Talking about minutiae of capitalism here is sort of detracting from the core issue (that also underlies the problems of capitalism).
The core problem is: humans can't coordinate at scale. Working together towards a shared goal comes naturally to us when we're in small, tightly-knit groups. The larger the group, the harder it gets. Once the group reaches ~hundred members[0], coordination generally collapses, and the group succumbs to the usual breed of prisonner-dilemma's-like problems. Or, it develops a governance structure.
If you look at history of civilization through the lens of coordination, you'll notice that all the governance structures, all the economies, up to and including democracy and the free market, are essentially a mechanism of coordinating larger and larger amounts of people. A government cuts trough prisonner-dilemma's-like problems. Its hierarchical nature lets direct coordination costs scale as O(n log n) instead of O(n^2) - but that's still not efficient enough for smaller and more localized problems. There, markets come to the rescue: they let people coordinate on smaller and more local issues, often without even explicitly noticing them - all gets handled by the feedback loops around prices.
The core observation here being: the market works at efficiently coordinating groups of people with diverse interests and smaller, more localized problems. It absolutely sucks at responding to a problem requiring to coordinate large groups of people. That's where you want the top-down solution. It's reasonable to look up to the government to solve a coordination problem below its level[1], that's what governments are for.
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(And you do need both a government and a market to limit each other's power. For instance, you mention that "businesses can be so easily destroyed". That only holds true in a spherical-cow free market that never existed. One of the features of capitalism is that profit compounds; a successful company has more resources to protect itself from its competition, ensuring further success. A successful company can't be easily destroyed.
The end-goal of competing businesses is monopoly, but society needs the competition, not the victory - so you need the government to ensure the victors get struck down and competition continues.)
The core problem is: humans can't coordinate at scale. Working together towards a shared goal comes naturally to us when we're in small, tightly-knit groups. The larger the group, the harder it gets. Once the group reaches ~hundred members[0], coordination generally collapses, and the group succumbs to the usual breed of prisonner-dilemma's-like problems. Or, it develops a governance structure.
If you look at history of civilization through the lens of coordination, you'll notice that all the governance structures, all the economies, up to and including democracy and the free market, are essentially a mechanism of coordinating larger and larger amounts of people. A government cuts trough prisonner-dilemma's-like problems. Its hierarchical nature lets direct coordination costs scale as O(n log n) instead of O(n^2) - but that's still not efficient enough for smaller and more localized problems. There, markets come to the rescue: they let people coordinate on smaller and more local issues, often without even explicitly noticing them - all gets handled by the feedback loops around prices.
The core observation here being: the market works at efficiently coordinating groups of people with diverse interests and smaller, more localized problems. It absolutely sucks at responding to a problem requiring to coordinate large groups of people. That's where you want the top-down solution. It's reasonable to look up to the government to solve a coordination problem below its level[1], that's what governments are for.
--
(And you do need both a government and a market to limit each other's power. For instance, you mention that "businesses can be so easily destroyed". That only holds true in a spherical-cow free market that never existed. One of the features of capitalism is that profit compounds; a successful company has more resources to protect itself from its competition, ensuring further success. A successful company can't be easily destroyed.
The end-goal of competing businesses is monopoly, but society needs the competition, not the victory - so you need the government to ensure the victors get struck down and competition continues.)
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[0] - Dunbar number is ~150, which may or may not be a coincident. https://en.wikipedia.org/wiki/Dunbar%27s_number
[1] - Governments have their own coordination problems at the international level; geopolitics is essentially a completely unregulated free market.