DickCheney must just be wetting himself with joy over our nation's newly exploded government-as-provider largesse.  Add in a dose of unequal largesse on subjective grounds of "fairness" and utopia can be achieved at last!

Praise to the motherland.

Your definition of capitalism runs pretty far astray from the widely accepted definition.

Yeah our society deffo needs a wakeup call if it thinks class differences justify a huge, thieving bureaucracy.

See what I did there

tpractice is right in that a system based on free market capitalism would stabilize itself even without government intervention, but the problem is in the tradeoffs made in the name of free markets.

By allowing individuals and companies to freely make their own choices, you empower them to wildly succeed beyond the possibilities of any other system when they make smart bets and do things right.  But, incumbent in this is the risk that some won't make the smart choices and thus will fail.  As a result, companies that grow huge and become stupid (note: not an inevitability) will end up dragging a lot of investors and business partners down with them.  It's the nature of capitalism -- with the possibility of greater success comes increased volatility.

The alternative, the anti-thesis of the free market, is a regulated market, aka socialism when applied to individuals.  Risk is managed and kept low, but the higher cost of regulation reduces the level of success that can be achieved.  At its worst, markets would never fail because no one bothers taking risks or innovating, because there's no chance those risks will pay off.  That decreased growth hurts productivity and lowers the amount of capital that can be redistributed, ultimately resulting in the kind of failure seen in places like the Soviet Union.  Think of it as a flat, smooth line on a graph as compared to the up and down spikes of a free market.  The U.S. has tended towards mildly regulated free markets in the past century, attempting to create stabilized growth without limiting the payoff too greatly.  The problem is, it's easy and appealing for politicians to sell massive regulations to an otherwise ignorant public when times are bad, so the overall trend is towards regulation (until an industry becomes so stifled that someone proposes boosting it through deregulation (see: airlines), and the cycle begins again).

I'm sure you can guess my preferences, but we as individuals and as a nation need to decide what kind of economic environment we want: stable but low growth or high growth but with the chance for failure.  I prefer freedom of choice over a bloated government filled with self-serving people that think they know my business better than I do, so I'll take the latter.

"Stability" means low risk.  The higher the risk, the greater the reward or failure.  You can't have "stability" without limiting the risk that gets taken.  Complete stability would mean no meaningful risk gets taken, no one fails, but no one is a break-out success either.

A completely free market would stabilize itself because it separates the individual actors (companies or individuals) from the "market" as a whole.  A huge company like Citigroup goes under, which would cause huge ripples, but its customers and the assets it had wouldn't just vanish.  Customers would go elsewhere (to better companies, thus rewarding them for being smarter than Citi), and its assets would be bought off at a discount.  So no, life wouldn't stabilize itself for Citigroup in a completely free market, but the negative results of a company's failure would result in new opportunities at other places, and life would go on.

See also: Creative Destruction