How government is destroying the financial market and capitalist ideology?

In my opinion governments of all the major economies are in the process of destroying the financial market and capitalist ideology. Centralized planning was a concept followed by communist regimes and they failed because economy as a whole is too big to be controlled by any government or G8/20 nations.

What makes capitalist ideology work is the innovative ideas and entrepreneurship of individual citizens. If millions of individual work towards their individual goal of being successful in their life, it takes country forward and grows GDP. What government is trying to do by all these bail-outs to financial institutions, manufacturing companies and unemployed individuals is encouraging bad behaviors and discouraging the innovation and entrepreneurship of their citizens.

In an efficient market – weak companies declare bankruptcy and go out of business and new companies take their place because they are innovative and create wealth for their investors. By helping GM and Chrysler, the US Government is making sure that new car companies with more efficient/hybrid cars will have to compete with Government Motors (GM) with full backing of US taxpayers. Is it fair to the new car company? Similarly, AIG was supported with full backing of the US Government – Do we really think we don’t have enough insurance company in the world? AIG’s gain was loss for Prudential, Aetna, Allianz and other insurance companies. If Citi had failed that would have been good thing for Wells Fargo, J.P. Morgan and other well managed banks.

US government keeps saying that if we didn’t have all the bailouts, the situation would have been worse in terms of access to capital and unemployment. I agree with them but I don’t think US government has enough resources to provide bail-outs required to keep the “Doomsday scenario” from happening. If we continue with current budget deficit projections, at some point, US government will have problem in raising capital to continue these bail-outs. That may not happen this decade but it will definitely happen as I don’t see any budget surplus anytime soon.
What governments have to realize that economies have to go through these business cycles? To some extent this is evolution and intelligent design in one. Growth and recession are part of the business cycle and we have to learn to deal with them without interfering with them with all the GOVERNMENT POWER as we are trying to do across the world. Week companies fail and new companies takes their place and world and economy goes on. So let Greece default.... They would go through the pain and come out stronger like Mexico, Russia and SE Asia in 90s. As far as US goes, stop handholding individuals and company as we’ll come out stronger as we have done in the past.