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

by Raghuram G. Rajan

Politically engaged largely self- governing communities were a natural unit of organisation, and facilitated organized protest. Common economic causes could then bring them together in a movement across the United States, as with the Populists and Progressives. The sense that the system had worked earlier gave the movements confidence that they could reform it and therefore did not need a revolution. Chance also helped. The tragic assassination of the pro-business president William McKinley and his replacement by a reform- oriented Theodore Roosevelt conspired to empower the anti-monopoly movement in a timely way.47 These democratic movements pushed back against the system’s natural drift toward cronyism. In the next chapter, we will see that the reverse is also true. By creating a healthy competitive private sector, competitive markets also help keep the state’s authoritarian tendencies in check, and democracy vibrant. Thus, markets and democracy could be mutually supportive. I emphasise ‘could’ because there are circumstances where the voting public is apathetic to public policy, and others where it might actively turn against private wealth and competitive markets. This is why democratic protest works best when it is timely, before people believe the system is beyond reform.

Markets & democrcy r self serving