The missing factor

Trevor Grundy reviews "The Third Pillar: The Revival of Community in a Polarised World" by Raghuram Rajan

THE THIRD PILLAR –The Revival of Community in a Polarised World by Raghuram Rajan (William Collins. 2019, 433 pp. £20. 00)

The Canadian banker and economist Mark Carney is scheduled to step down as Governor of the Bank of England, this summer. Some prominent names are tipped for the job. One is India’s Raghuram Rajan, Professor of Finance at the University of Chicago’s Booth School of Business and a man eminently qualified after stints as chief economist at the IMF and as a former head of the Indian Central Bank. 

His new book The Third Pillar – the Revival of Community in a Polarised World is a timely contribution to our understanding of why the world is in such a sad, upside-down state.

“This book,” he writes, is an attempt to imagine the future and what we can do to get to a better place. Two of the pillars (the state and markets) are the usual suspects. It is the neglected third pillar, the community that I want to re-introduce into the debate.”

In a hard-hitting Preface, he writes: “Once we understand that the community matters, then it becomes clear why it is not enough for a country to experience strong economic growth. How that growth is distributed across communities in the country also matters immensely. People who value staying in their community are not very mobile. Since they cannot move to work where growth occurs, they need economic growth in their own community. If we care about the community, we need to care about the geographic distribution of growth.”

He believes that many of the most worrying problems of our time – the rise of populism one of them - can be traced to the diminution of the community.

“The state (pillar one) and the markets (pillar two) have expanded their powers and reach in tandem and left the community (pillar three) relatively powerless to face the full and uneven brunt of technological change.”

His main concern is that politicians are busy centralizing power rather than spreading it out to regions and towns so that they can re-build a sense of local responsibility and autonomy – the glue that keeps the pillar three upright and strong.

But what happens when the glue fails to stick?

He writes: “We used to rely on neighbours, or perhaps the local midwife, to deliver our children at home. Today we go into hospital. We used to offer to take our elderly neighbour shopping because she did not have a car. Today she can order groceries online. Our homes are now likely to fall down and child mortality is lower, but something has been lost along the way.”

He laments -“In my adult life, I have never been more concerned about the direction our leaders are taking us than I am today.

The book is divided into three parts – How the pillars emerged, the imbalance between them that exists at the moment and ways and means of restoring equilibrium.

“I will argue that many of the economic and political concerns today across the world, including the rise of populist nationalism and radical movements of the Left, can be traced to the diminution of the community. Importantly, the solution to many of our  most disturbing problems are found in bringing dysfunctional communities back to health, not in clamping down on markets. This is how we will re-balance the pillars at a level more beneficial to society and preserve the liberal market democracies many of us live in.”

Raghuram Rajan is a man to take seriously.

His peers will remember that in 2005, he was one of a handful of economists to warn of a financial collapse which rocked the world in 2008.

As we turn the pages, his contempt for both Britain’s Margaret Thatcher and her infamous “There is no such thing as society” mentality is apparent.

“The world as created by the United States after World War Two is reaching the end of its shelf life. There are a number of economies that are large now but weren’t large then, China and (soon) India, and the European Union didn’t exist then.”

One is reminded of Antonio Gramsci’s attempt to explain the dilemma of modern men and women –“The crisis consists precisely in the fact that the old world is dying and the new one cannot be born; in this interregnum a great variety of morbid symptoms arise (The Prison Notebooks).

We all know that Raghuram Rajan is one of the world’s best -respected economists.

But there are times when he sounds like a politician, or a Governor of the Bank of England in-waiting, with this book serving the purpose of exhibiting a vast knowledge of history from classical times to the present.

Part of the book is devoted to the origins of capitalism and how the impact of the IT revolution has eroded and in many cases destroyed communities the world over.

(How it would have improved with a few maps, pictures, graphs).

Other parts warn of a looming economic class war that could fuel a revival not of fascism, or its opposite Communism.

“Through the sorting of economic classes and the decline of the mixed community, it is also becoming a hereditary one, where only the children of the successful succeed. The rest are left behind in declining communities, where it is harder for the young to learn what is needed for good jobs. Communities get trapped in vicious cycles where economic decline fuels social decline, which fuels further economic decline. The consequences are devastating. Alienated individuals bereft of the hope that comes from being grounded in a healthy community, become prey to demagogues on the extreme Right and Left who cater for their worst prejudices. Popular politicians strike a receptive chord when they blame the upper-middle-class elite and establishment parties.”

How a man with such emotion for fair-play and de-centralisation would fit into chaotic Britain with its greedy bankers and out-of-touch celebrity politicians, we can but imagine.

Right at the end there is reference to possibly the single most disturbing development in world history and it is a subject that this great economist almost ignores - climate change.

”I have said little about one our most pressing problems, climate change and associated problems like water scarcity.” (page 396)

One wonders why.

A book seeking solutions to problems facing communities large and small around the world that doesn’t give space to climate change is like staging Hamlet without the ghost.  

Trevor Grundy is a journalist who lived and worked in Central, Eastern and Southern Africa from 1966-1996 and who now works in Kent, England as an author and researcher.