This is the passage that gets quoted when someone wants to argue that the text is a manual for keeping people in the dark. Those of old who were good at the way did not use it to enlighten the people but to keep them simple. People are hard to govern because they know too much. To govern a state by knowledge is to rob the state, and to govern it without knowledge is a blessing to the state.
The charge is not unfair and the chapter does not make it easy to answer. It says plainly that a population which knows more is harder to govern, and it treats that as a reason to prefer the population that knows less.
Two things can be said without explaining the passage away. The first is that the word rendered simple or unspoiled is the book's standing positive term, the same one applied to the uncut block, and elsewhere it names a condition the ruler is also asked to be in, so it is not straightforwardly a policy of imposed ignorance from above.
The second is what the chapter attacks in the ruler. Governing by knowledge is called robbery, and the target of the sentence is the sovereign's cleverness at least as much as the people's. The complaint runs in both directions, and chapter fifty-seven identifies the same fault with skill, contrivance and published law.
Neither observation removes the difficulty. A book can be read as recommending that subjects be kept unlearned, and this chapter is why. Readers have been arguing about it for a very long time and the words support the hostile reading as well as the sympathetic one.