I wrote a bit about this issue last May, and it's still really bugging me. Let me try another angle in.

It would be bizarre to suppose that the United States has a stream of conscious experience distinct from the streams of conscious experience of the people who compose it. I hope you'll agree. (By "the United States" here, I mean the large, vague-boundaried group of compatriots who sometimes act in a coordinated manner.) Yet it's unclear by what materialist standard the U.S. lacks consciousness. Nations, it would seem, represent and self-represent. They respond (semi-)intelligently and self-protectively, in a coordinated way, to opportunities and threats. They gather, store, and manipulate information. They show skillful attunement to environmental inputs in warring and spying on each other. Their subparts (people and larger subgroups of people) are massively informationally connected and mutually dependent, including in incredibly fancy self-regulating feedback loops. These are the kinds of capacities and structures that materialists typically regard as the heart of mentality. Nations do all these things via the behavior of their subparts, of course; but on materialist views individual people also do what they do via the behavior of their subparts. A planet-sized alien who squints might see individual Americans as so many buzzing pieces of a diffuse body consuming bananas and automobiles, invading Iraq, exuding waste.

Even if the U.S. still lacks a little something needed for consciousness, it seems we ought at least hypothetically to be able to change that thing, and so generate a stream of experience. We presumably needn't go nearly as far as Ned Block does in his famous "Chinese nation" example—an example in which the country of China implements the exact functional structure of someone's mind for an hour—unless we suppose, bizarrely, that consciousness is only possible among beings with almost exactly our psychology at the finest level of functional detail. If we are willing to attribute conscious experience to relatively unsophisticated beings (frogs? fish?), well, it seems that the United States can, and does sometimes, act with as much coordination and intelligence, if on a larger scale.

The most plausible materialistic attempt I have seen to confine consciousness within the skull while respecting the broadly functionalist spirit of most materialism is Andy Clark's and Chris Eliasmith's suggestion that consciousness requires the functional achievements possible through high bandwidth neural synchrony. However, it's hard to see why speed per se should matter. Couldn't conscious intelligence be slow-paced, especially in large entities? And it's hard to see why synchrony should matter either, as long as the functional tasks necessary for intelligent responsiveness are successfully executed.