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

Translation from English by S. Moiseev. – Moscow: Gaidar Institute Press, 2025. – 488 p.

ISBN 978-5-93255-688-7

In The Third Pillar, Raghuram Rajan, professor at the University of Chicago, former chief economist at the IMF, former governor of the Central Bank of India, and author of the 2010 Financial Times-Goldman Sachs Best Business Book of 2010, Fault Lines, offers an unfamiliar perspective for economists on the social and economic consequences of globalization and the impact they ultimately have on policy. It shows how these three major forces – the state, markets and our communities – interact with each other, why things are starting to break down and how stability can be returned.

The “third pillar” in the title of the book is the community in which we reside. Economists often believe that they should only be concerned with the relationship between markets and the state, and that social issues are not part of their field of interest. That’s not just myopic, Rajan argues, it’s dangerous. All economics is in fact socioeconomics – all markets are embedded in a web of human relations, values and norms. As Rajan shows, throughout history, technological phase shifts have ripped markets out of these old webs and led to violent clashes and what we now call populism. Eventually everything comes to a new equilibrium, but it can be extremely unattractive.

As markets scale up, so does the state, with economic and political power concentrated in prosperous central hubs and the periphery left to decay, literally and figuratively. To prevent this from happening, Rajan proposes a rethinking of the relationship between the market and civil society and advocates a return to strengthening and empowering local communities as an antidote to a growing sense of hopelessness.