The Third Pillar Book Summary - The Third Pillar Book explained in key points
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The Third Pillar summary

Raghuram Rajan

The Revival of Community in a Polarized World

4.4 (38 ratings)
26 mins
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    The Third Pillar
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    The feudal manors of medieval Europe were swallowed up by emerging nation-states.

    Medieval Europe was a patchwork quilt of self-governing manors owned by the continent’s leading noble families. Peasants pledged allegiance to their masters and paid taxes. In return, they were permitted to work part of their land.

    The manors were self-contained communities governed by lords, who settled disputes among tenants and saw that justice was done. Goods produced on these estates were traded internally rather than exported. All in all, it was a social arrangement dominated by the community pillar.

    The fact that the medieval Church prohibited usury – the practice of charging interests on loans – cemented the sense of community felt by the inhabitants of manors. Rather than being given in the expectation of a monetary reward, help was a social obligation: people gave each other a hand knowing that their neighbors would return the favor.

    In the fifteenth century, technological developments disturbed this social order. Why? Well, innovations like the siege cannon changed the rules of the game. If you wanted to survive, you needed enough cash to fund a large army and defensive structures. Small manors just didn’t have the means to do that, so enterprising rulers began combining their estates.

    By the end of the century, the number of sovereign entities in Europe had halved to just 500. This was the beginning of a new era – the age of nation states. These new states eventually became so powerful that they eclipsed the Church, an institution whose laws had traditionally been seen as trumping secular law.

    When Henry VIII ascended to the English throne in 1485, for example, he was determined to expand his kingdom’s military prowess. He made up for shortfalls in his budget by seizing Catholic monasteries and selling their lands to lower status nobles. The most astute investors in these former Church properties became known as the “gentry” – an entrepreneurial agricultural class that invested in the productivity of their holdings and used the profits to buy up even more land.

    By the end of the sixteenth century, states had come into their own. Monarchs ruled a unified people and levied taxes on the gentry to cover the costs of increasingly expensive wars. The state was in the ascendance but, as we’ll see in the next blink, it’s dominance would soon be challenged by the market.

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    What is The Third Pillar about?

    The Third Pillar (2019) traces the evolving relationship between the three “pillars” of human life – the state, markets and communities – from the medieval period to our own age. Economist Raghuram Rajan argues that, throughout history, societies have struggled to find a sustainable balance between these pillars. Today is no different: caught between uncontrolled markets and a discredited state, communities everywhere are in decline. That, Rajan concludes, is jet fuel for populist movements. But a more balanced kind of social order is possible.

    Best quote from The Third Pillar

    Populism, at its core, is a cry for help, sheathed in a demand for respect, and enveloped in the anger of those who feel they have been ignored.

    —Raghuram Rajan
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    Who should read The Third Pillar?

    • Anyone apprehensive about the rise of intolerant political movements
    • Historians and economists
    • Community organizers and neighborhood activists

    About the Author

    Raghuram Rajan is an economist and Professor of Finance at the University of Chicago Booth School of Business. He was the Chief Economist and Director of Research at the International Monetary Fund between 2003 and 2006 and the Governor of the Reserve Bank of India between 2013 and 2016. His previous book, Fault Lines: How Fractures Still Threaten the World Economy (2010), won the 2010 Financial Times & Goldman SachBusiness Book of the Year Award.

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