An analysis of the concept of social capital, which has been written about extensively in recent years, establishes differences between the various kinds of social capital and its relative effects on the behavior of a country’s economy. For example, there are two main kinds: bonding social capital and bridging social capital.
Bonding social capital
Bonding social capital refers to the ruling ties of closed groups and circles of trust that identify themselves in opposition to other groups. Examples are military groups, fraternities, country clubs, urban gangs, business, professional and labor associations, ethnic groups and political entities, among others. Bonding social capital, by reinforcing ethnocentric and sectarian tendencies, may be exclusionary and tends to work against the construction of a more prosperous, just and cohesive society. The exclusive confidence in the immediate group and the lack of confidence in others can also inhibit the creation of reliable public institutions that can mediate relationships between different groups.
Bridging social capital
While bonding social capital involves interpersonal relationships in a limited circle of people who know each other, bridging social capital facilitates interaction between diverse groups and opens possibilities for solidarity in society, thus expanding the range of civic and economic activity. It is inclusive, provides access to others, and has the ability to unite communities in activities that promote the well being of others. This type of social capital, however, needs reliable public institutions to mediate relations between those who do not know each other. These institutions must create trust between persons who do not belong to the same family, club, profession, guild, sect, race or ethnic group.
One of the obstacles to bridging social capital is the general lack of confidence in public institutions. When institutions frequently violate their own rules and regulations, they create an environment of noncompliance that leads to weak social capital. This lack of confidence has direct effects on economic behavior because it increases the level of uncertainty, which in turn causes social instability. When the symbols of authority are corrupted, the citizen is demoralized, and when confidence in the system is in doubt, prosperity declines. Bridging social capital aims to bring stability to social and economic transactions through an orderly coexistence governed by shared patterns of conduct that are formalized by functional and reliable public and private institutions that reinforce the values of solidarity.
It is also important to note the impact of social capital on the implementation of effective public policy. Once it is established that both the public sphere and the political agenda are the property and responsibility of the citizens (and not the political class), citizens begin to take responsibility for creating working institutions through which their voices can be heard. In other words, the citizens’ commitment to the public institutions that get around political authority will facilitate the implementation of public policies that are effective and beneficial for economic development.
Linking social capital
The mechanisms, institutions, practices and rules that citizens use to communicate with the power structure are grouped under a form of bridging social capital that is called linking social capital. Linking social capital allows citizens to tell institutional powers, both in the government and in civil society, how to set and implement the public agenda. In a truly democratic society, linking social capital is common and available to all. This general access makes powerful institutions more reliable, more predictable and more respected.
Social capital replaces uncertainty with trust. Therefore, mediating institutions must break through to win the confidence of closed groups in order to create a generalized sense of confidence and credibility that can only be obtained through fair application of rules that apply to everyone. They must encourage an environment in which all citizens understand the rules of coexistence in social and economic life and can expect that the rules will be applied fairly and without favor. This confidence is the mechanism through which the institutions can make interrelated agreements work. Finally, bridging social capital and linking social capital depersonalize interactions and reward merit, thus opening up opportunities for initiative and innovation without allowing favoritism, corruption and personal loyalty. On the contrary, the practice of making exceptions to the rule, which is so valued by the authoritarian mentality, is a drag on social capital and reduces quality of life.
In summary, according to the concept of social capital, economic and social progress depends on the ability of citizens to live harmoniously, first within their own communities, and then between communities, and finally their ability to cooperatively create and maintain alliances with the power structure. Broad acceptance of shared norms makes public behavior more predictable by reducing uncertainty, incentivizing risk taking and increasing economic efficiency.
It is well known that one of the central components of capitalism is the presence of a rule of law that guarantees both the integrity of private property and the application of universal contractual rules among social entities. No citizen, for example, will invest capital in a business or a property if he or she thinks it might be arbitrarily seized by the state. Nobody would enter into a contractual agreement if there was no judicial guarantee (by the state) that it would be fulfilled. Similarly, nobody would deposit money in a bank without knowing that the conduct of the bankers is regulated by the state to prevent depredation. Confidence, in other words, is not based on luck or expectations of good faith, but on the existence of reliable rules, both formal and informal, both societal and state.
So the state plays a central role in developing and promoting social capital. In other words, social capital is not possible without the guiding role of the state (administrated by the government) and the vigorous exercise of its social responsibility. It is a level of trust in human relationships that transcends the private interests of capital and the logic of the market.
Author: Roberto Gándara Sánchez
Published: September 11, 2014.
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