So what's a nation of chesed? Note I didn't say a national attribute of chesed. Chesed on the national scale is a country that gives and takes are of it's people. This, of course, sounds pretty good. However, when its the prime direction or drive in a country, it leads to the overwhelming or smothering aspects of chesed.
The governmental attitude becomes "the people can't take care of themselves, the government must decide for them". Better for the government to decide more and more not just national issues but also more personal issues.
Not for command and control reasons, it's not an attempt to be dicatorial. More for the purity of reason of helping the people. This action or that is bad for people, they must not be allowed to do it. We must care for all the people and enforce common standards, so that none be allowed to fall below.
These aspects usually sound positive, and indeed are in moderation. They become negative when they prevent growth and success. When everyone is being held to a common denominator standard, when there is no risk of failure, and when there is no reward for success (the rewarding aspects of society are often prevented either because the resources are required to provide for fulfilling everyone's needs or because of fear of injuring or insulting the less successful) then there is no incentive to succeed.
BS"D - בסיעתא דשמיא