This chapter discusses the societal formation of “territorial states”, best exemplified by the European state system after the Peace of Westphalia in 1648. Territorial states possess well-defined borders and their capacity to wage war against each other is limited. According to Giesen, this leads to a “turn inward” that triggers a process of modernization: Monarchic rule becomes absolutist, tightening political control over the entire territory; the limited availability of resources necessitates more effective taxation; rulers exert control over their economies with mercantilist trade policies; developments in science demonstrate humanity’s mastery over nature and result in productivity increases. Territorial states are hierarchically structured with the monarch on top and the commoners below. The aristocracy loses its independent power base and becomes a “community of manners” at the princely court. Conversely, the bourgeoisie emerges as a social class and historical force—and with it the idea of a public sphere, which represents bourgeois class interests (in the economy) as well as a universal humanity (in literary circles), before it aspires to political representation.