The very title of this post will probably make you think that I'm crazy, but hear me out for a second. I want to talk about why capitalism itself is not flawed, and why what we live in today is not really capitalism.
I will argue that capitalism is not really an economic system. To say something is a system is to imply that it is planned out, that it has forethought, or that it follows a series of steps that lead to a single logical conclusion. Socialism is an economic system because it has all of those things. It's goal is to create a more egalitarian society by redistributing wealth to lower classes in order to bridge the gap between high income and low income. There are a series of steps, things you can do, in order to achieve this (whether or not it is achievable is something that can be argued). To call capitalism an economic system is like calling evolution a system. It follows a basic set of fundamental rules (laws), but ultimately it has no forethought and doesn't follow a particular pathways.
Capitalism is the result of nature. Much like evolution is the result of natural forces (laws) acting upon organic molecules, capitalism is the result of natural economic forces (laws) acting upon a society. It is not a planned out process, it is not a process that occurs because of the decision by an individual, a population, or a government; it occurs in nature. Laws of capitalism, like supply and demand, act much like the law of natural selection does in evolution. It guides it, but with no predetermination.
So, why does capitalism not have any flaws?
Let me ask you this question. Is natural selection flawed? Does it do what it's supposed to, and nothing else? Sure it does. Now, to simply claim that capitalism has no flaws because of what I just said is a logical fallacy (argument from analogy), but it leads me to this question. Does supply and demand do what it's supposed to do? Of course it does, and that same answer applies when you ask the question of all of the natural laws of capitalism. They work because they occur naturally in a society. People trade out of necessity, people are given incentives by commodities, etc. That doesn't matter if you are an Arab, European, South American, or Canadian, they apply to everything.
That is the reason why capitalism has no flaws, but, there is something related that does have flaws; qualities that bend the rules of capitalism. Human beings.
Human beings are flawed. When you apply capitalism to human beings, it will work with them, but they will not always work with it. They will steal, kill, commit fraud, or a whole bunch of other little things that warp capitalism. Essentially, human beings are the cause of capitalisms "flaws".
What we live in today is not capitalism; far from it. It is the human interference with capitalism that has given us the current state of affairs today. This is unfortunate because when something goes wrong economically it gets blamed on capitalism when in reality, it is the fault of those individuals. Capitalism works, it's people that don't always reciprocate.
So, what is the answer to human economic flaws? Should we regulate the economy, in order to minimize those faults? The problem with regulations is that it intertwines the government and the economy in a way that it shouldn't. The more the government regulates, the greater incentive there is for businesses in the private sector to lobby for their own interests. They see that the government is willing to legislate private sector matters, so they will try to push legislation that will benefit them and possibly reduce competition, all in the guise of "economic security". However, if there was no regulation, there would be no incentive. Businesses couldn't lobby a Congress that isn't going to pass legislation for or against them. Regulation has created this pseudo-capitalist, pseudo-socialist, corporatist state that we live in today.
If we want capitalism, the only way to do so is to return it to its natural state (without regulation). That way, mass action on the part of society can cause the necessary change without restricting the rights of other individuals. Capitalism in its natural state is beautiful, efficient, and self correcting. Regulation is ugly, slow, and cannot correct itself easily. You pick which one you want.