How to Reconcile Democracy, the State and the Global Market

Nation states were the vehicle for market capitalism, but global market capitalism has freed itself from regulations imposed by nation states. A trilemma between democracy, the state and the market became an irreconcilable one, and gathered momentum. The post-War period has shown it is impossible to have a fixed exchange rate, free capital movement and sovereign monetary policy all working at the same time. To reconcile the trilemma, development banks need to cooperate or merge to finance transcontinental infrastructure projects to push up growth and employment and the World Trade Organization (WTO) should include a norm whereby countries joining it adopt the same exchange-rate regime (be it fixed or flexible). Without a deep reform in the global architecture, disequilibria, both economic and social, will continue to worsen, and conflicts will arise – only another ‘great depression’ will shock the international economy to induce the necessary international cooperation and joint action.