I just realized there's a counterexample to the theory that rugged territory is associated with less government: the Inca Empire.
This was mentioned in The Art of Not Being Governed and attributed to the fact that the upland kings in South America could afford a better army than the lowlanders.
Another possible explanation is that South American civilization did not have iron but did have bronze, a much more expensive metal. That in turn meant only royalty could afford the best weapons which would weaken potential resistance to State power. (I've mentioned the effects of that before.) As for why the State was stronger in the mountains, maybe it's because the local domestic animals were llamas instead of horses.