And no, not every suitcase is labeled, that's the entire point. Luggage gets lost when those tags get torn off, chewed up, etc. Luggage is handled by both humans and conveyor belts, and all sorts of things can go wrong.
And how would you define "full compensation"? If your luggage is lost, you could just lie and say it was carrying a million dollars in cash. How is anybody going to prove what full compensation is?
Or, if you were required to declare the value of your luggage when checking in, and you said it was a million dollars, the airline would just say nope, not gonna take it. Too risky for us if we lose it, which we can't guarantee because we employ fallible human beings.
Smart people work on this. The current solution really is a pretty good one, for what's practically achievable given the price you pay for your ticket.