don't under estimate the satisfaction of a job well done.

I think it's more likely to be the centralized decision making, and how the people who make those decisions get chosen. A centralized system where people are choosen based on political ability/connections is likely to lead to corruption and mediocrity.

Note the above problem can happen in other systems as well - I'm not sure US politics is operating well at the moment for example.

Nit: they had worker’s medals and similar non financial recognition.

However yes, the price paid for labour was far below the point to ensure supply met the demands of economic development.