When contemplating this question one needs to keep in mind the expansion of the “crony sector” too. Much of what is considered “private” economic activity really is not.
(From Forbes) George Gilder’s Wealth and Poverty persuasively testifies why America’s lately shrinking private sector is cause for concern. Written three decades ago, it is more than a paean to capitalism, it is testament to its supply side. Relentlessly it makes the case that it is the innovator who propels capitalism to its heights. Innovation is capitalism’s unique and unparalleled economic contribution. Stressing this point, Gilder quotes Schumpeter: “Creative destruction is the essential fact about capitalism…” Not only does capitalism encourage people to take risk, but then distributes resources according to the risk taker’s success – concentrating the results and extending the process.