Yes, I agree with much of this.
In past life I was involved in a private enterprise project where rusted in bureaucrats were paid large amounts of money to give up their positions.
It was expensive, but paid off handsomely for society in the long run.
Your observation about the need of a large swath of the populace for an external authority is right, I think, rather depressingly.
Your two questions are key, and perhaps the answers to them is where the hope & optimism I feel resides?
Once the perverse incentives of broken money materially weaken, perhaps the new class of bureaucrats will be more appropriately incentivised?