We don't fit it in, because it's a nonsense. The distinction between the private sector and government is that the government claims the monopoly on initiating violence to enforce edicts. I'm in favor of decentralizing that role so that market incentives limit its effect.

I actually wrote a constitution which would trend toward what I'm looking for, based on the US constitution's framework. You need to set up explicit support for secession, with processes for how it's to be done peacefully, and that checks centralized power. The only way to escape the decentralization is a war of conquest, which is becoming more and more difficult in the age of gun and communications proliferation.