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What’s Wrong with Contemporary Capitalism?

Behind today's populist upheavals is a widespread recognition that the economy no longer serves the public good, or even the interests of most of its participants. To understand why, one must identify what has been lost amid so much material technological gain.

PRINCETON – Rather suddenly, capitalism is visibly sick. The virus of socialism has reemerged and is infecting the young once more. Wiser heads, who respect capitalism’s past achievements, want to save it, and have been proposing diagnoses and remedies. But their proposals sometimes overlap with those who would tear the system down, making nonsense of traditional left-right distinctions.

Fortunately, Raghuram G. Rajan, a former governor of the Reserve Bank of India who teaches at the University of Chicago Booth School of Business, brings his unparalleled knowledge and experience to bear on the problem. In his new book,The Third Pillar: How Markets and the State Leave Community Behind, he argues that the cancer afflicting contemporary capitalism is the failure neither of “Leviathan” (the state) nor of “Behemoth” (the market), but of community, which no longer serves as a check against either monster. Rajan thus prescribes an “inclusive localism” to rebuild communities that can furnish people with self-respect, status, and meaning.

Rajan’s book, like Oxford University economist Paul Collier’s The Future of Capitalism, is part of a rapidly growing genre of critiques by capitalism’s friends. Rajan is a proponent of capitalism who has accepted that it no longer works in the interest of the social good, and must be brought back under control.

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