But the whole point of the novel is that neither system really works very well! I think you're doing it a disservice to characterize it in that way.Given the tremendous increase in the standard of living of so many people, Capitalism does a pretty darn good job. I think in that by grouping it in a pair where "neither system really works very well," you and LeGuin would be "doing it a disservice to characterize it in that way."
One major weakness of Capitalism, due in part to Pareto, is the perception of relative disparity. Psychological research indicates that such perception is a basic reality of the human condition. We should regard the bitterness of have-nots as real, even if the have-nots are fabulously well off in a global and historical sense. Any system which is forward thinking should take that into account, or fail to do so at its own peril. (One of Basic Income's biggest problems is that it does nothing to alleviate the problems relative disparity, so plants the seeds for its own political instability.)
She did her best to imagine a communist system that was nearly ideally designed and it still fails in so many ways.
Any system which isn't perfect is going to fail in innumerable ways, in that countless instances of terrible tragedy and injustice will exist within it, and no system is going to be perfect.
Re: Your user name: I once came up with an acronym for a sensor-network Internet thing. BACON: Basic Autarchic Communication/Observation Network.