The recent column by Andy McInerney ("Officials Speak too Soon on Free Market Success," July 21) correctly points out many of the major problems faced by the free world: large national debts, a widening gap between the rich and the poor, reduced standards of living in underdeveloped countries, food riots in South America, and international political and social tensions.

However, he ignores the economic and political problems currently faced by socialist nations, and he incorrectly concludes from this lopsided analysis that the free market's inherent flaws are about to spell its demise.

Many of the economic problems currently faced by the United States are a result not of the capitalist system's flaws but of poor management within the system.

Over the last four decades, U.S. corporations have failed, through ethnocentrism and myopia, to adapt to the changing market situation. The political and economic hegemony enjoyed by the United States at the close of World War II put American corporations in a position in which they did not have to worry about global competition.

Emphasis shifted from management of innovation to management of standardized, large-scale production. Short-range goals became important and foreign tastes were simply not considered in product design or marketing.

Meanwhile, Japan and Europe were able to rebuild their economies with U.S. aid. Foreign companies, at a disadvantage with respect to U.S. economic power, had no choice but to innovate. And now, with foreign companies once again on a competitive basis with the United States, it is Americans who must adapt.

Adaptation does not mean scrapping the capitalist system; it means adopting a global outlook rather than a local one, long term vision rather than short-term.

Adaption is also necessary for socialist nations. Mr. McInerney claims that planned economies "insulate" socialist economies from free-market oscillations.

This insulation, however, is false. It hides natural fluctuations in tastes, values, and prices. Inflation does not disappear in a socialist system; it is simply suppressed until it finds its way into supply shortages.

This was demonstrated recently when the ruble, set will above $1 by the Soviet government, traded at less than $0.10 in a closed bidding session held in the USSR.

The socialist system does not, as Mr. McInerney claims, provide its citizens with "the basics" -- price controls have greatly overvalued basic goods, leading to shortages, and while employment is virtually guaranteed, workers have almost nothing to spend their wages on.

Thus personal savings are so large that the majority of Soviet currency is out of circulation. Yes, compared to the backward, agrarian nation Russia was in 1917, the USSR is quite advanced.

But recall that modernization was achieved by Stalin only at great cost to the Soviet people, and note that the entire socialist world has lagged far behind the rest of the world, technologically and with regard to standard of living, for most of this century.

Recent economic improvements in China are directly linked to aid from the West. The Soviet Union is already considering a similar program with foreign investors. The problems of socialism are fat from insignificant compared to those of capitalism.

Most of our difficulties as a planet spring from the lack of realization that we are, indeed, that -- one planet. Both socialist and capitalist nations have failed to recognize that we cannot "insulate" a national economy and that we must compete globally in order to survive.

Hopefully the coming century will bring a new age of global cooperation and an economic system combining the best qualities of planned economies and the free market.