To understand Galatians 5:4-7 means to understand Christianity.
When a Christian who has been born again by faith in Christ begins to use a religious system (or, any other means such as rules, fake Christian character, good deeds because of guilt, pseudo-application of sermon points) they "have been alienated from Christ." This does not mean they are no longer saved, but it means they have been cut off from the power source. They have been severed from the vine and their spiritual growth and production is powerless.
"I am the vine; you are the branches. If you remain in me and I in you, you will bear much fruit; apart from me you can do nothing...If you remain in me and MY WORDS REMAIN IN YOU, ask whatever you wish, and it will be done for you. This is to my Father’s glory, that you bear much fruit, showing yourselves to be my disciples." -John 15:5-8
The word "alienated" in Galatians 5:4 is the Greek word katergethete and it means "you are made impotent." So, instead of continuing to grow in grace through an understanding of the apostolic doctrine (the Word), the Galatians have cut off the message and made themselves spiritually impotent. They are now living imitation Christian lives which were spiritually powerless.
So, actually the phrase, "you have fallen away from grace," is NOT a reference to people falling into a lifestyle of non-religious lives of pagan immorality. Instead, "fallen from grace" refers to believers in Jesus Christ who have fallen into a life of religious bondage to rules, codes which merely imitate true spiritual transformation. The true transformation is the production of righteousness in the life of the Christian who is maturing and producing the fruits of righteousness because of their growth in the Word of Jesus.
Paul understands that his Galatian believers are already saved and secure in their salvation, so Paul is encouraging them to continue in the Word, grow in their faith, produce righteousness, and so, run "a good race." Paul's goal for them was to produce righteousness in their daily lives by faith through the power of the Holy Spirit. While Paul was preparing the Galatians for their eternal rewards, the Judaizers were still trying to secure eternal salvation for the Galatians through works of the flesh.
The only thing left when the Word of God is rejected is to imitate righteousness and spiritual growth through rules, regulations and motivational sermons that teach an emotional, but impotent, practice of endless points of application in imitate the Christian life.
"The only thing that counts is faith expressing itself through love. You were running a good race. Who cut in on you to keep you from obeying the truth?" - Galatians 5:6-7
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