Why do you seek a flaw in capitalism? Capitalism simply means the voluntary exchange of goods and services. The alternative is non-voluntary exchange i.e. you are forced.
If you don't know why privately controlled means of production are good you have a lot of reading to do. Might I point you to the Cato Institute or Ludwig Von Mises Institute (google for free literature). Or for a more popular example check out Friedman's bestsellers.
For the ugly and fast version: Would you put up with wal-mart taking $40 from your paycheck every month and telling you that you can come get a gallon of milk every week for "free"?
first you should be free to choose whether you want milk or not and whether to support it with your money.
second you have no way of knowing if you're overpaying because you have no idea what price milk would sell for if several companies were competing for your business.
thirdly you have no recourse if the quality of the milk goes down. you can try to sue wal mart..good luck with that. You might claim that people are still free to go buy other milk, but any other company selling milk is at a huge disadvantage. People have to pay that $40 a month regardless, so most figure they might as well get the milk out of it. competitors milk could cost half of what wal-mart charges, $20 a month. But from the perspective of the citizen that "private milk" costs $60 a month since they have to pay the $40 regardless.
In this scenario wal-mart has you as a captive customer. Before it made money by convincing you to buy milk from it with high quality and a low price. Freed of having to convince you to buy it wal-mart doesn't have to care much about customer service or product quality.
This is essentially the scenario of state owned goods and services. you're assuming that the central planner can come up with a better solution than lots of entrepreneurs taking a crack at it.