While I have some quibbles with the rest of this post, this is actually a very strong point:
One point of dispute, though, is that to me the idea of state committed to neutral and effective administration of justice around laissez faire lines seems like an illusion. The alternative to reasonably effective democratic institutions and a viable left-wing political movement isn’t free markets but the capture of the state by large economic interests as during the Gilded Age or, indeed, the Bush administration.
This is essentially the same point upon which Noam Chomsky based an old lecture called “Free Market Fantasies.” The hope, of course, is that a sufficiently small government won’t be worth capturing. But this has always struck me as one of the stronger objections to a libertarian program.