Social Capital: Implications for
Development Theory, Research,
and Policy
Michael
Woolcock
•
Deepa Narayan
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 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
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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
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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
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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
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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-
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