If you listened to the guy at the end of the episode he says that by keeping the news of war out of his "utopia" it will maintain order and news of war would make chaos or soemthing like that I have to watch it again to remember.
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Okay well basically its like a totalitarian government that wants to control all of its citizens so they can ensure the stability of their power. They work to make sure the people of Ba Sing Se have no idea whats going on in the outside world so that they can maintain control over the population. They have the Dai Li as a secret police force (reminiscnet of the thought police in 1984) to take care of dissenters like Jet or anyone who speaks about the war.
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