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Fixing Capitalism

Power must devolve from global and national levels to the community.




In Lenin's language commanding heights of economy are Market and The States. After fell of Berlin wall it looking as market taking charge of economy. Globally we saw many supporters of strong State, becomes champions of free market or capitalization. 

Year 1990 came with wave of financial globalization, the free flow of capital across the national borders. Mr. Rajan never victim of euphoria. He is strong believer of free market and their benefits.  In Saving Capitalism from the Capitalists he wrote that the victims of competition should get help to ease their pain and secure their future: “Markets need a heart for their own good.” 

In 2005, in his speech he warned  that the excesses of financial globalization raised the odds of a “catastrophic meltdown,” earning a rebuke from Summers that Rajan was “slightly Luddite” and “largely misguided.”

The global financial crisis and recent discontent with globalization have proved his words. His latest book attempts to go beyond warning of the dangers of unfettered capitalism to what can be done to fix it. Mr. Rajan suggests restoring the third pillar of society, the community, which he defines as a social group residing in a specific area that shares government and often a common heritage. Markets and the state remain indispensable, but “when the three pillars of society are appropriately balanced” ............… “society has the best chance for providing for its people,” particularly those who lose out from the effects of trade and technology.

Mr. Rajan focusing damaged International trade. US job loss due to increased foreign competition resulting Mr. Trump's 'America First' slogan. 

Mr. Rajan of course knows that communities too can pose dangers. The book contains a fascinating account of how markets and the state overcame the shortcomings of feudal communities, which provided stability but did little to spare most from abject poverty. Modern communities also erect walls, and overemphasis on tradition and fear of strangers and new ideas can leave people “trapped by the past.”

Still Mr. Rajan argue market and the States are backed by communities power and need of reset its balance.  Rajan notes that as machines and robots begin to produce more of our goods and services, human work “will center once again around inter-personal relationships.” Communities could well be the workplace of tomorrow.


Original Writer- PRAKASH LOUNGANI is assistant director of the IMF’s Independent Evaluation Office.

Copyrights- Article from IMF's magazine Finance & Development(F&D Sept. 2019)


Edited by,

Mayur Jagtap

Investment Consultant.




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