I don't think anybody says that.
What "they" say is that you can't have a brutal absolute totalitarian regime with a modern economy.
Which is true.
#1 illustration: North Korea.
Which is true.
Actually, it's not true. Nazi Germany had a really spiffy modern economy. Their downfall was caused by military failures, not economic problems.
Now, I'll certainly grant that North Korea's got a pretty odd setup. But they also have some significant technological capabilities.
Both Nazi Germany and North Korea did/do face the same problem, though, which is to ensure that the population remains loyal and working toward the goals of the rulers. The Nazis did it using nationalism (for most) and racial purity (for their goons). The North Koreans do it by putting Kim Il Sung and Kim Jong Il forth as gods.
IMHO, the latter works only as long as Kim Jong Il can remain a god -- once the shine is off, North Korea probably collapses.