AHC: Many City States

A city state can include more than one city (or village, in the case of some less populated countries). Several of the ancient Greek and medieval Italian city states controlled other cities.

Luxembourg, Lichtenstein, and Monaco are effectively city states.
 
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Here is a Point Of Departure that would produce a plethora of city states:

Roosevelt, Churchill, and Stalin conclude that the best way to keep the Axis powers from rising again is to break them up into states so small that they cannot re-unite for at least a generation.

Sometime late in World War II, after the struggles for Leningrad and Stalingrad have made Germany's situation hopeless, but before Russian victory became inevitable, Hitler is overthrown. The Germans and Italians sue for peace.

The peace treaty breaks up Germany, Italy, Austria, Croatia, Hungary, Czechoslovakia, and Romania into hundreds of city states.
 
Shattered India

Here is another Point of Departure that could produce many city states. It can be combined with the "Shattered Axis" POD:

Britain agrees to withdraw from India, but instead of a sectarian division into two states, it grants independence to a multitude of tiny states. The process might be just as bloody in the short term, but the result would include many pockets of economic and religious freedom.
 
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