Philip Cerny analyzes the form and function of democracy in todays globalized world. He asserts that liberal democracy is being eroded through increased globalization and internationalism, and therefore factors such as public accountability, responsiveness, policy capacity, and legitimacy are all in decline. The result is the emergence of ad hoc public and private governance structures that undermine the democratic state from above and below, leading to a durable disorder of overlapping and competing institutions.

Cerny asks two questions:

1. To what extent is democracy as we know it so embedded in the nation-state that we cannot transplant it into the kind of governance structures and processes characteristic of a complex globalizing world?
    
2. To what extent is globalization itself essentially undemocratic?

The answers to these questions are very disturbing: The kind of world which is crystallizing through globalization is not only inherently less permeable to democratically-grounded values and conceptions of the public interest or collective good, but also less capable of generating the policy outcomes that people want (p.6).

Today's globalizing world is set on a somewhat shaky framework. A single world marketplace is emerging, resulting in the loss of state capacity to make effective economic policy decisions. This is a threat to democracy, as shown by a look at the history of political institutions throughout the world. Democratic transitions arise from the public demand for democracy when the state demands war taxes, manpower, loyalty, etc. If the state is unable to control economic policy, this natural system breaks down.

The nation-state can in some ways be said to be both a product of the global system of its era and the source of the dynamic drive for globalization (10). Regardless, it is necessary to question how globalization affects the economic, social and political environment within which states operate. This includes the internationalization of markets, the effect of new production techniques that are more flexible and tailored to a range of different market structural conditions, and the development of new information and communications technology. These advances may affect the sovereignty of the state, in that they corrode and transform specific tasks, roles and activities.

Currently there is a fiscal crisis of the state: the costs of simply maintaining state functions and structures outstrip the sources of taxation and other income. Further, the expansion of international trade and financial flows, while at first supporting domestic economic management and social democratic functions of the industrial welfare state, now makes states vulnerable to political and market pressures of financial liberalization and increased international capital mobility. This change compounds with the delegitimation of the national and industrial welfare state, a call for lower taxes and balancing budgets, and loss of regulatory policy throughout the world.

State legal systems- the core framework of national sovereignty- are increasingly being bypassed, especially by the most internationally-linked firms and market actors. Democratic public law is being replaced with negotiated private law, due to the changing nature of the public/private relationship, and private sector interconnections across borders.

Cerny concludes with a number of predictions about the evolution of government structures and the role of democracy in the future. He presents three possible scenarios: global hierarchy, global chaotic anarchy, and the emergence of a relatively stable, quasi-pluralistic system that he calls plurilateralism. Existing democracy, as we have known it, will no longer function effectively in a world of fragmented globalization.