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functional languages ill-suited for large programs?

That's what Peter Van Roy is claiming, if I read him right.  In
http://lambda.weblogs.com/2003/10/22#a9361, he writes

    In our experience, true state (destructively assignable entities)
    is essential for reasons of program modularity (which for this
    discussion I take as meaning: the ability to change one part of a
    program in a significant way without changing the rest of the
    program). Threaded state, e.g., monads as used by Haskell or DCGs
    as used by Prolog, cannot substitute for it.

Not having used any functional language, I don't have an opinion one
way or the other, but would be very interested to hear what others
think about this claim.