I'm drawing two conclusions from your analysis:

• Wizards must inherently be much more intelligent than Muggles.
• The Wizard government is insanely bureaucratic.

The first point is ignored in canon, but ought to be noticed by Harry in MoR. This makes it even more in need of explanation that Wizards never noticed the Enlightenment (or never had it themselves much earlier). The interesting possibility is that they did have it, and the Methods of Rationality have long been actively suppressed for some reason.

In contrast, the second point seems to be well recognised in canon. Besides all of the off-hand references to silly regulations (flying carpets, anybody?), the Ministry seems to account for around half of the adult employment, and well over half of the employment of intelligent people. All three of the main characters went to work for the Ministry in the epilogue, with Hermione having two Ministry careers in succession. Outside of Hogwarts (which is only somewhat independent of the government, like the BBC), the Ministry is the only source of high-class professional careers in Wizarding Britain. (I don't count Gringott's, because it is an international Goblin-run concern, although Bill Weasley worked there in canon. Now that I think of it, both Bill and Charlie Weasley left the country to find good careers, so maybe Britain suffers from this more than other countries do.)

Is Magical Britain some kind of "totalitarian police village" or something?

When Grindelwald was setting up his Muggle puppet states, he wasn't trying to be evil; he was just doing what comes naturally to a Wizard.