Teal, you seem to gone off on a tangent from a few words in Geo's post and missed the meaning of it entirely...
Capitalism
is not a government. It does not require any specific form of government to be in practice. Democracies, monarchies, oligarchies, etc. can all have capitalistic governments. Capitalism does not require "real little government", no more than "real strong central government" requires or creates "communism". Economic and government theory are not that simplistic.