This book is a reflection on the present state of our world seen through the prism of the triad of markets, state and community, constituting the three pillars of society as it were.
The author Raghuram Rajan’s contention is that the first two have surged ahead, often in collusion, leaving the third behind. Interestingly, the first two emerged out of the community itself but now dominate it.
Since the collapse of the former Soviet Union the forward movement gathered steam through globalisation, which unleashed market forces across countries hitherto protected by national boundaries. The community has not merely been devalued by this process, its economy has been devastated.
Disruptive revolutions
There are three phases in this story. In the beginning there was only the community. The example used is of the medieval English manor, which though hierarchical, was yet a community that was bound together by mutual obligation. Out of this, by a gradual process, emerged a king and finally the constitutional state. There also emerged market relations, which replaced the world of custom-bound provision of goods and services to one another by the members of the community.
A millennium later, during a period of extraordinary growth in the western world in the middle of the 20th century, governments made promises of an ample welfare provision that have proved to be unsustainable as growth slowed and populations aged. Governments faced with chronic budget deficits and sclerotic economies yielded to pressure from corporations to liberalise the economic policy regime. That was in the 1980s. Then came the collapse of the Communist empire in Europe and with it a thrust for even greater freedom for capital.
Alongside these political developments there has been the disruptive role of the ‘ICT Revolution’. This has enabled multinational corporations to arrange the global value chain in a geography most favourable to their profit considerations, exacting a toll on existing production communities. Disregard for this dislocation by the ‘establishment political parties’ has led to the rise of populist leaders who exploit the ensuing resentment, with Donald Trump representing its culmination.
‘Think local’
Rajan’s solution to the present state of affairs is ‘inclusive localism’ whereby the community is given far greater say in economic matters, of course within the national framework of a liberal democracy. Particularly valuable to the author is the potential role of the community in the provision of schooling, central not only to building capabilities but also to instilling citizenship.
Finally, community-based governance is also proposed as a superior arrangement for enforcing efficient and accountable behaviour of public bodies.
Some of the author’s arguments are contestable. First, his description of an endogenous emergence of the state and markets, in a mutually re-inforcing way, from within the community is distinctly Eurocentric. In India both the colonial state and the Mughal one were impositions from without. Recent progress in DNA mapping suggests that the same may hold true for the pre-Mughal north Indian state too.
Secondly, markets, as opposed to corporations, even when combined with ICT can enable the oppressed to break free of their constraints. Thus a national market enabled freed slaves to leave the South permanently in 19th century United States and ICT has enabled India’s traditional weaving communities to access the global market today.
Third, the author appears to invest the community with a virtue that may be too much for it to live up to. Globally, the local community has at times been a site of cultural exclusion and active in the despoliation of nature through unrestrained consumption.
Finally, it is not as if the importance of the community in our social and economic spheres has not been recognised even in the formal political process. After all, India legislated a Panchayati Raj Act over 25 years ago, giving local bodies a constitutional status. What difference this has made requires a frank assessment.
The critical comments made here notwithstanding, The Third Pillar is a work marked by depth, reach and assurance. Its author engages with the main economic issues of the day, and by never hesitating to speak truth to power leaves us wanting to engage him in argument.
The Third Pillar: How Markets and the State Leave the Community Behind ; Raghuram Rajan, HarperCollins, ₹799.
