Social Capital and Economic Development: Well‐being in Developing Countries

Citation

Allan Schmid, A. (2004), "Social Capital and Economic Development: Well‐being in Developing Countries", International Journal of Social Economics, Vol. 31 No. 3, pp. 315-317. https://doi.org/10.1108/03068290410518544

The World Bank has provided ideas and money for research on social capital. This conference volume showcases the analytic framework developed by World Bank scholars and this framework will be the focus of this review. Michael Woolcock defines social capital as norms and networks that facilitate collective action. He argues, “social capital makes most sense when it is understood as a relational (that is, sociological), rather than psychological or political variable” (p. 22). Woolcock then distinguishes sources as “bonding” (relation between family members, close friends) and “bridging” (distant associates and colleagues) and “linking” (alliances with sympathetic individuals in positions of power).

Already there is a bit of conceptual jumble. Why would a colleague bother to help you other than expecting a quid pro quo exchange, which is an ordinary economic relationship? Why would a person in power help? Isn't defining “linking” as based on sympathy evoking a psychological dimension that Woolcock otherwise denies? He seems afraid to speak of motive, but it sneaks in the back door. And, what of the powerful? Whence comes their power? Politics seems implicit. So while he denies psychological and political variables, they conflate his categories.

For Deepa Narayan, bridging and linking relationships collapse into “cross‐cutting ties”. She makes the connection to poverty reduction as follows: “voluntary cross‐cutting networks, associations and related norms based in everyday social interactions lead to the collective good of citizens, whereas networks and associations consisting of primary social groups without cross‐cutting ties lead to the betterment of only those groups” (p. 59). For Narayan, these sociological dimensions interact with state governance and the mix of these are the hypothesized levers of economic development.

Income inequality is seen as a proxy for exclusion, also referred to as “social division” and “cleavage”. Empirically, research indicates that the greater the income inequality, the slower the growth. Associated stories have the élite not investing in the poor and inequality leads to social unrest that is bad for foreign investment. None of this is expressly labeled social capital, but perhaps the implication of social exclusion and division is negative or zero social capital.

Do we need the language of “connectivity”, “ties”, and “knitting society together” to support a transfer of power and resources from the élite to the poor? Are the élite likely to say, now that I know income inequality is bad for growth, I want to contribute more taxes to educate the poor and give them more power in governance? The poor are urged to “identify potential allies” in powerful groups. The ability of the excluded poor to obtain resources from the rich is called a “cross‐cutting tie”. But why would the rich be willing?

Unless we unpack the language of connectivity and ties, the policy suggestions to share power and resources will go unheeded. Put simply, people give when they care for others, i.e. feel affinity and sympathy. Why are social scientists (sociologists no less than economists) so frightened of feeling, emotions, and motives? Why do they hide behind the lifeless language of connections, networks and ties? If ties are merely physical, then the spread of cell phones and roads will solve the problem of social and political reform and poverty.

The poor are urged to organize in civic groups and the rich are urged to help them. Why would the rich do it? Tax exemptions are unlikely to be sufficient incentive, especially when the rich already evade many taxes. Narayan argues, “The best strategy is to increase social interaction among those social groups that have little [to] do with one another” (p. 76). Parks and public transport are nice, but why would the rich in their walled villas and private schools want to participate in these so‐called “weak ties”? “Cross‐cutting ties” become a vacuous and lifeless recipe for change and poverty reduction. Recommending a redistribution of political power will not be heeded if the rich despise the worthless scum of the earth who deserve little. The World Bank scholars’ concepts of social capital are unlikely to find and create a sufficient motive, motor, or energy to support any transformation process. Use of the metaphor of capital implies a “motor” to drive the transformation, but it is exactly this that is missing in the World Bank research program. A “tie” without human motive is only a cold telephone, road or name file.

The authors in this volume are fond of speaking of networks, but are loathe to be specific about the character of the connections. One of the earliest examples of network analysis described the sexual habits of young people. Jake slept with Jane and Mary. Jane slept with Jake and Harry, and etc. This was the only “connection” described. It makes a nice diagram of nodes and connecting lines. There was no mention of the placing of positive or negative valence by each person to the other. Were they loving or just objects to be manipulated – favors to be exchanged? There was no distinction drawn between prostitution (a market relation) and caring. The World Bank's social capital research has not advanced much beyond this early example of network analysis. Without the feelings and motives it is hard to predict what happens next or to suggest policies to affect outcomes.

As an example of applied research, Christiaan Grootaert, Gi‐Taik Oh and Amand Swamy use data from Burkina Faso to show that “community participation in parent‐teacher associations is associated with substantially higher rates of school attendance” (p. 85). The regressions control for such things as wealth, income, religion, and ethnicity. Note here that the dependent variable of school attendance is not dependent on the rich giving away resources, but rather a matter of individual choice. So the question of why the rich are willing to transfer wealth and power is not particularly relevant. Then why would parents bother to spend their time improving the schools if the result is available to all without participation. The research offers no answers, we only know that if the free rider problem is overcome and parents attend, they will also send their kids to school. Or, is it the other way round? Recommending that PTAs be encouraged, while useful, gives little understanding of how to do it. What are the antecedent conditions that help parents avoid calculating narrow self‐interest?

Data from Paraguay are used by José Molinas to find the determinants of individual's decisions to join local peasant committees. An individual benefit‐cost framework guides the inquiry. Given the free rider problem, he finds that the more successful the committee is in providing benefits, the more likely people join. Is not this a bit circular? If more people join and contribute resources, the more likely the committee will be successful. Granted that there is no reason to join a group that has no benefits, there is still the question of why not free ride. Molinas further asserts, “Successful committees, with bridging strategies that provide mutual assistance across neighborhoods, lead to more formal bonding within communities” (p. 113). The meaning of bonding is never specified, only inferred. Why would an individual join if they can ride free and why would a neighboring committee or government agency give resources other than in economic exchange? No data were collected to answer these questions. They will not be until motive is admitted as a variable and ties are given valuational content.