This is the thing about the USSR; any Marxist (Trotskyist) today will describe it as "state capitalist" rather than socialist. This sounds like trying to dump responsibility for it onto someone else's head, and in part it probably is, but then it also makes plenty of sense as well.
Capital, for Marx, is that portion of profits, not which is spent on consumption (i.e. new cars and private jets) but which is
recycled into further profit making activities. A capitalist society is one in which the dominant source of economic growth is the continuous regeneration of such recyclable profit. And, the inevitable consequence of this drive towards recyclable profit is what generates working and employing classes who are constantly opposed to eachother's material interests.
It shouldn't really matter who owns this recyclable capital, it is still capitalism. Such was the nature of the USSR; a society dominated by capital, but simply owned by the government rather than private business.
"Marxism" has failed in practice because any elite group of revolutionaries that attempts to remould society according to a predetermined template will end up having to enforce their will on other people, hence repression. This is precisely the anarchist critique of Marxism that was emerging long before any Russian Revolution, from people such as Bakunin.
But if someone were to say it has failed as a mode of analysis, then I would pretty much have to say that person is living on cloud cuckoo land. Especially now. It's pretty obvious that Marx was right when he said that capitalism moves in cycles characterised by booms and slumps (and we recognise Keynes as a genius for pointing this out in the
1930s?!). It's pretty obvious that Marx was right when he talked about the formation of the industrial proletariat (look at what is happening in the new industrial centres of China currently, and tell me this is not a Marxian analysis in living colour).
He was wrong to say that capitalism wouldn't be able to meet the basic material needs of people consistently, and that they would inevitably starve or freeze in a recession. But WHY was he wrong about this? He didn't predict the idea of the liberal mixed economy, with welfare for those out of work, and free healthcare for even the poorest. It is that liberal mixed economy that ultimately throughout the 20th century, did "prove" Marx wrong, because it provided a strictly regulated framework in which the needs of those people exploited by capitalism could be met by the government itself.
Now, however, that is all on the way out, and those people that wrote Marxism off are pretty much looking pretty stupid at the moment. (EDIT: I should say that it looks like it is coming back in again now capitalism has fallen on its arse again. When I say "now" I mean the period beginning in the 1970s up to very recently when the welfare state and mixed economy was indeed slowly being dismantled)
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Marxism, in the form of his ideas, doesn't have to be insitutionalized in a government; it can help organize Ecuadorian plantation workers or Malaysian textile workers to fight for their rights as workers and to not allow the "bourgeoisie", the rich who mistreat them to take advantage of them any longer.
You are quite right, trapt. The most visible manifestations of Marx's analysis and predictions is in the developing world, especially somewhere like China as I mentioned above, in the same sweatshops that pretty much keep the world economy stumbling onwards.