That there have been setbacks, in and of itself, is more of a symptom of spaceflight being difficult than an assessment on private industry, per se. But it does provide an opportune moment to ask why spaceflight is being nearly wholly commercialized in the first place.
It is notable that NASA's Space Shuttle program was shut down after its final flight in July 2011, and over three years later, the US is still in the position of having to pay Russia in order for US astronauts to reach space. The notable recent failures of commercial spaceflight, together with NASA's capitulation of manned spaceflight and recent steps by India and China to establish a space presence lead one to ask: why is US surrendering leadership in space?
NASA technology, being government funded, provided scientific advances that could be used across many industries; NASA maintains an entire separate site (NASA Spinoff) tracking the effects of spaceflight technology in the broader economy. With spaceflight being increasingly subcontracted to private industry, however, scientists and engineers that would have worked at NASA, providing advances that could benefit many, will now find themselves in the position of working in a more proprietary setting: any advances discovered at budding new businesses will benefit those businesses alone, if anyone.
And this is part of the mythos: the cherished idea, for those of a "fiscally conservative" bent, that private industry is somehow inherently more efficient than a government effort, no matter what the venue. It should be self-evident that this idea is problematic if for no other reason than private industry's need and drive to provide a profit first and foremost, something that a government agency does not need. Yes, a private industry might save money by paying workers less than a government agency might, but that can wind up akin to saving money on your car by only changing the oil every ten thousand miles; you save a little money now, but you are degrading your engine.
More specifically, SpaceX has recently found itself sued once more for labor violations even while squabbling with Boeing-Lockheed ULA over how much to charge per launch (even while the entire industry is receiving massive government subsidies to even exist). The latter point, in particular, points up the peculiar nature of the space industry: critics of public spaceflight (done by a government agency) seem to have little trouble with shoveling buckets of taxpayer money into private industry instead, in the form of subsidies. Government funding invested in NASA has resulted and can continue to result in a technological payoff for consumers and industries across the board, but funding poured into a private industry benefits that industry alone: an industry which, when finally successful, will likely be hungrier to focus upon commercial satellite and ultra-rich space tourism than to provide NASA with a scientific, exploratory route to space.
This is the space-industrial complex. The US is more eager to generate profits for a few than to maintain a leadership role in space exploration, scientific discovery, and technological development.
Is there a place for private spaceflight industry? Of course. But not only is the current industry playing by the rules of crony capitalism, rather than the general "free market" rules of capitalism most startups face, but also the US is increasingly sacrificing its past and current successes in space in order to enable space-based profiteering. The private space industry is welcome to exist as any other business, but we shouldn't give up NASA's worthwhile leadership role in science and exploration in order to establish it.
And Americans shouldn't have to watch our country fail at space while others succeed, and wonder if our country's time is passing.