When you asked why Fire wasn't a utopia, I was confused because you had practically just said the answer yourself: none of the major players can trust each other, because each of them consider only their own people to have any moral weight. And that is what you said, that you would sleep well after killing a foreign citizen to save a Leaf one. Not that you would consider it a necessary tragedy to protect the people you care about, and not that you would devote so much as a second of thought toward avoiding having to make that choice again in the future, and you said all your counterparts in other villages feel the same way.
When the whole world does that, then everyone looks like monsters to everyone else. At that point, it's even easier to say all foreigners are morally irrelevant, trapping the entire world in a spiral of indifference and hatred, so we get the current state of the world even from initial conditions where everyone cares about people outside their clan or their village just slightly too little. And at that point, it becomes impossible to trust one another to do things like build utopias, since all that power looks like a threat.
Which gives us the answer to your original question: the reason Fire isn't a utopia is that even though it's strong, it's not as strong as everyone else all at once, and if you withdraw resources from maintaining your current military dominance to focus on things like civilian wellbeing, other nations will see that apparent weakness as an opportunity to help their people by hurting yours, who as we've established they don't care about. Boom, the next shinobi war. And if you did anything with your vast resources that would put you on a clear trajectory to become strong enough to fight them all off at once, like letting civilians live well enough to lead to significant population growth, the entire world will throw everything they had at you, even though they'd be eviscerated afterwards and have an even harder time stalling civilization's collapse.
They'd do it even if you weren't being hostile, like the world did to Whirlpool. It's probably pretty easy to see from the reversed perspective - if Mist suddenly became insanely good at sealcrafting, and started using it to protect their civilians and grow more food and help all their citizens live comfortably, would you be glad your neighbors were growing happy and prosperous? Or would you see the impending population boom as a threat to be sabotaged and undermined? And if you find a low-risk method that sabotages your enemies' future strength without going to war, well, how could you not take it, even if it's morally horrific and accelerating the gradual downfall of the human race.
You can't build up because you would get smacked down. You can't truly work with other nations to break out of the downward spiral because you won't be trusted and won't trust them, since you both know that trust would be exploited. So Leaf ends up having to contribute to the status quo, even if you guys are better about humanizing the enemy than others, according to Akane. But it isn't working, and something has to change, or everything is going to crumble into dust, and everyone is going to die - including Leaf. So, again, will you help us?
