Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks.
Interpretation
The quote emphasizes the importance of stability over rapid growth in the face of potential economic risks.
Raghuram Rajan expresses a critical perspective on the common belief that growth should be prioritized above all else. He argues that convincing the public to value stability, especially in uncertain economic times, is a significant challenge. The quote underscores the tension between the desire for immediate growth and the necessity of ensuring a stable foundation, which can prevent larger economic problems in the future.
In practice
During an economic policy discussion, one might quote this to advocate for prioritizing stability over immediate growth.
The U.S. should worry about the effects of its polices on the rest of the world. We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, broadly, rather than what is just right given the circumstances of that country.
Customers often value a good more when its price goes up. One reason may be its signaling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich.
The problem with forbearance is that it always looks like a good thing to do until it stops working.
Too many years away from academia renders you pretty incompetent at research and teaching. So I had to go back.
The gap in India has always been between the promise and the execution.
Democratic accountability means that governments must be popularly accepted, with citizens empowered to replace corrupt or incompetent rulers.
Just as we should never balance the budget on the backs of the poor, so it is an economic delusion to think you can balance it only on the wallets of the rich.
The role of liquidity in systemic events provides yet another reason why, in the future, a more system wide or macroprudential approach to regulation is needed.
If bankers become overly conservative in response to past lending mistakes - or if examiners force such behavior - it will hurt bankers' own long-term interests and the economy in general.
A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.
Credit markets were originally created to serve human needs; to provide businesses and individuals with capital to start or expand businesses or fulfill other financial needs.
This power becomes particularly irresistible when exercised by those who, because they hold and control money, are able also to govern credit and determine its allotment, for that reason supplying, so to speak, the lifeblood to the entire economic body, and grasping, as it were, in their hands the very soul of production, so that no one dare breathe against their will.
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