The Third Pillar

How Markets and the State Leave the Community Behind

By: Raghuram Rajan

Narrated by: Jason Culp, Raghuram Rajan

Shortlisted for the Financial Times/McKinsey Business Book of the Year Award

From one of the most important economic thinkers of our time, a brilliant and far-seeing analysis of the current populist backlash against globalization.

Raghuram Rajan, distinguished University of Chicago professor, former IMF chief economist, head of India's central bank, and author of the 2010 FT-Goldman-Sachs Book of the Year Fault Lines, has an unparalleled vantage point onto the social and economic consequences of globalization and their ultimate effect on our politics. In The Third Pillar, he offers up a magnificent big-picture framework for understanding how these three forces - the state, markets, and our communities - interact, why things begin to break down, and how we can find our way back to a more secure and stable plane.

The "third pillar" of the title is the community we live in. Economists all too often understand their field as the relationship between markets and the state, and they leave squishy social issues for other people. That's not just myopic, Rajan argues; it's dangerous. All economics is actually socioeconomics - all markets are embedded in a web of human relations, values, and norms. As he shows, throughout history, technological phase shifts have ripped the market out of those old webs and led to violent backlashes, and to what we now call populism. Eventually, a new equilibrium is reached, but it can be ugly and messy, especially if done wrong.

Right now, we're doing it wrong. 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, figuratively and even literally. Instead, Rajan offers a way to rethink the relationship between the market and civil society and argues for a return to strengthening and empowering local communities as an antidote to growing despair and unrest. Rajan is not a doctrinaire conservative, so his ultimate argument that decision-making has to be devolved to the grass roots or our democracy will continue to wither is sure to be provocative. But even setting aside its solutions, The Third Pillar is a masterpiece of explication, an audiobook that will be a classic of its kind for its offering of a wise, authoritative, and humane explanation of the forces that have wrought such a sea change in our lives.

©2019 Raghuram Rajan (P)2019 Penguin Audio

Critic reviews

“Compelling...urges economists to recognize a blind spot. The places where people grow up, live and work are not simply agglomerations of economic activity. They shape people’s identities.... Having been insufficiently mindful of this over the past few decades, business and government leaders may have little option but to brace themselves for frustrated communities demanding change.” (The Economist)

"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.” (Kirkus Reviews)

“Raghuram Rajan has done it again. Fresh, insightful and engaging, The Third Pillar offers a brilliant reckoning with one of today’s most important and potentially crippling challenges. He does more than analyze the unbalance that has developed among the three pillars that support society; he also tells us what’s needed to shift our prospects in favor of the exciting upside of technological progress that empowers, enables and enriches the many; and away from political anger, alienation and political radicalization. His clear and compelling case goes well beyond protecting the vulnerable. It’s also, critically, about enhancing the whole.” (Mohamed El-Erian, author of When Markets Collide and The Only Game in Town)

“My parents lived through the Great Depression, the rise of Fascism, and World War II. I thought I was brought up in a world organized in a fundamentally different way. I was wrong. We all need to start thinking about this issue right now and this book is a place to begin.” (James A. Robinson, professor, University of Chicago, coauthor of Why Nations Fail)

Excellent socioeconomic analysis

This book presents an excellent historical analysis of the evolution of society from a tribal nature to the three pillars as defined in the book (markets, state, and community). It is interesting how the separation of those pillars has led to different levels of progress across countries as described in the book. The policy prescriptions for how the US may achieve balance between the pillars are thoughtful yet intuitive. The call to action is inspiring. It highlights the importance of balance and the need for all of us to work towards progress to address the problems of our time including inequality, racial justice, and climate change.

Eyeopeing, Detailed, and Solution Oriented

Great book describing a solution to inprove life in our society. Written by an respected academic for the average person to understand. To the author, Thank you for putting this together. To the reader, you will not be disappointed.

Very important topic

I think the author could have fleshed out his very important idea about rebuilding community as a force in society. Hard to do. Important book as far as it goes. Begs for deeper discussion...

Excellent listen

Very well thought out interesting listen. I have listened to many economic and other market business books, this one is definitely on the top of that list.

Policy prescription seems to be impractical

The history lessons in the first part was great. History of the economic development in Europe, UK and America and later China, India and other BRICs countries.

The policy prescription of 'strengthen community' is very vague and wishy washy. The fact that we must allow 'ethnic micro-societies' but make sure these communities are fair. How do you do that, without interfering? Must social behavior now be made into policy? Isn't the history of policy making strewn with examples of failed experiments like this? Note that I am not a libertarian by any means. I just found the policy prescriptions wishy-washy. We know that the community must be strengthened. How does Washington go about doing it, when it has failed repeatedly to even understand what people want.?

Unrealistic, insipid

Rajan's previous work, Fault Lines, was very impressive. I read it twice. This, on the other hand, is weak and unrealistic. He focuses on communities, primarily of the local variety. But his own resume contradicts this model. Born in India, teaching at the University of Chicago. and having held other academic and bureaucratic appointments, this is not a guy rooted in a local community.
I personally have lived in numerous US states, different neighborhoods within particular cities, and a few foreign countries. I'm grateful for this mobility. And there are people I know who are much more mobile than I am.
So, empirically, I would say that local communities are a vestige of a former time. To elevate them to a "third pillar" of society is unrealistic. It's like the author was searching for some kind of hypothesis and he came up with this dud.
The narrator doesn't help. His reading style is bland, to the point of being soporific. Maybe he's as bored by this book as I am.

PHD Thesis vs Book

Read the book with great expectations. It felt more like a dissertation than a book. Though the last 6 chapters got my attention. Maybe fast forward. I sure hope there is another edition but condensed.