As has been stated in this thread, Morrowind does not really have a government that can be described in a single word. It can, however, be described, which is what I'll really try to do with this post.
In the beginning there were the Chimer, and they followed the Prophet Veloth, so the assumption would be there was a theocratic autocracy. After Veloth's death, however, the Chimer splintered into a variety of different political units which were finally united under the banner of Indoril Nerevar who, with his with Almalexia and his companions Dagoth Ur, Sotha Sil, Vivec, bound the leadership of these units, including the different Great Houses and Ashlander tribes, into aptly named First Grand Council which, in my mind, is an oligarchy of sorts though perhaps Nerevar's role as Horator/military leader of the Chimer would make it more of a dictatorship.
After Nerevar's death at Red Mountain, however, there was a shift as the Ashlanders were muscled out of the Grand Council, which lead to greater political power for the Great Houses. This was, of course, another oligarchy of sorts , but again another force really prevented a true oligarchy as concurrent to the departure of the Ashlanders from the Grand Council the Tribunal assumed their roles as God-Kings of Morrowind and created the Temple, an institution which really enhanced their power, greatly tempered that of the Great Houses, and centralized all authority of the country in their hands, creating a sort of theocracy ruled by a triumvirate of autocrats.
This system, with the God-Kings controlling the Temple which controlled the Great Houses and the people, remained in position virtually unchanged until the Third Empire of Men (the Septims Empire), which forced a change in the system by emposing a King upon Morrowind. Originally the King's only real purpose was to act as the Emperor's represenative within the province and as a sort of check against both the Great Houses and the Temple, a task which I feel they would have utterly failed at had it not been for the reawakening of Dagoth Ur and beginning of the decline of the power of both the Tribunal and their instrument the Temple, which left a hole in Morrowind's longtime political that the monarchy was only too perfect to fill, though I really don't believe that either Barzeniah or Athyn really tried to expand their power significantly, which lead to a period where the Temple was weak and the Great Houses ran relatively wild creating for the first time a real oligarchy as the members of the Grand Council began to assert more authority with less supervision.
This oligarchy, however, was utterly doomed with the rise of Helseth who, recongnizing the monarchy's position to fill the Temples declining role in Morrowind's political system, began to expand his power by leaps and bounds by politically outmanuevering the Great Houses and assuming the authority that had been abandoned by disappearing God-Kings and, eventually, the Nerevaraine. This centralization of power from Nobles and the Temple reminds me somewhat of the actions of the Kings of Wester Europe during the 1500 and 1600's, which would make modern Morrowind a proto-Absolute Monarchy.
The governmental situation in Morrowind is what one might call a stable anarchy. You have a number of big players that influence the final picture, but no ultimate head of state. You've got the Great Houses, whose primary power is land ownership, along with their unique contributions to Morrowind's socio-economic health (Hlallu business interests, Redoran military prowess,etc.). You've got the Tribunal Temple, which also owns land while having great influence in the realm of ideas and daily conduct. Then there are the Tribunes themselves, which appear to be linked to, but somewhat separate from, the Temple hierarchy. Indeed, within the Temple, there are several branches (priests, armingers, ordinators) which do not always get along.
Then, of course, there are the Imperial influences: legion units, the Cult, the East Empire company, and the Monarchy, which is sort of a halfway point between Imperial politics and Dunmer politics.
Don't forget the tribes, which, despite their lack of influence in national politics, dominate their territories and must always be taken into consideration when considering matters of trade and war. And, with no explicit head of state, every individual has a variety of options as to how he sees to his own security.
The structure of power is always the result of push and pull between many players, big and small; but it is only in a place like Morrowind where this fact is plainly visible to the average person.
I like this post even if I disagree with it somewhat.
I think he is quite awesome. A Game At Dinner is one of my favourite books in game next to the historical and mythological ones.
A Game At Dinner is historical heh.