ABSTRACT
During the four decades following the Great Depression, governments had little difficulty in demonstrating their capacity to tame markets, promote growth and keep social inequality within strict limits. Nowadays, markets have taken their revenge. Financial institutions decide which state policies are acceptable and which are not. In these new circumstances, governments are beholden to market forces in a way few could have predicted. Markets now define the limits of politics; the dismal economic science is back and economists now exert unprecedented influence in shaping public policy. Everywhere countries are looking for ways to compete and increase their global share of exports. Strikingly, most advanced economies have ceased to consider their home market crucial to a strong performance even though innovation seems to be happening everywhere; the new industrialized countries now openly challenge the technical leadership of the mature countries. If all this intense activity could be reduced to a single concept, it would be that of globalization. Globalization is redefining the role of the nation-state as an effective manager of the national economy. The question is why is this happening and how can nations everywhere maximize their leverage despite highly volatile conditions in price and demand?
