NGL, I've always found societies like this and in cultivation novels such a farce. They would literally either collapse under the sheer incompetence of their supposed rulers or someone would revolt and cleanse the government of the morally corrupt.
I suppose that could be what's happening here, but the taint is too ingrained. The commoners seem too affluent for the kind of suppression and misery that would be afflicted upon them generation by generation under this system.
I agree with you on the point that such sheer incompetence of these corrupt and evil rulers would eventually run the nation to the ground. But just because the ruling power is morally corrupt doesn't mean that it'll be overthrown or won't succeed. Just take a look today at Russia, China, North Korea, many South American countries, etc. Plenty of terrible, corrupt governments that are morally bankrupt, but they haven't been disposed of yet. If the ruling power has an iron grip over their people, nothing can be done unless by some miracle the entire populace are able to gather to bring about violent revolution, but that is a pipe dream. The only reason why in this manga the nation hasn't collapsed yet is because it hasn't even been a full year since Cedric has died basically, so there hasn't been enough time passing for the collapse to happen.
The bigger plot issue here is that Cedric had no idea just how evil his own underlings were, and was somehow easily poisoned just like that. Even though they state that Cedric grew lax because it seems he figured out rebirth, even then why go through that process? It would be way easier and simpler to demolish the retard trio there and then. THEN he can rebirth if he feels the need. But that's the thing with a lot of these dime-a-dozen isekai/reincarnation/rebirth mangas. With thousands of these kinds of mangas produced all the time, most will lack quality writing skills that top tier mangas do. For every Oda, Kishimoto, Kubo, Toriyama, etc, you get millions of high school level writers. Hence why these types of mangas never see much light of day outside of just people reading through every garbage isekai/reincarnation manga they find.