You are proposing a means of setting up a benign government. For it to be a government, it must wield sufficient power to rule. For it to be benign, it must be run by "good" men (i.e. those who will not use the state to increase their personal power). But as you pointed out, it is foolish to trust that the state will be run by such individuals, regardless of who they are. Thus it would seem that it is impossible to create a benign state. Thus we should avoid having one.
State is not "created" or "set up". This assumes in-born willingness and desire of subjects to have a state, and that a state becomes because so-called "people" need it. Or that having a state is somehow natural order of things. A state is just an extension of a tribal power structure, or, deeper into the past, successor to silverback hierarchy. A group of people (families, clans, etc.) that happen to have power over the rest on some territory. The centuries long brainwashing to the contrary has successfully muddled the issue and made it "something complicated and not for ordinary people to worry about." And a great topic for ranting. The semantics of this indoctrination are deep in the language. In newspeak it is impossible to think wrong thoughts. A state is not "run" by individuals - (that neatly implies that it is something above mere individuals) - state is just a terrific excuse for individuals for herding the rest. "State" is not good or bad, any more that a tree is good or bad. State is creation of human ability to abstract, and demonstrates self-limiting attribute of intellect in general. We are capable of imagining extremely perverse systems for screwing ourselves voluntarily. Using that to one's personal benefit is as natural as eating. And history proves that. The question is, can we really escape newspeak limitations ? Is a new language required for individuals to exist ? Maybe use of an ancient tongue that is not polluted with the modern bias ? Me