I feel like you might be confusing capitalism for market economies in general. A market economy is when private entities buy and sell things. Capitalism specifically is a market economy where the means of production, the equipment that makes things, are owned by investors who do not themselves participate in production.
What you describe in that last paragraph is called market socialism. You still have private entities buying and selling things, that’s the market part, but instead of being owned by investors those entities are collectively owned by the employees doing the production, that’s the socialism part.
This system preserves the strengths of markets, namely efficient specialization and price discovery, while eschewing the liabilities of capitalism, namely the siphoning of value from those who create it to investors.
I feel like you might be confusing capitalism for market economies in general. A market economy is when private entities buy and sell things. Capitalism specifically is a market economy where the means of production, the equipment that makes things, are owned by investors who do not themselves participate in production.
What you describe in that last paragraph is called market socialism. You still have private entities buying and selling things, that’s the market part, but instead of being owned by investors those entities are collectively owned by the employees doing the production, that’s the socialism part.
This system preserves the strengths of markets, namely efficient specialization and price discovery, while eschewing the liabilities of capitalism, namely the siphoning of value from those who create it to investors.