People should be more worried than they are by the fragmentation of states. . .in recent years, the main cause has been, essentially, ethnic separatism. . .the resulting nation states can be too small to govern themselves – Kosovo is an example, again. They either become failed states, magnets for terrorists and drug smugglers, or wards of powerful states or what is mischievously called the “international community.”
I want to believe that more fragmentation would be a good thing. To an economist, having more suppliers means more competition and more choice. The key here is choice. If people have sufficient choice about where to live, then I would hope that this would lead to better governance.
Of course, if people choose mainly on the basis of ethnic identity, then a government that satisfies the desire for ethnic solidarity or ethnic dominance has a lot of freedom to govern badly without losing power. In that case, a multi-ethnic state will put more pressure on government to govern well.