An advertising-funded product will always prioritize engagement - they want you to "engage" with the product even if it means degrading the experience intentionally such as making a process manual or take more steps than necessary (so that you are exposed to more ads). The "destroy civil society" problem you mention is a direct consequence of the pursuit of engagement.
In contrast, with a paid product, the company's interests are directly aligned with yours and they have no incentive to intentionally degrade the experience or get in your way any more than necessary. They don't care about how much you "engage" with the product as long as the bill gets paid (if anything, the less you engage the better as it uses less server resources).
I asked a PM about this and was told that the money they made was too much to turn down.
Capitalism. It's why we can't have nice things.
Regulation around ads is the only definitive solution, but in the meantime if there's a business model that's non-toxic I'm not going to hate on it even if technically someone could still misuse it.
A major reason for these markets is that the information can be used for advertising or marketing targeting. In a world where the majority of products/services are paid and the amount of advertising is significantly reduced there will be much less demand for this information, leading to lower prices and even lower payoff from selling this information, not to mention potential legal risks (GDPR, CCPA, etc).
The biggest crux of this, though, is the fact that both of these monetization schemes are destructive. Paying for software simply doesn't make sense in most cases, as there aren't that many people who are developing novel solutions these days. That's the exact reason why advertising is so popular: the market knows that relying on your conscious contribution is unsustainable, so why should you believe otherwise?