Specifically he says that the first roman emperors could walk around the city as if they were just another wealthy citizen who just happened to be in charge of government because they had real power. In contrast he says that as the empire became weaker and weaker symbols like crowns, capes, kneeling and court etiquette became more important in order to create the illusion of power that would protect the little power they actually had.
It seems all very reasonable to me, but is it correlation or causation?, and I wonder if this is true in general, do we see the same pattern in other nations?
In the Roman case, at least, neither correlation nor causation; merely incidental.
Very briefly, the early Roman Empire (what we call the Principate) evolved from, and continued to gesture toward, the oligarchic Roman Republic. Everyone knew that the emperors were autocrats; but any emperor who wanted to preclude the antagonism and enlist the talents of the Senate (always a good idea) had to maintain the fiction that he was merely a senator who happened to be the first among equals.
The crises of the third century, and the increasingly close relationship between the emperor and the legions that was both a cause and consequence of that disorder, stripped the Republican mask from imperial power. The later Roman Empire (which we used to call the Dominate) emphasized the emperors' transcendent might. To that end, the emperors borrowed court ceremonial from their Persian neighbors, and attempted to project a godlike image. The advent of Christianity provided a new symbolic and theological language for such display, but did little to change its tenor.
The openly autocratic Roman Empire, of - say - Constantine was indeed slightly smaller and less dominant over its neighbors than the pseudo-Republican Empire of Trajan. But it was still the most powerful state on the face of the Earth. Although the hierarchical organization of the later Roman Empire created sources of weakness that had not existed earlier, the splendor of the late Roman court was not intended to compensate for any perceived lack of power. It was intended, rather, to advertise genuine power more efficiently than ever before.
As the Empire declined, of course, the splendor of its court was increasingly out of sync with its failing strength. And there were times when the emperors really did try to "compensate" for military weakness with the grandeur of their ceremonial and capital - one thinks of the pneumatic throne in the great palace of Byzantine Constantinople. At least in theory, however, such display was always a currency backed by reserves of real power.