Capitalism is the economic system in which the assets used to produce goods and services are privately owned, and the owners determine the price at which to sell those goods and services. Private markets, because they organize and direct production and consumption, are the basic institutions of a capitalist system. Government regulation of markets is (in capitalist theory) limited to correcting situations in which externalities (positive or negative) distort output and therefore reduce value. Sometimes correction of the failings of free markets requires governmental proprietary rather than merely regulatory activities (the standard example is national defense), and government levies taxes to finance those activities. Taxes can also be regulatory devices (taxes on emissions of pollutants, for example) or redistributive; if they are made redistributive in order to correct an externality (for example, underinvestment in human capital of poor children), they are also consistent with the aims of a capitalist organization of the economy.
There are libertarians who believe that the only true capitalism is a system in which there is no government at all; this is “anarcho-capitalism”; a prominent spokesman is the economist David Friedman, who teaches at Santa Clara University. Most defenders of capitalism stop well short of anarcho-capitalism, and admit a substantial regulatory and proprietary role for government. The Scandinavian nations admit the largest such role; yet they are still capitalist countries—and more prosperous than most even more capitalistic countries.
I agree with Becker that there was a journalistic overreaction to the latest economic crisis, as to previous ones. Journalism thrives on exaggeration and fear-mongering. But capitalism has survived intact a long, long history of economic crises, including the Great Depression of the 1930s. The major modern challenges to capitalism came not from that or any other depression, but from the two world wars of the twentieth century, without which it is hard to believe that the European nations would have lost their colonies, experienced a great depression (in the 1930s), or (in central and eastern Europe) become communist. Without World War I, it is very doubtful that Russia would have become communist; and without the Soviet conquests in eastern and central Europe in World War II, neither would Poland, Rumania, etc. have become communist.
The recent (actually current, though diminishing) depression kicked off by the worldwide financial crisis of September 2008 has not created any new communist or socialist countries. What it has done is give rise in almost all countries to a demand for more stringent regulation of banks and other financial institutions, and of some of their financial instruments, and to large public deficits; but neither of these developments is a harbinger of socialism. It’s no longer even clear what “socialism” means, or who has a coherent program of socialist administration of a modern economy.
One reason that capitalism has easily survived the economic crisis that began in 2008 is the collapse of communism in the Soviet Union, its satellites, and China, in or around 1990, and the continuing dreadful performance of the communist economies of countries like Cuba and Vietnam, and of socialist economies of countries like Venezuela and until recently India. The issue today is not communism or socialism versus capitalism; it's how much regulation of capitalism is optimal. Clearly, financial regulation was too lax in the late 1990s and early 2000s (pursuant to Alan Greenspan‘s mistaken dictum that banks and other financial institutions are “self-regulating,” to the “Greenspan put,” to the incompetence of the SEC, and to not a little outright fraud), and this laxity played a significant role in the 2008 collapse and ensuing depression (as I regard it). So we'll have—we need—more regulation. If we get it, that won’t be communism or socialism.
In the last half century the United States has experienced substantial deregulation and privatization movements, coupled with lower taxes, but at the same time has experienced increased regulation in areas such as employment discrimination, job safety, welfare benefits, and environmental protection, and increased economic inequality. Whether on balance the country is more capitalist or less capitalist than it was in 1953 is unclear, but I think it is more capitalist—notwithstanding the post-2008 movement for tighter regulation of financial markets.