Tao te Ching: 60

Ruling a big country is like cooking a small fish.
If Tao is employed to rule the empire,
Spiritual beings will lose their supernatural power.
Not that they lose their spiritual power,
But their spiritual power can no longer harm people.
Not only will their supernatural power not harm people,
But the sage will also not harm people.
When both do not harm each other,
Virtue will be accumulated in both for the benefit [of the people].

"Too many cooks spoil the stew." Cooking a small fish is the same. It means that excessive handling, even with the best intentions, can ruin something. It is a violation of wu-wei to do so. So the Tao is employed to rule the empire, then one practices wu-wei and does not compete with the world. Lao Tzu says in Chapter 22:

It is precisely because he does not compete with the world the world cannot compete with him. 

So what are these spiritual beings and their supernatural power? Superstition. Taboos. The amalgamation of various forms of spiritual practice and belief that guides people even though it doesn't follow the Tao. This isn't the "Thou shalt have no other gods before me" of Exodus 20:3. That is competition, and those that choose the path of Tao do not compete with the world, or any of the ten thousand things.

It also doesn't advocate abandoning the practices. The Pentateuch (notably Leviticus and Deuteronomy) lay down a series of laws and commands that formed a practical basis for living. Whether or not it was divinely inspired is going to be laid aside here. I'm not interested in the religious aspect of this as much as I am about the precedent it sets. It gives laws for what days to hold holy, how to dress, how to treat crime, and even what to eat.
In 1996, comedian Chris Rock gave a perfect example of a spiritual being losing it's power to hurt people,

"Religious books were written by man. ... Before there was refrigerators, before there was freezers, before there was seasoning, a pork chop might kill you! ... But times have changed. ... Five thousand years ago, they're like 'Damn, this pork is killing everybody. How can we get people to not eat pork?' OK, tell them God said don't eat it. Everybody said, 'OK, God said don't eat it.' and  they stopped eating it.  Times have changed, though. And now we got 'frigerators, we got freezers. We got Saran wrap. We got Reynolds wrap. Now a pork chop's your friend. That's right, if you're starving a pork chop will save your life!"

This is exactly what Lao Tzu means about spiritual beings losing their supernatural power. The spiritual power can no longer harm people because they recognize the habits and taboos for what they are. One might realize that they shouldn't covet because it's competing with the world, not because of the fear of reprisal. In the case of pork, we developed sufficient technology that it's no longer hazardous to eat easily perishable meat.

But the sage should not compete with these spiritual beings. Competition and fighting only leads people to hold more tightly to what they know (reversion). And when the leaders do not fight tradition but allow change (wu-wei), it benefits everyone.