I work in the public sector- a reasonably big scottish uni. We're doing OK, and we've got people in charge who value people. Yes we're wasteful- in fact, comically so sometimes. But then when I worked in banking, that was wasteful too, and at least the uni can say it's incompetent not unethical.
Ironically, the things we do most inefficiently are the things that happen when we pretend to be a real company and try to "learn lessons" from the private sector. When we act like a university, we generally do better.
We contribute a ton to the economy, in a dozen different ways, but every year there's cuts or freezes. We often react to them stupidly, but then it's fairly hard to react intelligently to a stupid cut.