Creative Destruction and Federalism

Boyes recent examination of the predatory impact of progressive philosophy and policy calls to mind a fellow blogger's observation:

US economic growth can be characterized as a 3 horse race - the horses are called Smith, Schumpeter and the State. As long as the first 2 are ahead of the last, the economy can continue to grow.

There are a number of points to be made about the emergence of a system of Federalism. North, Wallis and Weingast in their new book Violence and the Social Orders describe the state in natural orders (limited access) and open access orders. They indicated that, in open access orders the state as represented by the government becomes larger, denser and more visible in society. They also underscore the importance in open access orders of both a national government and what they call subnational government organizations - towns, counties, improvement districts, school districts, and states.

I wonder to what extent this emergent federalism acts as a force to balance the predatory forces of the state? Further, is it possible that the 3 horse race can in any way constrain wealth destruction by the state?