http://www.econlib.org/library/Enc/Capitalism.html
"Economic individualism’s basic premise is that the pursuit of self-interest and the right to own private property are morally defensible and legally legitimate. Its major corollary is that the state exists to protect individual rights. Subject to certain restrictions, individuals (alone or with others) are free to decide where to invest, what to produce or sell, and what prices to charge."

Capitalism is a derogatory term for economic individualism. It is derogatory for good reasons in view of global corporations and the destruction they have brought to many local economies throughout the world.

The flaws with capitalism exists wherever the government fails to protect individual rights ("individual" meaning flesh and blood persons and NOT corporations) and impose appropriate restrictions to protect the environment, natural resources, workers, consumers and legitimate competitive enterprises.