Bad governance is a very hard problem to solve. We have been living in organized states for over 4000 years and various combinations of corruption and nepotism seem to be common problems regardless of the political and economic system.

The very fact that the question "Quod custodiet ipsos custodes?" (who will guard the guards themselves?) was originally formulated in Latin is an indication of how long has this been going on.

Sure but this wouldn't be an argument against capitalism, it's an argument for reform of government. If you think that regulation is extremely flawed and prone to corruption, then governmental systems including socialism and communism would be even more flawed since they are by definition more highly regulated.