Populism , nationalism , and xenophobia all contributed to the victory of the “ Leave ” campaign in the United Kingdom ’ s recent referendum on membership in the European Union . But these forces float on the surface of a larger sea change : a fundamental shift worldwide in the relationship between the state and the market . Since the birth of modern capitalism , these two frameworks of human activity have generally been at odds . While the market tends to expand geographically as its participants pursue economic benefits , the state seeks to keep everybody and everything orderly within the territory it controls . A merchant may recognize market opportunities in a foreign country , but he will run into the state — most immediately , that country ’ s immigration authorities — if he pursues them . How to reconcile the tension between the market and the state is the central concern of political economy today , just as it was for Adam Smith in the 18 th century , Friedrich List and Karl Marx in the 19 th century , and John Maynard Keynes and Friedrich von Hayek in their long debate on the topic through the middle decades of the 20 th century . Let ’ s consider two hypothetical extremes in the state - market relationship . The first is a seamless global market in which individuals can maximize their material benefits without any state intervention . The problem with this scenario is that you may live in a country that is vulnerable to all the negative consequences of no - holds - barred globalization , such as currency devaluation , labor exploitation , the flouting of intellectual property laws , and so forth . The other extreme is a world comprising entirely isolated autarchic states , where individuals are protected from external economic forces and the state has full autonomy over domestic affairs . In this scenario , you will have to forgo all the well - known economic benefits of the global division of labor . Between these two extremes lies most of the world as it is , characterized by regional integration projects like the EU or the North American Free Trade Agreement . We can identify important swings during the history of capitalism over the last two centuries , either toward the market or the state . For example , the repeal of the Corn Laws in the U . K . in 1846 favored a free market in international trade and accelerated globalization until the outbreak of World War I . After WWI , the pendulum swung back toward the state . Financial capital in the West was weakened politically , and a mobilized working class took the opportunity to demand jobs and social welfare programs that ran counter to the logic and rules of a globalized market . In the run - up to World War II , beggar - thy - neighbor policies and rampant protectionism ensued — with Britain leaving the gold standard in 1931 in response to a run on the pound . The Economist declared Sept . 21 of that year , “ the definite end of an epoch in the world ’ s financial and economic development . ” After the passage of Brexit , the same journal warned , “ Britain is sailing into a storm with no one at the wheel . ” The 1944 Bretton Woods conference marked another swing back toward the market , but this time allowed for some degree of national autonomy . Until the late 1960 s , a harmonious balance of international openness and national autonomy allowed for widespread prosperity . Turbulence returned in the 1970 s , however , as the slow growth and high prices of “ stagflation ” and a global energy crisis pushed the pendulum back toward fully liberalized markets — a shift from the Keynesian to the Hayekian world , helped along by Margaret Thatcher in the U . K . and Ronald Reagan in the United States . This brings us to the present . The economic crisis of 2008 , and the global economy ’ s failure to recover from it fully , put an end to the project begun by Thatcher and Reagan . As in the post - WWI period , workers came to see themselves as left behind by globalization , with political leaders favoring financiers and big business at their expense . In the case of Brexit , the “ Leave ” camp voted for more national autonomy , even though it will have a clear material cost . An American version of Brexit may not be far behind if the next U . S . president scraps the Trans - Pacific Partnership trade deal with 11 Pacific Rim countries , signed in February of this year . At a time when global trade negotiations are almost dead , the TPP should seem like a reasonable approach to boosting multilateral trade . And yet both presumptive U . S . presidential candidates say they oppose it , promising what would be tantamount to an “ Amexit ” from the global trading system . We are at an interregnum . Social and political discontent will continue to bubble up around the world until we return the state - market relationship to a healthy equilibrium . The problem is that no one knows how best to do this . Some propose re - harmonizing international markets with national autonomy , as occurred under Bretton Woods . But the post - war international economic order was built for the pre - globalization age , and we cannot put the genie back in the bottle , even if it were possible to do so . Brexit marks the beginning of the end of the latest era of globalization . What comes next is anyone ’ s guess , but we can be certain that it won ’ t be the final destination . By Yoon Young - kwanYoon Young - kwan , former minister of foreign affairs of the Republic of Korea , is professor emeritus of international relations at Seoul National University . -- Ed . ( Project Syndicate ) <ⓒ KoreaHerald ( www . koreaherald . com ) 무단 전재 및 재 배포 금지 >