He isn't saying that all state should be accessible to all functions, he is saying that all state (including subtle state like call stacks) should be colocated

He isn't saying that all state should be accessible to all functions, he is saying that all state (including subtle state like call stacks) should be colocated in a data store. The data in the store can still be protected (with access tokens or existential types or whatever) so that an item can be only accessible by parts of the code that have the "key".