Community, The Third Pillar by Raghuram Rajan
This book to us is one of the most thought provoking and important piece that we see as part of Rethinking America. It is new, published in 2019. The author is an economist at University of Chicago. He was the 23rd Governor of the Reserve Bank of India and was named Central Banker of the year by Euromoney magazine in 2014. His background provides a unique perspective.
We will share some key parts of this book in this section.
First, Raghuram points out we are surrounded by plenty. Yet with all this economic success some of the seemingly most privileged workers are worried to death, and this situation can be seen worldwide. The peril is if our communities and society are not able to adapt to the technological change and how it affects our values and institution as technology disproportionately empowers and enriches some.
We are now seeing the reaction in populist movements of the extreme Left and right. What we have not seen yet is the necessary societal change, which is why so many despair of the future. We are at a critical moment in human history, when wrong choices could derail human economic progress.
The book is about the three pillars that support society and how we get the right balance so that society prospers. Two of the old pillars are the State and the Markets. The neglected third pillar is the Community, the social aspects of society.
When any of the three pillars weakens or strengthens significantly, typically as a result of rapid technological progress or terrible economic adversity like a depression, the balance is upset and society has to find a new equilibrium. The period of transition can be traumatic, but society has succeeded repeatedly in the past. The central question that Rajan poses in his book is how we restore the balance between the pillars in the face of ongoing disruptive technological and social change.
He goes on to say many of the economic and political concerns across the world, including the rise of populist nationalism and radical movements of the Left, can be traced to the diminution of the community.
Importantly, the solutions to many of our problems are also to be found in bringing dysfunctional communities back to health, not in clamping down on markets. This is how we will rebalance the pillars at a level more beneficial to society and preserve the liberal market democracies many of us live in.
Further on in the book, he states his belief that local community government acts as a shield against the policies of the federal government. Healthy communities are essential for sustaining vibrant market democracies. This is perhaps why authoritarian movements try to replace community consciousness with nationalist or proletarian consciousness.
So what then is the source of today’s problems? In one word, imbalance between the three pillars.
Society suffers when any of the pillars weakens or strengthens overly relative to the others. Too weak the markets and society becomes unproductive, too weak a community, and society tends toward crony capitalism, too weak the state and society turns fearful and apathetic. Conversely, too much market and society becomes inequitable, too much community and society becomes static, and too much state and society becomes authoritarian. A balance is essential.