At the start of this unusual and interesting book, which is subtitled “On Technology, Stupidity, and the Secret Joys of Bureaucracy”, David Graeber states what he calls the iron law of liberalism: any market reform, any government initiative intended to reduce red tape and promote market forces will have the ultimate effect of increasing the total number of regulations, the total amount of paperwork and the total number of bureaucrats the government employs.

An American anthropologist who is currently professor of anthropology at LSE, Graeber begins his inquiry with an angry and moving account of the horrendous form-filling he endured when he had to place his aged mother in a nursing home after she had a stroke. Much of the red tape he came up against surrounded the American Medicare system, which he uses to show how a regime of rules can promote a condition of helpless stupidity in those who deliver the services and those who use them. In effect, such a regime defeats the purposes of the institution it is meant to regulate. This is what happens, Graeber believes, when governments insist on market solutions to every social problem: “a nightmare fusion of the worst elements of bureaucracy and the worst elements of capitalism”.

With this diagnosis in mind, it is surprising that Graeber doesn’t explore recent British experience, which has seen successive Conservative and Labour governments attempting to import an American model of market-driven competition into public services. The upshot has been a compelling demonstration of his iron law in action. No doubt the NHS as it existed a generation ago was far from perfect. But it wasn’t a monument to wasteful and dysfunctional management, and even in narrow economic terms it operated far more efficiently than the elephantine bureaucracy it has since become. The vast managerial class that stands between the medical profession and patients today didn’t exist then, any more than did armies of low-paid contract workers.

The old-style NHS was like many of our public services. Established as part of the 1945 postwar settlement, they were creations of a strong state, but they were not distracted from their true functions by intrusive monitoring and shifting targets set by governments. In contrast, since the injection of market mechanisms into public institutions, life in Britain has become more invasively regulated than it has ever been. The cult of the market has produced a society throttled by bureaucracy.

Though it provides strong support for one part of his argument, there may be a certain logic in Graeber overlooking this experience. An activist in the Occupy movement and a theorist of “anarchist anthropology”, he ascribes most of the evils of society to oppressive state structures. In his book Debt: The First 5,000 Years (2011), he argued that the centrality of debt in social exchange came about only with the rise of imperial government. The book was rightly celebrated as offering a fresh perspective on the financial crisis. But there is nothing novel in Graeber’s overall scheme of ideas. As he has acknowledged, his account of the role of the state in suppressing spontaneous human cooperation has much in common with the Russian anarchist Peter Kropotkin’s account in Mutual Aid (1902). What Graeber fails to recognise is that the view of the state he advances also has something in common with that of neoliberals, who, like him, see state power as the root of all social ills.

The Utopia of Rules is packed with provocative observations and left-field scholarship. Ranging from witty analysis of comic-book narratives to penetrating discussion of world-changing technologies that haven’t actually appeared, it demystifies some of the ruling shibboleths of our time. Modern bureaucracy embodies a view of the world as being essentially rational, but the roots of this vision, Graeber astutely observes, go all the way back to the ancient Pythagoreans, who believed that mathematics, music and the motions of the planets all obeyed the same principles. The Enlightenment is supposed to have broken with such ways of thinking, but this is a myth: “The appeal to rationality in Descartes and his successors remains a fundamentally spiritual, even mystical commitment, that the mathematical or math-like abstractions that are assumed to be the essence of thought, are also the ordering principles that regulate nature – and this remained true whether they were identified with God, or seen as the ultimate proof of God’s non-existence.”

Over time, this vision of a world ruled by rational principles evolved into an ideal of a society governed by rules. It was bureaucratic utopianism that undid the great revolutions of the last century. Graeber cites Lenin, just months before the Russian revolution, declaring he would organise “the whole national economy on the lines of the postal service”. If the Bolshevik leader hadn’t been possessed by utopian dreams of bureaucratic order, Graeber seems to be saying, the Soviet experiment could have turned out so much more happily than it did.

It is an entertaining fancy, but it wasn’t the sinister appeal of the German post office that made the Soviet system so tyrannical. It was the Bolsheviks’ attempt to impose an unworkable economic system on Russia, together with their fear – entirely realistic – that, if they were given the chance, enemies of the revolution would overthrow the new regime and liquidate its leaders. Lenin grasped an iron law of revolution: whatever they believe or desire, revolutionaries will survive if, and only if, they construct and deploy an apparatus of repression more far-reaching and more ruthless than that of the regime they have overthrown. As he famously put it: “Who, whom?” Who will kill and who will die?

Graeber likes to imagine that future revolutions can be made by means of non-violent civil disobedience, not in a single upheaval but through a succession of “insurrectionary moments”. But it doesn’t matter how revolution occurs, or whether revolutionaries spurn violence. If they pose any genuine threat to the prevailing structures of power or to rival revolutionary movements, the insurrectionists will be repressed and liquidated anyway. Revolution isn’t a walk through Zuccotti Park, but a life-and-death struggle to gain and keep power. If anyone doubts this fact they should consider what became of the followers of the kindly, deluded Kropotkin once the Bolsheviks were fully in control.

In Graeber’s neo-anarchist view, the state is a demonic force thwarting human freedom. This seems to me a simple-minded philosophy, but perhaps it explains why he says so little about the public services that were created as part of the postwar settlement in Britain. Not entangled in government directives as almost every public body is at the present time, these were genuinely autonomous institutions. Regulated by those who worked in them, they weren’t burdened by the bloated bureaucracy that strangles them today. But they were able to enjoy this freedom only because a public space had been created for it by the use of state power.

Why is the state such a durable institution? One reason may be that most human beings grasp a truth not acknowledged by anarchist anthropologists: violent social conflict is every bit as spontaneous and natural for humans as social cooperation. Might this not be why so many have turned to state power for protection from evils such as organised crime? No doubt Graeber is right in thinking states are themselves always implicated in crime (though this hasn’t prevented them from enjoying high levels of popular support). But does it follow that state power is always and only repressive? Can’t it sometimes also be liberating? Turning away from these awkward questions to a fantasy of unfettered freedom, Graeber joins hands with the neoliberals he scorns.

• John Gray’s latest book is The Soul of the Marionette: a Short Enquiry into Human Freedom (Allen Lane/Penguin). To order The Utopia of Rules for £15.19 (RRP £18.99) go to bookshop.theguardian.com or call 0330 333 6846. Free UK p&p over £10, online orders only. Phone orders min p&p of £1.99.