It is ironic that although the last decade has witnessed an appropriately lauded wave of transitions to capitalist democracy, the advanced industrial countries that stand as the presumed exemplars of the synergies between capitalism and democracy are in deep trouble. The era of noninflationary economic growth and full employment in the OECD ended abruptly in 1973, and whether it will ever return must be in serious doubt. The policy legacy from the golden age of capitalist democracy is under siege in this new straitened economic climate. Just twenty-five years ago, the mixed economy in which governments redistributed wealth and social risk without harming the macroeconomy was considered by many to be the greatest achievement of the postwar industrial democracies. Today, most government interventions in the economy are viewed with skepticism and many pundits contend that redistributive objectives must be sacrificed at the altar of efficiency. The driving force behind this perceived transformation of capitalist democracy is thought to be the globalization of markets and the attendant ease with which production and capital can be moved around the world in search of higher rates of return.

The standard line on globalization is that markets now dominate politics as social forces and there is nothing that governments can do about it. For anyone interested in substantive equality or indeed the vitality of the democratic process, this is a distressing conclusion. Markets generate winners and losers (in the short term at least), but it is commonly assumed today that it is impossible to help losers without inciting socially damaging behavior by winners.