Competition is non-existent at the subnational state level. The number of subnational states are limited. Not all permutations of preferences would be availiable. For example, one state may support corporations but oppose taxation. Another state may oppose corporations but support taxation. There are a limited number of combinations. The legislatures at each state would override individuals quickly. Also, individuals do not have the incentive to move from state to state. There is no real competition. If individuals do have an incentive to move, then the state would be already abolished. This is still a popularity contest.
Even if the state dismantled into hundreds of autonomous municipalities, it would be still be the same. Capitalists would still have the capital to fund propaganda to delude individuals. Capitalists would fund politicans who would re-unite the manicipalities.
If the state was suddenly abolished, capitalists would fund another state. The capitalists' supply of money are unlimited. Multinational corporations would use their money from foreign states to fund a new state.
Multinational corporations would fund wars between each others' states so individuals would choose to elect politicians who unite the states. Multinational corporations would fund violence to show that conflict would arise if there are too many autonomous municipalities. Therefore, individuals would be believe that unity is required.
Unless individuals are convinced that anarchy is the solution, capitalists would fund propaganda to show that anarchy equates violence.
The state's existence entails the majority's consent. If the majority do not consent, they would revolt against the state. This is simply because majorities possess significantly more physical force than the minority that control the state. Unless the majority is disarmed, the state resides on majority acceptance.
Like anarchism, autonomous municipalism would not work without the majority's consent. As said, the capitalists would use anything to convince the majority to vote for pro-union politicans or collude the municipalities. Anyway, federalism is shifting the popularity contest to sub-national states.
The solution is to convince the majority that free markets are the best system. If a purely free market system is adopted that contradict's the majority's consent, then the majority would revolt. Without the majority's consent, a purely free market system would only exist if there is a dictatorship--that means strict gun control, censorship and spying--to prevent criticism of the free market. Free market anarchism would exist only if the majority agrees.
If the majority agrees to free market anarchism, then it is impossible to establish a state. Municipalism would work only if the majority agrees to municipalism.
If the majority is convinced to municipalism, then municipalism would inevitably exist. If the majority is convinced to free market anarchism, then free market anarchism would inevitably exist. It is much harder to be convinced of municipalism than anarchism. Capitalists would fund the reunification of municipalities.
It is easier to be convinced of anarchism than municipalism. Most libertarians do want municipalism. This suggests that municipalitism is derived from anarchism.