When the Great Depression followed the 1929 stock-market crash, almost everyone acknowledged that capitalism was unstable, unreliable, and prone to stagnation. In the decades that followed, however, that perception changed. Capitalism’s postwar revival, and especially the post-Cold War rush to financialized globalization, resurrected faith in markets’ self-regulating abilities. Today, a long decade after the 2008 global financial crisis, this touching faith once again lies in tatters as capitalism’s natural tendency toward stagnation reasserts itself. The rise of the racist right, the fragmentation of the political center, and mounting geopolitical tensions are mere symptoms of capitalism’s miasma. A balanced capitalist economy…

Rather suddenly, capitalism is visibly sick. The virus of socialism has reemerged and is infecting the young once more. Wiser heads, who respect capitalism’s past achievements, want to save it, and have been proposing diagnoses and remedies. But their proposals sometimes overlap with those who would tear the system down, making nonsense of traditional left-right distinctions. Fortunately, Raghuram G. Rajan, a former governor of the Reserve Bank of India who teaches at the University of Chicago Booth School of Business, brings his unparalleled knowledge and experience to bear on the problem. In his new book,The Third Pillar: How Markets and…