In 5th grade I think playing time should be as equitable as is reasonable, so I strongly disagree with how that coach operates, but if I were on the other end of it I would just think to myself that he's doing a disservice to the growth of the rest of his team and move on from it.
The league is supposed to be 'equal playing time' the way that I do on my team is my bench players will get more time in games we are up in and the close games not as much but it ends up roughly 'equal' as much as I think you can realistically make it.
In the youth league I help run, there are playing time restrictions depending on how many are on each team. If there are 7 or more players on a team, everyone sits at least a full quarter and nobody sits more than two (barring injury). Your league should do something like this, but I still vote jerk move.
As
@Yo Mama mentions, if your league was truly about "equitable" or relatively "equal" play time, this could easily be enforced via rules. The rec league that I still help out with has these kinds rules in place. They play the games as 5 8-minute periods. In the first 4 periods, there's no subs, those are done at the end of each quarter. Every player must sit at least one full period in those first 4 periods, and every kid must play 1 full period in each half. The 5th period is open substitution. If a player has not sat in the first 4 periods, thy are not eligible to play in the 5th period.
There are also player advantage rules in place for teams that have short rosters - for example, if you only have 6 players at a game and the other team has 8, the coach with 8 picks which player for the team with 6 sits in the 3rd period. That way, the best player can not play the entire game. I'd need to look at the most current version of the rules, but they also used to award points to the team with more players in the first and third quarters as part of the player advantage rule, as in theory the best players for the team with less players would be playing more. Something like 4 points at the start of the game, and another 4 at the start of the 3rd quarter if additional players were not there by half time. You'd be amazed by what some coaches will do to win even in 3rd grade rec, such as telling their worst players that a game was cancelled so they wouldn't be at the game, which is the actual case that necessitated the addition of this type of rule.
There are also rules in place for blowouts (mercy rule). In this particular league, a team that is up by 20 or more can not play defense outside of the 3 point line*. As the league is rec, teams are not allowed to play defense in the backcourt for the first 4 periods, with 5th period being full court allowed, other than the mercy rule.
This league also has a slightly higher, still recish division, with rules that are more akin to high school rules - open subs, press anytime but still mercy rule in place.
* While I like the intent of the mercy rule, especially since often times in blow out it's because the losing team simply does not have players capable of making decent passes or hitting any shots, the unintended consequence of the rule is that it makes it even harder for the team to score, as now all 5 defenders are packed into the 3 point circle, making it even harder for the losing team to get an open easy shot. I don't have a better idea really though that makes sense, and this league has used this type of rule for 20 plus years.