There is no reason given in the show to think the Federation will 'Collapse in on itself' or start behaving tyrannically.
In no version of Star Trek does Starfleet have direct political control over its member planets. Member planets have civilian governments, and so long as their governments adhere to certain basic principles they are not interfered with.
The only reason to think that Starfleet will get so big it will destroy itself is if you're applying modern fashionable cynicism and misanthropy to a universe that's not designed for it.
I suppose it would eventually collapse, only because everything does in the long run.