The Third Pillar: How Markets and The State leave The Community Behind by Raghuram Rajan - Review by Chris Cotton
I enjoy reading non-fiction. Sometime it tells you things you didn’t know, sometimes it joins the dots between things that you may or may not have been aware of, sometimes it makes you think more deeply about things, but I like it best of all when it gives you a new perspective – and, for me, this book did just that.
Rajan is an economist. He has been chief economist at the IMF, then governor of India’s reserve bank and is now a Finance Professor at Booth School of Business.
The pillars, as indicated in the subtitle, are the market (commerce and finance), the government and (thirdly) the community. The book is organised into three parts: the first looks at the historical development of the three pillars from the medieval period onwards; the second looks at the imbalance that has built up between the three pillars over the last hundred odd years and the problems that imbalance has brought; and in the final part Rajan suggests approaches for restoring some kind of balance.
I found both the first two parts very rewarding, showing the evolving relationships between the state and the market, especially as increasingly sophisticated ways of doing business developed, then showing how globalisation and technology have directly impacted the cohesion of society, leading to increasingly segregated communities. I found it especially interesting in his analysis of the rise of populism, not seeing the causes as based in stupidity or the “basket of deplorables” but more as a rational, if misguided, reaction to feelings of disempowerment brought about by the changes that the state and the market have forced on them.
The third section is also thought provoking but, for me, it was not as immediately satisfying. Rajan puts forward a series of ideas which he believes could help to resolve the problems that he has illustrated. With any proposed solution the devil is in the detail, and there wasn’t space in the book to explore every detail. I think they are, on the whole, good ideas but each one (there are several) will need detailed investigation and planning to determine in detail if and how they could work. I was left in no doubt that it is a worthwhile aim, for instance he illustrates the value of empowered communities through a study showing that Italian cities that achieved self-government in the Middle Ages have higher levels of social capital today (measured by more non-profit organisations per capita or fewer children caught cheating in national exams).
This is a dense but well written book, covering a lot of ground, but all his ideas are clearly laid out. It is a book that will stay with me for a long time, I strongly recommend it.