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So the economic paradise promised by unlimited, uninhibited, inescapable global free trade has proved illusory. President Clinton acknowledges that world finance is in the worst shape since the Depression. The International Monetary Fund doesn't have enough money to keep bailing out nations hit by the crisis. In Asia, the backlash is getting ugly as people who were promised riches suddenly find themselves poor--and turn on the nearest targets at hand to vent their anger. We've seen violence against the Chinese in Indonesia and political turmoil in Malaysia. Others look for old nationalistic, militaristic solutions. The Japanese prime minister has suggested that a ''wartime economy'' might save his country from its financial meltdown. Faced with Russia's descent into economic chaos, Siberia's Aleksandr Lebed recently made a bid to control the nuclear weapons in his region. The plague of discontent is moving westward, and it is likely to get worse before it gets better.

Many economists, politicians, social activists and environmentalists saw these dangers coming. But in the last decade their voices have been drowned out by fundamentalists of free trade who, claiming the defeat of communism, abandoned common sense as well. What is needed now, and for the future, is a restored sense of balance, moderation and humanity.

Utterly unregulated global markets, so the zealots told us, would achieve the most efficient allocation of scarce resources and thereby maximize the size of the ''pie'' to be shared by the world's people. But how to determine who gets what share? Within any individual country there's a government that is more or less responsible for distributing the pie fairly. Open, democratic regimes further ensure social justice. People press them to deal with market excesses by busting trusts to assure competition while setting rules for worker health, consumer safety, environmental protection. But no effective global government exists, and the organizations that do are not in any way accountable to the immense majority of the world's population.

Never mind, we've been told, vast wealth will be created by unhindered trade--and a rising tide lifts all boats. But the share of world trade grabbed by the United States over the last 20 years increased dramatically while the least developed countries, in particular many African countries, saw their portion cut in half. The boats of the rich countries, it would seem, got bigger and more opulent. Those of the poor have been shrinking, or sinking.

Nor is the problem limited to inequalities among nation-states. Of the top 100 world economies, 51 are corporations, according to David Korten's book "When Corporations Rule the World." Two thirds of international trade now involves transnational companies, and one third involves trade within a single transnational. As noted recently by the United Nations Conference on Trade and Development, small- and medium-size enterprises employing the majority of the world's workers are not faring well against these corporate behemoths. Meanwhile the rapid increase in global financial speculation and the furious shifting of "hot money" from one market to another has created enormous instability. This should have been obvious. But, until the crash came, speculators thrived. Their money was made at the unstable margins of the market.

Income inequality within countries has increased as well. Even in the United States, Bill Gates's fortune is equal to the combined net worth of the 106 million poorest Americans. Globalization has not tended to increase diversity and competition, but to standardize production and homogenize consumption. People are encouraged, and sometimes compelled, to adapt to the needs of global corporations. Governments that try to curb corporate excesses are accused of restraining free commerce. The World Trade Organization, seeing its role exclusively as building free markets, refuses to reveal its deliberations to the public, or be held responsible for the social, political and environmental costs of its decisions.

Providing a better system requires three things: We must slow down the rate at which we cede sovereignty to the global marketplace; we must build checks and balances into existing international economic instruments, with greater public participation and investor responsibility, and we must strengthen the parallel system of checks and balances found in the U.N. system of institutions and agreements.

These are complicated problems demanding many difficult decisions, but surely it is wiser to trust in our ability to solve them intelligently and democratically rather than to put our faith in a free-trade panacea that is dismally flawed.

Sadruddin Aga Khan, president of The Bellerive Foundation, recently hosted an international conference on "Policing the Global Economy" in Geneva.

Newsweek, October 12, 1998