Raghuram Rajan: How markets and the state leave the community behind

As markets are embedded in a web of human relations, values and norms, they are impacted by human events. Indeed, throughout history, technological advancements have displaced the market from its traditional webs, precipitating sometimes violent backlashes and periods of surging populism. Currently, the strain of globalization and technological shift is both reflecting and exacerbating the polarizing political tensions so evident around the world today.

In a new book, “The Third Pillar: How Markets and the State Leave the Community Behind,” Raghuram Rajan – a professor of finance at the University of Chicago, a former chief economist at the International Monetary Fund and the former governor of the Reserve Bank of India – argues that as markets scale up, the state scales up with it, concentrating economic and political power in flourishing central hubs and leaving the periphery to decompose. His solution: To rethink the relationship between the market and civil society, and strengthen and empower local communities (the “third pillar”) as an antidote to growing despair and unrest.

Rajan outlined his argument at the Hutchins Center on Fiscal & Monetary Policy at Brookings on February 27 at 10:30 am.