Your civilization is always operating under one of the available forms of government. The form which you adopt influences the productivity and trade of your cities, their morale, and other game factors.
Your civilization starts the game under Despotism. As you research advances, you can select other forms of government that become available. To change government, you start a revolution; this will cause your nation to suffer a period of Anarchy lasting up to five turns. At the end of the period of Anarchy, you will be asked to select your new government.
One result of governmental type is the level of corruption. Corruption is the loss of trade points due to inefficiency and greed. Under most forms of government, the farther away a city is from your capital (where your Palace is), the larger a proportion of that city's trade will be lost to corruption. A Courthouse will reduce the level of corruption in a city.
In general, offensive military campaigns are difficult under Republican and Democratic governments unless you give your citizens lots of luxuries to keep them happy. You may find it useful to convert to one of the more militant forms of government for the time needed to conquer a neighbor.
Scientific achievement requires a high level of trade, which are much easier to achieve under Republican and Democratic governments. Consider switching to a Republic as soon as you can; gaining advanced technology early in the game puts you at an advantage.
Civil War is devastating to any empire, and can be triggered by the loss of your capital city (whichever city contains your Palace). If you have treated your people with kindness, you are more likely to retain their loyalty. Each city that is celebrating reduces the chance of civil war, while each revolting city increases it. If civil war take place, up to half of your cities will rebel and declare allegiance to a new AI player. The new player will take half of your treasury and all of your advancements, as well as whatever buildings and Wonders are present in the seceding cities.
During a Civil War, none of the taxes/luxury/science rates may be set higher than 60%.
Civilizations remain in the Civil War state for just one turn, after which they enter Anarchy. Small civilizations which have fewer than 10 cities (by default) are immune from Civil war; they fall into Anarchy directly.
Anarchy is the absence of any recognizable government. Citizens are disorganized and unproductive, and will spend all of their income as quickly as possible, rather than paying taxes or conducting research.
Anarchy offers slightly less corruption than Despotism, but slightly more unhappiness. Any of the taxes/luxury/science rates may be set to 100%, but this is of no real effect because no taxes are actually collected or science research actually performed.
Settlers consume one food point per turn. Squares which, according to the terrain and improvements, should yield more than two units of food, production, or trade, suffer a one-point penalty.
Under Anarchy, each of your cities can support a number of military units (throughout this section on government types, "military" means all units except Settlers, Engineers, Diplomat, Spy, Caravan, Freight, and Explorer) equal to the size of the city, without paying production points for maintenance. Additional units require one production point per turn.
You may impose martial law under Anarchy; each military unit inside a city at the update will keep one unhappy citizen content (or, at least, will make the citizen act content, and not cause disorder).
Your initial government in the game, Despotism is the rule of an absolute dictator. Your control over your cities is maintained largely by martial law.
Despotism suffers the highest level of corruption of all forms of government. None of the taxes/luxury/science rates may be set higher than 60%
Settlers and Engineers consume one food point per turn. Squares which, according to the terrain and improvements, should yield more than 2 units of food, production, or trade, suffer a one-point penalty.
Under Despotism, each of your cities can support a number of military units equal to the size of the city, without paying production points for maintenance. Additional units require one production point per turn.
You may impose martial law under Despotism; each military unit inside a city at the update will keep one unhappy citizen content.
A Monarchy is a constitutionally-limited hereditary rule, where you are the sole ruler but subject to some approval of the aristocracy, and having need of the support of the propertied class.
Monarchy suffers the same small amount of corruption that the Republic does. None of the taxes/luxury/science rates may be set higher than 70%.
Settlers and Engineers consume one food point per turn.
Under Monarchy, each of your cities can support up to 3 military units, regardless of the size of the city, without paying production points for maintenance. Additional units require one production point per turn.
You may impose limited martial law under Monarchy; each military unit in a city, up to a maximum of 3, will keep one unhappy citizen content.
A Communist government is based on the idea that all people are equal. All means of production are owned by the state, rather than by private citizens. Communism gives a balance between military and commercial styles of government.
Communism has a modest amount of corruption, which does not vary by distance from the capital; even the capital suffers some corruption. None of the taxes/luxury/science rates may be set higher than 80%. Cities more than 10 squares away from the capital are considered to be only 10 squares away when computing the cost of inciting a revolt (see Entice City Rebellion).
Settlers and Engineers consume 2 food per turn. Diplomats and Spies created under Communism are always Veterans.
Under Communism, your cities can support up to 3 military units without paying production points for maintenance. Additional units require one production point each.
You may impose limited but efficient martial law under Communism; each military unit in a city, up to a maximum of 3, will keep two unhappy citizens content.
In a Republic, citizens hold an election to select a representative who will govern them; since elected leaders must remain popular to remain in control, citizens experience a greater degree of freedom, and work more productively. Citizens under a Republic become unhappy easily, but the productivity of your citizens allows a high level of trade.
Cities under the Republic suffer a small amount of corruption. None of the taxes/luxury/science rates may be set higher than 80%.
Settlers and Engineers consume 2 food per turn. Squares with at least one trade point deserved by terrain and improvements get a bonus of one additional trade point.
Under the Republic, military units require one production point each for maintenance. In addition, the following units are considered "aggressive" units:
Under Democracy, citizens govern either directly by voting on issues, or indirectly by electing local representatives to vote on issues. Democracy offers the highest possible level of trade, but also has the most potential for citizen unhappiness. There is no corruption during Democracy, but citizens become very upset during wars.
Under a Democracy, there is no limit on taxes/luxury/science rates. Settlers and Engineers consume two food per turn. Squares with at least one trade point deserved by terrain and improvements get a bonus of one additional trade point.
Military units require one production point each for maintenance. In addition, the following "aggressive" units generate unhappiness:
If a city remains in disorder (see Population) for more than two turns under Democratic rule, the citizens of the nation will spontaneously revolt and plunge the civilization into Anarchy.
Because citizens of a Democracy believe strongly in the government, their loyalty is unswerving. Military units of Democratic civilizations cannot be bribed (see Bribe Enemy Unit), and their cities cannot be inclined to revolt by enemy Diplomats and Spies.