The fall of the wall: Red dusk was a rare bright spot in 20th century

The collapse of the Soviet Union, Russia's President Vladimir Putin famously once proclaimed, was "the biggest geopolitical catastrophe of the century". Putin was speaking as a former Soviet apparatchik, in language calculated to stoke ever-combustible Russian nationalism, articulating his country's grievances against a world which no longer gave it the respect it believed due.

But few beyond the Motherland's borders would agree, even today when capitalism's shortcomings are more brutally on display than at any time since the 1930s. The demise of communism, of which the fall of the Berlin Wall exactly 20 years ago is the most single powerful symbol – more powerful even than the hauling down of the Red Flag over the Kremlin on the evening of 25 December 1991 – is beyond all doubt one of the few unqualified boons of the 20th century.

That century might not quite have started with the October Revolution of 1917; the event that set in motion the destruction of the old world was the onset of the First World War, three years before. However, the bloodiest century in recorded history most certainly ended, in practice if not in strict calendar terms, on that Christmas night almost 18 years ago when the Soviet Union ceased to exist.

The defeat of Nazi Germany in 1945 was the Soviet Union's one great service to humanity. But during the years of its division, Germany provided perfect illustration of communism's failings. The conquered western part developed into a thriving, open and highly prosperous democracy, coming slowly but honestly to terms with its responsibility for the catastrophe of the Third Reich. The former East Germany was a closed, totalitarian state, with a standard of living barely half that of West Germany, a state imprisoned by the lies of the system imposed upon it.

Even so, the undistinguished 40-year life of the so-called German Democratic Republic could have been far worse. People were persecuted, imprisoned, even killed, but on nowhere near the scale of communism's two mega-states, the Soviet Union and China. In the former, Lenin and Stalin between them, through Red Terror, man-made famines and purges, caused the deaths of tens of millions of Soviet citizens. In China, even that figure pales beside the estimated 70 million victims of Mao Tse-Tung.

Broadly speaking, communism only "worked" – in the sense of gaining legitimacy via the support of the population – when it became synonymous with nationalism and resistance against a foreign enemy. The most obvious examples are Vietnam, Cuba and Russia itself. Elsewhere it was little different from the imperialism it claimed to be fighting. The countries of Eastern Europe were mere satrapies of a foreign power.

In these hard and uncertain economic times, some in the former Soviet Bloc lament the passing of the "good old days", when the mediocre, however mediocre, was at least guaranteed. But for Poles, Czechs, Hungarians, Estonians, Lithuanians and Latvians, these two post-communist decades have surely been among the better ones of their modern history. Only in the former Yugoslavia and the former Soviet republics of southern Russia and the Caucasus did violence increase after 1991. But in the Balkans at least, nationalist blood-letting is at last subsiding. A happier future, akin to that of central Europe, may be at hand.

Could communism, left to its own devices, have reformed itself? The unequivocal answer is, no. Mikhail Gorbachev's fatal mistake was to believe that it could.

But I saw with my own eyes, as correspondent for this newspaper in Moscow between early 1987 and early 1991, how perestroika only made matters worse. Gorbachev's reforms served to release hopes and theoretical possibilities that collided with the realities of a system whose supporting beams could not be moved without the entire edifice crashing down.

In that sense, the hardliners were right. If the system was to survive, it had to be kept rigidly in place. Communist regimes that still exist, like North Korea and Cuba, merely prove the point. For all their economic liberalism, China's rulers – unlike Gorbachev – have refused to give up the party's absolute monopoly of power. But even China cannot for ever be immune to the inherent contradictions of communism.

You do not have to be a lover of Ronald Reagan or George W Bush to realise that communism is at odds with basic human nature. Not only is it incompatible with personal freedom and human rights; a political party cannot replace family and friends. A doctrine founded (theoretically) on equality of outcome, rather than equality of opportunity, could never in the long run compete with the human instinct to get ahead, to go one's own way. Underpinning the creed was the lie that it signified the victory of the working class.

The workers' state of course was a mockery. The dictatorship of the proletariat envisaged by Marx turned into the dictatorship of the Party and then the dictatorship of a single individual – Stalin.

The classless communist utopia never arrived. Indeed communism had classes as obvious as any in the West. As the ancient joke runs, what's the difference between capitalism and communism? Under capitalism, man exploits man; under communism it's the other way round.

Is there a happy medium? The answer, as recent events have shown, is that it's not capitalism, US-style. It may be benign paternalism; it may be some form of social democracy. But it certainly is not communism whose end-century downfall, pace Vladimir Putin, was a spiritual and political triumph to match the victory over fascism in the century's middle.