Contrast that with a State-Uber-Alles philosophy like Communism, and you get a situation where you've got what is putatively the same organization trying to organize the strategy for keeping the borders secure with nuclear weapons also trying to manage the local school bake sale. It's a fragile setup if it isn't perfect, and of course it isn't perfect. And lo, Communist governments that fall tend to fall hard and shatter their whole society, economy, country, and all in the process. All the eggs, you might say.
And let me highlight the issue of resiliency and fragility as being my main point, rather than any particular local issue of efficiency on this point or that. Capitalist societies hardly blink if a 100-person organizations proves unable to make a profit. It might be locally annoying, even devastating to some people, but globally it tends to work out for the best. (And those 100 people tend to be able to move on to something else too.) By contrast a centralized command-and-control system may keep this net-negative organization going for a long time for any number of reasons, but all of them, in the end, meaning that a net-negative organization lives on, draining the society it lives in. (Bear in mind the meaning of "net negative"... the entire point is that whatever benefits it may have, it is still net negative in my discussion here.) The summation of such decisions is incredibly destructive.