Rajan, while speaking in Davos at a session of the World Economic Forum (WEF) Annual Meeting also highlighted that no one would be able to resolve any problem of a ‘fractured world’ if things are not set right soon.
“The approach of the Western world must change soon for the good, or else there may be a chance that we are not able to solve any of the problems of the ‘fractured world’,” he said.
The West must realise that their population is ageing and the demand for their products would mostly come from the emerging world, said the Chicago University professor, who is credited with having predicted the global financial crisis of 2007.
Rajan, who is known for his frank views on various economic and monetary policy matters, said there is a risk that by the time the West goes to the emerging world for their support, they may have to answer quite a few questions about why they did not share the benefits earlier.
The issues facing the Western world include technology, ageing population and climate change, he highlighted.
He reportedly said some governments such as Singapore have done something to address the problems arising out of income inequality and the divisions in the society by setting up housing projects where middle class and lower middle class families can live together.
Rajan also took on the economists who frown upon the idea of economic narratives and said it has become difficult to make people believe in them for setting things right.
“When the economist hears the word narratives and stories he thinks it’s below me. They believe they are beyond the tradition of narratives,” he was quoted as saying by news agencies.
“Post World War II, we realised we have to come together once again and we need to break barriers of trade and everything else,” he added.
Asked whether he is optimistic or pessimistic on the issue of narratives, Rajan reportedly said politicians just pick the economic theory that fits in their scheme of things but he hopes things do not go out of hand and there is a solution before that.