"which effectively serves as a protection racket for their customers?"
Governments have the monopoly on sanctioned use of violence. They could choose to outsource that to a 3rd party, such as privateers.
Governments have the monopoly on sanctioned use of violence. They could choose to outsource that to a 3rd party, such as privateers.
It is true that one plausible mechanism of that transition is outsourcing. Let a mercenary outfit become too competent and your vendor can become your rival.