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Communism failed in Russia because communism and socialism are fatally flawed, both in theory and practice. Imagine the market as an infinite number of transactions. In socialism/communism, most of the transactions result from the forcible redistribution of wealth, from producer to consumer. In other words, the government takes some form of wealth from one party and gives it to another party. This has four very harmful effects on the transaction, and collectively, on the economy:
(1) only one party benefits, while the other party is harmed. There is a winner and a loser in every transaction;
(2) typically, the party that benefits simply consumes the benefit instead of turning it into production;
(3) the government must insert itself as a middleman in the transaction (the hammer that forces the redistribution), and this must also be financed, usually by taking their cut; and
(4) eventually, no one wants to be a producer, when producers are what the economy (and the society) needs the most.
In capitalism, transactions are mutually beneficial. If I value your loaf of bread more than I value the dollar in my pocket, and you value the dollar in my pocket more than you value your loaf of bread, then we trade. Both of us benefit! There is no "winner" or "loser" in the transaction. Further, I can add value by selling individual pieces of toast to other customers, for example, at 20 cents per piece, and turn that loaf into a $2.00 profit for me, while still getting to eat some of it. And, in a capitalist society, the government pretty much keeps its hands out of the deal (except for a relatively nominal sales tax). There is no need for the government to "force" the deal, because it is voluntary and it is good for the economy and society.
Now imagine the cumulative effect of this dynamic: if you have an economy that institutionalizes the plunder of the producers for the benefit of the consumers, then you compound all the inherent flaws infinitely, while you deny society the opportunity for the mutually beneficial interaction. On a personal level, this makes your neighbor your enemy instead of your potential partner, because there is only so much the government can plunder on your behalf.
This was the tragedy of the Soviet Union. It did not collapse because of U.S. intervention. That is an utter fallacy. It would have collapsed long ago had it NOT been for U.S. aid bailing it out of its self-created famines during the Stalin years.
China is in a different situation. Communism there did not fail spectacularly and dramatically like the Soviet Union, because it is gradually adapting capitalist policies and allowing greater freedoms. As one answer pointed out, approximately 1/3 of its economy is now private. This is a huge step forward for them, and has allowed millions to bring themselves up out of the poverty that years of communism had forced on them.
