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Journal ArticleDOI

Social capital: implications for development theory, research, and policy

01 Aug 2000-World Bank Research Observer (Oxford University Press)-Vol. 15, Iss: 2, pp 225-249
TL;DR: In this article, the authors trace the evolution of social capital research as it pertains to economic development and identify four distinct approaches the research has taken : communitarian, networks, institutional, and synergy.
Abstract: In the 1990s the concept of social capital defined here as the norms and networks that enable people to act collectively enjoyed a remarkable rise to prominence across all the social science disciplines. The authors trace the evolution of social capital research as it pertains to economic development and identify four distinct approaches the research has taken : communitarian, networks, institutional, and synergy. The evidence suggests that of the four, the synergy view, with its emphasis on incorporating different levels and dimensions of social capital and its recognition of the positive and negative outcomes that social capital can generate, has the greatest empirical support and lends itself best to comprehensive and coherent policy prescriptions. The authors argue that a significant virtue of the idea of and discourse on social capital is that it helps to bridge orthodox divides among scholars, practitioners, and policymakers.

Summary (3 min read)

Four Perspectives on Social Capital and Economic Development

  • None of these writers, interestingly, cited earlier work on the subject, but all used the same umbrella term to encapsulate the vitality and significance of community ties.
  • In this paper the authors are concerned with this final category and related work in political economy and new institutional economics.
  • Research on social capital and economic development can be categorized into four distinct perspectives: the communitarian view, the networks view, the institutional view, and the synergy view.

The Communitarian View

  • The communitarian perspective equates social capital with such local organizations as clubs, associations, and civic groups.
  • Communitarians, who look at the number and density of these groups in a given community, hold that social capital is inhcrendy good, that more is better, and that its presence always has a positive effect on a community's welfare.
  • Where communities or networks are isolated, parochial, or working at cross-purposes to society's collective interests (in ghettos, gangs, drug cartels, and so on), productive social capital is replaced by what Rubio (1997) -in discussing Colombia-calls perverse social capital, which gready hinders development.
  • But the extensive literature on caste inequality, ethnic exclusion, and gender discrimination-the bleak outcomes often produced and maintained by community pressuressuggests otherwise (Narayan and Shah 1999) .
  • In Kenya a participatory poverty assessment recorded more than 200,000 community groups active in rural areas, but most were unconnected to outside resources and were unable to improve the lot of the poor (Narayan and Nyamwaya 1996) .

The Networks View

  • A second perspective on social capital, which attempts to account for both its upside and its downside, stresses the importance of vertical as well as horizontal associations between people and of relations within and among such organizational entities as community groups and firms.
  • It can provide a range of valuable services for community members, ranging from baby-sitting and house-minding to job referrals and emergency cash.
  • Portes and Sensenbrenner (1993) cite the case of prosperous Asian immigrants who anglicized their names in order to divest themselves of communal obligations to subsequent cohorts.
  • Second, the sources of social capital need to be distinguished from the consequences derived from them.
  • (Without this distinction, for example, it could be argued that successful groups are distinguished by their dense community ties, failing to consider the possibility that the same ties could be preventing success in another otherwise similar group.).

Outcasts

  • Poor villagers Recent rural-to-urban Successful members of migrants microfinance programs immediate neighbors and friends (their bonding social capital) for credit, insurance, and support, require access to more extensive product and factor markets as their businesses expand.
  • Similarly, long-term members of group-based credit programs may find that obligations and commitments to their colleagues present obstacles to further advancement, especially for the more ambitious (Woolcock 1999) .
  • In these circumstances, many poor people partially divest themselves of their immediate community ties (D) and find a potentially more diverse network where "bridging" social capital is more abundant and economic opportunities more promising (E).
  • The networks view has been employed with great effect in recent development research.
  • Far from dismissing the vitality of traditional village groups in poor communities (the modernization view) or romanticizing it (the communitarian view), the networks view in effect recognizes that these groups can both help and hinder economic advancement.

The Institutional View

  • A third perspective of social capital, which the authors call the institutional view, argues that the vitality of community networks and civil society is largely the product of the political, legal, and institutional environment.
  • It also stresses that the performance of states and firms themselves depends on their own internal coherence, credibility, and competence and on their external accountability to civil society.
  • Research from the institutional view has two variants, both of which have yielded remarkably complementary results.
  • This approach, pioneered by Knack and Keefer (1995, 1997) , equates social capital with the quality of a society's political, legal, and economic institutions.
  • Rampant corruption, frustrating bureaucratic delays, suppressed civil liberties, vast inequality, divisive ethnic tensions, and failure to safeguard property rights (to the extent that they exist at all) are major impediments to prosperity.

The Synergy View

  • In recognition of this disconnect, a number of scholars have recendy proposed what might be called a synergy view, which attempts to integrate the compelling work emerging from the networks and institutional camps.
  • They are not always won by the most powerful, nor do challenges to authority always entail violent conflict.
  • Patient efforts by intermediaries to establish partnerships between associations of the poor and outsiders can reap significant dividends (Isham, Narayan, and Pritchett 1995) .

Measuring Social Capital

  • Several recent innovative studies have attempted to quantify social capital and its contribution to economic development.
  • One measure is membership in informal and formal associations and networks.
  • The National Commission on Philanthropy and Civic Renewal (1998), for example, has developed a National Index of Civic Engagement based on a sample of 1,000 respondents.
  • In exploring the roots and determinants of Hindu and Muslim riots in India, Varshney (2000) focuses on the role of intercommunal networks.
  • Because the forms of social capital are society-specific and change over time, the instruments must focus on a range of dimensions of social capital (Narayan and Cassidy 1999) .

Implications for Development Theory and Policy

  • The concept of social capital offers a way to bridge sociological and economic perspectives and to provide potentially richer and better explanations of economic development.
  • Understanding how proposed policy interventions will affect the power and political interests of the stakeholders is a vital consideration, since all policy interventions occur in a social context characterized by a delicate mix of informal organizations, networks, and institutions.
  • Second, it is critical to invest in the organizational capacity of the poor and to help build bridges between communities and social groups.
  • One of the great virtues of the idea and discourse on social capital is that it provides a common language for these different stakeholders, enabling them to communicate more easily with one another.
  • Fifth, development interventions should be viewed through a social capital lens, and assessments of their impact should include the potential effects of the intervention on the social capital of poor communities.

Conclusion

  • In unpacking the literature on social capital and development, a recurring message is that social relations provide opportunities for mobilizing other growth-enhancing resources, that social capital does not exist in a political vacuum, and that the nature and extent of the interactions between communities and institutions hold the key to understanding the prospects for development in a given society.
  • This consideration suggests that one of the most important examples of social capital at work in the absence of formal insurance mechanisms and financial instruments is the use by the poor of social connections to protect themselves against risk and vulnerability.
  • In many respects the research on social capital is still in its early stages, but practitioners and policymakers cannot wait for researchers to know all there is to know before acting.
  • Instead, all those involved should adopt a stance of learning by doing.
  • It is only through collaborative efforts-with all that this entails regarding struggle, perseverance, negotiation, and mutual willingness to learnthat genuine progress will be made.

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Social Capital: Implications for
Development Theory, Research,
and Policy
Michael
Woolcock
Deepa Narayan
In the 1990s the
concept
of
social
capitaldefined
here
as the norms and networks that
enable people to act
collectivelyenjoyed
a remarkable
rise
to
prominence
across
all the
social science
disciplines.
The authors trace the evolution of social capital
research
as it
pertains to economic development and identify four distinct
approaches
the
research
has
taken:
communitarian, networks, institutional, and
synergy.
The evidence
suggests
that
of the four, the
synergy
view, with its emphasis on incorporating different levels and
dimensions of
social
capital and
its
recognition
of the positive and
negative outcomes
that
social
capital
can
generate,
has the
greatest
empirical support and
lends
itself
best
to com-
prehensive and coherent policy prescriptions. The authors argue that a significant virtue
of the idea of and
discourse
on social capital is that it
helps
to bridge orthodox divides
among
scholars,
practitioners, and policymakers.
What is social capital? How does it affect economic development? What are the
implications for theory, research, and policy? These questions lie at the heart of
recent attempts to make sense of the burgeoning literature on social capital and to
ascertain its relationship to economic development. In this article we endeavor to
answer each of
these
questions; in so doing, we provide an overview of
the
scholar-
ship on social capital for those unfamiliar with the term as well as a sense of coher-
ence and direction to those embarking on new empirical research and policy analysis
in this rich field.
What Is Social Capital?
"It's not what you know, it's who you know." This common aphorism sums up
much of the conventional wisdom regarding social capital. It is wisdom born of
The
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Research
Observer,
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15,
no.
2
(August
2000),
pp. 225-49.
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for
Reconstruction and Development
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THE WORLD BANK
338
Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized
76649

experience—that gaining membership to exclusive clubs requires inside contacts,
that close competitions for jobs and contracts are usually won by those widi friends
in high places. When people fall on hard times, they know it is their friends and
family who constitute the final safety net. Conscientious parents devote hours to the
school board and to helping their children with homework, only too aware that a
child's intelligence and motivation are not enough to ensure a bright future. Some of
our happiest and most rewarding hours are spent talking with neighbors, sharing
meals with friends, participating in religious gatherings, and volunteering for com-
munity projects.
Intuitively, then, the basic idea of social capital is that a person's family, friends,
and associates constitute an important asset, one that can be called on in a crisis,
enjoyed for its own sake, and leveraged for material gain. What is true for individu-
als,
moreover, also holds for groups. Those communities endowed with a diverse
stock of social networks and civic associations are in a stronger position to confront
poverty and vulnerability (Moser 1996; Narayan 1995), resolve disputes (Schafft
1998;
Varshney 2000), and take advantage of new opportunities (Isham 1999).
Conversely, the
absence
of social ties can have an equally important impact. Office
workers, for example, fear being left out of the loop on important decisions; ambi-
tious professionals recognize that getting ahead in a new venture typically requires an
active commitment to networking. A defining feature of being poor, moreover, is
that one is not a member of—or may even be actively excluded from—certain social
networks and institutions that could be used to secure good jobs and decent housing
(Wilson 1987, 1996).
Intuition and everyday language also recognize an additional feature of social capital:
that it has costs as well as benefits, that social ties can be a liability as well as an asset.
Most parents, for example, worry that their teenage children will fall in with the
wrong crowd and that peer pressure and a strong desire for acceptance will induce
them to take up harmful habits. Even close family members can overstay their wel-
come. At the institutional level, many countries and organizations have nepotism
laws,
in explicit recognition that personal connections can be used to discriminate
unfairly, distort, and corrupt. Everyday language and life experience, in short, teach
that the social ties individuals have can be both a blessing and a blight, while those
they do not have can deny them access to key resources. These features of social
capital are well documented by the empirical evidence and have important implica-
tions for economic development and poverty reduction.
These examples suggest a more formal definition: social capital refers to the norms
and networks that enable people to act collectively. This simple definition serves a
number of purposes. First, it focuses on the sources, rather than the consequences, of
social capital (Portes 1998) while recognizing that important features of social capi-
tal,
such as trust and reciprocity, are developed in an iterative process. Second, this
definition permits the incorporation of different dimensions of social capital and
326
The World Bank
Research
Observer,
voL
15,
no.
2
(August
2000)

recognizes that communities can have access to more or less of
diem.
The poor, for
example, may have a close-knit and intensive stock of
"bonding"
social capital that
they can leverage to "get by" (Briggs 1998; Holzmann and Jorgensen 1999), but
diey lack die more diffuse and extensive "bridging" social capital deployed by die
nonpoor to "get ahead" (Barr 1998; Kozel and Parker 2000; Narayan 1999). Ac-
cordingly, such an approach allows the argument that it is different
combinations
of
bonding and bridging social capital that are responsible for the range of outcomes
observed above and incorporates a dynamic component in which optimal combina-
tions of these dimensions change over
time.
Third, while this definition presents the
community (rather than individuals, households, or the state) as the primary unit of
analysis, it recognizes that individuals and households (as members of a given com-
munity) can nonetheless appropriate social capital and that the way communities
themselves are structured turns in large part on their relationship with the state.
Weak, hostile, or indifferent governments have
a
profoundly different effect on com-
munity life and development projects, for example, than do governments that re-
spect civil liberties, uphold the rule of
law,
honor contracts, and resist corruption
(Isham and Kaufmann 1999).
This conceptualization of the role of social relationships in development repre-
sents an important departure from earlier theoretical approaches and therefore has
important implications for contemporary development research and policy. Until
the 1990s the major theories of development held rather narrow, even contradictory,
views about the role of social relationships in economic development and offered few
constructive policy recommendations. In the 1950s and 1960s, for example, tradi-
tional social relationships and ways of life were viewed as impediments to develop-
ment. When modernization theorists explained "the absence or failure of capital-
ism," Moore (1997:289) correcdy notes, "the focus [was] on social relations as
obstacles."
As
an influential United Nations (1951) document of the time put it, for
development to proceed, "ancient philosophies have to be scrapped; old social insti-
tutions have to disintegrate; bonds of
caste,
creed and race have to burst; and large
numbers of persons who cannot keep up with progress have to have their expecta-
tions of a comfortable life frustrated" (cited in Escobar 1995:3).
This view gave way in the 1970s to the arguments of dependency and world-
systems theorists, who held that social relations among corporate and political elites
were a primary mechanism of capitalist exploitation. The social characteristics of
poor countries and communities were defined almost exclusively in terms of their
relation to the means of production and die inherent antipathy between the interests
of capital and labor. Litde mention was made of the possibility (or desirability) of
mutually beneficial relationships between workers and owners, of the tremendous
variation in the degree of
success
recorded by developing countries, or of political
strategies—other than revolution—by which the poor could improve their lot. At
the same time, communitarian perspectives stressed the inherent beneficence and
Michtul
Woolcock
and
Deep*
Ntrayan
937

self-sufficiency of local communities but underestimated die negative aspects of com-
munal obligations, overestimated die virtues of isolationism and self-sufficiency, and
neglected die importance of social relations in constructing effective and account-
able formal institutions. For dieir part, neoclassical and public choice theorists
whose voices were die most influential in die 1980s and early 1990s—assigned no
distinctive properties to social relations. These perspectives, which focused on die
strategic choices of rational individuals interacting under various time, budgetary,
and legal constraints, held that groups (including firms) existed primarily to lower
die transaction costs of exchange; given undistorted market signals, die optimal size
and combination of groups would duly emerge.
The major development dieories, dien, construed social relations as singularly
burdensome, exploitative, liberating, or irrelevant. Reality, unfortunately, does not
conform so neady to these descriptions and dieir corresponding policy prescriptions.
Events in the post—cold war era—from ethnic violence and civil war to financial
crises and the acknowledgement of widespread corruption—demand a more sophis-
ticated appraisal of the vices, virtues, and vicissitudes of the social dimension as it
pertains to the wealth and poverty of nations (Woolcock forthcoming). The litera-
ture on social capital, in its broadest sense, represents a first approximation to the
answer to this challenge. It is a literature to which all the social science disciplines
have contributed, and it is beginning to generate a remarkable consensus regarding
the role and importance of institutions and communities in development. Indeed,
one of the primary benefits of the idea of social capital is that it allows scholars,
policymakers, and practitioners from different disciplines to enjoy an unprecedented
level of cooperation and dialogue (Brown 1998; Brown and Ashman 1996).
Four Perspectives on Social Capital
and Economic Development
The letter and spirit of social capital have a long intellectual history in the social
sciences (Platteau 1994; Woolcock 1998), but the sense in which the term is used
today dates back more than 80 years to the writings of Lyda J. Hanifan, then the
superintendent of schools in West Virginia. Explaining die importance of commu-
nity participation in enhancing school performance, Hanifan (1916:130) invoked
the concept of social capital, describing it as
those tangible substances [that] count for most in the daily lives of people:
namely good will, fellowship, sympathy, and social intercourse among the
individuals and families who make up a social unit. ... If [an individual
comes] into contact with his neighbor, and they with other neighbors, there
will be an accumulation of social capital, which may immediately satisfy his
SIS
The World Bank
Research
Obterver,
voL
15,
no.
2
(August
2000)

social needs and which may bear a social potentiality sufficient to the
substantial improvement of living conditions in the whole community.
After Hanifan the idea of social capital disappeared for several decades but
was
rein-
vented in the 1950s
by
a
team of Canadian urban sociologists (Seely, Sim, and Loosely
1956),
in the 1960s by an exchange theorist (Homans 1961) and an urban scholar
(Jacobs 1961), and in the 1970s by an economist (Loury
1977).
None of these writ-
ers,
interestingly, cited earlier work on the subject, but all used the same umbrella
term to encapsulate the vitality and significance of community ties. The seminal
research by Coleman (1987,1988,1990) on education and by Putnam (1993,1995)
on civic participation and institutional performance, however, has provided die in-
spiration for most of the current work, which has since coalesced around studies in
nine primary
fields:
families and youth behavior; schooling and education; commu-
nity life (virtual and
civic);
work and organizations; democracy and governance; col-
lective action; public health and environment; crime and violence; and economic
development.'
In this paper we are concerned with this final category and related work in politi-
cal economy and new institutional economics. Research on social capital and eco-
nomic development can be categorized into four distinct perspectives: the
communitarian
view,
the networks
view,
the institutional
view,
and the synergy view.
The Communitarian View
The communitarian perspective equates social capital with such local organizations
as clubs, associations, and civic groups. Communitarians, who look at the number
and density of these groups in a given community, hold that social capital is inhcr-
endy good, that more is better, and that its presence always has a positive effect on a
community's welfare. This perspective has made important contributions to analy-
ses
of poverty by stressing the centrality of social ties in helping the poor manage risk
and vulnerability.
As
Dordick (1997) notes, the poor
have
"something left to lose"
each other.
In their celebration of community and civil society, however, many enthusiasts of
this view of social capital have ignored its important downside (Portes and Landolt
1996).
For
example,
where communities or networks are isolated, parochial, or work-
ing at cross-purposes to society's collective interests (in ghettos, gangs, drug cartels,
and so on), productive social capital is replaced by what Rubio (1997)—in discuss-
ing Colombia—calls perverse social capital, which gready hinders development. Many
benefits certainly are associated with being a member of a highly integrated commu-
nity, but there are also significant
costs,
and for
some,
the costs may gready outweigh
the benefits. Consider, for instance, the bright girls who are taken out of village
schools in India because of community expectations. The social networks underly-
Micboel
WooUock
and
Dap* Narayan
M9

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TL;DR: A growing number of sociologists, political scientists, economists, and organizational theorists have invoked the concept of social capital in the search for answers to a broadening range of questions being confronted in their own fields as mentioned in this paper.
Abstract: A growing number of sociologists, political scientists, economists, and organizational theorists have invoked the concept of social capital in the search for answers to a broadening range of questions being confronted in their own fields. Seeking to clarify the concept and help assess its utility for organizational theory, we synthesize the theoretical research undertaken in these various disciplines and develop a common conceptual framework that identifies the sources, benefits, risks, and contingencies of social capital.

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Cites background from "Social capital: implications for de..."

  • ...Those who hold the institutional view of social capital have argued that “the very capacity of social groups to act in their collective interest depends on the quality of the formal institutions under which they reside” (Woolcock and Narayan 2000, 234; see also Evans 1996; Ostrom 1996)....

    [...]

  • ...Potential interactions between networks and the state are shown in Figures 2 and 3, building on the ideas of Woolcock and Narayan (2000)....

    [...]

  • ...It is the different combinations of bonding and networking social capital that allow communities to confront poverty and vulnerability, resolve disputes, and take advantage of new opportunities (Woolcock and Narayan 2000)....

    [...]

  • ...This table outlines the pertinent features (following Woolcock and Narayan 2000) of the horizontal bonding and networking aspects of social capital, the institutional limitations on the formation of social capital, and the potential for synergy between the state and civil society....

    [...]

  • ...As I alluded to earlier, social capital is made up of “the norms and networks that enable people to act collectively” (Woolcock and Narayan 2000, 226)....

    [...]

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Abstract: Three perspectives on the efficacy of social capital have been explored in the public health literature. A "social support" perspective argues that informal networks are central to objective and subjective welfare; an "inequality" thesis posits that widening economic disparities have eroded citizens' sense of social justice and inclusion, which in turn has led to heightened anxiety and compromised rising life expectancies; a "political economy" approach sees the primary determinant of poor health outcomes as the socially and politically mediated exclusion from material resources. A more comprehensive but grounded theory of social capital is presented that develops a distinction between bonding, bridging, and linking social capital. It is argued that this framework helps to reconcile these three perspectives, incorporating a broader reading of history, politics, and the empirical evidence regarding the mechanisms connecting types of network structure and state-society relations to public health outcomes.

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Shu-Chuan Chu1
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References
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TL;DR: In this paper, it is argued that the degree of overlap of two individuals' friendship networks varies directly with the strength of their tie to one another, and the impact of this principle on diffusion of influence and information, mobility opportunity, and community organization is explored.
Abstract: Analysis of social networks is suggested as a tool for linking micro and macro levels of sociological theory. The procedure is illustrated by elaboration of the macro implications of one aspect of small-scale interaction: the strength of dyadic ties. It is argued that the degree of overlap of two individuals' friendship networks varies directly with the strength of their tie to one another. The impact of this principle on diffusion of influence and information, mobility opportunity, and community organization is explored. Stress is laid on the cohesive power of weak ties. Most network models deal, implicitly, with strong ties, thus confining their applicability to small, well-defined groups. Emphasis on weak ties lends itself to discussion of relations between groups and to analysis of segments of social structure not easily defined in terms of primary groups.

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TL;DR: In this paper, the concept of social capital is introduced and illustrated, its forms are described, the social structural conditions under which it arises are examined, and it is used in an analys...
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TL;DR: Douglass C. North as discussed by the authors developed an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time.
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Abstract: Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)

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01 Jan 2000
TL;DR: Putnam as mentioned in this paper showed that changes in work, family structure, age, suburban life, television, computers, women's roles and other factors are isolating Americans from each other in a trend whose reflection can clearly be seen in British society.
Abstract: BOWLING ALONE warns Americans that their stock of "social capital", the very fabric of their connections with each other, has been accelerating down. Putnam describes the resulting impoverishment of their lives and communities. Drawing on evidence that includes nearly half a million interviews conducted over a quarter of a century in America, Putnam shows how changes in work, family structure, age, suburban life, television, computers, women's roles and other factors are isolating Americans from each other in a trend whose reflection can clearly be seen in British society. We sign 30 percent fewer petitions than we did ten years ago. Membership in organisations- from the Boy Scouts to political parties and the Church is falling. Ties with friends and relatives are fraying: we're 35 percent less likely to visit our neighbours or have dinner with our families than we were thirty years ago. We watch sport alone instead of with our friends. A century ago, American citizens' means of connecting were at a low point after decades of urbanisation, industrialisation and immigration uprooted them from families and friends. That generation demonstrated a capacity for renewal by creating the organisations that pulled Americans together. Putnam shows how we can learn from them and reinvent common enterprises that will make us secure, productive, happy and hopeful.

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