Sheri Berman has a great article in Dissent Magazine on the history of leftist movement in response to capitalism. The very short synopsis: Marx thought capitalism served an important purpose in bringing to an end a feudal economic system. But he also thought it was a transitional phase on the way to communism. Lenin decided to help the transition along by using force. The rest of the left recoiled at the violence of communism but was split about whether capitalism still needed to die (democratic socialists) or whether capitalism was a good economic system but needed the state to protect its citizens against the worst excesses of Laissez-faire economics (social democrats) as championed by classic liberalism or modern American conservatism.
I think the evidence is clear that capitalism is unmatched in its ability to lift people out of poverty. It is equally clear, though, that the unchecked invisible hand of the market leads to vast inequality of wealth and power. Conservatives don't care of course; it's survival of the fittest or the will of God for them. I do care. I think in a global economy the state needs to be big and powerful and that it needs to use its muscle to police for the cheaters (and aren't they being forced out of the woodwork right now) and to provide a strong social safety network so that basic needs are taken care of for all citizens. This means that those who have succeeded or been fortunate (by birth) under capitalism need to pay a larger share of taxes to level the playing field. How much is always the big political question. You don't want to stifle the entrepreneurial spirit but you also don't want create a social situation that is so intolerable for the poor that they either give up or rise up in rebellion.
For awhile now in America the invisible hand has been allowed to move without adequate regulation or redistribution and inequality and cheating has been growing. The result is the mess we are in now. Hopefully we will seize this moment of crisis and reintroduce some needed regulations and take care of some serious problems, like our woeful healthcare system. We need some form of universal healthcare.
But we also don't want to go the xenophobic Lou Dobbs route of closing the borders to immigration and buying only American. We want the best and brightest to want to come to America. We want the tired and the poor to have a chance to make it here. We also want the Indians and the Chinese to buy our goods and sell theirs here. We want to lift all boats.
Capitalism can make this happen. With the power of the state to soften its hard edges.