The Third Pillar

December 1, 2018
Capitalism builds private fortunes--often at the expense of the polity.Communities--tribes, neighborhoods, and kindred social structures--are the basis of human commerce and the marketplace. Yet, writes Rajan (I Do What I Do, 2017, etc.), former chief economist and director of research at the International Monetary Fund, markets and the state alike have assumed many of the roles of traditional communities. By way of example, he writes that whereas in years past, we might have taken an auto-less neighbor to the grocery store, "today, she orders her groceries online." The insistence on credentialing is one cause, with licensed professionals dominating many services that were once done within communities. While there are reasons of liability and public health at play, Rajan notes that the one-off transactions of today do not have the same network-building value as the repetitive, within-community transactions of old; "only individual interests matter, and they have to be met transaction by transaction." This zero-sum economic scenario is especially prevalent in poor communities, but it is not inevitable--though it has a long historical basis in the replacement by modern structures of capitalism for the "reciprocal feudal obligation" of the pre-capitalist era. Strong communities, argues the author, can promote democracy and contain crony capitalism and corruption, just as healthy markets can contain the authoritarian impulses of the state. In that regard, democracy, capitalism, and community need not be mutually exclusive propositions even if the modern American emphasis on the market has produced profound inequalities that might have been tempered "by sensible government regulation." Inequality yields radical populism, which yields authoritarianism, all, again, working against community. Rajan is sometimes repetitive, but his emphases seem well-placed, especially because we can see so much of his argument playing out in daily life, with private interests ascendant and the public good untended.A welcome survey of a big-picture problem: Rajan proposes a rebalancing to be brought about by decentralized politics, diverse immigration, and other measures that, though controversial, certainly merit discussion.

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February 1, 2019

The central argument in this latest work by Rajan (Katherine Dusak Miller Distinguished Service Professor of Finance, Univ. of Chicago Booth Sch. of Business;$SPACE$Fault Lines) is that three elements of society--state, market, and community--must work together in harmony in order for a country to prosper. Community can refer to a localized social group with a shared history or culture that has, to some extent, shared governance. The author contends that communities have been weakened over time and that there needs to be a rebalancing with renewed emphasis on sharing. He provides a history of the prominent growth in both state and market at the expense of community, and thoroughly discusses the effects of international trade and the development of information technology. Rajan is a defender of the post-World War II liberal democratic order and maintains that, in order to preserve it, it's necessary to decentralize government and reform the market. VERDICT Rajan's intriguing analyses and policy proposals, will appeal to those with an academic or professional interest in the effect of government and economy on the current social order.--Shmuel Ben-Gad, Gelman Lib., George Washington Univ., Washington, DC

Copyright 2019 Library Journal, LLC Used with permission.

February 1, 2019

Most economists home in on the relationship between markets and the state, but Rajan argues that markets don't exist in isolation but are intimately a part of the human community. When new technologies disrupt the market, they disrupt the community as well, with the sort of consequences we are seeing today.

Copyright 2018 Library Journal, LLC Used with permission.