To use your reasoning: a century ago the United States had much smaller government, and today we have massively larger government, but the country as a whole is far richer.
Government, above a certain small size, is a net drag on the economy.
If the US labor force were still distributed today the way it was a century ago, the US would still be poor. However, if the size of the government were still that of a century ago, the US would be much richer than it is now.