Let's see, China is about to surpass US in science, have the fastest growing economy, one of the biggest military and the world rely on it for the production of it's goods. Ok, socialism doesn't work. So let's see the country with the highest standart of living, right, Sweden, Norway,... hmmm, running on an heavily modified version of socialism.
Ok, but there is America, THE superpower... that is right now in an huge economical crisis, plagued with ignorance and bigotry and whose social right are being stripped. Right, pure, unaltered capitalism is THE way to go.
Ok, now it's an old recipe and it's been theorized by Ernest Solvay, one of our most successful industrials.
Industry have to provide for it's workers, in term of health-care, education and culture. That is an obligation , and without it, activity in the country is not sustainable. Those should be free, because it's at the industry advantage to have healthy, competent and "sane" workers. It's very reasonable that if you don't provide it, the standard of your labor will slips.
State is the structure who allow the citizens of the country to take coordinated action, whether it should be centralized or not is something that should be decided case by case. State is the structure that must assure the three function mentioned above, plus the usuals : defense, security and tax collection.
The problems met right now by our democracy doesn't come from a bloated government or from laziness of the population, they come from the fact that state no longer work for us : capitalism, while being a powerful force behind innovation, is a bit to good at it. Why work hard when you can just cheat your way to the top? The current patents war is a proof of this : instead of innovation, company such as Microsoft, Apple and Sonny are suing each other on such patent as "displaying information of a web browser on a limited space" or whatever. And or government are the battleground. Lobby-ism is the standard way to take action, and corruption is frequent. War are being fought to assure the prevalence of such or such oil company, and measure are taken to keep general population out of the political debate.
The economic debate are sterile : the best economic system is known, but the problem is that the govs have no longer any invective to apply it.