The Aretaevian monkeybrains hypothesis argues (along with most leftists and BBdM) that leaders and citizens have quite different interests, and that the primary problem facing government is in how to constrain the leaders so that they don't screw the citizenry too badly.
We monkeybrainers think that Castro/Saddam/Stalin/King Leopold-in-the-Congo (see, I stuck a full-blown King in there) is the natural evolution of the investor/leader interests, and that Denmark/Sweden is the current stop in the natural evolution of the egalitarian impulse.
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The formalist goal is to align the interests of the ruler and the ruled. I believe the profit motive and joint-stock formation would work best.
I have posted a response on my own blog.
The interests of rulers diverge from the ruled in two ways: Most obviously, resources are scarce. Also, the first priority of the ruler is to hold onto power, where the ruled have no direct interest in that. Bluntly, rulers steal, and they protect their power.
The reason for formalism is that rulers do far more harm in the course of protecting their power than they do in stealing, and that systems of government that aim to reduce stealing by reducing the security of the ruler make everyone worse off because of the extra damage done by the ruled in the course of retaining power. Iraq could easily afford what Saddam stole, but not what he did to stay in power.
As for BBdM's suggestion that the key difference between 19th century Belgium and 19th century Congo was the institutional arrangements of each... words fail me.
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