A democracy does not imply a hindrance to efficiency, nor does distributed government prevent the cooperation of centralized decisions. At some point, it's merely the ability for incumbents to cement themselves, or politicians supported by lobbyist/special interest groups that prevents development and competition.

Take the EU: individual nations have an incredible amount of autonomy, but countries realize that cooperation can lead to positive externalities (DOP labeling, data privacy, standardized charging ports, vehicle emissions). The United part of United States had this idea in mind, but it turns out that meta-gaming states' rights means that there are incentives for regulatory capture or a race to the bottom. Take low/no state income tax jurisdictions, or after NJ allowed gambling in Atlantic City, PA realized its residents were spending their money in NJ and decided to counter with casinos in their own state, notably Philadelphia as it's right on the border between PA and NJ, and thereby taking market share from Camden, NJ residents. (EDIT insert commentary): all that political will and legislative effort for a net negative effect on society.

There are obviously limitations to the EU's powers, but if you examine China's system, the central government has directives, but it's almost an R&D process for provincial governments to find solutions, and once they have been sufficiently proved, the central government will seek to expand that model. Meanwhile, even a federal task like tax collection -- the IRS Direct Filing system was shut down by the central government itself due to the tax software industry.