The story opens in Los Angeles in the 21st century, an unspecified number of years after a worldwide economic collapse. Los Angeles is no longer part of the United States since the federal government has ceded most of its power and territory to private organizations and entrepreneurs. Franchising, individual sovereignty, and private vehicles reign supreme. Mercenary armies compete for national defense contracts, while private security guards preserve the peace in sovereign gated housing developments.: 45  Highway companies compete to attract drivers to their roads,: 7  and all mail delivery is by hired courier.: 306  The remnants of government maintain authority only in isolated compounds, where they do tedious make-work that is, by and large, irrelevant to the society around them.: 176  Much of the world's territory has been carved up into sovereign enclaves known as Franchise-Organized Quasi-National Entities (FOQNEs),: 14  each run by its own big business franchise (such as "Mr. Lee's Greater Hong Kong", or the corporatized American Mafia), or various residential burbclaves (quasi-sovereign gated communities). In this future, American institutions are far different from those in the actual United States at the time the book was published; for example, a for-profit organization, the CIC, has evolved from the CIA's merger with the Library of Congress.: 22

Snow Crash is set in the Los Angeles of the future in which the government has collapsed and been replaced by corporations, mercenary armies, and a new type of organization, the Franchise-Organized Quasi-National Entity. Examples of the latter include Mr. Lee's Greater Hong Kong and the corporatized American Mafia. Government functions like road building, policing, and mail delivery have been taken over by corporations.