I think this is one of the finest essays I have read. You make a penetrating analysis of the problems brought on by big government. Your observations regarding the current state of large governments ring true to me. More to the point, the proposed solution sounds effective as well, "Decentralized control that deals with a limited number of inputs of maximum importance has higher probability of success".
I am not sure what such a system should look like. My attempt to model intelligence of systems led me to construct a government model that you may want to check out. It focuses exclusively on protecting and enhancing the life of its citizens. I think the model is aligned with Ashby's and Conant's works, and therefore might also satisfy the demanding criterion that you have developed in your work.
Regards, Willy