Right, but there will always be people who depend on an overarching power structure (A government), and depriving them of that desire is still coercive. Under this decentralized Federation anyone would be free to shop around for any Government they so wished for, rather than forcing an entire geographic area to submit to one ideology.
Government kinda requires coercion to fit under the definition of 'Government'. The word you're looking for is Phyle. And I'm 100% behind that idea.