Social Capital and Development

Norman Uphoff, Cornell University

Open Research Center (ORC),

Ryokoku University,

Kyoto, July 26, 2003

What Is Social Capital?• Social Capital is currently a fashionable concept in

social science and in development agencies• For many years, I avoided the concept because of its

ambiguities and imprecisions• After doing an analysis, with Anirudh Krishna, of

Social Capital in the Indian State of Rajasthan where we evaluated its contribution to improving ‘watershed management,’ and after I rethought my own work with Sri Lankan colleagues in introducing participatory management in the Gal Oya irrigation system, I think it has merit

What Is Social Capital?

• To be useful, Social Capital needs to be understood in terms of what it is -- not just considering examples or similarities

• Social Capital should be understood within given cultural and institutional contexts, not presented as having universal content -- it can have universal relevance, but not always the same substance

• Social Capital is not the same thing as its consequences -- we need to distinguish between causes and effects

Conceptualizing Social CapitalWhat are the basic features of ‘capital’ in general?• Capital is now considered as more than physical capital

-- more than machines, infrastructure, etc.

1) Does capital require investment? No Natural resources are inherited, not created

2) Does capital always have depletion from use? No Renewable natural resources are maintained when used within certain limits -- at sustainable rates; Human resources can be improved through use

• While investment and depletion are important issues, they are not defining criteria for ‘capital’

Conceptualizing Social Capital• To speak in general terms, CAPITAL = ASSETS,

things that are valued for their productive potentials• ASSETS yield a stream of benefits over time• CAPITAL = a STOCK, while Benefits = a FLOW • Income or benefit streams results from Capital• All forms of Capital produce some flow of benefits; they

may require investment, and may be depleted• Both Capital & Resources increase PRODUCTIVITY • But Capital Resources -- since latter are used up in the

production process; Capital can be accumulated

Main Kinds of Capital

• PHYSICAL capital = INFRASTRUCTURE such as road network and telecommunication system, power generation and distribution; FACILITIES for production, e.g., factories, machines, etc.

• FINANCIAL capital = stocks, bonds, money, etc.• NATURAL capital = petroleum, minerals, forests,

fisheries, soil, flora and fauna, microbes, etc.• HUMAN capital = labor power, talent, creativity• SOCIAL capital = factors that contribute to mutually

beneficial collective action (MBCA)

Main Kinds of Capital

• Different kinds of capital can be accumulated -- i.e., increased by purposeful actions

• All kinds of capital can be diminished through certain actions or circumstances

• All yield certain flows of benefits, and resources can be reinvested to augment capital stock or to replenish this stock

• Sustainable development = development that enhances capital stocks rather than depletes them

Subcategories of Capital

• FINANCIAL Capital -- fixed vs. liquid assets• PHYSICAL Capital -- infrastructure vs. directly

productive assets (yielding final products = G/S)• NATURAL Capital -- renewable vs. non-renewable • HUMAN Capital -- skilled vs. unskilled labor• SOCIAL Capital -- structural forms that facilitate

mutually beneficial collective action (MBCA) with lower transaction costs vs. cognitive forms that predispose people toward MBCA -- same difference as ‘able’ vs. ‘willing’ -- both are important

Mutually Beneficial Collective Action (MBCA)

• Why define the ‘income stream’ (flow of benefits) from Social Capital in this way?

• Collective Action can produce benefits that individual uses of other forms of capital cannot

• So those things that enable or encourage people to cooperate produce streams of benefit worth considering and promoting in their own right

• Concern with ‘mutual benefit’ derives from the concept of what is ‘social’ (word derives from the Latin word for ‘friend,’ implying ‘friendship’)

First Kind of Social Capital

• ‘STRUCTURAL’ Social Capital derives from networks of relationships among persons that are maintained for mutual benefit

• The main forms of Structural Social Capital are:– ROLES

– RULES

– PRECEDENTS, and

– PROCEDURES

that facilitate mutually beneficial collective action

Structural Social Capital• These forms of Social Capital can be added to or revised

or improved so as to facilitate MBCA• Roles can be created• Rules can be formulated• Precedents can be set by certain decisions• Procedures can be established

These can become more or less effective for facilitating MBCA, by lowering or raising transaction costs

They can be invested in, and they can be depreciated or diminished

Second Kind of Social Capital

• ‘Cognitive’ Social Capital comes from shared ways of thinking and evaluating among persons, leading to MBCA for mutual benefit

• The main forms of Cognitive Social Capital are:– NORMS

– VALUES

– ATTITUDES, and

– BELIEFS

that predispose people to engage in and to sustain mutually beneficial collective action

These Kinds of Social Capital

• Are INTERACTIVE -- mutually reinforcing each other, not separate or simply parallel

• However, they are analytically distinguishable: as seen from a simple example (thought experiment)

• Imagine a rural community in Japan or anywhere else, where a house burns down during the night

• What happens the next morning?• If little or no social capital, the household must begin

putting its property and life back together all by itself, with no assistance from others

Where There Is Social Capital

• ROLES -- Village headman, Emergency Committee• RULES -- Temporary exemption from taxation?• PRECEDENTS -- Each household contributes

something to restoring the house and its goods?• PROCEDURES -- How resources will be given?• These can get the household’s rehabilitation started

quickly and efficiently -- no need for meetings or consultations -- relief work starts automatically

• What if there is no Structural Social Capital?

With Cognitive Social Capital

Can get MBCA without Structural Social Capital:• NORMS -- Reciprocity, e.g. -- assistance should be

rendered, and reciprocated, whenever it is needed• VALUES -- Generosity toward others in need is a virtue,

to be respected and praised• ATTITUDES -- Trust; assisting neighbors builds

community solidarity, which is good for everyone• BELIEFS -- “There but for the grace of God go I”• Villages could contribute materials and other aid on an

ad hoc basis, but it would be less efficient

‘Incomplete’ Social Capital?

Can there be just Cognitive Social Capital without Structural Social Capital? Or vice versa?

Possible, but unlikely -- Structural Social Capital gives effect to Cognitive Social Capital; and Cognitive Social Capital underlies Structural Social Capital

• Analytically these forms can be distinguished; can have ‘investment in’ Cognitive Social Capital, and ‘depletion of’ Cognitive Social Capital, just as with Structural Social Capital

• But in practice, the two forms always INTERACT

Example from Cambodia

Survey of the situation of the rural elderly population during reconstruction (for HelpAge, UK NGO)

Elderly Khmers reported a local tradition (institution) that they did not particularly appreciate:

• Whenever villagers became involved in disagreement that could lead to conflict, they should identify the oldest person around and ask him/her to mediate the conflict, to avoid possibility of violence

• Elderly Khmer were very uncomfortable doing this because rural society was now more violence-prone

Example from Cambodia

What were the elements of Social Capital here?

ROLE: Dispute mediator, to be filled automatically by oldest person available who should hear the dispute and give an impartial judgment

Various RULES, PRECEDENTS, PROCEDURES were understood to apply to this process

NORM AND VALUE: Avoidance of conflict

ATTITUDES AND BELIEFS: Respect for age

RESULT: Mutually beneficial collective action, which had survived the disruption of Khmer Rouge rule

Example from JapanAncient form of Social Capital: the Kumi

Groupings of about 10 households,

with a designated (rotating) chairman

(male head of household)

Collective responsibility for actions of Kumi members

Designed as instrument for control from above -- served as instrument for collective action from below

Self-help, protection, insurance against disaster, resource mobilization, etc. = SOCIAL CAPITAL

Example from Japan

STRUCTURAL SOCIAL CAPITAL• Roles -- Kumi leader, and Kumi member -- created

mutual expectations, coordinated efforts• Rules -- governing behavior, contributions, etc• Precedents and Procedures-- local problem-solving

COGNITIVE SOCIAL CAPITAL• Norms -- reciprocity, cooperative behavior• Values -- solidarity, peaceful resolution of conflict• Attitudes and Beliefs -- mutual self-help

Example from Nepal

Chhattis Mauja traditional irrigation system (terai):• Roles -- elected chairman and secretary, branch

associations and chairmen, messengers, technicians• Rules, Precedents and Procedures -- annual meeting,

resource contributions, fines, schedules, etc.

COGNITIVE SOCIAL CAPITAL• Norms -- per person contributions (all equal voice)• Values -- efficient distribution, technical solutions• Attitudes and Beliefs -- no caste or ethnic advantage

Example from Sri LankaGAL OYA IRRIGATION PROJECT -- introduction of

‘participatory irrigation management,’ 1981-85

STRUCTURAL SOCIAL CAPITAL• Roles -- Farmer-Representative and members of farmer

organizations; multi-level structure• Rules -- regulating water distribution, etc.• Precedents and Procedures-- preventive maintenance

COGNITIVE SOCIAL CAPITAL• Norms -- equitable sharing of water, participation• Values -- solidarity, resolutions of conflict, etc.

What To Do about Social Capital?

• RECOGNIZE Social Capital for what it is -- an ASSET that is valuable and worthy of appreciation

• PRESERVE/CONSERVE Social Capital where it exists, reinforcing institutions and thinking that are supportive of mutually-beneficial collective action

• INVEST in Social Capital to increase its stock -- (a) in institutions (roles, rules, precedents and procedures) and (b) in shared thinking (norms, values, attitudes and beliefs) that facilitate MBCA or are conducive to MBCA

Who Can Support Social Capital?• ACADEMICS can do research and evaluation to

improve understanding of Social Capital (their own understanding and that of others)

• OFFICIALS can learn more about Social Capital and can work with it and reinforce it by ensuring its effectiveness

• POLICY MAKERS can invest in institutions and can set good examples for MBCA, acting for common interest, demonstrating benefit from collective action

• INDIVIDUALS can make their own investments

How to Invest in Institutions? Identify opportunities (gaps) for building up institutional

capacity -- four basic functions:• Decision-making• Resource mobilization and management• Communication and coordination• Conflict resolution

Each of these is facilitated by ROLES, RULES, PRECEDENTS and PROCEDURES

Each can be reinforced by appropriate NORMS, VALUES, ATTITUDES and BELIEFS

How to Invest in Shared Thinking? National, regional and local political leadership • Set good examples of action for common interests• Articulate the values, norms, attitudes and beliefs that

are supportive of MBCA• Encourage demonstrations of solidarity, trust etc.

These should be reinforced by religious, educational, civic, business and other leaders acting similarly

Individuals and local groups• Demonstrate merits of MBCA by visible practice• Promote discussions and articulation of norms, etc.

What Is the Future of Social Capital? Social Capital depends on the actions and thinking of

both leaders and members of the public

Japan has long been regarded as ‘rich in Social Capital’ although the concept has been poorly understood

Other countries have often been well-endowed with Social Capital, but their stocks of this asset are now often declining, as the norm of individualism increases

Social Capital is only one form of capital, but it a very productive and cost-effective asset for development

No need to lose it, and many good reasons to increase it