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Raghuram Rajan warns of perils of neglecting social issues, rising inequalities

PTI     March 13, 2019

Mumbai, Mar 12 (PTI) Raghuram Rajan, the former governor of the Reserve Bank, Tuesday warned that capitalism is under attack from both the populist of the left and of the right due to the rising economic and social inequalities that communities across the globe have been facing for long.

It can be noted that since the 2008 global financial crisis, the poor have become poorer, while the minuscule rich who constitute under-1 percent of the global population, have become richer.

He also blamed rising inequalities to technological changes which have been very disruptive both in terms of creating job losses due to automation and also increasing the ability to trade and manufacture globally, which has affected some communities very adversely across the world.

"In these communities, which are in many ways loosing economic activity, there is a search for alternatives.

"Sometimes politician provides those alternatives and what we see increasingly is that across the globe, capitalism is under attack from populist of the left and the populist of the right," Rajan said through a video link after being awarded the Yashwantrao Chavan award for his contribution to national integration, democratic values and social and economic development.

Rajan, now a economics professor at the University of Chicago, said the solution to deal with some of these issues require addressing the problems of the affected communities.

If communities are left behind then there is a need to find ways of reviving it so that the communities adapt better to technological changes.

He said people believe that a community has a very big role to play much less so in the developing country like our and much more so in industrial country like the US.

Rajan has just released his third 'The Third Pillar: How markets and the state leave the community behind.' His two earlier books are 'Faultlines: How hidden fractures still threaten the world economy' and 'I do what I do,' which is a collection of speeches during his gubernatorial days at the RBI between September 2013 to September 2015.

Rajan said technology has impacted communities but it also has created the possibility of holding communities together. Technology has made possible to access a much larger market, he added.

The former chief economist at the IMF said as markets have expand and become more international, governance also tends to become, first more national and then international.

"So the market has expanded, government has expanded, the third pillar, the community has shrunk. Why? Because both the markets as well as the government have taken up some of the activity the community actually does," he said.

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