I think its a "trust but verify" mentality. You know that your neighbor is probably trust worthy but you still keep tabs on them to make sure they are not secretly planning something against you.

The issue you have with stopping yourself is that your neighbor may still be doing so, and I'd imagine from a nation's perspective its crucial to have the same kind of info on them that others have on you.

"trust but verify" is an old Russian proverb and was Reagan's line that he used to refer to the USSR WRT a nuclear disarmament treaty.

Are we treating the Germans like the old USSR now? Is having an unfair advantage in commerce as important as knowing where are all of the nuclear missiles that are aimed at us?

I think it is somewhat less "crucial" than you appear to think; and I think that "because fuck you, that's why" is the foreign policy of a thug.

If it's apparently less crucial than I think then why do most major governments have clandestine intelligence services whose sole purpose is to spy on other nations?

Just because you have some paranoid fuckups in your government doesn't mean you should give them all powers unchecked, right? Like all else in hierarchical structures, there should be some proper oversight and control, by unbiased authorities (well, it would be nice at least). Problem seems to be, these services run at free will, they feel above law and constitution, justifying just about everything with "terrorist threat" mantra. Politicians seems weak/corrupt so they don't stand for common citizen's rights. Somebody from Obama's government expressed frustration once how all these services/programs/activities run basically on autopilot, and nobody dares to cut their budget.

Let's take a step back... does anybody truly believe current terrorism can shake foundations of any western society? I don't mean blowing hypothetical nukes in manhattan, but real things that happened. Planes falling, buildings collapsing, very sad events, but nothing major in civilization perspective. Our perception of these events is hugely disproportionate, based on our fears. Yet we are, step by step, losing our freedom like the alternative would be total annihilation and end of the world as we know it. Not even terrorist themselves want that. And they are not winning in any measurable way.

It's natural for any ambitious organisational unit, with strong leader, to try to grab all power, influence etc that's available. Normal comapnies have strict boundaries how far the power can reach, so for example you won't find a single bank that is effectively run by it's head of IT, in fact in contrary (IT is a true backoffice, in the back of the back of the back of the rest). Just set the boundaries and enforce them with budget cuts threat. Now who will do that is the question :)

On a statistical side almost anything else is likely to kill you. There's probably more people killed each year by ladders than some perceived external threat, and I don't see a war on ladders happening anywhere.

To me that sounds like no trust at all.

I do believe intelligence services are necessary. Essentially a government has two different sources of information: the overt sources, and the covert sources.

Both have their problems. The overt sources are easy for adversaries (in a very broad sense) to manipulate and observe. The covert sources have the inherent problem that less oversight usually means incompetence and abuse.