The issue isn't God's wisdom, but our own corruption. As George Orwell said, "Power corrupts and absolute power corrupts absolutely."
Look at the first king of Israel, King Saul. Chosen by God to be the nation's king, Saul was expected to obey God. In a sense, we see a theocracy once-removed. God, through Samuel, instructed Saul. Saul gave those instructions a quick glance and then did what seemed practical to him.
Saul's reign began with a great military flourish as he defeated the Ammonites miraculously. We're told clearly that God was with him, winning that battle. Ironically, his end came on the same battlefield against the Philistines. God was not with him this time. God did not speak to him because of his disobedience.
Samuel's farwell address contains fascinating guidelines to the people he ruled. Samuel did not direct their attention to obedience of their new king but notice what he said:
If you fear the LORD and serve and obey him and do not rebel against his commands, and if both you and the king who reigns over you follow the LORD your God--good!
1 Sam 12:14
Israel thought they had moved into a monarchy by demanding a king. God chose their king and made clear that their ultimate obedience was to follow the Lord their God. God has not handed off the reins and headed to a new galaxy to dabble with some other civilization somewhere else.
He is still here. Even as he allows governments to operate, ultimately he expects obedience to be to him. We can't lose sight of that fact: God is here, ruling still, and our job is to obey him.
Samuel closed his farewell address with encouraging words:
But be sure to fear the LORD and serve him faithfully with all your heart; consider what great things he has done for you.
1 Sam 12:24
No matter how our earthly governments rule, our job is to fear the Lord and serve him faithfully with all our hearts.