Some good food for thought here. I don't think blockchain tech can completely replace government. There will always be a need for a physical meatspace entity to take action in the real world, enforce laws, etc. But blockchain tech in general, and smart contracts in particular, can be adopted as governance tools to great improve the efficiency of governments and cut through a lot of red tape.

Corruption, bribes, unfair treatment. These are all problems that smart contracts can solve, provided that politicians agree to abide by the results of the smart contracts. Imagine how much smoother and simpler elections would be if voting was done with, say, a decentralized application living on the Ethereum blockchain! Nobody could be accused of tampering with votes. There would be no need to ever have a contested recount. Citizens could vote from the safety and comfort of their homes, free from any threat of harassment or intimidation from opposition parties (not really a problem in the first world, but there are many countries where exercising one's constitutional rights can be quite hazardous to one's health). The potential here is so vast!