In The Third Pillar, economist Raghuram Rajan offers up a magnificent big-picture framework for understanding how 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 they leave squishy social issues for other people. As Rajan argues, that’s not just myopic; it’s dangerous. All economics is actually socioeconomics – all markets are embedded in a web of human relations, values and norms. He demonstrates how, throughout history, technological phase shifts have ripped the market out of those 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.
And right now, we are 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. Rajan is not a doctrinaire conservative, so 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 provocative.
But even setting aside its solutions, 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.
About the author
RAGHURAM RAJAN is the Katherine Dusak Miller Disti
‘Insightful and impressive … As local governments