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SOCIAL CAPITAL AND
ECONOMIC DEVELOPMENT
PAWEŁ STAROSTA UNIVERSITY OF LODZ
1. History and operationalisation of the ‘social capital’ concept 2. The notion and types of capital 3. Social capital theories 4. Social capital components 5. Types of social capital by function 6. Economic and non-economic factors of economic develoopment 7. Social requirements of economic development 8. Theoretical model of the relationship between social capital and economic
development 9. Empirical examples of the relationships between social capital and economic
development 10. Conclusions
LECTURE PLAN
Motto- Against neoliberalism
• Fiction is that society consits of a set of independent individuals, each of whom acts to achieve goals that are independently arrived at , and that the functioning of the social system consists of the combination of these actions of independent individuals . This fiction is expressed in the economic theory of perfect competition in a market, most developed in Adam Smith’s imagery of an ‘ invisible hand’.
• This fiction derives : 1. in part from fact that the only tangible actors in society are individuals, 2. in part from the impact that A. Smith and other clasical economic theorists , as well as
political philosophers of eighteenth centuries have had on the way we think about society and economic life.
3. in part from the fact that social changes have moved modern society toward a structure in which individuals act more independently than they did in the past.
History of the ‘social capital’ concept
• ‘social capital’ concept was first used in 1916 by Lynda J. Hanifan (Castilione, 2007) • In the 1960s economists and sociologists from the Chicago school (T. W. Schultz, G.
Becker, M. Olson i inni) introduce the concept of the human capital • In the 1970s P. Bourdieu again introduces the concept of social c apital in his the
hidden class violence theory • At the turn of the 1980s and 90s the social capital notion becomes the key
sociological and economic concept due to new institutional economy, rational choice theory, neoweberism and participatory democracy theories
Two reasons for popularity of social capital notion
• scientific (alientaion problem in the economic theory (Becker) and sociological nominalism socjologicznego (Coleman, 1990)
• ideological (legitimisation of liberal policy and
communitarianism) • number of works on social capital in scientific journals
1984 - 4 1996 - 50 2003 - 550
Social capital concept
`Social capital’ is a set of resources that a group or an individual may use due to being a member of the group; these resources contribute to producing common goods as well as benefits for individuals
Concept and types of capital
Capital is a value with two characteristics • First is conversion into another value • Second is the possibility of achieving added value due to the
transformation the original value within the exchange process
Types of capital • Physical capital is created by making changes in materials so as to
form tools that facilitate production . • Human capital is created by changing persons so as to give them skills
and capabilities that make them able to act in new way. • Social capital is created when the relations among persons change in
ways that facilitate action
Social capital theories
1. Structuralism (Wellman 1999, Lin 2001, Cook 2004)Social capital is defined as resources embeded in one’s social network that can be accessed or
mobilized ties in the network(Lin,2001) 2. Normativism (Fukuyama 1999, Putnam 2000, Sztompka
2007)Social capital can be defined as an set of informal and formal values or norms shared among members of a group that permit them to cooperate with
one another( Fukuyama, 1999) 3. Rational choice theory (Coleman 1990)Social capital is a useful set of
resources available to an actor through his or her social relatiopnship. It is not a single entity , but variety of different entities having two characteristics in common. They all consist of some aspects of social structure and they facilitate certain actions of individuals who are within structure( Coleman,1990)
4. Synthetising approach (Paxton 1998, Halpren 2005)
Social capital components
• Social network (Bourdieu, Lin, Granovetter) • Trust (Fukujama, Sztompka, Putnam) • Norms (Coleman, Halpren) • Effective sanctions (Coleman)
Types of social capital by functions
• Bonding social capital. Denotes ties between people inside a given social group. It is kind of ‘cement’ binding together group members and maintaining their relationship to one another. The word of ‘ cement’ is refering here to processes indentification individuals with the group, identification of the group and mutual individual’s dependency within the group.
• Bridging social capital. Denotes links between people coming from different social group and between different social group as such. It encompasses more distant ties between members of society.
• Linking social capital. Woolcock and others have started using the concept of ,linking social capital’capital to describe the extent to which an individual’s or group’s network are characterized by linkage between those with very unequal power or resources. In the other words it is refering to asymmetrical power relations between individuals nad groups.
Economic and non-economic factors of economic development
Classic factors • natural resources • workforce • trading scope • technologies
Non-classic factors • work organisation • system of values • Individuals’ skills
Social requirements of economic development
Types of social integration and economic development (Woolcock, 1998)
MICRO LEVEL EMBEDEDNESS Inter-group
integration
low high
AUTONOMY
Outer-group links
High 1.Anomie
4.Social
opportunity for
development
Low 2.Amoral
individualism
3.Amoral
familism
Types of social integration and economic development • The first case anomie. That is classically associated with the urban setting and
contemporary modernization processes. The anomie is appearing where individuals have newly –found freedom and opportunity to participate in a wide range of activities but lack in society stable community base to provide gudance, support and identity. Between individuals exist linkages but there is no community interactions and community groups.
• Amoral individualism exists where there is neither familial nor generalised trust , where narrow self- interest literally permeates all social and economic activity and where members of society are isolated – ether by circumstances or discriminations - from all forms of cohesive social networks.
• Amoral familism is characterized by presence of strong inter-group integration and shortage of common shared values. Patterns of social relations are governed by a limited –group morality and ethic nad particularistic social norms.
• Social opportunity for developmental outcomes to be achieved in contemporary societies strong intra-group ties needs to be combined with the higher respect to extra
group relations.
Free ride passanger dilemma of the first stage
Free ride passanger dilemma of the second stage
Theoretical model of the relationship between social capital and economic development
Figure 2.2. The causal relationship between social capital and economic growth
Factors conducive
to economic growth
Reduced transaction
costs
Innovation
Enterpreneurialism
and risk-taking
Effective competition
Efficient allocation of
resources
Better flow
of information
Mutual support and
co-operation,
honcoured
contracts
Agreements easily
and cheaply enforced
Networks:
Bridging
expecially
Sanctions:
Exclussion
and shaming
for default
Norms:
Co-operation
and trust
Investment in public
goods
MEANS of SC Components in EUROPE (2008)
Country Institutionalized
trust
Generalized
trust
Internet
network
Personal
network
N
Belgium
Bulgaria
Switzerland
Cyprus
Germany
Denmark
Estonia
Spain
Finland
France
United Kingdom
Norway
Poland
Portugal
Russian Federation
Sweden
Slovenia
Slovakia
Total
19,5203
9,3916
23,5829
21,8856
20,4102
26,8950
18,0994
18,6549
25,9022
18,7656
19,1400
24,1667
14,4495
15,2641
15,4433
22,9608
17,1995
16,8511
19,1259
15,8128
10,8942
17,6448
13,8366
15,7724
20,3760
16,1312
14,6300
18,9636
14,7479
16,5693
19,5459
12,7549
12,4373
13,0513
19,0997
14,1358
12,6642
15,3935
3,5174
1,5303
3,8146
2,0971
3,4604
4,3851
3,5155
2,3202
3,9640
3,3777
3,4898
4,7134
2,7794
1,8442
1,2584
4,4148
3,0976
2,1354
3,0303
1,1205
1,1009
1,3095
,6708
1,0316
1,5261
,5635
1,2352
1,2032
1,3512
1,1416
1,4751
,5948
,8923
,7046
1,4541
,8079
,6564
1,0559
1760
2230
1819
1215
2751
1610
1661
2576
2195
2073
2352
1549
1619
2367
2512
1830
1286
1810
35215
Min 0,0 0,0 0,0 0,0 Max 40,0 30,0 6,0 3,0
Linear Regression – OLS: Household income and Social Capital Components in EUROPE - 2008
Predictors Beta t p.
Constant
Generalized trust
Institutionalized trust
Personal network
Internet network
,038
,036
,035
,312
261,103
6,533
6,208
6,600
58,689
,000
,000
,000
,000
,000
R2 = ,118 p. ,000 F = 1180,531
Empirical examples of relationships between social capital and economic development Stable democracy and interpersonal trust
Countries Gener
alized
Trust
1990
in %
Gener
alized
Trust
1995
in %
Gener
alized
Trust
2000
in %
Gener
alized
Trust
2005
in %
GNP
1990
GDP
1995
GDP
2000
GDP
2006
Belarus
Bulgaria
Czechoslovakia
Estonia
Lithuania
Latvia
Poland
Czech Republic
Romania
Russia
Slovakia
Slovenia
Hungary
Ukraine
26
30
28
28
31
19
35
-
16
38
-
17
25
-
24,1
28,6
-
21,5
21,9
24,7
17,9
28,5
18,7
23,9
27,0
15,5
22,7
31,0
3110
1840
3190
4170
3110
3590
1690
-
1620
3430
-
3000
2780
1349
1568
-
3114
1788
1991
3634
5360
1575
2677
3676
10329
4442
953
2639
1513
-
-
2874
-
4078
4818
1515
2750
3654
10076
4569
770
3792
3956
-
12007
8592
8781
8940
13863
5647
6877
10221
18443
11211
rs (1990) = 0,193 rs (1995) = -0,390
1. „Dirty social capital” PROBLEM 2. Maximalization vs. Optimalization of SC 3. Social organization vs. Technological progress
