I attended a talk on Social Capital by Sunder Ramaswamy, Director of the Madras School of Economics, at the Shriram HRD Centre in Chennai on September 18. The talk was organised under the aegis of the Scientific Research Association for Economics and Finance*, Chennai. Sunder Ramaswamy is one of the co-editors of the book titled Social Capital and Economic Development - Well Being in Developing Countries, published in 2002.
In the late 1980s and the early 1990s, people began to realise that two communities with the same profile of physical and human capital developed in very different ways under similar sets of circumstances. The difference in results was attributed to the organisational ability inherent in the community and that difference has loosely come to be called Social Capital. As an example, the speaker cited his experience with two different communities in Burkina Faso in West Africa, which had roughly the same number of children and the same school infrastructure and also the same income levels in the community. But one community had 45% higher attendance in school than the other and the only significant difference between the two communities was the fact that one of them had an active Parent Teacher Association. The speaker admitted that he himself was skeptical about social capital 8 years ago, but has only become less skeptical today and is still trying to get a better grasp of it. The concept of social capital is still evolving - in the early 1990s, there were 25 different definitions and now it has been distilled to the following (along with the concept of TNN described below).
Social capital is believed to consist of three different components:
- bonding capital - the ties that exist within small units like the family
- bridging capital - the ties that exist across the entire community, and
- linking capital - the ties that exist between the community and the state or other relevant power groups
A key challenge for development economists is to define and design development projects to deliver results, despite the ground realities in communities being complex and varying from community to community. The speaker argued that not understanding the principles of social capital will result in more mistakes in the delivery process. The basic economic principles themselves apply similarly to all communities but it is social capital that gives the development economists a common framework to discuss the differences and variations between the communities.
How does social capital work? It works by creating Trust, creating Norms of shared behaviour and creating a Network of interaction with the government (TNN) . The main questions relating to social capital that need to be addressed are:
- What are the reasons for development successes - is success a result of social capital at work?
- Does lack of social capital result in developmental failure?
- How does one create social capital in areas that are absent?
The economist, Robert Putnam suggests that SC is the third leg of a three legged stool. The first leg is the private sector, the second is the State and the third is Civil Society which can also be termed as Social Capital. Social capital is that part of Civil Society that translates into a positive outcome of development in terms of immediate utilitarian results.
Deepa Narayan, an economist with the Poverty Group in the World Bank (who has published a study titled Voices of the Poor, after talking to the poor across many countries to understand poverty better) lists the following requirements to help create Social Capital in a community.
- dissemination of information
- effective use of technology
- active engagement between the public and the government whereby the members of the public can interact with the local government officials responsible for development and monitor the progress by the officials
- actively create forums for networking by providing things like a community hall as a place for people to meet, roads, safe spaces for women to meet etc..
- Create a stable macro economic environment in terms of growth rates, inflation, reducing regional inequalities etc.
- Try not to put impediments for information flow
Mr. A. M. Swaminathan, former Finance Secretary, Government of Tamil Nadu (and Chairman of the SRAEF Trust*) remarked that from his experience in Tamil Nadu, some regions seemed to have higher social capital than others. As an example, he said Erode District was better organised in terms of the milk and weaver co-operatives etc., but Coimbatore District next door was far behind. Kanyakumari, he said, seemed to lack social capital and was one of the most difficult districts in terms of getting development going.
Mr. P. K. Doraiswamy, former Additional Chief Secretary, Government of Andhra Pradesh remarked that bureacracy may actually be unwittingly excluding social capital by imposing rules and a top-down approach. As an example he said local water tanks and ponds in villages were maintained by the local community for centuries, but now PWD Engineers despatched by the bureacracy are charged with maintaining it and the bureacracy may actually look askance at attempts by locals to maintain the water bodies. He also suggested that the quality of the individual was also a factor in the creation of social capital and if individuals in the group were all bereft of social capital, the group itself may not have it either. He wondered if creation of social capital was also a function of local leadership and said when someone had once asked Dr. Kurien (of Amul) what was required to replicate the Amul success in Andhra Pradesh, Dr. Kurien's simple answer was to get another Sardar Vallabhai Patel. Mr. Doraiswamy also suggested that the concept of working together in a community be consciously taught right from the school level to help foster the creation of social capital.
In response to a question on metrics for measurement of social capital, the speaker said it was still early days and various groups are working on generating various metrics.
One person pointed to economist, Robert Putnam's book Bowling Alone in which Putnam worries about declining social capital in the US with people becoming increasingly disconnected from family, friends, neighbors, and democratic structures and asked if that was so because the civic institutions in the US are well developed, and so social capital wasn't really necessary for development since it actually seems to be declining if the institutions were well developed. The speaker responded to that by likening social capital to the scaffolding required to construct a building. It is still very much necessary in the intermediate stages to build the structure (institutions) whether or not it withers away later. The speaker also pointed out that Europe may be a better example of social capital at work than the US since community activities and interactions with the State were much stronger in Europe than in the US.
To a question on how social capital works in virtual communities and in the developed world, the speaker said studies are in progress and there is much literature on these areas.
I found the World Bank's social capital resource and the Saguaro Seminar resource at Harvard University as good starting points to find out more about social capital as well as good pointers to the literature.
* The Scientific Research Association for Economics and Finance (SRAEF) is a registered Public Charitable Trust under the Indian Trust Act, set up with the following objectives:
- To undertake applied and empirical research studies in the area of economics and finance
- Development of economic and financial models by application of statistics and mathematics to specific problems relating to India
- To invite eminent specialists to address the members of the public on their specific areas of expertise
- To organise seminars, workshops, lectures, training programmes etc. on economic and financial issues of national concern
- To organise essay competitions and debates for school and college students
- To undertake surveys on its won or commission such studies by qualified and experienced researchers on economic and financial matters