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

1 " Society suffers when any of the pillars weakens or strengthens overly relative to the others. Too weak the markets and society becomes unproductive, too weak a democratic community and society tends toward crony capitalism, too weak the state and society turns fearful and apathetic. Conversely, too much market and society becomes inequitable, too much community and society becomes static, and too much state and society becomes authoritarian. A balance is essential! "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

2 " In the early 1980s, the Reagan administration tasked the National Commission on Excellence in Education to assess the quality of schools. In its widely read report entitled A Nation at Risk, the commission asserted, “If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war. As it stands, we have allowed this to happen to ourselves.” It deplored “the rising tide of mediocrity” in schools, as “more and more young people [graduated] from high school ready neither for college nor for work.”27 Much of this is still true today. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

3 " Indeed, as we will see in the book, healthy communities are essential for sustaining vibrant market democracies. This is perhaps why authoritarian movements like fascism and communism try to replace community consciousness with nationalist or proletarian consciousness. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

4 " Finally, the people in industrial democracies, engaged in their communities and thereby organized socially and politically, enforce the necessary separation between markets and the state through their democratic voice. They do so because they want sufficient political and economic competition that the economy does not descend into authoritarianism or cronyism. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

5 " When the proximate community is dysfunctional, alienated individuals need some other way to channel their need to belong.4 Populist nationalism offers one such appealing vision of a larger purposeful imagined community—whether it is white majoritarianism in Europe and the United States, the Islamic Turkish nationalism of Turkey’s Justice and Development Party, or the Hindu nationalism of India’s Rashtriya Swayamsevak Sangh. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

6 " It is populist in that it blames the corrupt elite for the condition of the people. It is nationalist in that it anoints the native-born majority group in the country as the true inheritors of the country’s heritage and wealth. Populist nationalists identify minorities and immigrants—easily identifiable targets and the supposed favorites of the elite establishment—as usurpers, and blame foreign countries for keeping the nation down. These fabricated adversaries are necessary to the populist nationalist agenda, for there is often little else to tie the majority group together. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

7 " Even outside the EEC, global trade grew as new multilateral organizations like the General Agreement on Trade and Tariffs pushed for lower import tariffs across the world. The IMF helped, monitoring exchange rates so that no country attempted to get an undue advantage from the increased openness by depreciating its exchange rate and exporting more—the “beggar-thy-neighbor” strategy that was much feared during the Great Depression. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

8 " While the populist nationalists raise important questions, the world can ill afford their shortsighted solutions. Populist nationalism will undermine the liberal market democratic system that has brought developed countries the prosperity they enjoy. Within countries, it will anoint some as full citizens and true inheritors of the nation’s patrimony while the rest are relegated to an unequal, second-class status. It risks closing global markets down just when these countries are aging and need both international demand for their products and young skilled immigrants to fill out their declining workforces. It is dangerous because it offers blame and no real solutions, it needs a constant stream of villains to keep its base energized, and it moves the world closer to conflict rather than cooperation on global problems. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

9 " West Germany, even after absorbing the migrants fleeing East Germany, had yet more jobs to fill, and in the 1960s signed agreements with Greece, Morocco, Portugal, Spain, Tunisia, Turkey, and Yugoslavia whereby they would send “guest” workers to West Germany, on condition they would eventually return. In 1973, foreign workers were one-eighth of the labor force in Germany. France was not far behind, with 2.3 million foreign workers, or 11 percent of the labor force. Many of these were employed for childcare, as cooks, and as custodians.20 England drew immigrants from the Caribbean and South Asia, including those expelled by Idi Amin from East Africa. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

10 " Two of the pillars I focus on are the usual suspects, the state and markets. Many forests have been consumed by books on the relationship between the two, some favoring the state and others markets. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

11 " Dr. Martin Luther King Jr. said, “The arc of the moral universe is long but it bends towards justice.” When seen over short stretches, it seems that history repeats, that racism and militant nationalism erupt periodically in the world to sow hatred and spawn conflict. Yet the society that experiences these movements is not the same, it trends toward being more tolerant, more respectful, and more just. Around that trend line, we do go up and down. We may be down today, and we have a long way to go, but the distance we have come should give us hope. Let us not let the future surprise us. Instead, let us shape it. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

12 " The first victims of a political search for scapegoats are those who are visible, easily demonized, but powerless to defend themselves. The illegal immigrant or the foreign worker do not vote, but they are essential to the economy—the former because they often do jobs no one else will touch in normal times, and the latter because they are the source of the cheap imports that have raised the standard of living for all, but especially those with low incomes. There has to be a better way . . .”9 "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

13 " Eurosclerosis was the term German economist Herbert Giersch used to describe Europe’s slow growth and high unemployment, brought about by the postwar accumulation of regulations and social protections. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

14 " Three important impediments to a unified European market were a plethora of rules and regulations that differed across countries, impediments to the movement of firms and labor across countries, and currency fluctuation. In a series of negotiated agreements, starting with the Single European Act in 1986, the Maastricht Treaty in 1991, and the Treaty of Amsterdam in 1997, much of Europe agreed to merge into a Union which would implement the four freedoms—the freedom of movement of goods, services, people, and capital across the borders of the signatories. They agreed to a common European citizenship, over and above national citizenship. In addition, a subset of the countries decided to adopt a common currency, the euro. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

15 " The state, burdened with debt and large entitlement promises made in happier times, is strapped for funds. It is also paralyzed in many countries, with discredited establishment parties at each other’s throat, and challenged by radicals of all kinds. In the meantime, technology rolls on, threatening to automate many more jobs, while not yet producing the growth that will help address society’s difficulties. With society’s values having turned more individualistic, and with little empathy available to paper over differences in already diverse societies, there is none to spare for new immigrants. Nevertheless, population aging is already shrinking labor forces in many countries, so they may well need to encourage immigration. And even as countries turn inwards, bent by the weight of domestic problems, there are very visible signs that climate change, which will require global cooperation to a degree we have never seen before, is upon us. We need to act now, both domestically and internationally, but the will and ability to act is weak. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

16 " As wages in domestic currency rose faster in France and Southern Europe compared to Germany, they needed a steady depreciation of their exchange rate in order to retain competitiveness. Corporations disliked having to manage the resulting exchange rate volatility "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

17 " These strongly Aristotelian attitudes, which still dominate many societies today, reflected a suspicion of the middleman. They were thought to make money not by adding intrinsic value to the traded item, but by moving goods or money to areas of shortage, or even, many believed, by creating the shortage in the first place. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

18 " Daniel Patrick Moynihan once quipped “If you want to build a great city, create a great university and wait 200 years.”11 "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

19 " As economist Alan Blinder has argued, all impersonal services that can be delivered electronically at a distance, with little or no degradation in quality, are potentially vulnerable.16 What will be harder to replace are human creativity, customization, and human empathy. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind

20 " The more explicit and one-off the transaction, the more unrelated and anonymous the parties to the transaction, and the larger the set of participants who can transact with one another, the more the transaction approaches the ideal of a market transaction. The more implicit the terms of the transaction, the more related the parties who transact, the smaller the group that can potentially transact, the less equal the exchange, the broader the range of transactions and the more repetitive transactions are over time between the same parties, the more the transactions approach a relationship. The thicker the web of relationships tying a group of individuals together, the more it is a community. In a sense, the community and the market are two ends of a continuum. "

― Raghuram G. Rajan , The Third Pillar: How Markets and the State Leave the Community Behind