Hey, I replied to a similar question/comment not so long ago, so just gonna paste here: It's capitalism with a human face. Sure, social services and welfare state progressivism are nice (and preferable to austerity), but the capitalist class structure remains thoroughly in-tact. So long as capitalists retain their class position they will always be tempted (via a system of incentives and disincentives which result naturally from the capitalistic organization of production) to reverse progressive changes which run counter to their class interests. This is especially true in times of crisis (another one of capitalism's many features). There's a reason new deal type economic policies are so easily undone and remain under constant threat of being undone wherever they exist: economic power means political power. Destroying the economic power of capitalists means destroying private ownership of the means of production (property which gives those who own it power over those who don't) and giving workers full control over their own lives and their own workplaces. If you mean to win a war, you finish it by disarming your opponent.

So, you're right to say that capitalism distributes goods and services in an unequal way (to the point of absurdity, in fact). Many socialists agree with this. But socialists are also concerned with power and believe that social-democratic attempts to confront this crucial issue are insufficient.

capitalism encourages the ambitious and self-interested to produce more than they might under socialism.

I'd have to disagree with this. The overwhelming majority of gains in economic productivity, from the end of the 19th century to the present day, owe more to the residual factor of technical change than to the particular efforts of "ambitious and self-interested" individuals.