The reason that fails is that in practice the labourers generally decide to spend the money now, rather than invest it in growth, so businesses run that way tend to fail.

There are very, very few counter-examples in narrow low-growth specialised markets, but the general rule has been shown to occur countless times across economies as small as communes to as big as a superpower.

The reason capitalism works is that capital generally flows to people with a track record of making efficient, effective, growth (and therefore jobs) generating investments. Which is what you want. There is some wastage of course, but far less than in planned economies (at least all of them so far) and capitalism tends to be very efficient at recycling that wasted capital back into productive enterprises.