Capitalism hasn't been doing too well lately. Markets remain volatile, economies are under pressure and analysts are trying to do the impossible by making calls in an environment that is changing all the time.

People who are watching the value of their investments behave like a yo-yo in the hands of a not- very-competent practitioner are now beginning to wonder if the free market is all it's cracked up to be. And they're asking whether or not there is another way.

When you've worked for most of your life in banking and finance it's hard not to be a free marketeer. Intuitively you believe the market makes decisions on productivity better than anything else.

The free market can adapt to changing situations in a much more flexible way than a market that operates under strict governmental rules and quotas. And it is a very powerful growth producer. All of which are deep strengths.

So enamoured were most politicians and economists with the principles of the market over the past 10 years - and so efficiently did it operate in many cases - that there was a rush to privatise everything, on the basis that companies knew better than government what was needed in any given area and that corporates would deliver profitability where government delivered the black hole of subsidy.

The problem, of course, when you go hell for leather into the mad, bad and dangerous-to-know world of profit is that it doesn't always work out - as the shareholders in Railtrack found out this week. Companies that are privatised are often regarded by investors as having an inherent government guarantee (rather like Eircom unfortunately).

But there were many problems in the original selling off of British Rail, which meant that Railtrack, as a company, wasn't based on the best foundation.

The industry was fragmented in such a way that each part could blame another for any problems and it was easy to evade responsibility for things that went wrong. The financial structure was such that even though passenger numbers increased, the company didn't earn more money.

On the basis that all public bodies are vastly overstaffed (and because the first thing that anyone does when they privatise a public utility is cut costs) there was immediate rationalisation, which meant that a lot of the people who actually knew how the system worked were let go.

And then the management - here we go again - the management hadn't a clue what it was doing.

The British government bailed out Railtrack before. At a time when so many businesses are struggling it couldn't afford to bail it out again. So the administrator was sent in and now a re-think of Britain's rail strategy is under way.

Despite all of the criticism that the British railway network has received, I've always found it pretty good.

Sure, I've had the crowded carriage experience, where I've found myself in far too close proximity to someone who has yet to be acquainted with deodorant and I've sat in a train within sight of Paddington Station for 20 minutes while the driver waits for a platform to arrive at, but at least you can get to almost anywhere in Britain by train, which is more than you can say for the Republic.

And none of them were ever as bad as that rolling crock that brought me from Galway to Dublin earlier this year.

But it was always impossible, in my view, to provide a service to the average commuter that would also provide a profit to investors. It's like the bus routes and the post office (Consignia, the British privatised postal service is already cutting back on services). There are too many areas where you must provide a public service at a loss to be offset by the profits that you make from the high-income services.

The result is that the company cannot be truly efficient in the best traditions of a free-market economy.

You can't apply capitalist thinking to the bottom line of an industry that isn't a just-for-profit industry. Therefore, you can't expect it to operate in a capitalist way and still provide the services you want.

What you can do, of course, is to ensure that you have competent management and people who know the industry in the right positions, but that's never been capitalism's strongest point anyway.

Meantime, in the US, the shifting global environment still makes it very difficult for companies to predict their futures. The Fed funds rate is at its lowest since 1962 (when the US charts were topped by Telstar from the Tornados). The number of rate cuts has been the fastest series of reductions since the foundation of the Fed in 1913 (hits included Danny Boy and Too-Ra-Loo-Ra- Loo-Ra). Yet the latest job-loss figure of 199,000 shows the biggest increase since February 1991 (Do the Bartman) and services have lost jobs for the first time in a year.

Sun Micro, Credit Suisse, GE and Morgan Stanley Dean Witter have all announced cuts.

So people who think that capitalism doesn't work are looking at the problems in the world economy as a whole, and some specific issues like the dotcom industries and Railtrack, and feel they can say that we've all been conned.

But no matter how long the so-called war against terrorism lasts, economic problems will ease as time passes - they always do - helped, this time, by the money that the Fed continues to pour into the system.

If the events of the past month have proved anything, it's that no one and no system lives in splendid isolation. Actions in one part of the globe can provoke reactions elsewhere.

The free market needs help from government whenever it's bedrock, a stable global system, is threatened.

The public sector somehow manages to squeeze out new initiatives in favour of maintaining the status quo. And the uncertainty principle still hangs over everything we do, no matter how hard we might try to convince ourselves otherwise.