The problem is, I think that most people equate capitalism with laissez faire capitalism, where government allows private industry to do more or less whatever it pleases. As Keynes has shown, laissez faire capitalism does not always work.
Along with the notion of laissez faire capitalism is the notion that government = monopoly = inefficient, while free markets = efficient. Although true most of the time, this is not necessarily so. The government of France, for example, runs one of the most efficient power services in the world.
While the Communist ideology has been discredited the past years, a centrally planned economy does have its merits, especially if local situations are suitable. Singapore is a good example of a successful centrally planned economy.
Another problem with laissez faire capitalism is that local markets of developing countries tend to be so small that they are prone to manipulation. Even in Hong Kong -- that bastion of capitalism -- their government had to intervene in their robust stock market to staunch an attack coming from the influx of large amounts of foreign capital.
At that time, many commentators were saying that Hong Kong made a mistake, that it has compromised its support for free markets. However, most people now see it as a prescient and effective move to protect the local economy.