No, it usually doesn't. There are benefits of scale but there are also diminishing returns.

Having, say, a steel mill in every town would be a huge waste but centralizing all steel production in one place on the globe would provide only a very minor, if any, benefit over doing it in fifty countries at the massive hidden cost of now world-wide fragility of steel supply. (This almost happened with hard drives.)

You joke, but that's exactly what antitrust is about. When AT&T was broken up, dozens of flowers bloomed almost overnight. Unfortunately that was the also the apex of antitrust enforcement (certainly in the US and possibly worldwide).

In many ways, the ugly side of globalisation is often a failure to enforce real antitrust legislation: if a market has so few players that abandoning a location means losing a factory, then there should be space for antitrust action. You want a market so rabid that competitors would jump at the chance to take over an existing factory and already-skilled workforce.

Unfortunately it's also the sort of thing where nation-states rear their ugly heads, as they compete to establish their own champions. If I break my companies into smaller ones and you don't, your companies now have a powerful advantage when playing in my market, because they can exploit economies of scale that mine cannot. This has no solution unless we give more teeth to supranational bodies like the WTO, which nobody really wants to do, but it's probably the only way to save globalist capitalism from itself.

Independence in case of war is a good reason for governments to "overpay" domestic suppliers for defense contracts. It doesn't require them to isolate the general public from trade in peacetime.

Because nobody is arguing that. You're inventing an absurd position to argue against a pretty reasonable one.

>you're throwing away comparative advantage, wasting time and capital duplicating others' work (so this time and capital is no longer available to unsolved problems), etc.

Is this supposed to be a problem? Efficiency gains have simply gone into ballooning corporate cash stockpiles rather than demonstrably better purchasing power for consumers. Paradoxically, this is weakening the economy as more capital concentrates in fewer hands and consumer demand begins to falter.

Why is country less absurd than any other level of government?

The chasm between human development in a country's cities vs. its countryside is even wider around the world.

[0] https://en.wikipedia.org/wiki/List_of_U.S._states_by_income

Ah yes, that would be the definition of relatively.

Or are you implying that the difference in development between SF and Mobile, AL is bigger than the difference between the United States and Bangladesh? Because I would be highly suspect of that implication...