The government doesn't have a mechanism to self-regulate. Democracy was supposed to regulate the government, and probably can in small societies, or perhaps if formulated the correct way. American democracy definitely doesn't regulate government, and it doesn't self-regulate, so it's a system that's out of control.
You see the same mechanisms (plus others) in many societies in the 20th century. I don't see any evidence or reason to think the government can manage the economy. And a big part of the causal explanation is what I've stated above. Another is that the government isn't omniscient; it doesn't have enough information. Market solutions don't need to be omniscient and price serves to carry information.
As an aside, fun fact: Did you know that in the US, price controls are used by a government committee to set the price of the fundamental good, which is the US dollar? That does a lot to disrupt price as a signal of information. People think in the US we don't have government price fixing, and they are wrong. (I use the US as a pet example but I guess the above is basically true everywhere.)
China, on the other hand, as compared to the west, likes centrally planning things, but they can only lean on that opposing ideal so hard before they'd fail too, for reasons you have pointed out. Both approaches have yielded different mixes of central planning and bottom-up self-organization, and they're both necessarily mixes.