So, in this episode, we found out that the source of all magic in the Fantasyland comes from the enslavement of miners brainwashed from birth to accept the dictatorship of the fairies. In short, in this universe, the source of magic is the fantasy equivalent of North Korea.
The dwarves are hatched and instantaneously indoctrinated with the ideology that they were born for the mines. They’re then given names by their pickaxes, further reinforcing the link between identity and acceptance of the existing social order. To shake off this lifestyle, they would have to abandon their own names. Notice how they were very friendly and encouraging of Dreamy’s dreams until he threatened to undermine the big lie at the center of this system of control: “There’s no place for you outside the mines.”
Plus, the whole establishment is presided over by a racially-determined junta, the fairies, which rules through intermediaries to ensure minimal contact between the ruling class and their workers. They do this to ensure that they have power to manipulate events as they see fit. When do they offer help? Why do they offer help? To ensure that those they want receive and maintain power. Do they try to stop Jimminy from killing those two people? No, they just turn him into a cricket to make sure someone sympathetic to the fairies has the ear of those in power.
So basically everyone owes Regina a big “thank you” cause, from what we’ve seen, fairy tale world is a dysfunctional piece of shit.