My understandong of the economic model is the following : to produce, you need 1) cash and 2) workforce (includes manpower, logistics, etc.)
Unlimited amount of cash can be spent : it is not a hard limit to your production, as long as you have money in your chest.
On the other hand, workforce limits your production at all time. Manufacturing/research points actually reflect your maximum production that can be achieved if and only if all your worforce is devoted exclusively to social/military/research producion. If the workforce is split between different activities, none can achieve maximum production.
The inductrial capacity slider sets the amount of available workforce you want to use. Typically you want to use your industry/research infrastructure at 100%, but when cash is scarce you may want to use only a fraction of your workforce and let the rest unemployed.
This system is realistic if we assume that workforce can instantaneously switch from a production job to research work. In a our world this is obvously not true, but GalCiv is a game so things have to be streamlined a bit
Being able to use 100% manufacturing and 100% research at the same time does not make sense.
On the other hand, I understand people asking for more control on every individual planet. I think the "focus" option is good enough especially if your empire tends to be big. The bigger, the more inefficient, and micromanagement would really be a pain.