The governments of Ancient Greece commissioned art and sculptures all the time, and I think most people would call it objectively fantastic to this day.

Japan has some pretty amazing works funded by the government as well.

I think the issues arise when the government becomes a lifeline for artists who no longer have any other opportunities because fiat and unsound money has ravaged the private sector and free market.

Also when intelligence agencies, who are funded endlessly by the fiat machine, get to pull the strings and control the media.

You still need some sort of governing body to approve and select art as long as we have public spaces. Or even if a corporation owns a public space, they'll still have a sort of bureaucracy too. 

 I think the reason Japan still has great, contemporary public art (from what I saw briefly) is because they have a culture that really values artists. 

So much of this is evident in people of every generation, from all walks of life collecting characters and iconography in print media, video games, music, movies etc.