Sounds kinda like you're thinking of a republic of cooperatives... That was kinda the idea of the USA to begin with, but you see how that turned out.
The problem is that humans were never designed to be in large communities without conflict. The largest viable community size that humans are able to cooperate cohesively in is around 2000. (most work better down in the <200 range) This is basic human nature. If there are too many humans around, someone will ALWAYS try and impose their will on all the rest, sometimes even proclaiming it to be "for their own good". Sometimes they really are trying to help people, sometimes not, but it always ends up leaving minorities trampled on.
Essentially what I'm getting at is, this stuff sounds great on paper, but can't work in reality because it's got humans involved.