It's easier to model countries with sane wealth distribution - Sweden, Germany etc. Allow everyone to get rich as they wish, but tax them.

In return you get to live in a society with high trust, little crime and good social services.

This requires trust and ethics and the will to enforce it politically (and maybe a small homogeneous population).

Feels like one of those nice ideas that would never work well in the real world. Any defined measuring system would be gamed (Goodhart's law), and any undefined measuring system would be abused by nepotism/cronyism ("my brother adds tons of value").

Why would you ever trust the government to decide how meritocratous people were? "Why yes, commissar, the merit department thinks you did very well and deserve a 3000% bonus this year. Please remember this when looking at my nephew's resume, as he's applying to your division. Ah, sorry comrade Bob, you don't get any bonus this year. (That's what you get for cutting me off in traffic last Monday!)"

The incentives in capitalism actually work out. When you can only spend your own money, and you have the freedom to choose how to spend it, markets are stochastically optimal for a huge range of allocation problems. Any sort of centralized system that tries to have only "the advantages of capitalism" usually fails because it doesn't make any sense game-theoretically or from an optimization perspective.

Who measures the merits?

I'd say very soon you'd see fat cats sitting and deciding that on average their friends do better than the rest and here we are again.