The problems you speak of are due to corruption, not free markets. Even in the height of the Soviet Union, most people were living in squalor while the few lived in luxury. I know you are not going to say that the former Soviet Union was a free market.
Iraq under Saddam Hussein had the same situation. Most people lived in poverty while those that were high ranking party members were rewarded handsomely.
China is not a free market either. While it does have some capitalist tendencies, it is still a Communist nation. You need government permission to run a business. However, in order to make it, you better be tight with the person approving the application. It's one thing to get your application approved. It's something else entirely to have your competition denied and your abuses of the law and your employees ignored.
Mexico is another example. While the market there is freer than the other places I've mentioned, the success of your business rests on your ability to grease the palms of the right people.
Pakistan, Saudi Arabia, Kuwait and other countries are in the same situation. It doesn't matter what laws you have in place when those that enforce those laws are on your side. Selective enforcement of the law is a major ingredient in any tyranny.
What sets Europe and America apart is the lack of corruption compared to most other countries. It's not the laws that are in place, but a willingness to enforce them equally. Unfortunately, America seems to be moving away from that. Our DOJ, EPA and IRS departments seem to apply different levels of enforcement based on the political beliefs of those being investigated.