Exactly. My guess is that this publishing method is not the cause but the consequence of the current disfunction. Researcher are evaluated on prestige, exactly like businessmen are evaluated on money. That alone means that as a recognized researcher, you have absolutely no interest at seeing concurrent work get published, or perhaps only if they heavily cite your work. With such system, young researcher in small labs will never get any good publication (read in famous journals), whatever the quality of their work, except if they manage to attract a big name.
We have completely reproduced the capitalism system, albeit replacing money with citations. If you were "born" with a good initial capital because your advisors were rich, then you'll easily get more capital, creating dinasties of researchers. I'm not saying these dinasties are incompetent, I'm saying they are after some point barely correlated with competence, and that they mask really brilliant people, which in the end will lack proper funding and quit science.
You would have guess the world of science would have been more objective than that of business, but truth is humans are the same everywhere.