Words: 2964
ABSTRACT Nowadays, many social scientists agree that social capital is present and positively contributes to economic growth in the light of many studies. In other words, social capital is important to the efficient functioning of modern economies. It constitutes the cultural component of modern societies, which in other respects have been organized since the enlightenment on the basis of formal institutions, the rule of law, and rationality.
Building social capital has typically been seen as a task for second generation economic reform; but unlike economic policies or even economic institutions, social capital cannot be so easily created or shaped by public policy. This project will define social capital, explore its economic and political functions, as well as its origins, and make some suggestions for how it can be cultivated. INTRODUCTION
Social capital is a concept imroved in sociology and also used in business, economics, organizational behaviour, political science, public health and natural resources management that refers to connections within and between social networks as well as connections among individuals. Despite the fact that there are a variety of depended definitions, which have been described as “something of a cure-all” for the problems of modern society, they tend to share the core idea that social networks have value.
Just as a physical capital or a college education human capital can increase productivity of both individual and collective, so too social contacts affect the productivity of individuals and groups. Furthermore, Social capital is a form of capital that exists within relationships among individuals . The notion of physical capital, as embodied in machines, tools, and equipment, has been extended by economists to include human capital.
Just as physical capital is created by changes in materials to form tools that facilitate production, human capital is created by changes in persons that bring about skills and capabilities that make them able to act in novice ways. Social capital comes about through changes in the relations among persons that facilitate action. If physical capital is wholly tangible, being embodied in observable material form, and human capital is less tangible, being embodied in the skills and knowledge acquired by an individual, social capital is less tangible yet, for it exists in the interpersonal relationships.
Just as both physical capital and human capital facilitate productive activity, social capital does as well. It is argued that social capital is different from other forms of capital because it leads to bad results like hate groups or inbred bureaucracies. This does not disqualify it as a form of capital; physical capital can take the form of assault rifles or tasteless entertainment, while human capital can be used to devise new ways of torturing people.
Since societies have laws to prevent the production of many social “bads,” we can presume that most legal forms of social capital are no less “goods” than the other forms of capital insofar as they help people achieve their aims. Perhaps the reason that that social capital seems less obviously a social good than physical or human capital is because it tends to produce more in the way of negative externalities than either of the other two forms. This is because group solidarity in human communities is often purchased at the price of hostility towards out-group members.
There appears to be a natural human proclivity for dividing the world into friends and enemies that is the basis of all politics. It is thus very important when measuring social capital to consider its true utility net of its externalities. To be successful in today’s knowledge and intensive economic environments, one cannot simply work in isolation. For one thing, the beating volume and complexity of information available today makes it possible for any person to stay on top of leading developments and trends.
Moreover, competition across global markets forces managers to move beyond their spheres of local influence and effectively manage resource situated across multiple locations, time zones, and cultures. This situation calls for coordination that often stretches beyond formal boundaries of the organization, extending to a complex web suppliers, alliance partners and customers. However, in today’s rapidly changing environments, organizations still need to pay close attention to the development of personal knowledge, skills, and abilities what is often referred to as human capital.
At the same time, similar focus needs to foster connections among people and develop the trust, mutual understanding, and shared values and behaviors that bring people together and make cooperative action possible. Knowledge has always resided in organizations- but it wasn’t until the Information Age put a premium on ideas that intellectual capital was recognized as a critical resource. Now, factors like technology, globalization, and the rise of free agency and virtual workplaces are bringing another form of “hidden” capital to the forefront.
During recent years, the concept of social capital has become one of the most popular exports from sociological theory. Despite its current popularity, the term does not embody any idea really new to sociologists . That involvement and participation in groups can have positive consequences for the individual and the community is an essential notion, In this sense, the term social capital simply recaptures an insight present since the very beginnings of the discipline.
The novelty and heuristic power of social capital come from two sources: 1) the concept focuses on the positive consequences of sociability while putting a side its less attractive features. 2) it places those positive consequences in the framework of a broader discussion of capital and calls attention to how such non-monetary forms can be important sources of power and influence, like the size of one’s stock holdings or bank account. How Do We Measure Social Capital?
One of the major weaknesses of the social capital concept is the absence of consensus on how to measure it. At least two broad approaches have been taken: the first, to conduct a census of groups and group memberships in a given society, and the second, to use survey data on levels of trust and civic engagement. At the end of this section, I will suggest a third metric that may point to a measure of social capital within private firms. Robert
Putnam has tried to measure social capital by counting groups in civil society, using a number n to track size of memberships in sports clubs, bowling leagues, literary societies, political clubs, and the like as they vary over time and across different geographical regions. There are, in fact, a large number of n’s in any given society, n1.. t. Hence the first measure for the total social capital (SC) in a society is the sum of the membership of all groups, ??????(1)??????SC = [pic]n1.. t.
Both n and t are important measures of civil society. A small value for n may limit the kinds of ends a group can achieve; families, for example, are good at socializing children and running family restaurants, but not very good at exerting political influence or manufacturing semiconductors. The variable t itself constitutes a separate of measure of civil society; unfortunately, limitations in the data prohibit our knowing what t is for a given society, or how many missing or undercounted data elements there are between n1 and nt.
A number of attempts have been made to produce censuses of groups and associations in the United States. One was done by the US Department of Commerce in 1949, which estimated that there were 201,000 nonprofit voluntary trade and business organizations, women’s groups, labor unions, civic service groups, luncheon clubs, and professional groups at all levels of American society. Lester Salamon estimates that by 1989 there were 1. 4 million nonprofits in the US, indicating an overall rate of growth much higher than that of the population as a whole The near-impossibility of producing a complete census that catalogues the whole range of informal networks and cliques in a modern society is suggested by the Yankee City study, which counted some 22,000 different groups in a community of 17,000 people. Changing technology changes forms of association: how do we account for the proliferation of on-line discussion groups, chat rooms, and e-mail conversations that have exploded with the spread of personal computers in the 1990s?
N and t may also be inversely correlated (that is, the larger the average size of groups, the fewer there are); on the other hand, because individuals can hold overlapping memberships in multiple groups, they need not be. It is clear that each of these n1.. t groups is characterized by a different level of internal cohesion and therefore collective action. Bowling leagues are not capable of storming beaches or lobbying Congress, so some qualitative coefficient must be added to provide some measure of cohesion.
Let us call this coefficient c. Unfortunately, there is no accepted method for measuring the internal cohesiveness of groups; each one of the c coefficients would have to be determined subjectively by an outside observer who would note the types of activities the group could undertake and their difficulty, its cohesion under stressful circumstances, and other factors. Despite the subjective nature of its derivation, it is clear that c varies across groups and is a critical qualitative measure of social capital.
Hence a society’s total stock of social capital would be expressed as ??????(2)??????SC = [pic](cn)1.. t. As noted above, social capital is more heavily pervaded by externalities than other forms of capital, so measurement of a nation’s stock of social capital must take these externalities into account. The radius of trust can be thought of as a type of positive externality (which we will therefore designate as rp) because it is a benefit that accrues to the group independently of the collective action that the group formally seeks to achieve.
For example, a sect that encourages its members to be honest and reliable will foster better business relationships when they deal with each other economically, in addition to the sect’s religious objectives. For many groups, the radius of trust would extend to the whole group; this is true of most families, for example. The rp coefficient in this case is 1, and the total amount of social capital in the society would therefore be expressed as (3)??????SC = [pic](rpcn)1.. t.
Certain groups, particularly larger ones, are characterized by internal hierarchy, a division of labor, status and functional distinctions, etc. While the group may be united around some common interest or passion, the degree to which individual members are capable of collective action on the basis of mutual trust depends on their relative position within the organization. Putnam rightly distinguishes between what he calls a “membership organization” like the American Association of Retired People (AARP), which, at more than 33 million members, is second only to the Catholic Church in size.
Such a group has a very large n-value, but most of its members simply contribute yearly dues, receive a newsletter, and would have little reason for cooperating with one another on any issue not related to pensions or health benefits. For such an organization, the rp coefficient may be very small, limited to (for example) those people who work full-time in its national headquarters (though even there, there are presumably many employees who are simply wage-earners and not part of the trust network).
On the other hand, it is possible for a group to have an rp coefficient larger than 1. To take the earlier example of the religious sect that encourages honesty and reliability, if these traits are demanded of its members in their dealings not just with other members of the sect but generally in their dealings with other people, then there will be a positive spillover effect into the larger society. Again, Weber argued in effect that sectarian Puritans had an rp value greater than 1.
The final factor affecting a society’s supply of social capital concerns not the internal cohesiveness of groups, but rather the way in which they relate to outsiders. Strong moral bonds within a group in some cases may actually serve to decrease the degree to which members of that group are able to trust outsiders and work effectively with them. A highly disciplined, well-organized group sharing strong common values may be capable of highly coordinated collective action, and yet may nonetheless be a social liability.
I earlier noted the fact that strongly familistic societies like China and central-southern Italy were characterized by an absence of a broader, generalized social trust outside the family. At best, this prevents the group from receiving beneficial influences from the outside environment; at worst, it may actively breed distrust, intolerance, or even hatred for and violence toward outsiders. Certain groups may be actively harmful to other parts of society-criminal organizations like the Mafia or the Crips and Bloods come to mind.
A society made up of the Ku Klux Klan, the Nation of Islam, the Michigan Militia, and various self-regarding ethnic and racial organizations may score very high in terms of last three of the four variables given in expression (3), and each group may have an rp of 1, and yet overall it would be hard to say that such a society had a large stock of social capital. Group affiliation can therefore produce a negative externality which we can think of as the radius of distrust, or rn. The larger the rn value, the greater the liability that group represents to the surrounding society; hence the measure for a single roup’s social capital, rpcn, needs to be multiplied by the reciprocal of rn. (All rn values, we assume, must be 1 or greater. ) The final value for a society’s total stock of social capital would then be: ??????(1. 4)??????SC = [pic]((1/rn)rpcn)1.. t. To some extent, we could expect that c and rn might be positively correlated with one another. That is, internal cohesiveness is often based on strongly shared norms and values within a group: both the Marines and the Mormon Church are examples. But the very strength of those internal bonds creates something of a gulf between members of the group and those on the outside.
Latitudinarian organizations like most contemporary mainline Protestant denominations in the United States, by contrast, easily coexist with other groups in the society, and yet are capable of a much lower level of collective action. Ideally, one would like to maximize the c and and minimize the rn values: such would be the case, for example, in a professional organization that socializes its members into the values of its particular profession, while not at the same time breeding distrust of other professions or being closed to influences from them.
As this exercise indicates, producing anything like a believable census of a society’s stock of social capital is a nearly impossible task, since it involves multiplying numbers that are either subjectively estimated or simply nonexistent. This leads us to the other source of data that has been used as a proxy for social capital, survey data on trust and civic engagement. There are a number of data sources that are useful here, such as the National Opinion Research Council’s General Social Survey (for the US) and the University of Michigan’s World Values Survey (for international data).
Each of these surveys asks a series of question concerning trust in various political and social institutions, as well as others probing the respondents’ level of participation in voluntary organizations. There are manifold problems with survey data, of course, beginning with the fact that responses will vary according to the way the question is phrased and who is asking it, to the absence of consistent data for many countries and many time periods. A general question such as “Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people? (asked on both the General Social Survey and World Values Survey) won’t give you very much precise information about the radius of trust among the respondents, or their relative propensities to cooperate with family, co-ethnics, co-religionists, complete strangers, and the like. A third possible way of measuring social capital in specific organizations may be to look at changes in market valuations of a company before and after takeover offers. The market capitalization of any company represents the sum of both tangible and intangible assets; among the latter is, presumably, the social capital embodied in the firm’s workers and management.
There is no accepted methodology for separating out the social capital component of the intangible assets, which include other things like brand names, good will, expectations of future market conditions, and the like. Firms being taken over by other firms, however, are usually bought at a premium to their pre-takeover price. In such a situation, we can assume that part of the premium being offered is a measure of the degree to which the new owners believe that they can manage the new firm better than the old owners, with all other factors like tangible assets, expectations about market conditions, etc. eing held constant. In many cases, part of the premium being offered represents the cost savings that the new owners expect to achieve through realization of economies of scale and scope; one would have to deduct this from the actual premium to get a measure of the net value of the new management alone. This management premium is not a pure measure of social capital; it may consist partly of human capital rather than social capital. But social capital must constitute a significant part of the residual, since effective management is, after all, nothing more than efficient coordination of the firm’s activities.