The third pillar

Review and update

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-sighted analysis of the current populist backlash against globalization.

Raghuram Rajan, Distinguished Professor at the University of Chicago, former chief economist of the International Monetary Fund, and governor of India's central bank, and author of *Fault Lines*, which won the 2010 Financial Times-Goldman Sachs Book of the Year Award, has an unparalleled perspective on the social and economic consequences of globalization and its ultimate impact on our politics. In *The Third Pillar*, Rajan offers a brilliantly comprehensive framework for understanding how these three forces—the state, markets, and our societies—interact, why things start to unravel, and how we can return to a safer and more stable level. The "third pillar" in the book's title is the society we live in. Economists often define their field as the relationship between markets and the state, leaving complex social issues to others. Rajan argues that this is not just shortsighted; it is dangerous. All economics is, in fact, socioeconomics—all markets are embedded in a web of human relationships, values, and norms. As he shows, throughout history, technological transformations have wrested the market from those old networks, leading to backlash and what we now call populism. Eventually, a new equilibrium is reached, but it can be ugly and messy, especially if mishandled. Right now, we're getting it wrong. As markets grow, the state grows with them, concentrating economic and political power in thriving central centers, leaving the periphery to disintegrate, figuratively and even literally. Instead, Rajan offers a way to rethink the relationship between the market and civil society, calling for a return to strengthening and empowering local communities as an antidote to despair and growing unrest. Rajan is no ideological conservative, so his ultimate argument—that decision-making must be devolved to the grassroots or our democracy will continue to wither—is undoubtedly provocative. But even ignoring its solutions, The Third Pillar is a masterpiece of interpretation, a book that will become a classic of its kind for its wise, reliable, and humane explanation of the forces that have brought about this radical change in our lives.