Re: Surely, restricting the publication and distribution of an academic work hurts the author
when you submit to a journal, you effectively hand over copyright control to the journal
Depends on the journal.
paid editors and reviewers at universities will be getting (a fairly small sum of) money
In many disciplines, editors and reviewers are not paid. The EIC of a journal may get some quid pro quo compensation, such as a course release or larger office (woo!). In the humanities paying reviewers is essentially unheard of, at least in the US. And in many institutions, editorial duties don't even count for P&T (promotion and tenure), or if they do only apply to the service category, which in research universities is typically weighted low.
Most journals are run out of universities, and they're effectively contracted out to publishers like Elsevier and SAGE
Perhaps most are contracted out - I haven't seen reliable figures - but many are published by university presses or by academic organizations.
the poor author gets next to nothing
"next to nothing"? I don't think I've ever seen anyone get paid for a refereed article. In the sciences, it's not uncommon for an author to have to pay publication fees (generally out of research funding).
most departments are of the opinion that you need to 'publish or die'
Generally true of tenure-track faculty at research universities. Not all faculty are tenure-track (not by a long shot), not all universities are research institutions, and even then there are exceptions.
This is contributing to the death of actual thought, as academics publish derivative works that present nothing new, in a format designed to please a narrow selection of peer reviewers, with results that can often be interpreted to mean something when in fact they lack any real significance.
Hyperbolic rubbish. While there's certainly a lot of crap published under the peer-review system, there's also a tremendous amount of novel, useful work - far more than at any other time in human history. Anyone with even a glancing familiarity with, say, the history of ideas would recognize "the death of actual thought" as a claim so mind-bogglingly unsupportable it throws the rest of what you've written into serious doubt.
Open access is a way out of this - but the costs of the peer review process are placed on the author and the institution
It's not the cost of peer review, it's the cost of publication. I've been party to debates over open access with a few journals, prominent and obscure, which do not pay reviewers and have modest editorial costs. For those journals, the vast majority of the budget goes to publication. Nearly all of that is print publication, and it is cheaper to do online-only; but even then it's very difficult to survive without subscription fees.
their own postgrads and postdocs (who produce about 70% of the research at any given institution)
Again, depends on the discipline, and on the institution.
It's amazing how many people think their experience of academia is universal.