Small is beautiful.

Small things dont blow up and cause huge collateral damage.

Restaurants go out of business all the time. 1 collapse doesn't do anything.

However, 1 monster entity collapsing (LTCM, Lehman, AIG, any pharma today, or Amazon, Google, or 1 ship blocking a key waterway, etc) and its pandemonium.

City states may have warred more frequently, but they never led to the type of destruction that you saw with WWI, WW2 or the french wars of revolution.

Its wise to have resiliency by decentralizing central power, even if it costs a bit of convenience to the individual.