Earlier quoted context omitted.
They will not be able to meaningfully contribute to such military alliance - every state having single fighter jet? Or a few tanks? And if they pool money to form an army - how will be the funding determined? Some states will want more defence, some less, some will prefer naval power, some airpower . . . if those people can't agree on anything to such extent that they want to be entirely separate, how would they agre…
They will cooperate if they have a threat of invasion, they won't cooperate to have a large standing army - and that is a good outcome. For example see mutual defence of Switzerland cantons before federal state.
Also good luck with making an army from nothing just in time before invasion.
Edit: and you are still ignoring weakness of such states on economic level.