How about bubble -- one word -- or alternate reality -- two words? Both describe the "parallel universe" of dictators.
Many people live inside bubbles. In doing so, they insulate themselves from information from outside the bubble, and at the same time, they ensure that all the information they receive is from inside the bubble. From Dictionary.com:
bubble: anything that lacks firmness, substance, or permanence; an illusion or delusion (emphasis added)
Alternate reality is a synonym for parallel universe. [Wikipedia] It's fair to say that dictators live in alternate realities. To paraphrase the OP:
They don't see the world as it is, but only how they want to see it.
They don't know how average people feel.