I’ll agree with that at the point in the story where Tolkien brings us in. The hobbits had repelled an orc invasion a couple of generations before Bilbo at the Battle of Greenfields. This event is famous for the invention of the game of golf.
It really is like the European/American relationship, especially in the context of the Cold War, when it was written.
My chronology might be a little off, but if I remember correctly the Battle of Greenfields was the first and last in the Shire in about a millennium.
The hobbits were able to get along without a government because others protected them. That, after all, was the original purpose of governments, to protect people against outside aggressors. Those peoples in history who did not develop effective systems for accomplishing this just disappeared, destroyed by outside enemies.