The main flaw that I think you are making is that you see similar circumstances to something in the past and think the same thing will happen again. Its kind of like with the Ukraine war, people see a country invading another country and think russia is nazi germany and will take over the continent, but in reality the material conditions are completely different. No, we would not start having company stores pop up and kids losing hands on sewing machines, things are drastically different from the industrial revolution.
There is a lot here, so I will directly answer your questions - what part? Because the government is huge I will talk about what I know best - housing. The government(s) add over $100k for every single family house new build, on average. These are things that are not necessary but are required. I can explain in detail because this is going to sound crazy but it is not, I would eliminate nearly all government involvement in everything two story and under. All the government should do is verify location and then verify appropriate utilities (which is both gov and private). We should do a lot of this on most things and make it so people can afford things.