There aren’t any real capitalistic states in the world anymore, and it seems that most of the over-site and regulation of governments around the world is corrupt, inept, or designed to protect large firms from the consequences of their high-risk behaviour.
Many of the banking firms that were recently bailed out had previously been bailed out from their poor management, and they used this as a signal that they could take on greater risks (and pocket the profits from these risks) and when the risks finally caught up to them the government would save them (and they were right). If the government would have let these "Too big to fail" banks fail in the 1980s or 1990s when they took on extreme risks they wouldn’t have needed to be bailed out last year; and all that saving them has done is allowed them to grow bigger, fail to learn lessons about taking on too much risk, so that in 10 to 15 years their next crisis will be bigger and worse.
Capitalism is broken because the government is too heavily involved and chooses winners and losers based on political reasons; and poorly managed large firms are protected by funnelling money from smaller firms through higher taxes. The heavy involvement of the government in the economy works as a reverse Robin-Hood, robbing from the poor to give to the rich, and rewards political connections rather than innovation and hard work.
