Grad student here. I have thought about this a lot. I think governmental funding sources have problems similar to those from companies. They may not be as explicitly biased, but agendas will exist. There's also the problem that the people approving the funding don't necessarily make good choices. I might prefer an explicit lottery to the current system.

My plan right now is to save money, retire early, and then doing whatever research I want that fits my budget. This avoids many of the problems with the current system, but is not possible for many.

This would allow me to pursue more risky research (in the sense that the research may fail to produce useful results) than an assistant professor trying to get tenure could. I also wouldn't have to raise funds, so I could focus on projects I believe are important, not just what can get funded.

In the book "Invention" by Norbert Weiner, as I recall, he suggests that the government could fund independent researchers to encourage better research. I don't think that will happen, so I have a DIY solution instead.