The problem with this sort of reasoning is that it relies on the benevolence of a dictatorship (and I don't use the term dictatorship pejoratively). It's all fine and good to have a system where people's needs are provided for and in general the populace is taken care of (for example, the housing situation in Singapore is very good and much better than places where people have to pay through the nose for shacks, like for example Hong Kong and SF).
But the real problem is that this system is by its nature fragile. On the one hand, this means that you never know when leadership will no longer be so enlightened and shit will hit the fan with nothing you can do about it.
From another perspective, because of this fragility, it's not capable letting its crazy people reach their potential. Can you imagine what the system would have done to creative hippies or even Steve Jobs if he didn't toe the line? If you don't give free enough reign to these people, your society will hit a ceiling where you don't produce the most innovative culture or people.