That's so far from what exists now in the US, it's doubtful that it's an inherent factor in our government's dysfunction.
There are many governments that aren't totally useless, so if you're looking at the US and thinking that we can't do any better, that shows a serious lack of imagination and perspective.
European govt's stability and relatively cohesive civic cultures come after centuries of world-spanning bloodbaths, genocides and ethnic cleansing to reach the status quo of relatively tiny, relatively ethnically homogeneous states. And there are plenty of dark sides to this cohesion as well.
The US Government was the first institution in the world to put a man on the moon. A half century before the libertarian corporatism figured out the market incentives to merely put stuff into low orbit. Which even communism figured out a half century ago.
And even now the lead investor is government, because both public and private equity is too chicken-shit to lead investment in even tried-and-true tech when the dollar amounts get too big.
Excellence in government is possible. There is no magic "gub'mit" pixie dust which makes that institution by fiat incompetent.
Governments and businesses are just collections of people doing stuff. Getting all religious about the difference between the two is counter-productive. The question here is one of utilitarian division of responsibility.
And, btw, capitalists didn't save the day on COVID-19 in the USA either. 120K+ dead and growing. We failed the dry run.