a small minority of thugs would rule via terrorizing the non-thug
As I read this, I thought of medieval Europe. Isn't that how feudalism came to be - emerging out of an environment of general lawlessness and chaos following the collapse of Roman Empire?
Terrorized common folk put themselves (willingly or not) under the protection of the most powerful local thug, and became serfs in the process.
Thus, the rise of what came to be known as the (chortle!) NOBILITY. History since then has been the story of thugs who called themselves kings sending their woe-begotten subjects to die on battle fields in fearful agony.
The U.S. experiment in democracy was an attempt to get out of that cycle. It worked for a while, but the new feudalism of multi-national corporations is slowly dragging us under their collective thumbs.
Hayek had it exactly wrong. Government exists to protect us from the thugs. But a new breed of thug, with no loyalty to person, nation, nor any philosophy beyond money = power has bought government and now bends it to their fell purpose.
So - are we screwed, or what?