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So why is Trump the US President? Who are the people that may be delighted to have him as their President? Why is Globalization facing strong headwinds of protectionism and hyperbolic nationalism? Why there is an army of trolls online who will justify any act of omission or commission of their leader in the name of patriotism?

Why doesn’t the world seem a rational place anymore wherein the ‘haves’ now reduced to ‘have-nots’ will rather break down the System instead of picking themselves up to compete again in the eternal rat race of meritocracy and competition? Read on. Raghuram Rajan’s latest book that accurately diagnoses the disease but offers little more than a prayer in providing the cure.

“Yet even though the world has achieved economic success that would have been unimaginable even a few decades ago, some of the seemingly most privileged workers in developed countries are literally worried to death. Half a million more middle-aged non-Hispanic white Americans died between 1999 and 2013 than if their death rates had followed the trend of other ethnic groups. The additional deaths were concentrated among those with a high school degree or less, and largely due to drugs, alcohol, and suicide. To put these deaths in perspective, it is as if ten Vietnam wars were simultaneously taking place, not in some faraway land, but in homes in small-town and rural America. In an era of seeming plenty, a group that once epitomized the American dream seems to have lost hope.”

It is worth to reiterate the byte from Rajan’s book. It explains the anger of a generation that feels denied and deprived of what was rightfully theirs – a middle-class American life. The class has with the vengeance attacked what it sees as the perils of Globalization. In such a scenario its easy for a demagogue to emerge and point fingers at the others as the source of one’s problems. Anger promotes exclusion and a ticket to power.

While Rajan tries to write from a layman’s  perspective, he still comes with an academic approach. He first traces the origins of the pillars. Community was the all powerful and only pillar to begin with. To accommodate the changes wrought by industrialization it led to the emergence of State as an alternate pillar. The State’s excesses need to be kept in bounds and still drive resources to productive purpose. The answer was Markets. USA became the hallmark of demarcation of powers and accountability between the State and Markets. It promoted entrepreneurship and free markets. New paradigms emerged whereby the State and Markets connived to forge partnerships at the cost of local communities.

The gravy train was munificent and lulled the communities from protesting too much at the diarchy. But rapid globalization and unfettering of Capital created behemoths that took apart the community. The enemy was invisible and unknown but the community felt deprived and robbed of their fair share. They worried even more about the future of the children. Those who could moved away from poorer communities to something better did it at double-speed. This impoverished the community further and added more to their despair. The negative spiral simply sapped the community’s ability to respond the challenge. The schism widened and provide an easy handle for politicians to exploit for their own narrow interests.

Rajan’s diagnosis supported by anecdotes and empirical evidence is quite convincing. Most of us can relate to the dislocation being experienced by the masses and the rage it produces. However no easy solutions are around though Rajan rightfully suggests that the Community needs to regain its rightful place in the scheme of things and a reset of ‘balance-of-power’ between the three pillars is the only way to ensure a prosperous future for most of us.

The trouble remains with the fact that the prescription is not easy to implement. Rajan’s suggests a few piece-meal strategies but how much they would work at a mass scale is always an issue. The delicate balance in becoming a welfarist and inefficient society is counterpoised by the ‘winners-take-all’ approach that free markets have driven to the extreme. ‘Occupy Wall Street’ and ‘Brexit’ are credible examples of how widespread and deep is the anger of those who are left behind in the race to the top.

Every decision becomes a Pandora’s box. In the garb of promoting local communities are we resorting to protectionism? What happened to the theory of Adam Smith’s invisible hand? What happened to the story of leveraging your comparative advantage to maximize the output for the world at large? Can we worry too much about slicing the Cake for everyone instead of growing the Cake to meet the needs of more people?

Rajan’s answers have a ring of optimism about them but fall short in helping us find the magic bullet that will solve all our problems. May be there is no magic bullet after all? May be the conflict between the pillars that is negotiated and re-negotiated for every decision being made is the best we can do. May be we are liable to make mistakes and then possibly overcompensate. However multiple iterations will gives us a sense of how to balance the pillars and make them work. Just because it is difficult it doesn’t mean that we should attempt to find solutions. And we need to be flexible about changing our minds and trying new options when the old ones don’t work.

Rajan’s book scores particularly to remind us  to think about the hard core voter rooting for someone like Trump : “The primary source of worry seems to be that moderately educated workers are rapidly losing, or are at risk of losing, good ‘middle-class’ employment, and this has grievous effects on them, their families, and the communities they live in. It is widely understood that job losses stem from both global trade and the technological automation of old jobs. Less well understood is that technological progress has been the more important cause. Nevertheless, as public anxiety turns to anger, radical politicians see more value in attacking imports and immigrants. They propose to protect manufacturing jobs by overturning the liberal rules- based postwar economic order, the system that has facilitated the flow of goods, capital, and people across borders.”

Excerpted from https://wp.me/p44iYk-2Do