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

by Raghuram G. Rajan

We ended the last chapter describing two democratic movements in the United States that contained the overly strong markets pillar and its corrupt collusion with the state, and created a balance, even if temporarily. In this chapter, we will start by describing three situations when the community does not push for competitive markets – when market players or practices are deemed illegitimate and the strong state offers an alternative, when the state is weak and the community is bribed easily to stay apathetic, and when neither the state nor the community offer people the capabilities and the support they need to participate in volatile, changing markets. That will take us to how mechanisms to provide people capabilities and support evolved, and complete our discussion of the elements of the balance needed to sustain a liberal market democracy.

3 situations when community does not push for competitive markets