Tuesday 10 September 2019

The Third Pillar



Raghuram Rajan (2019), The Third Pillar, HarperCollins, New Delhi, pp. 436

The Third Pillar explores the neglected variable ‘community’ that economists barely discuss in their analysis of market economy. The state-market is the bipolar continuum within which all economic policies embed themselves.  Leaving out the community is essentially leaving out people. This omission has a human-centred cost because of the uncertainties unleashed by automation, financial crises and climate change that characterize the anthropocenic age that we live in. It seems that the explanatory models of economics are complex; the policy prescriptions required to forestall calamities dependent on large structures and institutions. People who are caught in between are unable to secure quality university education, find employment, access social security and settle in families of their own This book examines the cause and consequence of this context, keeping the community, at the heart of its analysis.

When a financial economist reviews the role and the reality of the community, a lot of questions abound. How far can he go meaningfully within the limitations of his discipline? What new idea does he bring that the sociologists, anthropologists and historians have not given us? Rajan surprises the readers on both counts: the breadth of his analysis of the variable ‘community’ in reference to state and markets and the depth of his enlarged vision for the community in the near-future. To accomplish this creditable feat, he marshals evidence from economic history as well as case studies of countries and cities.

Inclusive Localism

The book is divided into three parts. The first traces the origin and rise of the three pillars- the modern state, the market economy and the community. He describes the historical circumstances under which each pillar rose with its particular characteristics and also addresses some lost possibilities. The second part argues why an imbalance of the three pillars in mid-twentieth century changed the equation of how we perceive them through various models in social sciences. The ascent of the market has come about with limited state capacity and unravelling community. Therefore, the problems of the market such as recurring financial crises could scarcely be contained or addressed by a depleted state and weakened community. The rise of populism and the anti-competition rhetoric has been an attempt to retaliate against the market’s logic of ups and downs that has resulted in widening economic and social inequality. The third and final part of the book addresses the measures to restore this imbalance. Rajan has proposed ‘inclusive localism’, a concept by which communities can remain diverse and vibrant whilst having the power and financial resources to improve their local institutions and keep the neighbourhoods in good health.

This book marries the abstractness of theory with the concrete implications of policy. It is one of those books that you will finish fast because it is too important to miss. It is this contemporary relevance, the authority of evidence and a delightfully fresh and non-pedantic voice that sees you out of the last page. A winner through and through!