actually he is completely correct. Completely free capitalism does not deal with externalities because there is no incentive for private firms to pay for them. In fact, to make a market economy even a feasible option, the government must do the following:
1) Ensure Property rights (both physical and intellectual)
2) Build Infrastructure (transportation, utilities, communications, ect.)
3) Establish a rule of law (equality before the law, enforcement, and a well publicized law)
and communism alone obviously does not work. Just look at china and the great leap forward. that was a complete disaster of total communism and set china into a huge whole. Now they are beginning to combine and are doing a lot better but are still at about 1/3 the economic state of the US. Also consider russia. It is not a surprise that russia went into space first. It is because the government mandated it while people on the streets starved to death. Russia also has one of the largest black markets in the world and its economy is down the shitter.
/knowledge