You don’t have to speculate on what life is like in conditions you’re describing. There’s tons of first hand accounts of life in East Berlin behind the iron curtain, where the government “provided” food, sheltered, and clothing.

If it's not competitive with the current "capitalist" offerings in those areas, people won't choose them unless necessary. The only reason we have hunger and homelessness in a nation as wealthy as the USA is through choice, not lack of resources.