The Third Pillar Summary

Strong communities must stand alongside powerful states and thriving markets to create a sustainable and fair society.

1. Society’s Three Pillars: State, Market, and Community

Society is supported by three essential pillars: the state, markets, and communities. Each has a unique role. The state secures law, order, and infrastructure. Markets fuel innovation and wealth creation. Communities foster identity and solidarity.

Historically, the balance between these three pillars has been elusive. Medieval Europe, for example, was community-driven, with self-governing manors prioritizing allegiance and mutual support. Markets and states were comparatively weak in this feudal system. In contrast, the eighteenth and nineteenth centuries saw market-oriented societies with thriving yet often exploitative trade practices, but state institutions lacked control to ensure equity.

Today, our societal imbalance leans heavily toward markets, with weaker communities and states unable to counter market excesses or address societal disparities. Without equilibrium between these pillars, challenges like inequality, resentment, and populism arise, destabilizing societies.

Examples

• In medieval manors, resources and assistance were shared as social obligations rather than monetary exchanges.
• In the eighteenth century, the market ascended, as seen in Adam Smith's writings favoring competition and production.
• Modern deregulation has allowed corporations to prioritize profits over societal contributions.

2. The Rise of Nation-States

The transition from medieval manors to nation-states reshaped European societies. Technological advancements in the fifteenth century, such as siege cannons, pressured small feudal estates to merge into larger, defensible entities.

Nation-states grew increasingly powerful, eclipsing the Church’s influence on secular laws. Monarchs consolidated resources to fund armies and infrastructure, accelerating these changes. For instance, Henry VIII redirected Church land revenues to create a gentry class focused on improving agricultural productivity and expanding their wealth.

This era marked the ascendancy of the state pillar. However, as monarchs relied heavily on the wealth of entrepreneurial elites, new tensions emerged when the market began to challenge the state’s dominance.

Examples

• The arrival of siege cannons made small, independent manors defenseless, driving consolidation.
• Henry VIII’s dissolution of monasteries transferred power from the Church to the Crown.
• By the sixteenth century, taxation funded national armies and helped unify states.

3. Market Expansion and Backlash

The market pillar expanded rapidly between the sixteenth and early nineteenth centuries. Freed from monarchical and church constraints, private enterprise flourished, creating wealth but also inequality.

The Glorious Revolution of 1688 in England was a turning point that decentralized royal authority. Unchecked markets, however, led to exploitative practices such as Rockefeller’s monopolistic cartels in the nineteenth century. Public anger over such inequalities spurred governmental reforms, ensuring fairer representation and protections for workers.

By the early twentieth century, the pendulum shifted. Communities and workers asserted themselves through voting rights and labor movements, countering the abuses of unchecked market dominance.

Examples

• Parliament’s increased power post-1688 allowed the gentry to lobby for fewer royal interventions.
• Rockefeller’s deal with railroads exemplifies monopolistic practices.
• Early workers' rights movements pushed for fair wages and safer working conditions.

4. Post-War Growth Brought Prosperity and Then Challenges

The three decades following World War II marked an economic boom. Welfare programs, universal healthcare, and labor market expansions underscored state and community collaboration.

This prosperity had its limits. By the 1960s, inflation, unemployment, and budget deficits revealed cracks in this state-driven system. Leaders like Reagan and Thatcher responded by deregulating markets and privatizing industries. While this reinvigorated economies, it weakened communities and exacerbated inequalities.

The shift back to market dominance began to reshape societal structures, eroding the earlier balance that supported postwar recovery and growth.

Examples

• Britain’s National Health Service emerged during postwar prosperity.
• By 1973, one in nine French workers came from immigrant backgrounds, aiding labor shortages.
• Thatcher's miners' strike crackdown marked a sharp turn toward market deregulation.

5. Rising Inequality Fueled by Market Dominance

Market deregulation from the 1980s amplified inequality. Economists like Milton Friedman promoted profit-maximizing goals for corporations at the expense of broader societal contributions.

Stock-based executive compensation incentivized cost-cutting conduct, such as layoffs, to satisfy shareholders. Simultaneously, technological advances widened inequality. High-tech economies increasingly rewarded “superstars” while leaving less-skilled workers behind.

The music industry illustrates this dynamic. Global platforms amplify megastars like Taylor Swift while local musicians struggle to make a living. This "winner takes most" economy exacerbates disparities across sectors.

Examples

• Taylor Swift’s $170 million earnings in 2016 owed much to global streaming platforms.
• Milton Friedman’s theories influenced corporations to prioritize shareholder profits.
• Automation has decimated low-skill jobs while rewarding tech-savvy specialists.

6. Populist Backlashes Stem From Social Stratification

Technological change and globalization disrupted labor markets, dividing society into winners and losers. Automation wiped out manufacturing jobs, leaving many workers ill-equipped for emerging high-skill roles.

Residential sorting has deepened these divides. Wealthy families gravitate to affluent areas, pushing up housing costs and isolating poorer families in underfunded neighborhoods. Such segregation has bred resentment, especially as elites are perceived as detached from everyday struggles.

This resentment fuels populism. In the U.S., the Tea Party emerged amidst frustration over perceived favoritism in Obama-era reforms. In Europe, immigration crises drove voters toward right-wing platforms seeking stricter immigration controls.

Examples

• Outsourcing allowed companies to hire cheaper, overseas workers for previously domestic jobs.
• U.S. zoning policies left poorer families excluded from quality schooling opportunities.
• Brexit showcased voter frustration regarding immigration and globalization policies.

7. Emerging Markets Are Also at Crossroads

Emerging markets also struggle with balancing state, market, and community dynamics. China achieved its growth through state-supported industries but faces pressure to innovate domestically while liberalizing its economy.

Meanwhile, India grapples with corruption and political populism. Corrupt practices, like selling state land to cronies, undermine its democratic progress. As Hindu nationalism rises, India risks turning inward at the expense of necessary liberal reforms.

These challenges must be addressed to align the social pillars and ensure sustained growth for emerging nations.

Examples

• Chinese state enterprises thrived because of government subsidies that distorted markets.
• India’s economy grew by 7% annually despite widespread corruption.
• Hindu nationalism threatens India's advances in globalization.

8. Inclusive Localism as a Solution

Inclusive localism rebalances the three pillars by empowering communities. It delegates authority to local areas, enabling them to make decisions that suit their needs.

Communities could decide whether they prioritize chain stores or local businesses, blending economic and cultural considerations. States assist by creating inter-community links through infrastructure and mobility-enhancing policies.

Empowered communities thrive when supported by a fair state framework, which creates education systems and opportunities accessible to all. A revitalized education system would bridge socioeconomic gaps and foster community growth.

Examples

• Indore, India transformed its streets using innovative leadership and local cooperation.
• A national digital curriculum allows equitable educational access for all students.
• Local economies benefit from empowering small businesses over large chain operators.

9. Global and National Policies to Foster Fair Competition

Reforms are needed to ensure fair competition in domestic and global markets. For instance, personal data rights should grant users ownership over their information to limit monopolies by tech firms like Amazon.

Globally, lowered tariffs facilitate beneficial trade, while careful regulation prevents disruptive financial crises. Sovereignty remains vital for policies like monetary regulations while countries collaborate on shared environmental goals.

Balancing globalization with domestic empowerment requires dual strategies: encourage local growth while ensuring competitive, collaborative international markets.

Examples

• Giving users control over transaction data prevents tech monopolies.
• Harmonizing safety regulations globally balances diversity with fair trade practices.
• Collaboration on carbon emission goals aligns environmental and economic priorities.

Takeaways

1. Strengthen community involvement by delegating local decision-making powers for economic and cultural matters.
2. Advocate for equitable educational reforms, such as digital curricula, to reduce inequalities and build community cohesion.
3. Support reforming data rights to limit monopolies, promoting fair competition in both national and international markets.