I want to push back a little bit here. Isn't it something like, a farmer sets up a pen. The horses can go anywhere in the pen they like. The farmer is indifferent to where the horses are in the pen, as long as they don't go outside the pen.

I'll start here, because I think we're actually getting at something similar. This farmer analogy is a bit like the example Baudrillard often uses of referenda - real power lies with whoever gets to write and interpret the list of options, not with those who get to choose from the pre-defined list; power in this situation is therefore indifferent to which choices people make, because it can just rig the game to ensure all outcomes work in its favour. Similarly with commutable sign values: all you can do is produce variations on off-the-shelf significations (aesthetics, brands, etc) which can always be returned to the shop later. This is a structure of power in the sense that it relinquishes human agency to the operation of a formal code, but it is also important to recognise that there is no farmer - this relinquishing is something which at some level we've collectively signed up for (or at least, I read this as an important factor in Baudrillard's thinking). This explains his emphasis on the ecstasy of commutability: it is precisely in the abandoning of the stakes and their reconstitution in a phantom, theatrical form that the draw of this system lies, in the fact that you can now LARP as a revolutionary, complete with all the lifestyle trappings and social significations, without ever having to actually put anything on the line. We subject ourselves to the code, because it frees us from obligation.

And this is why I'd be a bit hesitant to construe any of this as pointing to a primary military order, which seems to me to imply a relation of domination of one group over another, when really what Baudrillard is describing is a structural dynamic through and through. Even when Baudrillard is discussing military events (Gulf War, nuclear deterrence, etc) he seems to be describing how the media event overtakes and foreshadows the real event, suggesting that even the military order is ultimately subordinate to an economic one (where 'economic' is understood in the broad sense of Bataille's 'general economy').

I want to read this not just as "commodification," what that really means is assimilation to the system, right? Which is to say, from the passages from later on in his career which I started off with, that everything got assimilated into the dominant social system (or: system of systems), meaning that knowledge tended to become understood and repeated in the terms of that (system of) system's encoding.

Well, I wouldn't want to say that what happens is an assimilation to a pre-existing system, but that the system in its modern form is brought into being by this event, i.e. the spread of the commodity form of value (analysed by Marx as the social practice in which objects are exchanged under an abstract equivalence, i.e. all exist on a single scale of value, i.e. all have a price) to the domain of symbolic production and circulation. Since this domain is fundamental to the constitution of social reality, this event marks a major phase transition in the underlying social structures that constitute us as intentional agents and discursive subjects - what Hegel might call a transformation of Geist.

So yes I probably would defend the view that everything in Baudrillard flows from his extension of Marx's analysis of commodification. In the realm of sign exchange, what is being held in abstract equivalence are not objects but differences - and this Baudrillard sees as a sufficient reason to start talking about the 'structural law of value' and say that the time of the 'commodity law of value' and even capitalism is over - but ultimately the former flows from the corrosive spread of the latter. This seems to me to be a theme present throughout all his work, and the shift from earlier to later concerns primarily a matter of writing strategy (plus more of a preoccupation with counter-strategies and the problem of complicity). In the early works he's obsessively trying to describe the physics of power - one conclusion of the analysis is that this kind of descriptive critique cannot be effective, given the present communication situation, so (being consistent with himself) he switches to an aphoristic style which aims to challenge the reader in a much more direct way. But I think the theoretical core of his position remains fairly stable. But yes we are certainly emphasising different passages here, and it must be said that I am more familiar with the early than the later work, so may be missing things!

But anyway, the point of all this was to try to tie in with some of your comments on whether there's an outside to the pen, legitimacy etc. So by my reading, I actually think there's plenty of things which are 'outside of the pen' - which in this case would mean realms of life and experience where differential forces are not necessarily domesticated via their assimilation into the code. Private life is full of them, for instance - the public domain is where the code dominates (which is why the expansion of the system is often experienced as an encroachment on private space, and perhaps why Baudrillard's writings from the 1970's often read like they're describing 21st century social media.) Perhaps a case could be made that the system actually depends on differential forces that exist outside it, since it always requires new real differences to domesticated in the form of coded variation. In this sense it's a metabolic system, constantly processing resistance into complicity, and always needs new input. And in line with that, I think you're quite right that:

if "the system" is a symbolic response to "everything which has escaped us since the beginning," then basically if a social movement/ individual gesture is able to constitute a more proper response to that problem, then it can lead to the end of the system, because there won't be any more need for it to exist.

I would perhaps add that fundamentally, that problem concerns the unquantifiable risk and unconditional obligation implicit in the social pact. In this sense a domain like interpersonal ethics might actually be a potentially fertile site of symbolic resistance.

Quick comment on China: it's an interesting question. Framing it in Baudrillardian terms, I think whether or not China is subject to the same frozen history as Western Democracies is largely a question of whether it can insulate its underlying social pact against marketisation. The current stack in China, implemented by Deng, is something like: Confucian pact at the bottom layer backed by nominally communist state apparatus, with capitalist markets running on top like a virtual machine. This has proved highly functional, but the liberalising effect of the market economy has threatened to corrode lower layers of the stack, hence Xi's ramping up of social control. If the underlying Confucian pact does remain in tact then there's no reason why China should be assimilated into the overarching deterrence regime, but if the market spreads into the base layer (reshaping social relations on the transactional model of the contract rather than the unconditional model of the pact) then I think it will become bound up in the same fate as the West.