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Democracy is in serious difficulties. Three features of the crisis stand out. First is the dominant culture of disillusionment in democracy, which transpires as the mistrust in constitutionalist institutions and values. Second, political authority, both at domestic and international levels, is largely substituted by the rule of non-transparent and unpredictable social powers. Third, democratic states are deprived of much of their capacity to govern, but they retain a non-negligible capacity to coerce.The article is structured as follows. Section I introduces Karl Polanyi’s concept of embeddedness and juxtaposes it to the theoretical defense of market disembeddedness advanced by the classical political economy. It then points to the challenge that the complexity of the contemporary society poses to the idea of embeddedness and identifies the need for further analytical clarification of the idea. Section II tries to explain why the idea of embeddedness is intuitively suspect. One reason is found in the dominant understanding of liberalism as a regime that rests on the separation between private and public realms. The section closes with a reference to internal tensions of this reading of liberalism. Section III provides a diagnosis of the contemporary condition of disembeddedness. The core claim is that the combination of neoliberalism and globalization has created a condition of multiple—normative, social, political and legal—disintegration, which questions the very survival of democracy. Section IV addresses the question of transformation, focusing on the need for the reconceptualization of liberal equality.