comunità Morning future
Inspiring Books 29 July Jul 2019 0703 29 July 2019

Raghuram Rajan: «To save the State and markets we need more communities»

«It is fundamental to give voice to the community as a place of empowerment», explains the economist Raghuram Rajan in this interview. Already head of the Bank of India, Rajan was among the few to have foreseen the 2008 crisis. Maybe we should listen to him

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Countless volumes have been written on the relationship between State and markets. «So many that we could count them from the number of forests used to make the paper», Raghuram Rajan notes. But less so on the community and its relationship with the State and markets.

Yet, Rajan - currently Professor of Finance at the Booth School of the University of Chicago, former governor of the Bank of India and vice president of the board of the Bank for International Settlements – explains that it is on this third pillar that we should leverage to guide progress and improve our condition.

Raghuram Rajan

State, market, community: these three pillars are suffering from a serious imbalance. Giving the community a role as a place of empowerment is urgent and fundamental, explains Rajan, who was among the few to foresee the 2008 crisis.

«When there is a correct balance between the three pillars, society is in the best condition to guarantee the well-being of the population». Today, our world is in a paradoxical situation.

«We find ourselves surrounded by abundance, we have never been richer, thanks to technology». For the first time, Rajan says, «it’s not only the more developed countries that enrich themselves, but there is a distribution of growth. For this reason, over the course of a generation we have seen billions of people moving from poverty to the middle class». Yet something isn’t working.

Faced with this unprecedented economic milestone in the history of humanity, «stress and concern are growing among the apparently privileged workers in more developed countries. Think of the United States, where suicide deaths among male, white and non-Hispanic citizens is on the rise. This statistic is higher among the people who have a degree rather than a high school diploma». Add to this the epidemics of opiates and alcohol and the matter appears even more dramatic. So what’s next?

Communities keep the individual anchored in a series of real human networks and gives it a sense of identity

Raghuram Rajan

Rajan says that these anxieties, with particularly dramatic results in the United States, but also endemic across the Western hemisphere, seem to stem from a specific concern: the loss of the «middle class» condition. A loss the common opinion puts down to international trade and «the technological automation of old jobs, while there is little awareness that the main cause is technological progress».

Il terzo pilastro. La comunità dimenticata da Stato e mercati (The third pillar. How markets and the State leave the community behind) (Egea, 2019)

«The technological revolution is having disruptive effects even outside communities affected by economic problems. It is causing a significant increase in the gap between the average salary and that of the most capable people, with the best employees in a few big corporations offering high salaries and exercising an increasingly marked dominion in various sectors. This leads middle-to-upper class families to move away from communities in which a mixed income population lives and to transfer their children to schools located in richer communities, where they will be better educated together with other children who come from a similar background».

Faced with this mix of perceived reality and living conditions, and increasingly stressed by an emotional overload, «the future appears both promising and dangerous». Can the State and the markets, alone, respond to these concerns? This is when the community comes into play.

Rajan explains that «the solution to this problem, and too many others that afflict our society, will not be merely in the State or the markets. If anything, it is about revitalizing communities and ensuring that they perform their essential functions in a better way: education for example. Only then will we have the chance to mitigate the seductiveness of radical ideologies. The way out of the impasse consists in giving back to the community the power that the state has taken away from it». A power in terms of welfare, values, real relationships.

The community gives us a sense of self-determination, of direct control over our lives, while making local public services more functional for us

Raghuram Rajan

«Companies should also be closer to the community», observes the economist who was included by Time in the list of the 100 most influential personalities in the world. Also because «as new technological developments are altering the world of employment, social structures must also change. We need new structures for new types of work: societies and communities need to adapt to technological change, since it is the lack of this adaptation that causes a state of socially widespread anxiety».

In this sense, small businesses, thanks to «technology, large-scale industries have become easier to manage and often more efficient. At the same time, it is also possible for small companies to use technology to be part of a larger network. I think the key is to find the right dimension for the specific sector. Italian companies have to adapt and some have done a great job. I see their closeness to communities as a strength, not a weakness. A force that must be allied with technology, because communities are a concrete reality. If we want to rebalance the system and limit populism, we must start from this concrete community, open to the world and to exchanges, not from an imaginary one of ethno-nationalisms».

To save the State and to safeguard the benefits of the market – Rajan concludes - we must remember the communities. «Above all the value of the networks of relationship, support, decision and exchange. Proximity is not a contradiction but on the contrary it’s an added value in an era of globalization and distance».

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