On the contrary, I think Linux is the product of a free market, and Linux's lack of success is due to the market not being free enough (see also: my personal vendetta against Microsoft). The FOSS movement shifts focus to selling services around the software, which gives incentive for the companies to make the software free, interoperable and high-quality.
If a major Western government decided to adopt open-source throughout, it would save them a massive amount of money. The interface and programs are mature enough now that switching would be about as hard as XP -> Vista (look how different Office 2007 is to 2003 and tell me retraining costs are low by sticking with MS).
Doing this would force major software companies to drop prices and improve their products in response. This is called "competition". I don't think Adobe, Microsoft, etc. have been subjected to that for some time.
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