“How is capitalism better than socialism and communism?”

First of all, capitalism, socialism and communism are four different things.
Socialism, per se, is two things.
Funny, right?

There is the democratic socialism. A social arrangement where ‘nobody is left behind’ and where the economy is run according to capitalist principles.
And there is the ‘stepping stone’ socialism. The ‘prep class’ a Marxist society was supposed to graduate from before acceding to communism. In fact, the former USSR – as well as all the other former ‘communist’ countries had never reached that stage. Stepping stone socialism is something nobody has yet been able to graduate from.

‘Stepping stone’ socialism and communism are bad. For the simple reason that both are authoritarian regimes. Run by a small group of people according to their own whims. Pretending to mind the best interests of the entire people but, in reality and like all other dictatorships, minding exclusively their own businesses.

Capitalism? Nazi Germany was capitalist. Not good. Because it was Nazi…

‘Capitalism’, the entire gamut covered by the blanket term, is neither good nor bad. People collaborating using capitalist principles can reach for the stars – literally – while people obsessed with amassing money will, eventually, end up in a cul de sac. Remember what happened in 2008?
Free market capitalism, run by a democratic society, makes wonders. The USA until 2008, Canada, Australia, New Zealand, Japan and South Korea after they had regained their freedom, W. Europe. Great Britain.
The problem with free-market capitalism being the freedom of the market. In order to make wonders, the market must remain functionally free. Free from obsessions, free from monopolies, free from political heavy handed interventions. And equipped with a sturdy social safety net. The US used to have one. W. Germany also. Unfortunately, that kind of capitalism is very hard to find nowadays… Too many oligopolies have cornered too much of the former free market and too many safety nets have been transformed into pampering devices for dependent people. Some of whom are already rich!

We’re currently experiencing a tug-of-war.
Frustrated people have been harnessed to pull in diametrically opposed directions.
Some have somehow been convinced that the free market should be allowed to become a MMA cage. A no holds barred free for all fighting place. And what if the whole thing will eventually be dominated by your local bully? We’ll deal with that if/when it will happen.
Others have been duped to believe that capitalism is bad. That usury is not an abuse but the defining characteristic of capitalism. Hence a compelling reason for capitalism to be rejected lot, stock and barrel!

OK, for the sake of the argument, let’s look for a replacement. A replacement for Adam Smith’s capitalism.

Let me remind you that bona fide socialism relies on redistributing wealth created using capitalist principles.
That stepping stone socialism is a mockery. An undercover capitalism where all significant property is owned by the state. Where all decisions are made by the government. By the revolutionary government which pretends to know better, as advertised by Marx. Karl, not Groucho.
And that ‘real communism’ is nothing more than a thought experiment! Wouldn’t it be nice if? Yes, it might have been nice if the practical aspects of the whole thing didn’t prevent those who have tried it from reaching their goals.