The idea that we can socially engineer a modern society through large government programmes is on the wane around the world. This is partly because of the realisation that liberal democracies are kept running by mutual trust, tolerance and civic engagement – beliefs, habits and virtues that cannot be achieved by legislation or fiat.

Many of these traits are summed up by the term ‘social capital’ – the study of which was fashionable during the 1990s among political scientists, anthropologists, economists and sociologists.

When members of a tightly-knit rural community informally keep an eye on one another's homes, that's social capital in action. Ditto the RSA phone-tree that kicks in to alert members of the death of a serviceman so they can attend the funeral. Twelve-step recovery programmes for alcoholics and addicts are social capital in action, and so too are e-mail exchanges among members of a cancer support group.

Social capital is best described as the ‘resource base’ of a civil society. It embodies the plethora of specific benefits that flow from the trust, reciprocity, information, and cooperation associated with social networks.

The instruments of social capital are families, neighbourhoods, churches, clubs and voluntary societies – even bars. The motto in Cheers, "where everybody knows your name", captures one important aspect of social capital.

Benefits accrue from the flow of information within a network. Many jobs are filled using informal means, because the employer or potential employee has communicated their need to friends, relatives and acquaintances.

Collective action also depends upon social networks. Consider how these must have helped during the recent uprising by rural New Zealanders against the government’s proposed research levy.

Social networks help translate an “I” mentality into a “we” mentality, fostering broader identities and solidarity. One study of tertiary students showed that children from ‘high’ social capital families (with many links to communities and social networks to depend upon) are less likely to drop out of university early.

Social capital provides economic returns for nations, too. A lack of social networks will increase the cost of doing business and inhibit economic opportunities. People who do not trust one another will only be able to cooperate under a formal system of rules and regulations. Widespread distrust imposes a kind of tax on all forms of economic activity.

Like other forms of capital, social capital is not divided evenly around the world. At one end of the continuum, we have truly individualistic societies ( Russia and inner-city neighbourhoods of the United States are often cited as examples) where both families and voluntary associations are weak. Here, the strongest organisations are often criminal gangs. But familistic societies frequently have weak social capital, too. This is because, outside the family unit, unrelated people have no basis for trusting one another. Chinese societies based on Confucianism (which elevates family bonds above other social loyalties) are familistic, but the societies of France and parts of Italy are also said to share this characteristic.

Countries where modern capitalism thrives tend to be those where social capital and generalised trust have been built up by past generations. Societies that have rich networks of voluntary associations and strong communities include the United States , Germany and Japan .

Observers in the United States and Australia have noted that replenishing social capital has become harder.

Paradoxically, although governmental engineering to foster social capital will invariably fail, politicians can easily undermine and destroy social capital.

Left-wing governments sometimes replace community-based welfare services with government-provided services for well-meaning reasons. Yet in doing so, they undermine vital social relationships. And further, by often providing money without reciprocal obligations, they create a perverse incentive not to work, and take people out of institutions (such as the workplace) that provide social capital.

Right-wing governments are not immune to the trap of weakening social capital. If a government funds community-based welfare services, there is a danger that attempts to hold them accountable for their use of public money will turn them into outposts of the bureaucracy, endangering their attraction to beneficiaries and volunteers.

Francis Fukuyama, who visited New Zealand as a guest of the Business Roundtable last year, argues in his book, “Trust: The Social Virtues and the Creation of Prosperity”, that “social capital is like a ratchet that is more easily turned in one direction than another; it can be dissipated by the actions of government much more readily than those governments can build it up again”.

Policy makers need to be conscious of policies with side effects on social capital. The closure of a local school can diminish the sense of community that develops around such schools. Obstacles to job creation reduce opportunities to develop personal skills and to access employment networks. Volunteer fire fighting services can easily be ‘crowded out’ by their public sector counterparts.

The death of ‘social engineering’ projects can only be seen in a positive light. But the new challenge – that of allowing social capital to revive – remains an enormous one for modern societies.

For more information, contact:

Roger Kerr
Executive Director
Ph: 04 499 0790
Email: rkerr@nzbr.org.nz

David Young
Communications Manager
Ph: 04 499 0790
Email: dyoung@nzbr.org.nz

Web: www.nzbr.org.nz