The Third Pillar

by Raghuram Rajan

  4. Yann Algan, Sergei Guriev, Elias Papaioannou, and Evgenia Passari, “The European Trust Crisis and the Rise of Populism,” Brookings (September 2017), https://www.brookings.edu/wp-content/uploads/2017/09/4_alganetal.pdf.

  5. Alexander Hamilton, James Madison, and John Jay, The Federalist papers (1788), available at https://www.congress.gov/resources/display/content/The+Federalist+Papers, especially Federalist 10, “The Same Subject Continued: The Union as a Safeguard Against Domestic Faction and Insurrection.”

  6. Evidence available from the author based on analysis of World Value Surveys.

  7. David Brooks, “Bobos in Paradise,” in The Inequality Reader: Contemporary and Foundational Readings in Race, Class, and Gender, ed. David B. Grusky and Szonja Szelényi (Boulder, CO: Westview Press, 2007).

  8. Mitchell Petersen and Raghuram Rajan, “Does Distance Still Matter? The Information Revolution in Small Business Lending,” Journal of Finance 57, no. 6 (December 2002): 2533–70.

  9. Christopher R. Berry and Edward L. Glaeser, “The Divergence of Human Capital Levels Across Cities,” Papers in Regional Science 84, no. 3 (December 2005): 407–44.

  10. Chang-Tai Hsieh and Enrico Moretti, “Housing Constraints and Spatial Misallocation,” rev. ed., NBER Working Paper No. 21154, May 2017.

  11. Han Kim, Adair Morse, and Luigi Zingales, “Are Elite Universities Losing their Edge,” Journal of Financial Economics 93 (2009) 353–81.

  12. Brooks, “Bobos in Paradise”; Charles Murray, Coming Apart: The State of White America, 1960–2010 (New York: Random House Digital, 2013); Ross Douthat and Reihan Salam, Grand New Party: How Republicans Can Win the Working Class and Save the American Dream (New York: Doubleday, 2008).

  13. See Betty Hart and Todd Risley, Meaningful Differences in the Everyday Experience of Young American Children (Baltimore: Brookes Publishing, 1995), cited in Richard Reeves, Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It (Washington, D.C.: Brookings Institution Press, 2017), 42.

  14. Walter Mischel, Yuichi Shoda, and Monica I. Rodriguez, “Delay of Gratification in Children,” Science 244, no. 4907 (1989): 933–38; Walter Mischel, Yuichi Shoda, and Philip K. Peake, “The Nature of Adolescent Competencies Predicted by Preschool Delay of Gratification,” Journal of Personality and Social Psychology 54, no. 4 (1988): 687–96; Jacoba Urist, “What the Marshmallow Test Really Teaches About Self-Control,” The Atlantic, September 24, 2014, https://www.theatlantic.com/health/archive/2014/09/what-the-marshmallow-test-really-teaches-about-self-control/380673/.

  15. Celeste Kidd, Holly Palmeri, and Richard N. Aslin, “Rational Snacking: Young Children’s Decision-making on the Marshmallow Task is Moderated by Beliefs About Environmental Reliability,” Cognition 126, no. 1 (2013): 109–14.

  16. Reeves, Dream Hoarders.

  17. Elizabeth Dickinson, “Coleman Report Set the Standard for the Study of Public Education,” Johns Hopkins Magazine 68, no. 4 (Winter 2016).

  18. Heather Schwartz, “Housing Policy in School: Economically Integrative Housing Promotes Academic Success in Montgomery County, MD,” The Education Digest 76, no. 6 (February 2011): 42.

  19. Sean Reardon and Kendra Bischoff, “The Continuing Increase in Income Segregation, 2007–2012,” Stanford Center for Education Policy Analysis, 2016, http://cepa.stanford.edu/content/continuing-increase-income-segregation-2007-2012.

  20. Ann Owens, “Inequality in Children’s Contexts: Income Segregation of Households with and without Children,” American Sociological Review 81, no. 3 (June 2016): 549–74.

  21. Brooks, Bobos in Paradise; Christopher Lasch, The Revolt of the Elites and the Betrayal of Democracy (New York: W.W. Norton & Company, 1996); Edward Luce, The Retreat of Western Liberalism (New York: Atlantic Monthly Press, 2017); Murray, Coming Apart; Robert Putnam, Our Kids: The American Dream in Crisis (New York: Simon & Schuster, 2015).

  22. “Grammatical Error,” The Economist, August 13, 2016, http://www.economist.com/news/britain/21704837-lifting-ban-new-selective-schools-would-damage-social-mobility-grammatical-error?frsc=dg%7Ca.

  23. Fred Harris and Alan Curtis, “The Unmet Promise of Equality,” The New York Times, March 1, 2018, https://www.nytimes.com/interactive/2018/02/28/opinion/the-unmet-promise-of-equality.html?rref=collection/sectioncollection/opinion&action=click&contentCollection=opinion®ion=stream&module=stream_unit&version=latest&contentPlacement=18&pgtype=sectionfront.

  24. David Autor, David Dorn, and Gordon Hanson, “When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Young Men,” NBER Working Paper No. 23173, January 2018.

  25. See Autor et al., “When Work Disappears.”

  26. Campbell F. Scribner, The Fight for Local Control: Schools, Suburbs, and American Democracy (Ithaca, NY: Cornell University Press, 2016), 55.

  27. National Commission on Excellence in Education, “A Nation at Risk: The Imperative for Educational Reform,” The Elementary School Journal 84, no. 2 (1983): 113–30. Also see Scribner, Fight for Local Control, 175–76.

  28. Joseph Fuller, Manjari Raman et al., “Dismissed by Degrees: How Degree Inflation is Undermining US Competitiveness and Hurting America’s Middle Class,” published by Accenture, Grads of Life, Harvard Business School, October 2017, https://www.hbs.edu/managing-the-future-of-work/Documents/dismissed-by-degrees.pdf.

  29. Zoe Baird and Rework America, America’s Moment: Creating Opportunity in the Connected Age (New York: Norton, 2015), 192.

  30. “PISA 2015, Results in Focus.” OECD Programme for International Student Assessment, https://www.oecd.org/pisa/pisa-2015-results-in-focus.pdf

  31. Claire Cain Miller, “Do Preschool Teachers Really Need to Be College Graduates?” The New York Times, April 7, 2017, https://www.nytimes.com/2017/04/07/upshot/do-preschool-teachers-really-need-to-be-college-graduates.html.

  32. Douthat and Salam, Grand New Party.

  33. “How Groups Voted,” Roper Center, Cornell University, https://ropercenter.cornell.edu/polls/us-elections/how-groups-voted/.

  34. Shanto Iyengar, Gaurav Sood, and Yphtach Lelkes, “Affect, Not Ideology: A Social Identity Perspective on Polarization,” Public Opinion Quarterly 76, no. 3 (January 2012): 405–31.

  35. John B. Judis, The Populist Explosion: How the Great Recession Transformed American and European Politics (New York: Columbia Global Reports, 2016).

  36. Guy Chazan, “Germany’s Economic Engine Fails to Power Struggling Rural Regions,” Financial Times, February 27, 2018, https://www.ft.com/content/c6edf308-1875-11e8-9376-4a6390addb44.

  37. “European Populism: Trends, Threats and Future Prospects,” Institute for Global Change (website), accessed August 6, 2018, https://institute.global/insight/renewing-centre/european-populism-trends-threats-and-future-prospects.

  38. Kerwin Kofi Charles, Erik Hurst, and Matthew J. Notowidigdo, “The Masking of the Decline in Manufacturing Employment by the Housing Bubble,” The Journal of Economic Perspectives 30, no. 2 (Spring 2016): 179–200.

  39. Raghuram G. Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton, NJ: Princeton University Press, 2010).

  40. Tito Boeri, Prachi Mishra, Chris Papageorgiou, and Antonio Spilimbergo, “A Dialogue between a Populist and an Economist,” CEPR Discussion Paper No. DP12763, Feburary 2018.

  41. Arlie Hochschild, Strangers in Their Own Land: Anger and Mourning on the American Right (New York: The New Press, 2016).

  42. Williams, “What So Many People Don’t Get.”

  43. Alberto Alesina, Armando Miano, and Stefanie Stantcheva, “Immigration and Redistribution,” NBER Working Paper No. 24733, June 2018.

  44. David Autor, David Dorn, Gordon Hanson, and Kaveh Majlesi, “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure,” rev. ed., MIT Working Paper, December 201
7, available at https://economics.mit.edu/files/11499.

  CHAPTER 8: THE OTHER HALF OF THE WORLD

  1. See the insightful two-volume work by Francis Fukuyama on the difference between China and India: The Origins of Political Order: From Prehuman Times to the French Revolution (New York: Farrar, Straus, and Giroux, 2011) and Political Order and Political Decay (New York: Farrar, Straus, and Giroux, 2014).

  2. Yasheng Huang, Capitalism with Chinese Characteristics: Entrepreneurship and the State (Cambridge, UK: Cambridge University Press, 2008).

  3. Huang, Capitalism, 162–63.

  4. See Richard McGregor, The Party: The Secret World of China’s Communist Rulers (New York: Harper, 2010).

  5. Huang, Capitalism.

  6. Ibid., 162–63.

  7. Minxin Pei, China’s Crony Capitalism: The Dynamics of Regime Decay (Cambridge, MA: Harvard University Press, 2016).

  8. Chang-Tai Hsieh and Zheng (Michael) Song, “Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China,” Brookings Papers on Economic Activity, March 2015, https://www.brookings.edu/wp-content/uploads/2016/07/2015a_hsieh.pdf.

  9. Hsieh and Song, “Grasp the Large.”

  10. See Yuen Yuen Ang, “Autocracy with Chinese Characteristics: Beijing’s Behind-the-Scenes Reforms,” Foreign Affairs 97, no. 3 (May/June 2018), https://www.foreignaffairs.com/articles/asia/2018-04-16/autocracy-chinese-characteristics.

  11. Huang, Capitalism, 234–35.

  12. McGregor, The Party, chapter 1.

  13. McGregor, The Party; Pei, China’s Crony Capitalism.

  14. McGregor, The Party.

  15. Ibid.

  16. Daniel A. Bell, The China Model: Political Meritocracy and the Limits of Democracy (Princeton, NJ: Princeton University Press, 2015).

  17. Shang-Jin Wei, Zhuan Xie, and Xiaobo Zhang, “From ‘Made in China’ to ‘Innovated in China’: Necessity, Prospect, and Challenges,” NBER Working Paper No. 22854, http://www.nber.org/papers/w22854.

  18. János Kornai, “The Soft Budget Constraint,” Kyklos 39, no. 1 (February 1986): 3–30, https://doi.org/10.1111/j.1467–6435.1986.tb01252.x [inactive].

  19. See Ang, “Autocracy with Chinese Characteristics,” and Elizabeth C. Economy, “China’s New Revolution: The Reign of Xi Jinping,” Foreign Affairs 97, no. 3 (May/June 2018), https://www.foreignaffairs.com/articles/china/2018-04-17/chinas-new-revolution.

  20. See Eswar Prasad, The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance (Princeton, NJ: Princeton University Press, 2014), and Kurt M. Campbell and Ely Ratner, “The China Reckoning: How Beijing Defied American Expectations,” Foreign Affairs 97, no. 60 (March/April 2018), https://www.foreignaffairs.com/articles/united-states/2018-02-13/china-reckoning.

  21. See, for example, the discussion in Eswar Prasad, Gaining Currency: The Rise of the Renminbi (New York: Oxford University Press, 2016).

  22. Robert Barro and Jong-Wha Lee, “A New Data Set of Educational Attainment in the World, 1950–2010,” Journal of Development Economics 104 (2013): 184–98, data available at http://www.barrolee.com/data/dataexp.htm.

  23. See Dani Rodrik, Arvind Subramanian, and Francesco Trebbi, “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development,” Journal of Economic Growth 9, no. 2 (June 2004): 131–65.

  24. See Kalpana Kochhar, Utsav Kumar, Raghuram Rajan, Arvind Subramanian, and Ioannis Tokatlidis, “India’s Pattern of Development: What Happened, What Follows?” Journal of Monetary Economics 53, no. 5 (July 2006): 981–1019.

  25. Shubham Chaudhuri, “What Differences Does a Constitutional Amendment Make? The 1994 Panchayati Raj Act and the Attempt to Revitalize Rural Local Government in India,” in Decentralization and Local Governance in Developing Countries: A Comparative Experience, ed. Pranab Bardhan and Dilip Mookherjee (Cambridge, MA: MIT Press, 2006).

  26. Petia Topalova, “Trade Liberalization, Poverty, and Inequality Evidence from Indian Districts,” in Globalization and Poverty, ed. Ann Harrison (Chicago: University of Chicago Press, 2007), 291–336, available at http://www.nber.org/chapters/c0110.pdf; Lakshmi Iyer and Petia Topalova, “Poverty and Crime: Evidence from Rainfall and Trade Shocks in India,” Harvard Business School Working Paper No. 14–067, September 2014.

  27. Campbell and Ratner, “China Reckoning.”

  CHAPTER 9: SOCIETY AND INCLUSIVE LOCALISM

  1. George Megalogenis, “Powering Australia’s Economic Surge,” The New York Times, November 1, 2016, https://www.nytimes.com/2016/11/02/opinion/powering-australias-economic-surge.html.

  2. “Gone in Their Prime: Many Countries Suffer from Shrinking Working-age Populations,” The Economist, May 5, 2018, https://www.economist.com/international/2018/05/05/many-countries-suffer-from-shrinking-working-age-populations?frsc=dg%7Ce.

  3. “Concentrate!: A Small Japanese City Shrinks with Dignity,” The Economist, January 11, 2018, https://www.economist.com/news/asia/21734405-authorities-are-focusing-keeping-centre-alive-small-japanese-city-shrinks-dignity?frsc=dg%7Ce.

  4. “Japan’s Foreign Minister Says Country to Open to Foreigners,” The New York Times, September 13, 2018, https://www.nytimes.com/aponline/2018/09/13/world/asia/ap-as-vietnam-japan-migration.html [inactive].

  5. “Physicians (per 1,000 People),” World Bank (website), accessed August 7, 2018, https://data.worldbank.org/indicator/SH.MED.PHYS.ZS.

  6. Dani Rodrik offers a related set of calculations from the World Value Survey in his book Straight Talk on Trade: Ideas for a Sane World Economy (Princeton, NJ: Princeton University Press, 2018).

  7. Craig Calhoun, Nations Matter: Culture, History, and the Cosmopolitan Dream (New York: Routledge, 2007), 139.

  8. Sunil Khilnani, The Idea of India (New York: Farrar, Straus and Giroux, 1998).

  9. Michael Ignatieff, The Ordinary Virtues: Moral Order in a Divided World (Cambridge, MA: Harvard University Press, 2017).

  10. Alberto Alesina and Eliana La Ferrara, “Ethnic Diversity and Economic Performance,” Journal of Economic Literature 43, no. 3 (September 2005): 762–800.

  11. J. D. Vance, Hillbilly Elegy: A Memoir of a Family and Culture in Crisis (New York: Harper, 2016).

  CHAPTER 10: REBALANCING THE STATE AND THE COMMUNITY

  1. Bruce Katz and Jeremy Novak, The New Localism: How Cities Can Thrive in the Age of Populism (Washington, D.C.: Brookings Institution Press, 2017).

  2. Luigi Guiso, Paola Sapienza, and Luigi Zingales, “Long Term Persistence,” Journal of the European Economic Association 14, no. 6 (December 1, 2016): 1401–36.

  3. Alberto Alesina and Eliana La Ferrara, “Ethnic Diversity and Economic Performance,” Journal of Economic Literature 43, no. 3 (September 2005): 762–800.

  4. Henry Grabar, “California Bill Would Allow Unrestricted Housing by Transit, Solve State Housing Crisis,” Slate, January 05, 2018, https://slate.com/business/2018/01/california-bill-sb827-residential-zoning-transit-awesome.html.

  5. “Internet/Broadband Fact Sheet,” Pew Research Center (website), accessed August 07, 2018, http://www.pewinternet.org/fact-sheet/internet-broadband.

  6. “Archive: Internet Access and Use Statistics—Households and Individuals,” eurostat (website), https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Archive:Internet_access_and_use_statistics_-_households_and_individuals. Accessed April 2, 2018.

  7. Rework America, America’s Moment: Creating Opportunity in the Connected Age (New York: W. W. Norton, 2015), 186.

  8. “Chicago, IL—Issues,” SeeClickFix (website), accessed on August 07, 2018, https://en.seeclickfix.com/chicago.

  9. “Across India,” I Paid a Bribe (website), accessed on August 08, 2018, http://ipaidabribe.com/#gsc.tab=0.

  10. Emily Badger, “Blue Cities want to make their own rules. Red states won’t let them,” The New York Times, July 6, 2017, https:/
/www.nytimes.com/2017/07/06/upshot/blue-cities-want-to-make-their-own-rules-red-states-wont-let-them.html.

  11. Garry Kasparov, “The Chess Master and the Computer,” The New York Review of Books, February 11, 2010, http://www.nybooks.com/articles/2010/02/11/the-chess-master-and-the-computer/; Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerization?,” Oxford Martin School (September 2013), https://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf.

  CHAPTER 11: REINVIGORATING THE THIRD PILLAR

  1. Peter Coy, “Keeping Up With the Joneses: Neighbors of Lottery Winners Are More Likely to Go Bankrupt,” Bloomberg Businessweek, May 29, 2018, https://www.bloomberg.com/news/articles/2018-05-29/keeping-up-with-the-joneses-neighbors-of-lottery-winners-are-more-likely-to-go-bankrupt.

  2. See, for example, the description in Jeremy Heimans and Henry Timms, New Power: How Power Works in Our Hyperconnected World—and How to Make It Work for You (New York: Doubleday, 2018)

  3. For the first, see Robert D. Putnam, Bowling Alone (New York: Simon & Schuster, 2000); Kraut et al., “Internet Paradox: A Social Technology That Reduces Social Involvement and Psychological Well-Being?,” American Psychologist 53, no. 9 (1998): 1017–31.

  4. Keith Hampton, “Netville: Community On and Offline in a Wired Suburb,” in The Cybercities Reader, ed. Stephen Graham (London: Routledge, 2004), 256–62.

  5. Matthew Gentzkow and Jesse M. Shapiro, “Ideological Segregation Online and Offline,” NBER Working Paper No. 15916, April 2010.

  6. Mark Aguiar, Mark Bils, Kerwin Kofi Charles, and Erik Hurst, “Leisure Luxuries and the Labor Supply of Young Men,” NBER Working Paper No. 23552, June 2017.

  7. Daniel T. Rodgers, “Prologue,” in Age of Fracture (Cambridge, MA: Belknap Press, 2012).

  8. This section draws on Rashmi Bansal, “The Curious Case of a Clean Clean Indore,” Business Today, July 2, 2017, https://www.businesstoday.in/magazine/columns/the-curious-case-of-a-clean-clean-indore/story/254144.html.

  9. Bruce Katz and Jeremy Novak, The New Localism: How Cities Can Thrive in the Age of Populism (Washington, D.C.: Brookings Institution Press, 2017).