Taken from Theonomy in Christian Ethics, Greg L. Bahnsen. Purchase this powerful volume. (http://www.cmfnow.com/index.asp?PageAction=VIEWPROD&ProdID=15)
In the process of investigating the scriptural view of the separation of church and state it was observed that the sword of the church (viz., God's word) is not of second-rate power just because it does not operate like the sword of the state (viz., physical punishment, even execution). In particular the power of the church sword is evident from the success that is promised to its preaching. In this prosperity that the gospel has been assured by God's sovereign word there is the indication that the Older Testament "theocracy" is now a "Christocracy" intended to become world-wide in its scope. However, caution must be exercised in understanding the previous assertion. Much rests upon how one defines "theocracy" (a word originating in Josephus, not Scripture). In its simplest form, a "theocracy" would be the rule of God in a particular country -- that is, the moral rule of God (for in the sense of God's sovereign, providential government of whatsoever comes to pass in history everything would be "theocratic," and it would serve no useful distinction to use the word). Hence a "Christocracy" would be the moral (i.e., Messianic, in distinction from sovereign or providential) rule of Jesus Christ. In this sense the Great Commission (Matt. 28:18-20) intends for the nations to become a Christocracy. Psalm 110 has Christological reference; in it we read that the Lord will stretch forth His strong scepter in order to rule amidst His enemies who shall be for Him a footstool (w. I f.). The Lord judges among the nations and shatters kings (vv. 5 f.). Psalm 67 declares that God will indeed govern the nations upon earth (v. 4), and all the ends of the earth will fear Him (v. 7); the kings of the Gentiles will come to the light of God's kingdom and minister unto it, or else they will utterly perish (Isa. 60:3, 10, 12). Psalm 72 speaks of the reign of the righteous king; it is a reference to both Solomon's accession (vv. 1, 20; cf. 1 Kings 1:30 ff.) -- thus an exhortation by godly example-and to the rule of Jesus Christ, God's Messiah. He will reign in accordance with God's righteous law (vv. 1 f.) and thus honor, integrity, prosperity and peace shall permeate His dominion (vv. 2 ff.). All nations and kings, from sea to sea, are to serve Him and bless Him (vv. 8-11; 15-17); the whole earth is to be filled with His glory (v. 19). The Messiah will bring justice to the nations and will establish justice in the earth; even the coastlands (i.e., the nations on the very perimeter) wait for God's law (Isa. 42:1-4). To this end God's covenant people are to be a light to the nations, for they have been called in righteousness (Isa. 42:4; cf. Matt. 5:14!). "Many nations will come and say, Come let us go up to ... the house of the God of Jacob in order that He may teach us His ways and in order that we may walk in His paths, for out of Zion will go forth the law ..." (Mic. 4:2). The zeal of the Lord of hosts will accomplish Isaiah's promise from God that the government will rest upon the shoulders of the Messiah, and that there will be no end to the increase of His government, which shall be characterized by justice, righteousness and peace (Isa. 9:6 f.). All things are being put in subjection under the feet of Christ (Heb. 2:8; cf. 1:13; 10:13; 1 Cor. 15:24 ff.), even world dominions and thrones; there is no area of God's creation where Christ is not the Lord. His rule is to be authoritative in church as well as state. Christ is seated above every rule and authority: since He is the Head of all things, all things are subjected under His feet (Eph. 1:21 f.; cf. Matt. 28:18). The book of Revelation makes it clear that Christ is the ruler over kings, that the kingdoms of this world have become the kingdom of our Lord and of His Christ, that consequently, the Lamb on David's throne (the King over kings) will be the judge of the kings of the earth (Rev. 1: 5; 6:15 f.; 11: 15; 15:3 f.; 7:14). The only ultimate King in civil government is Christ, and all rulers of the nations derive their authority from Him; hence all magistrates are subject to Christ's word, even Christ's confirmation of every bit of the law (Matt. 5:17 f.). National leaders have no exemption from the law of God just as they have no escape from the universal Lordship of Christ. All thrones, dominions, rulers, and authorities were created by Him and for Him (Col. 1:16). If the Kings in Older Testament Israel were responsible to God's law because of the "Theocracy," then also magistrates today are responsible to God's law because of the "Christocracy."
What we learn from the preceding is that neither considerations with respect to separation of church and state nor considerations pertaining to the word "Theocracy" are sufficient to dissolve the civil magistrate's duty to obey and enforce the law of God. Every argument advanced against the theonomic responsibility of the civil magistrate that attempts to impose discontinuity between the social standards of justice in the Older Testament and those of the New Testament (i.e., the specific obligations of political leaders) by use of the word "Theocracy" collapses for two reasons: it conceives of "Theocracy" in such a way that it either (1) fails to apply to Israel exclusively, or (2) fails to be argumentatively relevant since the magistrate's theonomic responsibility was never grounded in, or legally dependent upon, such a consideration.
For instance, the idea that a "Theocracy" is where there is no separation of church and state would fall under condition (1) above since it simply does not apply to Israel (as the foregoing examination has indicated).
The same disqualification holds for the idea that a "Theocracy" is where God is the sole ruler of a people; with this outlook Israel would have ceased being a "Theocracy" at the anointing of Saul! However, Saul was clearly under theonomic responsibilities; thus Israel was either not a "Theocracy," or the "Theocracy" was not the ground of the magistrate's theonomic responsibility.
If a "Theocracy" is seen as a country where God intends the people to be a "nation of priests unto Him," then we must remember that God now intends the whole world to become a nation of priests-that is, the church is to permeate the world. Therefore, in this sense, Israel was not exclusively a "Theocracy" (number  above). If a "Theocracy" is where God is the King of the commonwealth, then Israel was not exclusively a "Theocracy" because God is and was declared to be King over the whole world (number  above). If a "Theocracy" is where the King not only rules but also delivers the people from oppression, then not only are most nations of the world such "Theocracies" (the executive head being military leader), but this consideration is argumentatively irrelevant since Israel's kings were under theonomic responsibility irrespective of their military prowess (number  above). If a "Theocracy" is where direct divine revelation can be sent to the king, then this is argumentatively irrelevant since the King was obligated to enforce God's law based on an abiding theonomic responsibility, not the current presence or absence of a message from God (number  above). Further considerations that present what are legitimate and noteworthy discontinuities between Older Testament Israel and a national government today could be mentioned (e.g., the anointing of kings at God's direction, the presence of the temple, etc.), however they all fail to be directly germane to the present thesis since they were not given (or scripturally expounded) in the Older Testament as the ground for the magistrate's theonomic responsibility. Hence their current absence says nothing about ethical obligation. Finally, if someone were to argue against the theonomic responsibility of today's leaders by referring to Israel's "Theocratic" character, meaning by "Theocracy" a nation obligated to keep God's law, then he could arrive at the conclusion that magistrates today are not under theonomic responsibility by sheer question-begging. If a "Theocracy" is a nation under obligation to enforce God's law, then Scripture teaches, according to the thesis presented herein, that all nations are "Theocracies." Hengstenberg claims that David's highest honor was to be the servant of God; here, said Hengstenberg, was theocracy in its deepest reality. In terms of this outlook Romans 13 would teach that every magistrate, as a servant of God, participates in a theocracy.
Other senses for the word "Theocracy" might be, and have been, suggested, but the lesson that should have been learned by this point is that one needs more than simply a word or label to nullify the theonomic responsibility of the civil magistrate. Only the explicit teaching of Scripture can turn back the continuity which holds with respect to moral obligation and ethical standard in the Bible. The magistrate today, no less than in Older Testament Israel, is required by God's abiding law to enforce justice and righteousness in social affairs. This conclusion has the weight of specific and extensive biblical teaching in its favor; thus the burden of proof would have to lie on anyone who wishes to contradict the conclusion on the basis of "Theocratic" considerations.