Social capital/Citable Version

Social capital is an interdisciplinary social science concept that brings together aspects of social behavior, such as trust and cooperation, relationships, networks and social solidarity that may be expected to contribute to the well-being of a community. In the past decade, sociologists, economists, political scientists, economic and community developers and assorted other applied social scientists working with nonprofit and nongovernmental organizations as well as governmental bodies, financial institutions, like the World Bank and others, have sought to harness what they see as a very powerful idea.

To date, the results of those efforts are unclear. Authors in non-economic disciplines have generally limited their efforts to linking variables like trust and networks of social ties to social or political outcomes, while many economists remain skeptical of the qualitative nature of the activity. There have been attempts to quantify the influence of social capital upon community achievements, but there is no agreement concerning how to measure the economic contributions of dimensions like trust or the strength of social ties, or the weight that should be assigned to these components, and there have been reservations about the validity of any attempt to aggregate them.

Definition and implications

Though it was invoked by several political economists during the late nineteenth century and used in passing by John Dewey in 1900, the term "social capital" was first used extensively by L.J. Hanifan in his 1916 and 1920 studies of the rural community center. In the latter, he defined social capital as "that in life which tends to make ... tangible substances count for most in the daily lives of a people; namely, good will, fellowship, sympathy, and social intercourse among the individuals and families who make up a social unit." He further proposed that, just as financial capital must be amassed before a construction project can commence, social capital must be accummulated in order for meaningful community building to take place.

(CC) Map diagram: Robert D. Putnam
Estimated state by state distribution of U.S. social capital, Robert Putnam, Bowling Alone, (2000), p. 293

Hanifan's contribution went unrecognized for many years and, as Robert Putnam notes, the concept of "social capital" was subsequently "independently invented" at least five more times. In Foundations of Social Theory, for example, sociologist James Coleman credits the term to Glenn Loury, an economist who in 1977 defined social capital as a set of designated intangible resources in families and communities that help to promote the social development of young people. Loury himself has attributed it to Jane Jacobs, an urban planner who used the term metaphorically in her 1961 book, The Death and Life of Great American Cities.

There are many definitions of social capital in social and political science. One widely accepted version defines it as an “investment in social relations with expected returns in the marketplace.” This definition is consistent with interpretations by Pierre Bourdieu, Nan Lin, James Coleman, Hendrik Flap, Ronald Burt, Robert Putnam, Jenny Onyx, Bonnie Erickson and others; nevertheless, it may seem a too narrow individualistic reading and remains a matter of controversy, as noted in the concluding section of this article. The sociologist Pierre Bourdieu defined the concept as “the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition” . He pointed out that “Social capital is the sum of the resources, actual and virtual, that accrue to an individual or a group by virtue of possessing a durable network of more or less institutionalized relationships of mutual acquaintances and recognition.” Francis Fukuyama defined it as "a capability that arises from the prevalence of trust in a society." James Coleman defined social capital “as a variety of entities with two elements in common: They all consist of some aspect of social structure, and they facilitate certain action of actors-whether persons or corporate actors-within the structure.” To be capital a social structure must serve a function for individuals engaged in an activity. The actors exercise control over the resources in which they have an interest and at least partial control of others involved. Social relations are important to facilitating this action by the actors.

The Social Capital Foundation's (TSCF) approach to "social capital" is distinct from other, more socio-economic approaches in which the term "capital" approaches some of its conventional economic meanings. The Foundation promotes social capital defined as a set of mental dispositions and attitudes favoring cooperative behaviors within society. World Bank researchers draw a distinction between micro- and macro- levels of social capital, and between "structural social capital" - which facilitates information sharing, and collective action and decision making through established roles, social networks and other social structures supplemented by rules, procedures, and precedents - , and "cognitive social capital" - which refers to shared norms, values, trust, attitudes, and beliefs.

The concept of social capital can be related to similar characteristics of civil society that are drawn from the works of James Madison (in The Federalist Papers), Alexis de Tocqueville (in Democracy in America) and John Stuart Mill (in On Liberty).

The creation of social capital

The creation of social capital has been analyzed both as a personal investment and as a community investment. As a personal investment it has been taken to include social skills, charisma, and networks of contacts, all of which can be used as personal means of obtaining an economic return through interactions with others. A study combining empirical evidence with the predictions of an economic model of the personal investment decision has indicated, among other findings, that higher levels of investment are made by people who also invest in other aspects of human capital. As a community investment, it has been suggested that social capital is created by the process termed emergence by which a complex interactive system can transform itself from chaos to order. The initial position is taken to be similar to the "state of nature" envisaged by Thomas Hobbes in which there is a constant "war of all against all". That condition is taken to be analogous to the prisoner's dilemma parable of game theory, in which both participants suffer unnecessarily because neither trusts the other. Computer simulations have demonstrated that when the two protagonists interact repeatedly they can develop a mutually beneficial evolutionary stable strategy that once is established is likely to persist. Case studies and experiments with human participants show that mutually beneficial strategies involving trust do emerge spontaneously and that when they do, their stability often tends to be promoted by an urge to punish defectors.

Social capital can then emerge in the form of expectations that others will reciprocate in response to co-operative initiatives; and it can spread through the community as more and more people become aware of the advantages of cooperation, and Charles Darwin has suggested that it could be transmitted further by natural selection:

"A tribe including many members who, from possessing in a high degree the spirit of patriotism, fidelity, obedience, courage,and sympathy, were always ready to aid one another, and to sacrifice themselves for the common good, would be victorious over most other tribes; and this would be natural selection

The components of social capital

Organizational components

It is customary to distinguish the influence of a community's social organization on the social acts of its members from its influence on their individual attitudes, although they are interrelated. A community's or organization's social capital is generally considered to be determined as much by the traditions, beliefs and value systems that are part of its culture, as by the cognitive characteristics and perceptions of its members. Similarly, the collectively-determined rules embodied in institutions, are considered to be as necessary to the development of social capital as the impulses and constraints created by the psychological drives that are experienced by its members. The institutions that are held to be capable of contributing to social capital range from the state apparatus of law-making and enforcement, to the patterns of mutual obligation that are created by interpersonal networks. Interpersonal networks have been categorized by applying the terms "bonding", "bridging" and "linking" to, respectively, networks of family and friends; networks of colleagues and associates; and networks that connect different networks.

Cognitive components

Social influences are considered to provide the principal components of people's social attitudes. Trust, for example, is considered to be influenced mainly by the social institutions that have been referred to. However, there is evidence to suggest that a significant component may also come from the innate or “hard-wired” characteristics of the human brain. Neuroeconomics experiments have revealed an association between the possession of a particular hormone and a propensity to trust others.) Trust in the sense of believing most people to be trustworthy is referred to in the literature as "generalized trust" to distinguish it from trust in particular categories of people and trust concerning specific issues. Unsurprisingly, it has been found to be highest in communities where there are effective institutions that punish cheats; but it has also been found to be positively associated with education, civil liberties, and ease of communication (roads and telephones) and negatively associated with ethnic diversity and income inequality. Trust is generally held to be an essential component of social capital, as is willingness to conform to collectively-determined rules, but other cognitive characteristics have often been been included: notably the willingness to take actions that are for the exclusive benefit of others. Examples include charitable donations, participation in voluntary collective activities, and many other forms of philanthropy. The exercise of such social attitudes has been held to be among the main characteristics of civil society. Beyond those essentials, however, attitudes that are generally conducive to social concord such as tolerance of unfamiliar customs, practices and beliefs and a general preference for negotiation over confrontation have sometimes been included.

Sociological Implications

It has been established by a variety of studies that social capital has a direct effect upon the well-being of members of a community in addition to the indirect effects that arise from its economic consequences. The connection between social capital and individual well-being has been used to explain the fact that, in many countries, and despite growing prosperity, subjectively–reported well being has not increased over the years an observation that is often referred to as the “happiness paradox”. The connection has been attributed to the psychological importance of interpersonal relationships and the decline in happiness in the United States has been related to measures of “relational social capital”.

Other studies have examined social capital's effects upon health, longevity, suicide rates and the incidence of crime. In a study sponsored by Britain’s National Health Service, low levels of survey-determined neighborhood attachment were found to be associated with higher risks of mental illness and marital breakdown . A study of crime among homeless youths in Toronto and Vancouver established strong associations with social capital. However, it was found from a cross-country study sponsored by the World Bank that the only component of social capital that was negatively associated with the incidence of murder, was trust among community members .

However, Portes and Landolt have questioned the assumption that social capital is necessarily beneficial, recalling Mancur Olson’s suggestion that the principle motive for the formation of an association is rent-seeking in other words, an attempt by a group to gain an advantage at the expense of the community. (The assumption that social capital necessarily benefits even those groups that acquire it is contrary to the evidence of the “Robbers Cave Experiments”, which demonstrated that close-knit groups tend to acquire dangerously mistaken perceptions concerning their members and others .)

Economic implications

Economists were writing about social capital before that term came into use. Writing in 1891, Alfred Marshall attributed differences between successful and unsuccessful economic activity to variations in "general enlightenment ... and habits of mutual trust", and in the willingness of people to “sacrifice themselves for the common wellbeing.” Similar statements have been attributed to Thorstein Veblen, writing at about the same time. Some eighty years later the economist Kenneth Arrow remarked that much of the economic backwardness in the world could be explained as "lack of mutual confidence.". Until recently, however, social capital had been regarded as merely an exogenous factor that is necessary to a reasonable standard of economic efficiency in much the same way as a functioning monetary system; and little attention had been given to its creation or to its quantitative influence. The idea that collective action might be expected to promote economic performance had been specifically rejected in the writings of the economist Mancur Olson (whose views are summarised below under the heading objections and qualifications)

Interest in the quantitative effects of social capital was stimulated by Robert Putnam’s 1993 study of democracy in Italy, in which he attributed the higher levels of GDP per capita in the North to previously higher levels of civic engagement, his measure of which gave weight to membership of voluntary organizations (which he referred to as "horizontal ties") ; and later by his essay and best-selling book, Bowling Alone, in which he attached importance to the decline in membership of voluntary organizations in the United States, (of which he took the decline in membership of bowling clubs to be a typical example). Apparently prompted by Putnam's Italian study, several further examinations of the economic effects of various components of social capital have since been reported. A 1997 study using data collected by the World Bank for a sample of 29 market economies established a statistical association between economic performance and measures of trust and civic cooperation, but did not confirm Putnam's finding about the importance of horizontal ties.. In a survey of economic growth studies by Robert Barro several components of social capital emerge as making significant contributions, notably education, the maintenance of law and the strength of democratic institutions.

Political implications

An early exponent of the political implications of social capital was the 19th century political historian Alexis de Tocqueville. After a visit to America he wrote with approval of the practice there of the "art of association":

"When the public govern, there is no man who does not feel the value of public goodwill or who does not endeavor to court it by drawing to himself the esteem and affection of those among whom he is to live.... Men learn at such times to think of their fellow men from ambitious motives; and they frequently find it, in a manner, their interest to forget themselves"

The subject has been extensively explored since then. Robert Putnam, writing in 1993 argued that the existence of social capital is necessary for the function of government, a claim that was later supported by Francis Fukuyama , and Carles Boix and Daniel Posner have set out the ways in which social capital can enhance government performance by improving voter power, promoting rule compliance and increasing bureaucratic efficiency. Other writers have argued that Putnam's analysis fails to take account of the fact that social capital can be used to subvert government, and Mancur Olsen has even argued that organised pressure groups have had a damaging influence on government. Daniel Posner assigns two alternative roles to groups that are united by social capital: either to monitor government and hold it to account when its performance is unsatisfactory, or to act as a substitute for a failing government and so promote its downfall. Others have argued that Putnam gives insufficient weight to the role of government as a sponsor of social capital. However, Bo Rothstein has pointed out that Government institutions come in many forms, and there is no reason to believe that all of them influence social capital in the same way or even in the same direction

Insurgency and counterinsurgency

Even before a state failure, insurgency may flourish due to a lack of social capital, and counterinsurgents may need to rebuild it. Several studies have addressed it with respect to the Dinka and Nuer peoples of Sudan, who have fought against one another and against the central government. E.E. Pritchard-Evans noted in 1940,

There are three major forms of power in a society: coercive force, social capital, and authority. The power of coercion is the ability to compel a person through threat of harm or by use of physical force. ... Counterinsurgency forces must be aware of these groups, and understand the social role these coercive units play in the local political arena. Social capital refers to the power of individuals and groups to utilize social networks of reciprocity and exchange to accomplish their goals...In many non-Western societies, patron-client relationships are an important form of social capital. In a patronage system, an individual in a powerful position provides goods, services, security or other resources to followers in exchange for political support or loyalty, thereby amassing power. Counterinsurgency forces must identify, where possible, which groups and individuals have social capital and how they attract and maintain followers."

The Dinka and Nuer relationship was reexamined in 2010 by Luka Biong Deng, Minister of Presidential Affairs in the Government of South Sudan, who said that "exogenous" counterinsurgency increased social capital while "endogenous" counterinsurgency reduced it.

Not all current insurgency is Islamic. South Asia is experiencing a resurgence of Maoist activity. Social capital is not only useful to the counterinsurgent, but helps the insurgents recruit — "trust based on social networks also plays a big role, because he or she risks everything, including life, by joining the insurgency." Sztompka explains how social capital—like social networks, family, friendship, and religion—helps in taking risk.

The principal U.S. Army and Marine Corps doctrinal manual on counterinsurgency echoes Pritchard-Evans' words above,

Social capital and stability operations

In U.S. doctrine, stability operations strengthen host nation governments, often with the intent of preventing insurgency by "establishing peace, democracy, and market economies in a secure, well-governed environment." A research study at the U.S. Army War College discussed the role of social capital in stability operations:

Social capital -- defined as an instantiated set of informal values or norms that permit cooperation between two or more individuals -- refers to community trust, norms, and networks that link justice, security and public safety, economic prosperity, governance, and social well-being to each other. A state’s levels of trust and reciprocity, the nature, extent, and types of its social networks, and the relationship and strength of those networks and institutions affect the ability of the USG to implement stability operations doctrine... social capital is the bridge between stability operations policy and implementation, a concept which – if considered – could prevent the failure of stability operations in weak, failed, or fragile states.

Roger Myerson, of the University of Chicago, described a "chicken and egg" problem between the U.S. Coalition Provisional Authority under L. Paul Bremer, and Iraqi leaders including Grand Ayatollah Ali Sistani. Bremer insisted that a constitution was a necessary prerequisite for forming legitimate government, while Sistani believed that it was more essential that government be formed from popularly elected Iraqis. In the culture, however, Myerson suggests that to become a popular leader, a politician has to be able to dispense patronage. He echoed Pritchard-Evans' comment about Dinka leader patron-client relationships.

When the fundamental problem is political, the most important benefit from a development project may be, not its investment in physical infrastructure, but its investment in social capital, if it augments the nation's scarce supply of leaders whom people can trust to manage public resources

Connection to 'Failed States'

There have been extensive studies of the relationship between the existence (or lack) of social capital and the emergence of failed states, including the work of the Harvard University's Failed States Project and the World Bank's Social Capital Initiative.

In Somalia, Robert Rotberg notes that, before the failure and collapse of the state its inhabitants had been well integrated with a cohesive cultural history, a common religion, and a common language. . He attributes the destruction of social capital and consequent collapse of the state to the predatory behaviour of General Mohammed Siad Barre, assisted by support from Russia and then the United States.
In Rwanda, Colletta and Cullen report that, historically, the communities involved in the Rwanda massacre had lived together in symbiotic harmony.

In Cambodia, Colletta and Cullen attribute the destruction of social capital by the Khmer Rouge to their systematic attacks on traditional culture, religion, organizations, and networks.

Social capital and political geography

In Afghanistan and its neighbors, social capital is often strongest among ethnic groups such as the Pashtun, Tajiks, and Uzbeks, but the political geography of these groups does not correspond to national borders. In particular, the Durand Line dividing Afghanistan and Pakistan splits Pashtun groups and provides a base for cross-border conflict and hostility to both the Afghan and Pakistani central governments. In the early days of the Afghanistan War (1978-1992), the Taliban reconstituted social capital among largely Pashtun groups splintered by warlords, but then established its own alien control, also split among Pashtun subgroups; prior to the war, the less militant traditional Taliban were something of an informal civil service.
The Islamic Movement of Uzbekistan is strongest in the Ferghana Valley where the Uzbek, Kyrgyz, and Tajik people each have social capital developed within their group, but not among one another.

The results confirm the remarkable ambiguity of the relationship between the existence of social capital and the conduct and stability of the state. Although social capital can strengthen a state, its existence is no guarantee against weakness and failure. The "Robbers Cave Experiments" had revealed its potentially dysfunctional aspect, and that aspect of social capital has been instrumental in the failure of states. For example, the social capital that united the Rwandan Hutus is reported to have helped to persuade many of them that it was their civic duty to murder their neighbours, the Hutus. Conversely, other studies demonstrated that, although action by the state can foster the creation of social capital, it can alternatively be instrumental in its destruction. The importance of government performance in the restoration of social capital in failed states is brought out by Jennifer Widner's analysis of attitude surveys in three African countries. Responses differed among the three countries and did not always conform to the Putnam thesis, but there was agreement about the importance of the trustworthiness of government, its delivery of public goods and the reduction of income inequalities.

The erosion of social capital usually precedes state failure and, although social capital does not figure explicitly in the various leading indicators that have been developed by the U.S. Government's State Failures Task Force, the World Bank and others, indirect measures and estimates of its components figure in most of them. In the "Failed State Index," the Fund for Peace, and Foreign Policy define twelve indicators, the first four of which are explicitly social:

• Mounting Demographic Pressures
• Massive Movement of Refugees or Internally Displaced Persons creating Complex Humanitarian Emergencies
• Legacy of Vengeance-Seeking Group Grievance or Group Paranoia
• Chronic and Sustained Human Flight

A pair of economic indicators also reflect social fragmentation or lack of social support:

• Uneven Economic Development along Group Lines
• Sharp and/or Severe Economic Decline

Policy implications

The economist Partha Dasgupta has argued that a personal investment in a reputation for trustworthiness results in beneficial externalities: that is to say benefits to others besides the person who makes the investment. It is a generally accepted proposition of economic theory that markets tend to underprovide activities that generate beneficial externalities, and that it is to the benefit of the community for governments to make up the deficiency. That proposition has been extended to suggest that economic welfare can be increased by government intervention in the provision of many of the components of social capital, and has led to a variety of policy studies. A range of policy proposals has been put forward by the Saguaro Seminar in the United States , and a research paper by Australia’s Productivity Commission lists some possible policy initiatives to promote social capital, some side-effects of existing policies, and some policies that already make use of the existing stock of social capital. . The World Bank has recently examined its own potential role, concluding that it needs to increase the extent to which it takes social relationships and local and national networks and institutions into account in its project design and policy advice. Five areas were identified for action.. But, although potentially beneficial policies can be readily identified, the problem of quantifying the benefits of specific interventions, to enable them to be subjected to cost/benefit assessments, remains an obstacle to the formulation of policies that can be expected to yield net benefits.

Measuring social capital

Measurements of the components of social capital have been undertaken by social researchers in many different countries. In the United States, the "Social Community Benchmark Survey" was a telephone survey of over 30,000 respondents conducted by a network of researchers in 40 communities in the year 2000.. It was followed up in 2006 by a further selective survey As of the beginning of 2008, over 50 studies have used the Social Benchmark Survey data. The European Union’s "Active Citizen Composite Index" combines 63 basic indicators, drawn mainly from the European Social Survey into a single index by an arbitrary weighting regime. Composite indexes are also produced concerning the variously-defined topics of social cohesion, civil society, community cohesion, political life, human development, and corruption perceptions. The World Bank’s "Social Capital Assessment Tool" gathers information by survey and interview as source data for the assessment of social capital. Surveys conducted by national statistics agencies provide a further source of relevant statistics. British statistical surveys containing a social capital element have been listed by their Office of National Statistics.

The problem of combining measures of the various components of social capital into a single index number has been tackled by a number of researchers, but as Francis Fukuyama has noted, there is no consensus as to how it should be done. Robert Putnam combined 13 different measures into a single measure, using factor analysis a technique that establishes weights related to evidence concerning the effects of each component upon a chosen outcome. Other attempts have been criticized on the grounds that invalid econometrics methods were used .

Objections and qualifications

There have been several disputes about the interpretation of the concept of social capital, and about how should be measured. There have been objections to Robert Putnam’s approach to the concept on the grounds that it is logically inconsistent. Michael Woolcock has argued that to avoid tautological reasoning, any definition of social capital should focus on its sources rather than its consequences, or "what it is, not what it does." In other words, if social capital is defined as a contributor to an outcome, it would be tautological to claim that it contributes to that outcome. Studies that relate single components of social capital to the outcome under investigation are not affected by that objection, but it raises doubts about the use of combinations of components, members of which are included because of their expected contributions to that outcome. There have also been objections to the aggregation of organizational and cognitive components where the two categories are inter-related (since trust is promoted by law enforcement, a weighted sum those two components is difficult to interpret). Also, Portes and Landolt have questioned the assumption that a community’s social capital is the sum of that of its members. James de Fillipis has described Robert Putnam’s methodology as "fundamentally flawed" and has argued for a return to the interpretation of the concept by Pierre Bourdieu., and he rejects the idea that it is essentially about the power to attract and control physical capital.