WMG / Bugsy Malone

The characters are all reality warping gods

They're literally playing at being gangsters and nobody's really dead.The "We could have been anything that we wanted to be and its not too late to change" signifies that they'll play something else next time like cowboys or knights and the song in general shows they're really friends playing at being enemies.A more realistic take is that they're normal children playing with the events being their imaginations.