From one of the most important economic thinkers of our time, a brilliant and far-seeing analysis of the current populist backlash against globalization and how revitalising community can save liberal market democracy. Raghuram Rajan, author of the 2010 FT & Goldman-Sachs Book of the Year Fault Lines, has an unparalleled vantage point onto the social and economic consequences of globalization and their ultimate effect on politics and society. In The Third Pillar he offers up a magnificent big-picture framework for understanding how three key forces – the economy, society, and the state – interact, why things begin to break down, and how we can find our way back to a more secure and stable plane.The ‘third pillar’ of the title is society. Economists all too often understand their field as the relationship between the market and government, and leave social issues for other people. That's not just myopic, Rajan argues; it's dangerous. All economics is actually socioeconomics – all markets are embedded in a web of human relations, values and norms. As he shows, throughout history, technological innovations have ripped the market out of old webs and led to violent backlashes, and to what we now call populism. Eventually, a new equilibrium is reached, but it can be ugly and messy, especially if done wrong. Right now, we're doing it wrong. As markets scale up, government scales up with it, concentrating economic and political power in flourishing central hubs and leaving the periphery to decompose, figuratively and even literally. Instead, Rajan offers a way to rethink the relationship between the market and civil society and argues for a return to strengthening and empowering local communities as an antidote to growing despair and unrest. The Third Pillar is a masterpiece of explication, a book that will be a classic of its kind for its offering of a wise, authoritative and humane explanation of the forces that have wrought such a sea change in our lives. His ultimate argument that decision-making has to be watered at the grass roots or our democracy will continue to wither is sure to be both provocative and agenda-setting across the world.
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Raghuram Rajan. The Third Pillar: How Markets and the State are Leaving Communities Behind
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CONTENTS
PREFACE
INTRODUCTION. THE THIRD PILLAR
1. TOLERATING AVARICE
2. THE RISE OF THE STRONG BUT LIMITED STATE
3. FREEING THE MARKET … THEN DEFENDING IT
4. THE COMMUNITY IN THE BALANCE
5. THE PRESSURE TO PROMISE
6. THE ICT REVOLUTION COMETH
7. THE REEMERGENCE OF POPULISM IN THE INDUSTRIAL WEST
8. THE OTHER HALF OF THE WORLD
9. SOCIETY AND INCLUSIVE LOCALISM
10. REBALANCING THE STATE AND THE COMMUNITY
11. REINVIGORATING THE THIRD PILLAR
12. RESPONSIBLE SOVEREIGNTY
13. REFORMING MARKETS
EPILOGUE
ACKNOWLEDGMENTS
NOTES
Index
About the Author
About the Publisher
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To Radhika
Title Page
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Low education, low incomes, and high unemployment are a recipe for drugs, alcohol, and crime. At its peak in 1979, there were 67.4 murders per 100,000 residents in Pilsen, over double the wider city rate. In comparison, Western Europe averages a murder rate of about 1 per 100,000 per year. The average military death rate for Germany and the Soviet Union during World War II was about 140 per year per 100,000 of population.7 Pilsen was thus truly a war zone – in 1988, a Chicago Tribune reporter counted twenty-one different gangs along a two-mile stretch on the main 18th Street thoroughfare. The 1980s and 1990s were years of horrific gang fights and bloodshed.
Yet Pilsen is a community that is trying to pull itself up. One sign it is succeeding is that the murder rate has been significantly below the overall Chicago rate for a number of years since the early 2000s, exceeding it slightly only every few years. As we will see, communities typically do not pick themselves up spontaneously – leaders emerge to coordinate the revival. Among those driving Pilsen’s revival is Raul Raymundo, the CEO of the Resurrection Project, a nongovernmental organisation (NGO) whose motto is ‘Building relationships, creating healthy communities.’ Raul came to the United States from Mexico as a seven-year-old immigrant, went to Benito Juarez High School in Pilsen, attended college (including some time in graduate school at the University of Chicago), and started helping out in the community. He found his vocation after the murder of a young man just outside his church, when his pastor asked the congregation what the community was going to do about it. Answering the call, Raul and a few others started the Resurrection Project, with $5,000 each from six local churches. When the candidate they found to head the project declined to take the job, Raul stepped in, and he is still there, after twenty-seven years. Today, the Resurrection Project has funneled over $500 million in investment into the community.
