Book Review: The Third Pillar by Raghuram Rajan – IMF F&D
Source details
- Canonical URL
- Book Review: The Third Pillar by Raghuram Rajan – IMF F&D
Other formats
Bibliographic details
- Authors: PRAKASH LOUNGANI
- Published: September 1, 2019
Review metadata and framing
- Reviewer: PRAKASH LOUNGANI; director of the applied economics master’s program at Johns Hopkins University.
- Publication: F&D Magazine — Fixing Capitalism.
- Date: September 2019.
- Read time indicator on page: Less than a minute(0 words) Read.
- Book cited: The Third Pillar: How Markets and the State Leave the Community Behind, Penguin Press, New York, 2019, 464 pp., $30.00.
- Reviewer note: Opinions expressed are those of the author; they do not necessarily reflect IMF policy.
Core thesis summarized
- Rajan argues for restoring the “third pillar” of society: the community, defined as a social group residing in a specific area that shares government and often a common heritage.
- Markets and the state remain indispensable, but when markets, the state, and the community are “appropriately balanced” … “society has the best chance for providing for its people,” particularly those who lose out from the effects of trade and technology.
- Power should be devolved from global and national levels to the community.
Diagnosis of problems with current balance
- Rajan highlights harms from international trade and technological change:
- US job loss from increased foreign competition has contributed to lowering the life expectancy of middle-aged non-Hispanic white males.
- Rajan’s rhetorical framing: “It is as if ten Vietnam wars were simultaneously taking place, not in some faraway land, but in homes in small-town and rural America.”
- Historical perspective:
- Markets and the state overcame feudal communities that provided stability but left most in abject poverty.
- Modern communities can also be harmful by erecting walls; overemphasis on tradition and fear of strangers and new ideas can leave people “trapped by the past.”
Prescriptions and implications
- Restore and rebalance the role of community alongside markets and the state to better support people hurt by trade and technology.
- Policy implication: provide mechanisms that let communities play a stronger role in economic and social life, including devolved power and local responses to dislocation.
- Labor and technological change outlook:
- As machines and robots begin to produce more goods and services, human work “will center once again around inter-personal relationships.”
- Rajan suggests communities could become “the workplace of tomorrow.”
Author background and prior warnings
- Rajan has been a consistent critic of unfettered financial globalization despite being a believer in free markets.
- Earlier work and statements:
- In Saving Capitalism from the Capitalists he argued victims of competition should get help: “Markets need a heart for their own good.”
- In a 2005 speech he warned that excesses of financial globalization raised the odds of a “catastrophic meltdown,” for which Larry Summers rebuked him as “slightly Luddite” and “largely misguided.”
- The global financial crisis and recent discontent with globalization are cited as validating Rajan’s earlier warnings.
IMF F&D Magazine — Book Review by PRAKASH LOUNGANI, September 2019.
Content in this bundle
- استعراض الكتب
- Book Review: The Third Pillar by Raghuram Rajan – IMF F&D
- Críticas de libros ● Finanzas y Desarrollo ● Septiembre de 2019
- Comment remédier aux maux du capitalisme
- Книжное обозрение – Финансы и развитие – сентябрь 2019 года
- 《第三支柱：社群是如何落后于市场与国家的》 - 书评 - 《金融与发展》2019年9月号·第56卷·第3期 - 国际货币基金组织季刊