Technology and Market Changes:
ICT revolution facilitated global trade: Container ships and standardized containers reduced transportation costs. Low-cost byte transfer enabled real-time monitoring and control of production. Globalization facilitated production in emerging markets: Industrial countries lost traditional manufacturing jobs. High-tech manufacturing and service jobs emerged in big cities. Automation and digitization hollowed out middle-income jobs: Moderate income workers in industrial countries affected. Polarization of jobs at the lower and upper ends.

Technology and Government Changes:
Expansion of government powers: As markets grew, governance powers expanded. Migration of governance upwards: Regulation of banks moved from local to national to international levels. Social insurance migrated from local to state to national levels. Government intervention in times of national calamity: Federal governments stepped up to address pandemic and national downturns.

Technology and Community Changes:
Communities affected by economic activity shift: Economic activity leaving communities.

Technological Change and Community Decline:
Technological advancements have heightened the significance of good education and schooling. Local schools in declining areas have experienced a deterioration in quality. This double whammy prevents residents from developing the skills needed for emerging jobs and discourages parents from sending their children to failing schools. The departure of successful individuals further accelerates community disintegration.

Community Deterioration and Political Dialogue:
The divide between urban and rural areas is reflected in political discourse, with people in urban areas holding more favorable opinions of government intentions compared to those in rural or semi-urban areas. This disparity is influenced by the visible deterioration of communities affected by economic decline.

The Pandemic’s Impact:
The COVID-19 pandemic has exacerbated existing fault lines, intensifying community deterioration.

Local Communities’ Role in Mitigating the Pandemic’s Impact:
Civil society and local communities have played a crucial role in addressing gaps in social protection and essential services during the pandemic. Examples include young people volunteering to shop for the elderly and disabled, community policing of social distancing measures, and the establishment of safety nets. However, some centralized and abrupt solutions, such as nationwide lockdowns, have also negatively impacted communities.

Rethinking Globalization and Governance:
There is a need to re-evaluate the extent of international governance and decision-making in the post-pandemic world. Excessive internationalization of governance can lead to resentment and a sense of disempowerment among local communities. Instead, there should be a focus on devolving powers from international bodies to national governments and further to local governments.

Responsible Sovereignty and Inclusive Localism:
Responsible sovereignty involves taking back power from international institutions to national governments and further to local communities. Inclusive localism emphasizes the need for local control and decision-making, but with a focus on inclusivity and addressing social inequalities. This approach aims to empower local communities and foster a sense of ownership and responsibility for local governance.

Details of Inclusive Localism:
Inclusive localism involves empowering local communities to make decisions about issues that directly affect their lives, such as local infrastructure, education, and healthcare. It also requires ensuring that local governance structures are inclusive and representative of all segments of the community, including marginalized groups. This approach promotes local accountability, responsiveness, and sustainability in addressing community needs and challenges.

Avoiding Binding International Treaties and Centralized Solutions:
Excessive international treaties and harmonization efforts can disempower people and erode democracy. Centralized one-size-fits-all solutions, such as monetary policy, may not effectively address local needs and challenges. Focus on developing local communities and creating better business environments to address issues like crime and access to financial systems.

Subsidiarity and Decentralization:
Apply the principle of subsidiarity to push powers back to the lowest level that can effectively handle them. Decentralize decision-making and control to empower local communities and enable them to address their unique needs and priorities. Example of Switzerland’s education system, where responsibilities for different levels of education are assigned to different levels of government, allowing for local control and parental involvement.

Spreading Economic Activity Across Place:
The pandemic revealed that many jobs can be done remotely, opening up opportunities to spread economic activity beyond big cities. Encourage flexible work arrangements and remote work options to allow individuals to live in smaller communities while maintaining urban jobs. Promote the creation of products in niche markets in remote areas, facilitated by technology that connects producers to global consumers. Example of the Wengerts, an Amish family in Ohio, who have a thriving business selling high-tech horse-drawn farm equipment to Amish consumers across the country.

Inclusive Localism:
Inclusive localism maintains the global nature of production while empowering local communities and preserving democratic values. It allows for the creation of more viable and inclusive communities across countries, addressing issues such as inequality, social unrest, and political polarization. Inclusive localism can save globalization by balancing the benefits of global interconnectedness with the need for local autonomy and empowerment.

Addressing Broken Communities:
Broken communities are often found in industrial countries where economic activity has declined, leading to underdevelopment and social dysfunction.

Community Revival:
Community revival requires empowerment and the ability for communities to govern their own lives. Leadership is crucial in driving community revival efforts.

Example of Community Revival in Pilsen:
In Pilsen, a community initiative tackled crime and violence, resulting in a significant reduction in crime rates. With reduced crime, businesses began to move into the area, stimulating economic activity.

Localism and Community Engagement:
Encourage local ownership, leadership, and community involvement to address the unique needs of each locality. Utilize technology for greater community engagement and involvement, such as apps that allow residents to report issues and monitor local government.

Attractive Communities:
Enhance the attractiveness of communities by improving access to parks, waterfronts, and other amenities. Invest in infrastructure and transportation networks to reduce commute times and improve job accessibility.

Transportation Networks:
Optimize transportation networks by connecting job centers with residential areas to reduce commute times and improve job retention. Consider local input to improve the effectiveness of public transportation systems.

Decentralized Funding:
Provide decentralized funding to empower local governments to address community needs without excessive interference from central authorities. Shift away from the perception that local governments are corrupt and incapable of managing funds effectively.

Gentrification and Community Benefits:
Encourage communities to acquire and hold local assets as they improve, generating revenue that can benefit residents affected by rising costs. Ensure that the entire community benefits from revitalization efforts, rather than just a few individuals or groups.

Localism’s Potential for Jobs and Inclusion:
Localism can foster a sense of identity and empowerment, addressing feelings of powerlessness in the face of globalization. As automation increases, jobs in helping others, such as addressing loneliness and supporting the elderly, will become more prevalent, and communities can play a crucial role in this.

Balancing Localism and Globalization:
Raghuram Rajan argues for a balance between local empowerment and global integration to address the challenges of faceless globalization. This includes implementing laws against discrimination while allowing communities to determine their own way of life.

Localism and Economic Empowerment:
Rajan proposes strengthening local communities through economic activity and empowerment. He emphasizes the importance of empowering local communities to make decisions about their own lives and communities.

The Role of States in Localism:
Rajan uses the example of the United States, where states can enact laws on commerce within their borders but cannot prevent the entry of goods from other states. This demonstrates the balance between local autonomy and national integration.

Managing Faceless Globalization:
Rajan’s third pillar focuses on managing faceless globalization by strengthening communities. He believes that empowering local communities economically can mitigate the negative effects of globalization.

Coordination Mechanisms for Localism:
To address concerns about coordination between local communities, Rajan proposes the principle of subsidiarity. This means that decisions should be made at the lowest appropriate level, with higher levels of government intervening only when necessary.

Transportation Networks and Regional Cooperation:
Rajan suggests that transportation networks should be managed at the regional level, with input from local communities. This ensures that local needs are met while maintaining a cohesive and efficient network.

Flexible Work Arrangements and Local Communities:
Rajan believes that flexible work arrangements can reinvigorate local communities by allowing people to live outside of expensive city centers. He raises the question of whether businesses should be encouraged to adopt flexible work arrangements due to their potential social benefits.

The Changing Nature of Work:
Workers are increasingly demanding flexibility, with many preferring a hybrid work model of two days at home and three days in the office. From the corporate side, companies see the potential for increased productivity with reduced commute times and more productive workers. However, there are concerns about losing a sense of culture and unity with a remote workforce. Many businesses are aiming for a balance of four days in the office and one day at home to maintain both productivity and company culture. Corporate savings can be realized by reducing office space requirements.

Challenges of Economic Revitalization in Developing Countries:
Economic revitalization in developing countries is hindered by issues like corruption and violence. Previous attempts at revitalization have been hampered by these problems.

Strategies for Economic Revitalization:
To address the challenges of economic revitalization in developing countries, it is important to: Combat corruption and violence: Establishing strong institutions and enforcing the rule of law are crucial steps in reducing corruption and violence. Invest in education and skills development: Providing quality education and training programs can help create a skilled workforce that is attractive to businesses. Improve infrastructure: Developing reliable infrastructure, such as transportation and energy systems, is essential for attracting investment and promoting economic growth. Promote entrepreneurship and small businesses: Encouraging entrepreneurship and supporting small businesses can foster job creation and economic diversification. Attract foreign investment: Creating a favorable investment climate, including clear regulations and tax incentives, can attract foreign investment and boost economic growth.

Defining Underdevelopment:
Underdevelopment is more complex in developing countries compared to underdeveloped areas in developed countries. In developed countries, local systems can latch onto functional external systems, making it easier to address issues. Developing countries often face comprehensive challenges, requiring a holistic approach to fixing institutions and politics.

The Difficulty of Institution Building:
Simply implementing institutions from successful countries does not guarantee success. Institutions need to be endogenous, meaning they should evolve within the political context of the country. Changing politics to be less divisive and more goal-oriented is crucial for successful institution building.

The Role of National Structures:
Local development efforts can be more effective when supported by a functional national structure. Without a functioning national structure, local initiatives have to flourish independently, which is more challenging.

Urban-Rural Migration and City Dynamics:
The movement from cities to rural areas is a complex phenomenon influenced by various factors. Cities offer many advantages, including agglomeration economies, where people can exchange ideas and start new businesses. Despite the challenges faced by cities during the pandemic, they are likely to recover and continue attracting people. Niche in-person businesses and social interactions in cities will likely persist, contributing to their vibrancy.

The Question of Development:
Development remains a complex and challenging issue without easy answers. Addressing underdevelopment requires a deep understanding of the political, economic, and social dynamics of each country.

Strengthening Local Economies:
Raghuram Rajan believes that local economies can be strengthened by creating microcosms with institutional strengths, community colleges, schools, etc., to provide people with opportunities in the modern economy. This approach can help prevent cities from sucking away the life breath from smaller communities.

Impact of Work-From-Home on City Taxes:
As work-from-home norms increase, cities that rely on taxes from residents working within their boundaries may face backlash and challenges. Cities will need to justify their taxes and reconsider their tax policies to account for the possibility that people may choose to live elsewhere if taxes are too high.

Cities Need to Rethink Tax Policies:
The mobility of jobs and communication technologies will put pressure on cities to rethink their tax base and tax policies. Cities will need to find ways to balance the need for revenue with the desire to attract and retain residents and businesses.

Interactions of Governments:
Raghuram Rajan highlights the challenges faced when different levels of government operate within the same territory. Rajan cites examples of conflicts between New York City and New York State, as well as county-level disputes, emphasizing the inevitable nature of such conflicts. The resolution of these conflicts often involves compromises and negotiations to establish a modus vivendi, with each level of government handling specific responsibilities and receiving appropriate funding. When new demands arise, conflicts may escalate due to disagreements over funding and responsibilities.

Borrowing Practices by Companies:
Companies borrow funds based on various factors, including the cost of borrowing and their financial situation. The extent of borrowing depends on a company’s assessment of the risks and benefits associated with debt. Companies must consider the potential impact of revenue fluctuations, such as during economic downturns, and maintain financial buffers to mitigate these risks.

India’s Total Permissible Borrowings:
Rajan acknowledges a question regarding the total permissible borrowings by companies in India. However, he does not provide specific insights or recommendations on this topic.

Finance Commission in India:
Rajan mentions the finance commission’s role in allocating funds between the state and national governments in India. He highlights the state governments’ willingness to accept funds from the central government but their reluctance to pass those funds down to local governments. This issue has led to conflicts and disputes over the distribution of funds.