I don't think it is so simple as bigger or smaller. Governments (us as a society) clearly have a role in making things work. In some cases governments should only, in my opinion, have a regulatory role such as in most consumer goods producing industries. In other cases, they should form all of or a majority of the organizations supplying services (medical services and pharmaceuticals would be high on my list) since non government solutions have clearly worked very poorly (e.g., the US health care system-- terrible value for high cost and cruel (even unchristian ) to boot.
Having worked as a consultant to large organizations both governmental and not I feel that there is a danger in allowing an organization to grow too large whether they are governmental or not. You have to tune the size very carefully and constantly retune.