Raghuram Rajan, the former Reserve Bank of India Governor, has said capitalism is “under serious threat” as it has stopped providing for the masses.
“…When that happens, the many revolt against capitalism” Rajan told BBC Radio 4’s Today Programme, adding that governments cannot afford to ignore social inequality when considering the economy.
Rajan, who was also a chief economist at the International Monetary Fund (IMF), has been tipped by some as a possible successor to take over from Mark Carney as governor of the Bank of England.
Rajan said it was possible in the past to obtain a middle class job with “modest education”.
“Now, if you really want to succeed, you need a really good education,” he told Radio 4.
He believes that capitalism is breaking down because it is not providing equal opportunities.
“It’s not providing equal opportunity and in fact the people who are falling off are in a much worse situation,” he said.
He said authoritarian regimes arise “when you socialise all the means of production”.
“A balance is needed, you can’t pick and choose – what you need to do is improve opportunity.”
On the state of the global economy, Rajan, now a professor at the University of Chicago, also pointed to the challenges of putting limits on the trade of goods.
“If you put up those barriers, then down the line they’ll put up barriers to our goods. How are you going to keep the goods flowing across those borders when we need to send them?”