Unfortunately, this distinction is extremely hard to grasp for those indoctrinated and educated by statist systems and who have been immersed all their lives in the statist weltanschauung. Until a person realizes the difference between a state and an association for mutual security, they are unable to understand anarchism. Once a person has the epiphany and sees the difference, and starts to appreciate the fact that monopoly government is not the only way to provide security services, he is halfway to anarchism. At the very least, he understands the anarchist message and is likely to sympathize with it.
Now we can say how anarchy is related to panarchy. Anarchy is about a free society, a stateless society. Panarchy is about relations between stateless societies. Put another way, panarchy is the "foreign policy" of anarchy.
How can they be reconciled? - By not trying to reconcile them at all; by letting each party govern itself. Freedom should even extend to the right not to be free, and should include it. - P. E. de Puydt, Panarchy
Since anarchism opposes the initiation of force against others, it cannot force others to be free. Forcing others to be free is impossible - a clear contradiction. And as humanity includes diverse people, habits, opinions, and ideologies, it would be utopian not to expect some people to prefer various degrees and types of slavery over freedom. Furthermore, as we noted, much of current mankind has been trained like domestic beasts into servitude, and have not the imagination or ego to set themselves free. For the forseeable future, if not as long as man exists, there will likely be states. The best anarchists can hope for is that the existing states let us be and let us pass - laissez faire, laissez passez.
What is most admirable about this innovation is that it does away, for ever, with revolutions, mutinies, and street fighting, down to the last tensions in the political atmosphere: Are you dissatisfied with your government? - Change over to another! - Four words, always associated with horror and bloodshed, words which all courts, high and low, military and special, without exception, unanimously find guilty of inciting to rebellion - these four words become innocent, as if in the mouths of seminarists, and as harmless as the medicine so wrongly mistrusted by Mr. de Pourceaugnac.
"Change over to another" means: Go to the Bureau for Political Membership, cap in hand, and ask politely for your name to be transferred to any list you please. The Commissioner will put on his glasses, open the register, enter your decision, and give you a receipt. You take your leave, and the revolution is accomplished without spilling any more than a drop of ink. - P. E. de Puydt, Panarchy