"...but the people are unable to monitor and record the actions of the state.. then who exactly is master of whom?"
UK Gov't Proposes Massive Internet Snooping, Data Storage (http://yro.slashdot.org/article.pl?sid=08/08/13/2037219&tid=158)
solution (http://xkcd.com/525/) (might need to modified from the audio variant)
The best solution is to flood information, there's no way they can check everything now, try encrypting it and sending TONS of useless information around (oh wait, that's how the net works already).