I mean, one may assume incompetence and corruption. And perhaps that's the case.
But on the other hand, teaching languages are not the same as production languages. There are a number of languages that may be more powerful, but I think Delphi is a decent choice for teaching.
* You want to teach principles. Delphi allows you to teach OOP principles. You may or may not agree that OOP should be the starting paradigm, but that is at least a popular and conventional opinion.
* You don't want complexity. I am sure there are many alternatives that do things better. Heck, I am sure some Haskell guy will tell us itt how he can build a graphical interface in half a line of code. But remember these are kids who may not even understand what a program even is!
* You want results. In particular, it should be easy to create things like a user interface via the IDE. The fun about learning programming is to create something cool. Kids today most often use UI's and not terminals, and I think there is real value to allowing them to create something they might actually use. If you struggle through understanding your first program, and all it does is to print out "Hello World" on a black interface, it is somewhat underwhelming.
But if you can use the IDE to create your custom "hello world" box with pink borders and a unicorn picture - well that's cool!
* Of course you want students to be able to transfer their skills to other languages. But that's arguably not a big issue with Pascal.
* Finally, you want it all in one package. If you have to learn a vast module infrastructure, it just complicates things. Here is your "language", you can do everything in it.
I remember when we were learning, we started to try to build games and stuff. We used the tools available to use, because it was all very complex and we understood little. It was useful to have such a limited toolbox in the view of complexity. I think if we were forced to think about modules and many, many options to do a thing, we'd probably give up. Of course it is educational to try to come up with a solution with a limited set of tools!
From this perspective, Delphi is not a bad choice. Indeed I think the only other similar choice would be C#, which would probably cost more.