Book excerpt: Raghuram Rajan on how markets can work for community benefit
Markets endanger themselves when they stop working for the broader citizenry, because it may rise up to shut them down. Today, some people are disenchanted because they feel large firms are closing opportunities for small firms and individuals. Others are angry because they have suffered painful losses of wealth and incomes and see little support forthcoming from the community or state. Yet others fear their jobs will be displaced by technology or foreign competition. For far too many, the markets have been disappointing. We must take actions to restore public faith in the power of markets to improve well-being.
Growth in the economic pie, which requires innovation and competition, will help. To enable this, barriers that currently protect dominant incumbents must be brought down so that markets are accessible by all. Everyone’s ideas and products can then compete to generate that growth. Widely accessible markets are also less likely to be seen as . . .