Well, actually, it worked for some folks (fools?). Anyone here heard of the Aztec empire? The Flower Wars? The xochi yaoyotl?
http://en.wikipedia.org/wiki/Flower_war
This was an empire otherwise at peace killing its own youngest generation every year for political reasons. Try reading a little of that, Thywolf, for starters. Keep in mind, though, that the Aztecs lasted only 'till ze Conquistadores turned their sights on them. Your world, if you follow through with that idea, has one foot off the cliff and is balancing (poorly) on the other one.
I've wondered... maybe you could have that they're unwilling to colonize other worlds because they don't want to risk the colonies turning out to be better off than they are. Hell, in your place I'd have that as something that already happened: the guys in the colonies figger'd out they were being treated worse than toxic waste by the government and decided to revolt, so the corpos are conscripting young 'uns en masse so as to keep their own populace weak?
Now, if you'd really want to hammer in the grimdark, you could have those decisions be taken by a computer. A computer that's completely unconcerned with advancing the civilization, rather concerned with keeping those hoomyns on a tight leash, for whatever reason: since no one understands why the computer tells them to do this, their own leaders blindly follow the computer's orders out of selfish shortsightedness.
Any of this give you any ideas, wolf?