What does 'None are more hopelessly enslaved than those who falsely believe they are free' mean?

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What J W Goethe meant by this quote is probably this:

If the enslaved are aware of the fact that they are enslaved, the system is practically unsustainable and there are many good examples in history. The enslaved have strong incentive to rise against their slavers and the slavers have to guard them 24/7. There are big expenses for the slavers just to keep the slaves calm and the system has to break sooner or later.

But if the enslaved believe they are free, they have no reason to rise against the slavers, since they don't know there are any slavers at all. Thus the slavers don't have to worry about their safety and all they need to do is to make sure the slaves still think they are free. Such a system is sustainable for eternity. Therefore the people are "more hopelessly enslaved", because there is no hope to be set free.

As an example, we can take a dictatorship-like Cuba or Iran-and a democracy-like the USA or Germany. In Cuba, most people are angry and hate Fidel Castro, because they are aware of the fact that they are enslaved. People try to escape from Cuba and there were many attempts to kill Castro. This is clearly unsustainable, the communist government will cease to exist sooner or later.

In democratic states, on the other hand, people believe they are free. The slavers strenghten this feeling by setting up "elections" (which makes the people believe they can change something), comparing themselves to dictatorships, dragging people's minds to different problems through media etc. When you look at reality, you can see that democracies have no problem with upkeeping the system.
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