In a healthy capitalist economy, communities help to keep the state and the markets from accumulating too much power.
American history provides one such example of this happening: the progressive movement of the late 19th and early 20th centuries grew as a response to the growing power of railroads and banks and their grip on gilded age governments – many presidential administrations of that era are considered among the most corrupt in Ammerican history. Out of the progressive movement came the Sherman Anti-Trust Act, the Food and Drug Administration and the Federal Reserve.
“We fear too much concentration of power, therefore we want to break it up,” said Rajan. “We need to think of more effective ways of reducing the power of large organizations.”
By empowering communities, Rajan believes that countries can find more useful channels for policy – communities are better at understanding their own needs and can be more effective mechanisms of executing policy and enforcing rules.
For example, communities should have the resources and flexibility to set their own education policy. In some locales, free education need only continue through the high school years. In others where more technical or white collar jobs need to be filled, free four-year college tuition might make sense. In others still, where there might be a need for skilled labor or manufacturing workers, vocational training might be provided using the resources of the community or the state.
“A number of states have already made community college free,” said Rajan. “It should be decentralized. You don’t want everybody in college when, in fact, you could benefit more from having a higher level of vocational training. The point is that we have to be very practical.”