Raghuram Rajan

Former Governor, Reserve Bank of India
Professor of Finance, Booth School of Business, University of Chicago

Warned in 2010 that long-term economic instabilities would lead to today’s European financial crisis.

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Biography

Dr. Raghuram Rajan is a world-renowned economist and award-winning expert in the finance of economic growth. Raghuram was the 23rd Governor of the Reserve Bank of India from 2013 to 2016. Previously he served as the Chief Economic Advisor to the Government of India. Rajan was Economic Counselor and Director of Research (chief economist) at the International Monetary Fund from 2003 to December 2006, the youngest person ever to hold the position.

After his Governorship, Dr. Rajan returned to his academic career and was named the Katherine Dusak Miller Distinguished Service Professor of Finance at the Booth School of Business, University of Chicago.

His most recent book, Fault Lines: How Hidden Fractures Still Threaten the World Economy, is was the 2010 Financial Times/Goldman Sachs Business Book of the Year. In Fault Lines, Rajan argues that serious flaws in the economy are to blame, and warns that a potentially more devastating crisis awaits us if they aren't fixed. Rajan outlines several sensible reforms that will ensure a more stable world economy.

Dr. Rajan was one of the first people to see our financial crisis coming. As chief economist of the IMF, he warned in 2005 that disaster loomed and pushed the IMF's research department to focus on financial-sector issues. Professor Rajan is currently focused on coming up with institutional reforms that will avoid regulatory backlash against free markets and open trade.

He researches political economic policy and the role of institutions in fostering economic development. Dr. Rajan is an expert on economic development and on emerging economies, especially India.

Dr. Rajan is the co-author of Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity, a fresh approach to understanding the wealth-generating capabilities of free markets.

He has held a number of visiting professorships and was an advisor to the Prime Minister of India. He has been a consultant to the Indian Finance Ministry, the World Bank, the US Federal Reserve Board, the Swedish Parliamentary Commission, and various financial institutions.

He was awarded the inaugural Fischer Black Prize by the American Finance Association for contributions to finance by an economist under 40, and is perhaps the most prominent economist of Indian origin of his generation. He is one of Foreign Policy's Top 100 Global Thinkers 2012 and 2010. Dr. Rajan was elected a Fellow of the American Academy of Arts & Sciences in 2009.

Predicting the Crisis
Raghuram Rajan was one of the first economists to warn of a major financial collapse, and he remained among only a handful to hold that view until he was vindicated by the events of the past year.

In August 2005, the annual gathering of high-powered economists at Jackson Hole, Wyoming, planned to honor Alan Greenspan, who was about to retire, for presiding over a historic period of economic growth. Raghuram Rajan had planned to write about how the financial world had become safer under his tenure at the Fed, but the more he looked, the more he began to worry. In the end, the chief economist of the International Monetary Fund argued the opposite: disaster loomed. He called his paper "Has Financial Development Made the World Riskier?" The answer, he said, was yes.

Since then, of course, all the things he warned about have occurred: That incentives on Wall Street encouraged financial firms to invest in complex products that could fail spectacularly; that credit default swaps entailed immense risk—if defaults actually occurred; that "the interbank market could freeze up, and one could well have a full-blown financial crisis."

Solving the Crisis
Worried that governments will throw up protectionist barriers and bear down too hard on financial markets, as they did during the Great Depression, Professor Rajan is currently developing solutions that strike a balance between open borders and free markets with the need for controls. This includes restructuring Wall Street incentives and designing a form of financial-catastrophe insurance—efforts that are beginning to win over major players in business and government.

Saving Capitalism from the Capitalists
Capitalism’s biggest problem is the executive in pinstripes who extols the virtues of competitive markets with every breath while attempting to extinguish them with every action. Especially in economic downturns, political and economic elites can exploit public anger to restrict competition and access to capital in ways that serve their own interests at the expense of everyone else.

In Saving Capitalism from the Capitalists, Raghuram Rajan and his coauthor Luigi Zingales argue that financial markets are the catalyst for inspiring human ingenuity and spreading prosperity; they mean personal freedom and economic development for more people. But only if the people who write the rules write rules that protect everyone else from the risks of a free market, rules that offer opportunity to all.

In his presentation as in his book, Dr. Rajan breaks free of traditional ideological arguments of the right and left and points to a new way of understanding and spreading the extraordinary wealth-generating capabilities of capitalism.

Credentials

  • Katherine Dusak Miller Distinguished Service Professor of Finance, Booth School of Business, University of Chicago
  • Governor, Reserve Bank of India (2013-2016)
  • Chief Economic Advisor, Government of India (2012-2013)
  • Chief Economist ("Economic Counselor and Director of Research"), International Monetary Fund (2003-2006)
  • Fellow, American Academy of Arts & Sciences
  • Former visiting professorships:
    • Fischer Black MIT Sloan School of Management
    • Visiting Professor of Finance, Northwestern University Kellogg School of Management
    • Bertil Danielsson Visiting Professor of Banking, Stockholm School of Economics
  • Advisor to the Prime Minister of India, (2008-2012)
  • Advisory Board of the Comptroller General of the United States

Awards

  • Burton Foundation's Regulatory Innovation Award, 2013
  • 5th Annual Deutsche Bank Prize in Financial Economics, 2013
  • Bloomberg's 50 Most Influential Corporate Policy Makers, 2013
  • Financial Times/Goldman Sachs Business Book of the Year 2010 for Fault Lines
  • Foreign Policy’s Top 100 Global Thinkers 2012 and 2010
  • Inaugural Fischer Black Prize, American Finance Association (for the person under 40 who has contributed the most to the theory and practice of finance)
  • Jensen prize (runner-up), Journal of Financial Economics, 2006
  • Fama/DFA prize for best paper, Journal of Financial Economics, 2003
  • Brattle Prize for distinguished paper in the Journal of Finance, 2002
  • Brattle Prize for distinguished paper in the Journal of Finance, 2001
  • Brattle Prize for distinguished paper in the Journal of Finance, 2000
  • Michael Brennan Award for the Best Paper published in the Review of Financial Studies, 1997
  • Smith Breeden Prize awarded for best paper published in the Journal of Finance, 1994
  • Best Paper Award, Fifth Annual Small Firm Research Symposium, 1993
  • Smith Breeden Prize awarded for distinguished paper published in the Journal of Finance, 1992
  • Treffstz Prize for outstanding academic achievement, Western Finance Association, 1991
  • Gold Medal for academic performance, I.I.M (Ahmedabad), India, 1987
  • Director's Gold Medal for all round performance in the class of 1985, I.I.T. (Delhi), 1985

Education

  • Graduate, Indian Institute of Technology, electrical engineering
  • MBA, Indian Institute of Management
  • Ph.D., MIT

Books

Fault Lines

How Hidden Fractures Still Threaten the World Economy

Raghuram Rajan

Winner of the Financial Times/Goldman Sachs Book of the Year 2010

Economist Raghuram Rajan warned about the global financial crisis long before it hit, but few listened. Now, as the world struggles to recover, it's tempting to blame the crisis on just a few greedy bankers who took irrational risks and left the rest of us to foot the bill. In Fault Lines, Rajan argues that serious flaws in the economy are also to blame, and warns that a potentially more devastating crisis awaits us if they aren't fixed. Can we risk not listening to him a second time?

Rajan shows how the individual choices that collectively brought about the economic meltdown — made by bankers, government officials, and ordinary homeowners — were rational responses to a flawed global financial order in which the incentives to take on risk are incredibly out of step with the dangers those risks pose. He traces the deepening fault lines in a system overly dependent on American consumption to power the world economy and stave off a global downturn; a system where America's thin social safety net has created tremendous political pressure to keep job creation robust, because jobs are the primary provider of health and other benefits; and where the U.S. financial sector, with its skewed incentives, is the critical but unstable link between an overstimulated America and an underconsuming world. Rajan demonstrates how inequalities in U.S. incomes, education, and health care are putting all of us into deeper financial peril, and he outlines sensible reforms to ensure a more stable world economy and to restore lasting prosperity.

Princeton University Press (June 7, 2010)

Articles on Best Business Book of 2010

Rajan scoops Business Book prizeFinancial Times
The Best Business Book of 2010The Wall Street Journal
Chicago's Rajan Wins FT/Goldman PrizeBloomberg.com
Rajan winsThe Bookseller
And the Winner of The FT/Goldman Sachs Award Is...800 CEO Read
Raghuram Rajan Wins Business Book Of The Year AwardThe Huffington Post
Raghuram Rajan Wins Business Book Of The YearCNBC

Reviews

Global Lessons from the Financial CrisisForeign Affairs
We were all to blame for the crashFinancial Times
Cracks withinThe Economist
The Real Cause of the Crash of 2008Esquire

Saving Capitalism from the Capitalists

Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity

Raghuram Rajan and Luigi Zingales

Capitalism’s biggest problem is the executive in pinstripes who extols the virtues of competitive markets with every breath while attempting to extinguish them with every action.

Saving Capitalism from the Capitalists is a groundbreaking book that will radically change our understanding of the capitalist system, particularly the role of financial markets. They are the catalyst for inspiring human ingenuity and spreading prosperity. The perception of many, especially in the wake of never-ending corporate scandals, is that financial markets are parasitic institutions that feed off the blood, sweat, and tears of the rest of us. The reality is far different.

  • Vibrant financial markets threaten the sclerotic corporate establishment and increase corporate mobility and opportunity. They are the reason why entrepreneurship flourishes and companies like The Home Depot and Wal-Mart—mere fly specks a quarter of a century ago—have surged as they have.
  • They mean personal freedom and economic development for more people. Throughout history, and in most of the world today, the record is one of financial oppression. Elites restrict access to capital and severely limit not only general economic development but that of individuals as well.
  • Open borders help check the political and economic elites and preserve competitive markets. The greatest danger of the antiglobalization movement is that it will keep the rich rich and the poor poor. Globalization forces countries to do what is necessary to make their economies productive, not what is best for incumbent elites. Open borders limit the ability of domestic politics to close down competition and to retard financial and economic growth.
  • Markets are especially susceptible in economic downturns when the establishment can exploit public anger to restrict competition and access to capital. While markets must be free to practice “creative destruction,” Rajan and Zingales demonstrate the political and economic importance of a sustainable distribution of wealth and a baseline safety net. Capitalism needs a heart for its own good!

There are no iron laws of economics that condemn countries like Bangladesh to perpetual poverty or the United States to perpetual prosperity. The early years of the twentieth century saw vibrant, open financial markets that were creating widespread prosperity. Then came the “Great Reversal” during the Great Depression. It can — and will — happen again, unless there is greater understanding of what markets do, who benefits, and who really wants to either limit them or shut them down.

Princeton University Press (August 23, 2004)
Crown Business; 1st edition (February 18, 2003)

Topics

Raghuram tailors each presentation to the needs of his audience and is not limited to the topics we have listed below. These are subjects that have proven valuable to customers in the past and are meant only to suggest his range and interests. Please ask us about any subject that interests you; we are sure that we can accommodate you.

Economic policy

Weaknesses in the world economy

The current financial crisis

Growth & development

Banking

International finance

Organizations, power and the theory of the firm

Videos

Safeguarding stability | Center for Financial Studies

Feedback

A private equity firm:
Dr. Rajan was really well received and did a great job last week at the [...] meeting. He also happened to be very nice, and accommodating, which we always appreciate when working with an external speaker.