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Scholars have long debated whether Daoist political thought including the writings attributed to Laozi favor anarchism and reject the state as a legitimate and desirable political entity. In response, I contend that the anti-statist position in these debates misses the bigger picture in two respects. Firstly, Laozi’s political theory is not anti-statist as demonstrated here. While other early Daoist thinkers may have questioned the validity of the state, this was not the case for Laozi. Secondly, the core political critique at the foundation of Laozi’s political theory is not anti-government but anti-corruption. In Laozi’s view, rulers deviating from the Dao, the generative source of everything in the universe, is the ultimate form of corruption, and Laozi expresses strong dissent against how so much of the political establishment has deviated from this ideal. His proposed solution is not doing away with government but to have better rulers and better governments. In fact, as demonstrated here, Laozi's political philosophy contains a fair number of proto-democratic elements showing that classical Chinese political thought was not uniformly anti-democratic.