Government is the collective entity that attempts to provide some manner of control over a society so that either those in Government reap the benefits or so that the people reap the benefits.
Governments are required for any group over the size of a very small family. The smaller units are informal the larger are behemoths that do not even always know what all parts of said Government is doing.
A Government is a needed entity. Anyone that claims otherwise is a fool or anarchist.
I don't disagree with what you say here, but I would compliment it as such:
Government attempts to provide some manner of control: it's policies reflect the interests that are being protected- the kings, then the nobility, and now the parliaments and the closely intertwined political and financial elites that staff and run them. As we go back in history up to a certain point, the power of 'government' is held in an increasingly centralized way; Absolutism for example. But the nobility demanded representation, and eventually kings had to grant them; the House of Lords in the past for example. Then the wealthy males forced the ruling elites to allow them to vote, and people on down the economic ladder continued to struggle until all males could vote. Then women and minorities struggled for representation which eventually had to be granted. And now the majority of the world's governments are democratic; at least
far more democratic than 50 or even 25 years ago, all due to the struggle of various layers of society struggling for greater freedom- for further decentralization of decision-making, against the wishes of those who hold most power in the status quo. With democracy, at least there is an arena in which different sectors can vie for power, and elites or absolutists can no longer maintain total control through repression, though they continue to do so through economic strength. It's a continuum that never ends- I don't see how we can assume that this is the best that can be done? Take the 2004 election- two members of related elite families, who went to the same elite school, even were in the same bizarre elite college club, and most importantly received their funding from the same institutions and ultimately respond to that constituency, and its the same in most places. True, now at least we can all talk about it, we can read about it, and we can veto someone who is doing a
really bad job. But those gains have to be used to make further gains.
Take the Bolivian elections- you can say what you want about Evo Morales, but the fact is that there's few places which present such a stark example of a small, rich, white elite ruling over a mass of impoverished indian peasants, and it is almost unprecedented that the impoverished indians, a large certifiable MAJORITY of the population, actually were able to "hijack" the state by electing one of their own and use it for their own means- increasing living standards for the large majority, distributing the proceeds from natural resources in an equitable manner, and facilitating the equalization of income, and thus opportunity- a necessary step in a country so violated by centuries of institutionalized racial hierarchies of wealth and political power.
In that regard it is no different from the old Absolutist Kings, who also forged and utilized the state primarily as a way to meet goals and objectives (maximizing power, honor, wealth, etc), at the expense of their subjects but often at great benefit to themselves [for example, North Korea may be a failed state, but its sole voter/ruler/king is doing very well for himself). Hence, it is plain to see that government does have a principal function: to maximize welfare (the welfare of the interests who are in control: kings, elites, or people) and to more efficiently achieve major, large-scale goals (i.e. conquest, economic development, etc.). My point here is that government is there- the institutions and the structures are there- and they can be utilized, or "captured" by elites or by popular forces (as you said). Further decentralization of decisionmaking requires decentralization of economic power, essentially because of the way our system works. Massive centralization of wealth means regressing back to even more stringent forms of centralized political power- even in America, the same corporate donors who fund the spectacular billion-dollar elections
obviously do so in order to establish and protect their own agenda, and recent increases in inequality exacerbate that trend. The same corporate donors are then sometimes rewarded by being put in top cabinet positions, either from Wall Street or other Big Business sectors (corporate connections are almost a prerequisite in a political resume).
People are and must continue to struggle against such blatant muscling of the political system in favour of a small privileged class. That is when government is truly "by for and of" the people, as it should be, according to all the nice fourth of July speeches, and when it functions "best" (that is, representing and protecting the interests of the majority who elected them, not the short-term profits of the donors that fund them).
And that's my little rant on States.