Reading Raghuram Rajan on social, economic disarray; need for rebuilding communities

 

"The Third Pillar: How Markets and the State Leave the Community Behind" is a book written by economist Raghuram G. Rajan, published in 2019. The book explores the tensions and imbalances created by the dominance of markets and states over community, and highlights the importance of rebuilding and strengthening the role of communities in today's society.

 

Rajan argues that there are three essential pillars in any society: the state, the market, and the community. While the state provides governance and public goods, and the market offers economic opportunities and efficiency, the community plays a vital role in fostering inclusiveness, social cohesion, and well-being. However, in recent decades, the state and the market have grown in influence, often at the expense of the community, leading to social and economic disarray.

Some of the key learnings and insights from the book include:

 

Importance of inclusive growth: Rajan emphasizes the need for economic growth that benefits all segments of society, reducing inequality and ensuring a more equitable distribution of resources. Neglecting inclusive growth can lead to social unrest and political instability.

Role of communities: The book underscores the significance of strong communities in addressing societal challenges. Communities provide a sense of identity, belonging, and social support, fostering trust and cooperation among individuals.

Market and state failures: While markets and states have their strengths, they are not infallible. The book explores instances where market and state failures have resulted in negative consequences, such as financial crises, inequality, and social fragmentation.

Democratic participation: Rajan emphasizes the importance of citizens' participation in the democratic process. He suggests that communities should be empowered to voice their concerns and actively engage in decision-making processes to ensure policies align with their needs and aspirations.

Technological disruptions: The book discusses the impact of technological advancements on communities and highlights the need to manage the disruptions caused by automation and globalization. It calls for policies that support skill development, retraining, and job creation to mitigate the adverse effects on communities.

Rebuilding social contracts: Rajan argues for the rebuilding of social contracts that balance the power of the state and the market with the needs and aspirations of communities. This involves fostering inclusive institutions, encouraging civic participation, and promoting social cohesion.

Policy recommendations: The author provides policy recommendations for addressing the challenges faced by communities. These include improving education and healthcare systems, supporting entrepreneurship, investing in infrastructure, and designing welfare programs that empower individuals while preserving social safety nets.

 

"The Third Pillar" provides a comprehensive analysis of the dynamics between markets, states, and communities, highlighting the need to restore the balance among them. Rajan offers valuable insights into the challenges of our time and proposes a roadmap for creating a more inclusive and sustainable society.