Wild idea: the problem is that society as a whole cannot decide whether given area should be managed by a private company, or the government, therefore it oscillates between these two states. We could avoid this problem by having an economic system that enforces smooth transition, so that instead of flickering between "private company" and "branch of the government" with each change causing disruptions, we'd experience gradual, less noticable changes. In other words, instead of having same laws apply to all companies, have different laws for different-sized companies, making them naturally grow into branches of government as they expand, and return to private as they shrink.