Publisher's Weekly Review
In this ambitious but flawed book, University of Chicago economist Rajan (I Do What I Do) rigorously argues the importance of local communities as one of the three pillars, along with the state and markets, supporting global economies. Rajan impressively builds the foundation for his view of society in a fleet history of economic development that tracks the development of mostly Western economies from the earliest prohibitions on usury to the development of the 20th-century Progressive movement. The historic survey and analysis are the strengths of Rajan's work. The book falters when presenting potential paths to reasserting communities' role as equal player alongside markets and the state, including a dramatic rethinking of educational systems and the decentralizing of governmental power. Rajan focuses on the benefits of change and does not seriously address the obstacles to implementing the changes he recommends. Though Rajan's writing can stray into the academic, it is at times pithy ("Democracy preserved market competition, and market competition preserved democracy"), and he makes complex economic principles more accessible in brief end-of-chapter summaries. Rajan's view of community makes sense, but the book undermines its arguments by failing to acknowledge that communities are not always willing to collectively act in their own best interest. This work may be imperfect, but it's insightful and thought-provoking. (Mar.) © Copyright PWxyz, LLC. All rights reserved.
Kirkus Review
Capitalism builds private fortunesoften at the expense of the polity.Communitiestribes, neighborhoods, and kindred social structuresare the basis of human commerce and the marketplace. Yet, writes Rajan (I Do What I Do, 2017, etc.), former chief economist and director of research at the International Monetary Fund, markets and the state alike have assumed many of the roles of traditional communities. By way of example, he writes that whereas in years past, we might have taken an auto-less neighbor to the grocery store, "today, she orders her groceries online." The insistence on credentialing is one cause, with licensed professionals dominating many services that were once done within communities. While there are reasons of liability and public health at play, Rajan notes that the one-off transactions of today do not have the same network-building value as the repetitive, within-community transactions of old; "only individual interests matter, and they have to be met transaction by transaction." This zero-sum economic scenario is especially prevalent in poor communities, but it is not inevitablethough it has a long historical basis in the replacement by modern structures of capitalism for the "reciprocal feudal obligation" of the pre-capitalist era. Strong communities, argues the author, can promote democracy and contain crony capitalism and corruption, just as healthy markets can contain the authoritarian impulses of the state. In that regard, democracy, capitalism, and community need not be mutually exclusive propositions even if the modern American emphasis on the market has produced profound inequalities that might have been tempered "by sensible government regulation." Inequality yields radical populism, which yields authoritarianism, all, again, working against community. Rajan is sometimes repetitive, but his emphases seem well-placed, especially because we can see so much of his argument playing out in daily life, with private interests ascendant and the public good untended.A welcome survey of a big-picture problem: Rajan proposes a rebalancing to be brought about by decentralized politics, diverse immigration, and other measures that, though controversial, certainly merit discussion. Copyright Kirkus Reviews, used with permission.
New York Review of Books Review
RAGHURAM RAJAN COMES both to praise community and to bury it. This University of Chicago professor and former chief economist for the International Monetary Fund wants his new book to "reintroduce into the debate" the titular and neglected "third pilIar" of community alongside the pillars of market and state that dominate modern society. Rajan says he is seeking "the right balance between them so that society prospers." But he lacks the courage of his convictions. What begins as an incisive critique of how economists and policymakers abandoned community ends as a dismaying illustration of the problem. The prospect tantalizes: a voice from within some of our most market-focused institutions arguing that "community matters" and so "it is not enough for a country to experience strong economic growth." The opening chapters of "The Third Pillar" sparkle with concrete illustrations of how vibrant local communities contribute to human flourishing in ways typically overlooked. Rajan describes how ranchers benefit by handling livestock trespass cooperatively. Because the community is more attuned to individual circumstance, he observes, "given any quantity of available resources, it can offer a far-higher level of benefit to the truly needy." As a former central banker, Rajan gives special attention to the community's role in financial markets and goes so far as to defend long-ago prohibitions on usury. Neighbors helping neighbors represents a form of saving, creating a reciprocal obligation to be repaid when the tables inevitably turn. Small, young firms tend to get more and better loans when fewer banks are present, perhaps because less competition means a higher likelihood of retaining a firm's business as it grows. This leads to a crucial, more generalizable point: "Relationships seem to be stronger when the members of the community have fewer alternatives, for it gives the members confidence that they will stay mutually committed." The modern market's greater abundance of choice is not without trade-offs. These threads dissolve in the hundreds of pages of vaguely sketched economic history that follow. While ably describing how both a growing market and a growing state have eroded the community's relevance and vitality over time, Rajan gradually redefines the third pillar from "communities whose members live in proximity" to merely democracy or the "voting public." An intrinsically valuable and varied local institution congeals into a homogeneous tool for ensuring that the market and state behave. when genuine community does make a return in the book's section on prescriptions, Rajan sacrifices it willingly. Having shown how the state has weakened community by seizing the role of safety net, he nevertheless wants to go further in that direction. America's variety of antipoverty programs, "strung together with the help of the state government, the local government, private efforts and charitable funds" (in other words, "community"), are "inadequate," he says, calling instead for "a basic level of unconditional federal economic support" along with universal health care. On one page, Rajan recommends that "powers should stay at the most decentralized level consistent with their effective use," but on the next he declares that "when inclusiveness goes up against localism, inclusiveness should always triumph." Rajan's real aim seems to be movement "toward one borderless world," with stronger communities a perhaps helpful means to that end. "A central concern in this book," he writes, "is about the passions that are unleashed when an imagined community like the nation fulfills the need for belonging that the neighborhood can no longer meet." He recalls wistfully the days when "technocrats ... did not have to spell out these arguments to the wider public." Sure, "the elite did not engage" in any debate "as they abandoned the integrated community," but he finds it "hard to fault their choice." After all, "the meritocratic markets now demanded it." OREN CASS is a senior fellow at the Manhattan Institute and the author of "The Once and Future Worker: A Vision for the Renewal of Work in America."
Choice Review
Over the past few decades the evolution of the world economy--driven by globalized competitive markets--has far exceeded expectations. Not only have the basic premises of competitive advantage been reflected in the real world (albeit with plenty of flaws), but the speed of change has accelerated, producing plenty of winners and plenty of losers and challenges for the state--inequities that have often gone unaddressed and formed the roots of the political drift toward populism, with its simple answers to complex problems. Left in the dust, Rajan (business Univ. of Chicago) contends, is the "third pillar," i.e., the community in which people live and with which they associate, a community rooted in basic values and norms that anchor the social context of human existence. The first two pillars--the state and the markets--have put enormous pressure on the third, challenging uneasy equilibria in ways that are difficult to predict and ultimately threaten valuable social and political stability. What lies ahead? A global surveillance state? Widening of the urban-rural divide? Global spread of identity politics? Rajan argues for a renaissance of the third pillar of community cohesion, channeled through institutions that have a good shot at regaining control of where the system goes next. This is an original take on widely debated issues. Summing Up: Essential. Upper-division undergraduates through faculty. --Ingo Walter, New York University
Library Journal Review
The central argument in this latest work by Rajan (Katherine Dusak Miller Distinguished Service Professor of Finance, Univ. of Chicago Booth Sch. of Business; Fault Lines) is that three elements of society-state, market, and community-must work together in harmony in order for a country to prosper. Community can refer to a localized social group with a shared history or culture that has, to some extent, shared governance. The author contends that communities have been weakened over time and that there needs to be a rebalancing with renewed emphasis on sharing. He provides a history of the prominent growth in both state and market at the expense of community, and thoroughly discusses the effects of international trade and the development of information technology. Rajan is a defender of the post-World War II liberal democratic order and maintains that, in order to preserve it, it's necessary to decentralize government and reform the market. VERDICT Rajan's intriguing analyses and policy -proposals, will appeal to those with an academic or professional interest in the effect of government and economy on the current social order.-Shmuel Ben-Gad, Gelman Lib., George Washington Univ., Washington, DC © Copyright 2019. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.