I grew up believing that capitalism somehow separates business from government, with each operating independently. Same with separation of church and state. Not sure what to think of things now.
I think the problem, if we're talking about the US at least, is that the conservatives running things believe a government should be small... which inevitably leads to corporations virtually running parts of the government, unless you come up with a way to explicitly prevent that. But the people in power who want to remain in power would never go along with that.
It comes down to culture and society. A democratically elected government should ideally be there to represent the interests of the masses as a way to counteract the inevitable power of the wealthy elite. But when those same wealthy elite spend decades and billions of dollars to brainwash the masses by owning all the media companies and influencing school curriculums and so on, I don't see how the masses stand a chance over the long term.