Arnold (see here and here) bundles together several distinct claims about government.
1. Society is better off if somebody - anybody - stops the "war of all against all":
Once one warlord becomes successful, then it is easy for a second warlord to recruit followers, because people either envy or fear the followers of the first warlord. This process continues until everyone is driven to follow warlords.
To break a warlord equilibrium, you need government. That is the Hobbesian solution--a Leviathan that is capable of suppressing the "war of all against all."
This is an historically important but deeply flawed argument. There is an obvious reply: "Once the Leviathan suppresses the war of all against all, why won't it treat its subjects like slaves? Who guards the guardians?"
2. Government by a committee with formal procedures, including procedures for removing the current leader, is fundamentally different from government by one man.
I see government as an institutional arrangement. It is implemented by many individuals, with competing interests. The difference between government and warlordism is that these competing interests are resolved using rules that are viewed as more important than any one individual.
The problem with this argument is that committees can and do implement monstrous policies, and the main function of formal procedures is just to make whatever policies you have run more smoothly. For example, the Soviet Union from 1956 on was clearly an institutional arrangement, run by many individuals with competing interests, which were resolved using rules that were viewed as more important than any one individual. Khrushchev was peacefully removed from power and died of old age.
Thus, contrary to Arnold, I don't literally think that government is a "single warlord." I just think that rule by a committee according to formal procedures is not fundamentally different from rule by a single man. Committees and procedures are more predictable than individuals and case-by-case decision-making. But neither is predictably better.
3. Governments that do not personally enrich the leadership are fundamentally different from those that do.
Does paying taxes represent the same type of shakedown? I would say that it does not. With the Mafia, most of the money goes for the personal benefit of gang leaders, who hold their personal positions by threat of force. With the government, most of the money gets recycled back to people, and the government's leaders can be peacefully removed.
By most accounts, Lenin and Stalin lived like monks. Did that make their policies any less monstrous? Would they be any less monstrous if their colleagues were able to peacefully remove them from power - but chose not to? Similarly, why should I care if the government transfers my assets to the leadership, or someone else who isn't me?
My point, of course, is that whether or not you agree with Arnold's view that government is a good idea, he needs better arguments. I suggest the simplest: For reasons that remain poorly understood, the status quo in the Western democracies currently provides the highest standard of living in human history, and any radical change has a serious risk of ending in disaster.