1 The first version of this paper was presented to the Geuss–Skinner seminar at Cambridge University. My thanks to Raymond Geuss and Quentin Skinner for the invitation and to the participants for their merciless questioning. I am very grateful to Geoffrey Hawthorn who commented on too many drafts of the paper.

1 The first version of this paper was presented to the Geuss–Skinner seminar at Cambridge University. My thanks to Raymond Geuss and Quentin Skinner for the invitation and to the participants for their merciless questioning. I am very grateful to Geoffrey Hawthorn who commented on too many drafts of the paper.

2 See, for example, Hay, Cohn and Watson, Matthew, ‘The Discourse of Globalisation and the Logic of No Alternative: Rendering the Contingent Necessary in the Downsizing of New Labour’s Aspirations for Government’, in Dobson, Andrew and Stanyer, Jeffrey (eds), Contemporary Political Studies, 1998, Vol. II, The Political Studies Association of the United Kingdom, 1998, pp. 812–22.Google Scholar

3 See, for example, Strange, Susan, The Retreat of the State: The Diffusion of Power in the World Economy, Cambridge, Cambridge University Press, 1996.CrossRefGoogle Scholar

4 See, for example, Held, David, Democracy and the Global Order: From the Modern State to Global Governance, Cambridge, Polity Press, 1995.Google Scholar

5 See Skinner, Quentin, ‘The State’, in Ball, Terence, Farr, James and Hanson, Russell (eds), Political Innovation and Conceptual Change, Cambridge, Cambridge University Press, 1989, pp. 90–131.Google Scholar

6 Strange’s claim that ‘when the entire subway transport system of a major city like Tokyo can be brought to a standstill by some hitherto unknown pseudo‐religious sect led from outside the country, it is clear that the state‐control over the use of violence is under threat’ misses the point that it is legitimate violence and the authority of the state to punish that are at issue. Strange, Retreat of the State, p. 82.

7 Dunn, John, ‘How Democracies Succeed’, Economy and Society, 25:4 (1996), pp. 511–28.CrossRefGoogle Scholar

8 Dunn, John, ‘Conclusions’, in Dunn, John (ed.), Democracy: The Unfinished Journey 508 BC to AD 1993, Oxford, Oxford University Press, 1993, p. 246.Google Scholar

9 On the failure of representative democracy after 1929 see Linz, Juan and Stepan, Alfred, The Breakdown of Democratic Regimes, Baltimore, John Hopkins University Press, 1975.Google Scholar

10 In this sense participation in an open international economy had already encouraged the development of non‐parliamentary government through corporatism. See Maier, Charles, Recasting Bourgeois Europe, Princeton, Princeton University Press, 1975.Google Scholar

11 Prior to 1929, these powers had been used regularly between 1919 and 1924, first within constitutional limits to deal with revolutionary and counter‐revolutionary upheaval, and then in response to the hyper‐inflation of 1923. See Lepsius, M. Rainer, ‘From Fragmented Party Democracy to Government by Emergency Decree and National Socialist Takeover: Germany’, in Linz, and Stepan, , Breakdown of Democratic Regimes, pp. 3–79.Google Scholar

12 For further discussion see Breitman, Richard, German Socialism and Weimar Democracy, Chapel Hill, University of North Carolina Press, 1981 Google Scholar; Lepsius, ‘From Fragmented Party Democacy’; Stolper, Gustav, The Development of the German Economy: 1870 to the Present, New York, Harcourt & Brace, 1967 Google Scholar, part iv.

13 In the words of the former Labour chancellor, Philip Snowden, ‘The issue of the election is whether we shall hand over the destinies of the nation to men whose conduct in a grave emergency has shown them to be unfit to be trusted with responsibility.’ Quoted in Sturmthal, A., The Tragedy of European Labour, 1919–1939, London, Victor Gollancz, 1944 Google Scholar, p. 124.

14 See Sturmthal, Tragedy of European Labour, Polanyi, Karl, The Great Transformation: The Political and Economic Origins of our Times, Boston, Beacon Press, 1944 Google Scholar; Nurkse, Ragnar, International Currency Experience: Lessons of the Inter‐War Period, League of Nations, Economic, Financial and Transit Department, 1944.Google Scholar

15 The only successful experiment in social democratic government in Europe during the inter‐war years took place in Sweden. There the government which came to power in 1932, after the krona’s departure from the gold standard, implemented an economic and social reform project based on fiscal and monetary expansion driven by government investment and borrowing.

For a comparative discussion of the problems of social democratic governments in relation to the international economy see Sturmthal, Tragedy of European Labour.

16 D. Moggridge (ed.), The Collected Writings of John Maynard Keynes. Vol. XXV, Activities 1940–1944, Shaping the Post‐War World: The Clearing Union, Cambridge, Cambridge University Press, 1980, p. 149.

17 Moggridge (ed.), Collected Writings of Keynes, Vol. XXV, p. 11.

18 See Helleiner, Eric, States and the Re‐emergence of Global Finance: From Bretton Woods to the 1990s, Ithaca, Cornell University Press, 1994 Google Scholar; Ruggie, John, ‘International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order’, International Organisation, 36:2 (1982), pp. 379–415.CrossRefGoogle Scholar

19 Helleiner, States and Re‐emergence of Global Finance.

20 The only genuine international market of the Bretton Woods era was the Eurodollar market that emerged in the 1960s.

21 Cohen, B., ‘Balance of Payments Financing: Evolution of a Regime’, International Organisation, 36:2 (1982), pp. 457–78.CrossRefGoogle Scholar

22 Thompson, Helen, ‘The Nation‐State and International Capital Flows in Historical Perspective’Government and Opposition, 32:1 (1997), pp. 84–113.CrossRefGoogle Scholar

23 See, for example, Kapstein, Ethan, Governing the Global Economy: International Finance and the State, Cambridge Mass., Harvard University Press, 1994 Google Scholar; Evans, Peter, ‘The Eclipse of the State?: Reflections on Stateness in an Era of Globalisation’, World Politics, 50 (1997), pp. 62–87 CrossRefGoogle Scholar; Weiss, Linda, ‘Globalisation and the Myth of the Powerless State’, New Left Review, 225 (1997).Google Scholar

24 See Helleiner, States and Re‐emergence of Global Finance.

25 For a survey of endogenous growth theory see Romer, Paul M., ‘The Origins of Endogenous Growth’ Journal of Economic Perspective, 8:1 (1994), pp. 3–22.CrossRefGoogle Scholar

26 Compare, for example, the reaction of the foreign exchange markets to the British monetary and fiscal expansion of 1987–88 against the earlier experience of the French socialist government which pursued similar policies from 1981–83.

27 For a discussion of the post‐war projects in relation to representative democracy in a long historical context see Charles Maier, ‘Fictitious Bonds… of Wealth and Law On the Theory and Practice of Interest Representation’, in Charles Maier, In Search of Stability: Explanations in Historical Political Economy, Cambridge, Cambridge University Press, 1987, pp. 225–60.

28 In justifying representative democracy with universal suffrage, against those who wished to restrict it, Weber used exactly this argument: Considered purely in terms of national politics, however, the positive argument for equal suffrage consists in the fact that it is closely related to the equality of certain fates which the modern state as such creates. People are ‘equal’ before death. They are approximately equal in the most elementary requirements of physical existence. But precisely these most basic needs on the one hand, and, on the other, that most solemn and lofty facts of all are encompassed by those equalities which the modern state offers all its citizens in a truly lasting and undoubted way: sheer physical security and the minimum for subsistence, but also the battlefield on which to die. All inequality of political rights in the past ultimately derived from an economically determined inequality of military qualification which one does not find in the bureaucratised state and army. In the face of the levelling, the inescapable rule of bureaucracy, which first brought the modern concept of the ‘citizen of the state’ into being, the ballot slip is the only instrument of power which is at all capable of giving the people who are subject to bureaucratic rule a minimal right of co‐determination in the affairs of the community for which they are obliged to give their lives.’ Weber, Max, ‘Suffrage and Democracy in Germany’, in Weber: Political Writings (edited by Lasslam, Peter and Speirs, Ronald), Cambridge, Cambridge University Press, 1994, pp. 105–6.Google Scholar

29 For an overview of the West European post‐war projects see Milward, Alan, The European Rescue of the Nation‐State, London, Routledge, 1992 Google Scholar, ch. 2.

30 The most conspicuous exception so far has been the Common Agricultural Policy, despite the concessions made on agricultural subsidies in the Uruguay Round of GATT in December 1993.

31 But in Latin America the development project originated in the 1930s.

32 For discussion of the southern states see Hawthorn, Geoffrey, ‘The Crisis of Southern States’, Political Studies, 42: Special Issue (1994), pp. 130–45CrossRefGoogle Scholar.

33 See Wade, Robert, Governing the Market: Economic Theory and Newly Industrialising Countries, Princeton, Princeton University Press, 1990.Google Scholar

34 See Clarke, H. et al., ‘The Political Economy of Attitudes Towards Polity and Society in Western European Democracies,’ Journal of Politics, 55:4 (1993), pp. 98–109.Google Scholar

35 For an argument from the mid‐1980s that supposed, as far as could foreseeably be seen, that this would prove an intractable political problem, see Goldthorpe, John, ‘Problems in Political Economy after the Post‐War Period’, in Maier, Charles (ed.), Changing Boundaries of the Political, Cambridge, Cambridge University Press, 1987.CrossRefGoogle Scholar

36 Financial Times, 10 May 1996.

37 As a German official quipped on French economic policy in the first days of the Jospin government, ‘it took Mitterrand two years, and Chirac took six months. Maybe Jospin will take two months’. Financial Times, 10 June 1997.

38 On Germany’s success see Katzenstein, Peter, Policy and Politics in West Germany: The Growth of a Semi‐Sovereign State, Philadelphia, Temple University Press, 1987 Google Scholar.

39 This is not to suggest that wage restraint was a sufficient condition for low inflation. Those states that enjoyed the lowest levels of inflation during the post‐war era used a broad range of means to control micro‐costs and restrict the capacity of politicians to use inflation as a political tool. For the argument that the importance of wage increases as a cause of post‐war inflation has been over‐estimated see Smith, Michael, Power, Norms, and Inflation: A Sceptical Treatment, New York, Aldine de Gruyter, 1992.Google Scholar

40 Weber, Steven, ‘The End of the Business Cycle’, Foreign Affairs, 76:4 (1995), pp. 65–82.CrossRefGoogle Scholar

41 In his withering attack on the British Conservative government’s decision to return sterling to the gold standard in 1925 at the pre‐war parity, Keynes argued that the first mistake was to presume that wages would adjust to any given exchange rate.

‘We stand mid‐way between two theories of economic society. The one theory maintains that wages should be fixed by reference to what is ‘fair’ and ‘reasonable’ as between classes. The other theory – the theory of the economic juggernaut – is that wages should be settled between economic pressures, otherwise called ‘hard facts’, and that our vast machine should crash along, with regard only to its equilibrium as a whole, and without attention to the chance consequences of the journey to individual groups.

The gold standard, with its dependence on pure chance, its faith in ‘automatic adjustments’, and its general regardlessness of social detail, is an essential emblem and idol of those who sit in the top tier of the machine. I think that they are immensely rash … in their comfortable belief that nothing really serious ever happens. Nine times out of ten, nothing really does happen – merely a little distress to individuals or to groups. But we run a risk of the tenth time, if we continue to apply the principles of an economics, which was worked out on the hypothesis of laissez‐faire and free competition, to a society which is rapidly abandoning these hypotheses.’ Moggridge, D. (ed.), The Collected Writings off ohn Maynard Keynes, Vol. XIX, Activities 1922–1929: The Return to Gold and Industrial Policy, London, Macmillan, 1981, pp. 223–4.Google Scholar

42 See, for example, Financial Times, 28 April 1997.

43 Dunn, ‘Conclusion’, p. 249.

44 For the economic case for central bank independence see Alesina, Alberto and Gatti, Roberta, ‘Independent Central Banks: Low Inflation at No Cost?’, American Economic Review, 85:1 (1995), pp. 196–200 Google Scholar; Barro, Robert and Gordon, David, ‘Rules, Discretion and Reputation in a Model of Monetary Policy’, journal of Monetary Economics, 12 (1988), pp. 101–22.CrossRefGoogle Scholar

45 See Elgie, Robert and Thompson, Helen, The Politics of Central Banks, London, Routledge, 1998 Google Scholar, ch. 7.

46 Wood, Adrian, North‐South Trade, Employment and Inequality: Changing Fortunes in a Skill‐Driven World, Oxford, Clarendon Press, 1994.Google Scholar

47 See Wood, North‐South Trade. For a more sceptical analysis of the effect of international trade on the wages of unskilled workers see Bhagwati, Jagdish and Kosters, Marvin (eds), Trade and Wages: Leveling Wages Down? Washington, DC, American Enterprise Institute, 1994.Google Scholar

48 Nothing in the following discussion is intended to suggest that the future will necessarily continue along the same lines.

49 Most significantly, the SPD fell to its worst performance in Hamburg since the Second World War after re‐positioning itself against monetary union in the regional elections of November 1997.

50 Charles Maier, ‘Democracy Since the French Revolution’, in Dunn (ed.), Democracy, p. 134.

51 A point Alexander Hamilton candidly admitted in The Federalist, No. 28.

52 As an example of how far this judgment was engraved in post‐war politics take the following remark from Bernard Crick: ‘We today might want to consider the economic role of the skilled industrial worker rather than the conscript soldier; quite apart from talk of rights, all modern states depend upon him: he can be granted genuine political rights, or he can be indoctrinated and mobilised in the most elaborate and fantastic manner; but unlike the traditional picture of the peasant, he cannot be ignored. If the object of the state is now held to be his welfare, it is equally true that the safety of the state depends upon his support – on whatever terms.’ Crick, Bernard, ‘Introduction’ to Machiavelli, Niccolò, The Discourses, London, Penguin, 1970.Google Scholar

53 For a somewhat different argument that comes to a similar conclusion see Evans ‘The Eclipse of the State?’: ‘The danger is not that states will end up as marginal institutions but that the meaner, more repressive way of organising the state’s role will be accepted as the only way of avoiding the collapse of public institutions.’

54 It can be no coincidence that the retrenchment of the American welfare state has been paralleled by a large increase in the numbers sent to prison.

55 Hawthorn, Geoffrey, The Future of Asia and the Pacific, London, Phoenix, 1998, p. 1.Google Scholar