The Panopticon, while originally envisioned as a prison, seems like it would make for an effective model for a government as well.
Under this model the government would install a means for watching the movements and actions of it's citizens, while maintaining a veil of silence and\or secrecy about it's own under-takings. The simplest guise for this would be that it's all in the interest of National Security.
Any government that was intent on maintaining it's control of its citizens would likely see this as the optimal means to do so. Not as much time and energy would need to be spent on locating criminals and preventing crime, because the crime rates should reduce drastically since everybody knows that they are being watched at every moment.
One scary part is that the means to monitor everybody need not even exist, let alone be installed. The population just needs to be convinced that somebody may very well be watching right now, and they will modify their behavior accordingly. This is similar to stores having "video cameras" behind dark glass. The camera is not necessarily pointed at you, or even installed, but you are less likely to steal something because the chances that you'll get caught are a lot higher than if there is definitely nobody looking in your direction.
The part that I think is potentially the most dangerous would be a government that is able to act completely invisible to the people that it governs. Maybe this is just due to being a US citizen, but I think that it is important for there to be some sort of balance to any seat of power. The US Government is composed of 3 branches, between which the powers of governing are divided in a manner that is supposed to prevent any one branch from gaining the power to run away with the country. The Government is then balanced by the people that it governs. People with the power to remove from office those who do not support what the people feel is right for the country (at least ideally, the actual practice is another topic entirely).
A government that is able to act entirely without the consent or knowledge of it's citizens is a stage set for exactly the sort of tyranny that the US Revolutionary War was fought to stop all those years ago.
Basically, it is my belief that panopticonian principles should not be applied to the government, it just opens the door for the sorts of abuses of power that men have been fighting to stop for centuries.