Whence capitalism? That’s the question making the rounds at Davos, Switzerland. We might respond, “Well, it’s about time.”

The Economist magazine devoted a recent cover to China’s “state capitalism,” with a picture of Lenin holding a cigar. Cute. China is growing; we’re not. The New York Times article on iPhones and iPads being built in China rather than here in the states suggested that manufacturing clusters are key; China has them, we don’t. China has an activist state. We have Congress.

The western capitalist system is certainly in a funk, with very little agreement on what to do about it. As we fiddle and fight, China plows ahead. Our system, the one favoring small government and free markets (in theory if not also in myth), is supposed to be the only way, as Margaret Thatcher averred. Until it collapses or nearly so. In such events political and corporate leaders seem ill-equipped to cause or even facilitate recoveries.

Ed Miliband, writing for the New York Times, offers some refreshing candor on what ails western capitalism. He’s in Davos, where the rich and powerful convene to do something—haven’t quite figured out what. Miliband:

Both the United States and Britain suffered because their economies were overly reliant on the financial sector’s artificial profits; living standards for the many worsened while the economic rewards skewed to the top 1 percent; a capitalist model encouraged short-term decision-making oriented toward quarterly profits rather than long-term health; and vested interests — from giant banks to media moguls —were deemed too big to fail or too powerful to challenge.

We need to recognize that the trickle-down promise of conservative theorists has turned into a gravity-defying reality in which wealth has flowed upward disproportionately and, too often, undeservedly. To address properly the squeeze in middle-class incomes on both sides of the Atlantic requires fresh thinking from governments about how people train for their working lives and what a living wage should be.

Note the term “artificial profits.”

I’ve just finished watching a BBC production “The Way We Live Now.” It stars the inestimable David Suchet (better known as Hercule Poirot) as a rich “Jew,” Augustus Melmotte (Anthony Tollope reveals the stubborn racism of late 19th century Britain), who comes to England to make more money and gain public respect by winning a seat in parliament. His reputation precedes him, as London’s entrepreneurs anxiously curry favor with him, despite his Jewishness. Well, Melmotte is his century’s equivalent to Kenneth Lay or Bernie Madoff.

He creates a corporation, ostensibly to build a railroad from Utah to Mexico. But he has no such intention. He just wants rich men to purchase shares, then watch their buying bid up the stock. He then uses the market value of the phony company to secure a sizable loan, which he intends to use to start another company, and so on. An earnest and honest engineer who really wants to build the railroad visits the alleged route only to discover that little, if any, money has been spent to secure land or acquire equipment. It’s a “sham,” he says. The engineer returns to London to blow the whistle, and everything begins to unravel. The company’s shares plummet; the bank calls in its loan. But Melmotte has put all of his wealth in his daughter’s account to protect his fortune. Long abused by her father, she refuses him the money. Melmotte announces that he’s “ruined,” then commits suicide.

A fictional account, this was. Nevertheless, it foreshadows the present-day rise of the financial sector and its “artificial profits” and “crony capitalism.” Building an economy on a house of cards is not a very good idea. Miliband:

And governments must remember they are elected to serve the people, not the powerful lobbies who can pay for access or influence. Too often the real enemies of market capitalism are some of the leading beneficiaries of the current model, which favors price-gouging cartels and consumer exploitation.

Keynes said that he was trying to save capitalism from itself, though he didn’t much care for large governments. After all, he had made a fortune in the market and wanted that others could do the same. But Keynes also recognized the critical role governments must assume during recessionary periods. (His General Theory was published during the Great Depression.)

Perhaps we’re at a crossroads. But I can’t imagine the soul-searching at Davos resulting in all-out efforts to ape the Chinese.

I, for one, hope that there are still some adults in the room who will dare expose the naked emperor, who has been allowed to play too long without supervision. Western capitalism isn’t working for the Rest of Us, and there may come a day when even “artificial profits” are the stuff of dreams. To that I would say, “Good riddance to bad rubbish.”