As far as your romantic notion of post-Westphalia smaller states, it will fail in the presence of larger, non-state actors such as Dynastic Wealth and Trans-National corporations. These forces are controlling the large nations of today, smaller states will be even easier to devour.
In the US, the Walton family is setting the wage and benefits policies for employers, and the Kochs are binding us forever to fossil fuels. In my state AT&T is writing telecommunications policy and laws, and in the US as a whole it is Comcast.
Religion is also larger than nations, see the Middle East for historical lessons.
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