Earlier quoted context omitted.
Human behavior that works well on the scale of groups where everyone knows each other (like households, certain types of tribes, extended family "clan" structures, cooperatives or communes; perhaps kibbutzim in 1950s/60s are a relevant example), probably limited by Dumbar's number, does not scale in an equivalent way to large groups where almost noone knows each other. We homo sapiens simply don't treat strangers in…
nobody is trying to scale the communal model with more communalism though - it scales with delegates and democracy and whatnot. My town sends a delegate to your town's delegate to discuss where we can mutually support each other. Maybe our elected delegates form regional councils for more regular or coordinated cooperation. It's all good stuff and is basically how democracy /should/ work. In reality, your local rep d…
A community of a hundred humans will have emotional ties that allow them to cooperate in a way that a community of a hundred sub-communities and their delegates simply does not.
If your delegates emotionally treat the other delegates as "their community" then you get essentially a bureaucrat/administrator class that exploits the communities for their own gain and results in the usual scenario a reality where your local rep doesn't mean anything. The observed dynamics in the early Soviet structure is relevant, where smaller soviets/worker councils were sending their delegates to larger soviets of soviets and so on in multiple levels, which had your exact plans and expectations, but quickly started to get poor results as these representatives (the process of which continued pretty much forever) become less relevant, and got effectively turned into an 'apparatchik' class for the opposite top-down control - which quite well matched the incentives of these individual representatives, who formed a "community" with their fellow representatives and generally benefited from the structure.
And if your delegates are actually faithful to their communities and properly represent for their interests, then (in the absence of some authority forcing communities to do things) the relationships between the communities become effectively a market economy, based on objective trade instead of altruistic cooperation (they agree to win-win cooperation, but disagree on any extensive resource transfers from richer communities to poorer ones, caring about their community and ensuring their advantage) and the large scale economy of the country effectively becomes equivalent to free market only with the basic participants in the economy being slightly larger, not households but these communities - this is also a historical observation of how the relations between kibbutz communities turned out.
There is no "maybe" that you suggest, these things have been tried out, we know the results, and (sadly!) your expectations do not match what happens. I fully agree with your "should", in a perfect world it really should work, but in the one we live in it does not. Perhaps it would work with some post-homo-sapiens which are better than us, but that would be a substantial change in fundamental behavior and response to incentives which IMHO can't happen with purely cultural or social change, it would require change in us as a species.