Market perfection requires internalization of all externalities, and enclosure of all commons (these are two different ways of saying the same thing). The last commons to be enclosed is the state. It must be owned, or all its operations will tend to social vitiation.
Realized market perfection entails feudal monarchy. As markets operate and seek the healing of their own failures, then, so will they tend toward feudalism – or, at least, in conditions of high trust and confidence, and of general competence, its cameralist approximate.
So long as the state is not owned, it will not want to internalize other externalities or enclose other commons. Why should it? So long as the state is not owned, it will not on its own account want to maximize the NPV of its revenues (e.g., the IRS does not collect taxes for itself, but for the Federal government – for everyone, ergo no one). Thus will it have no nisus that is its own, but will be rather in the service of those who can best game the existing system. It will be swayed by their special interests, rather than its own. They will be its hidden owners; it will be theirs, bought and paid for on the grey market, or the black, or in perfectly legal but corrupt, quid pro quo transactions (e.g., massive contributions to the Clinton Foundation).
Who has a personal fief wants it to prosper in good health. His personal interest and the general interest of his fief coterminate. And when these relations are explicit, public and well understood, his subjects will therefore feel no inclination to replace him, unless he fails as a lord, and their fortunes then suffer; for they too, like the sagacious and virtuous lord, will see that their interests are his.
A fief with no lord on the other hand is just prey. It is for that reason unstable, apt to devour itself, weak and vacillatory, riven with internal conflict and disagreement, timorous, vulnerable to conquest or capture by interests inimical to those of its denizens. This is so even when it is prosperous and powerful. A state that is not owned is ripe for the taking by someone who would be owner. Such states are bound to dissolution, or to ownership.
All these same sorts of bad things can happen in an owned state, too, of course; but only when its owner is inept or wicked or foolish – when, that is to say, it is owned by a lord who is not proper lord of himself.
The prudent lord wants all costs of his people’s business accounted for properly, and by them properly paid, so that he can himself reap revenues from fees, tolls, taxes, and tonlieux he earns on market transactions. The more that costs are internalized, thus controlled, the greater then the prosperity and size of the economy, and the greater his revenue base. Perfect monarchy, then, tends toward market perfection.