Around the time of independence, Gandhiji and Babasaheb Ambedkar clashed over the kind of structure the new nation of India would possess. Gandhiji believed in what would today be called a version of localism as he wanted most of the powers of the state to be vested with villages with the federal government having minimal interference. Ambedkar, having lived a life full of discrimination and social exclusion, did not agree. He saw villages and local communities as regressive centers of oppressive customs and traditions, with a hierarchy meant to subjugate those at the bottom, and which would not give all Indians the freedom that they should deserve.
Fast forward to today. Raghuram Rajan writes a book that is part of the many, many...many books out there at the moment on (i) the ills plaguing (predominantly) the developed world; (ii) an analysis of the conflicts therein; finally, (iii) offering a set of solutions. As is unfortunately the case with all these books, written by very smart people, the analysis is often highly informative and enlightening but the solutions are impractical or hopelessly naive.
What comes out is a book that has an intriguing thesis - that there is a third oft ignored pillar of the community that can bolster the support systems that individuals need in a time of great turbulence, and which can more efficiently take decisions for the people living in their communities.
There is much to agree with the thesis. Rajan is a nuanced person. He does not think in terms of ideological manifestos. He does not, at least for the developed world, think Ambedkar was right, but he doesn't want us to push out the state and the market to the extent that Gandhiji would have wanted.
The book itself, though, leaves a lot to be desired. In a topic as complex as the one Rajan has picked - of analyzing the community's role and empowering it in specific ways - the big flaw that comes out, and I can't believe I am saying this, is that he chooses to look at most of these problems purely as an economist. Not always, I hasten to add, but almost everywhere of note. Therefore, the analysis (historical and current) is often based on incentives. Give the right incentive and communities will not be overly insular or discriminatory, even in subtle ways. This line of thinking is not persuasive not least because there exists a history of regressive community structures and bad equilibria where the community chooses to live in a manner that is hostile to all kinds of outsiders as well as interruptions to their way of life. Despite these decisions affecting those communities economically. Despite the state trying to interfere.
In addition, the solutions miss an important aspect of so much of populist anger in the world today (something that Rajan himself mentions earlier in the book). People are not convinced the world is fair. That there is justice out there. People will not feel better by rising in their local community boards or church groups as compensation for feeling excluded from those who are far wealthier than they can imagine themselves to be. The number of roles that the community is ostensibly supposed to support is huge. One cannot see how all these roles can be smoothly and uniformly fulfilled. If people feel that they cannot live in the same elite circles as the elite, or have their children study in the same public schools, or see a way up if they work hard enough, the communities will not be able to compensate for this kind of distrust and disgruntlement.
I think the book would have done better if it had a more practical view of how changes can be implemented. Who is going to make the change? How do you engender this change endogenously? Or at the very least, what's the sequencing of the many tweaks and modifications (admirably) analyzed and recommended. One would expect that changes to how fair the system is perceived has to come first, for example.
Finally, the book is far too long for what it wants to present. Part I has a hurried jaunt through history and is neither insightful nor coherent; there are far too many digressions. The point of the argument struggles to come across. Part II is the analysis of the current situation. This is where Rajan's immense scholarship in the field of finance, contract theory, policy making etc comes to the forefront. I learnt a lot from this section. Part III is the solutions part. Interestingly, I found the author's analysis of solutions for the market and the state to be highly thought provoking; the solutions for the community are vague and seem to be a rather long laundry list of possible steps that can be taken.
All in all, the thesis is interesting. Some parts are very good. And to be fair, it is probably the start of a debate on this topic. This is not Rajan's best book but then, we hold him to the highest standards of expectation.
