Ha! Try using any ultra-capitalist third-world country instead of East Germany, and you will reach the opposite conclusion...
yeah, you could say the same thing about capitalism.. socialism is not great, but people act like it's the devil and capitalism is perfect.
Any form of government "breeds" sociopaths. The word breeds is a little misplaced. The fact is, sociopaths are created in time of distress in childhood. The more peaceful your childhood is, the less likely you will become inflicted.
Where sociopaths do the most harm in society, is when they are in power. If you centralize power in the form of a government, you will unwittingly draw the sociopaths to positions in said government. The best liars make the best politicians.
It is much easier to deal with sociopaths when they don't control armed forces.