The Third Pillar: How Markets and the State Leave the Community Behind

by Raghuram G. Rajan

These are dangerous times. If people have lost faith in their ability to compete in markets, if their communities continue to decline, if they feel that the elite have appropriated all opportunities for themselves, both by monopolising the markets and by monopolizing access to capability building, popular resentment can turn to rage. Democracy requires equal access, and when access is unequal, democracy reacts. More populist radicals will be elected. Of course, if these radical populist movements push for reforms that include rather than exclude, that tackle the cronyism and the usurpation of opportunity by the elite – as did the Populist and Progressive movements in the nineteenth-century United States – they would be very healthy correctives for restoring the balance. More likely on offer are populist nationalist movements led by charismatic leaders who seek to exclude rather than include, and thus tend to skew rather than restore the balance. While the populist nationalist does not offer lasting solutions, she still has the power to damage. Institutionalised checks and balances may contain new Napoleons for a while. Yet rare is the institution that can stand up to popular will for a sustained period of time, without support from other sources of power. A key element of the populist nationalist’s agenda is to undermine those sources. Authoritarian crony capitalistic states, hostile to the ties between nations that come from trade and the flows of people and capital, host...

Dangerous times