Beyond Social Capital in Poverty Research
Staveren, Irene Van, Journal of Economic Issues
Social capital has been a contested notion among economists since it came up in economic literature in the mid 1990s. It is not a theory as human capital theory is, nor is it a clearly distinguishable field of study, but it is a concept that has been embraced as the missing link in economic analysis. Basically, the concept addresses the social and cultural aspects of human behavior, recognizing that these dimensions have economic implications. Given the variety of views among economists on social capital, there are various definitions of social capital around. Most definitions emphasize a functionalist dimension, referring to collective action (in political science definitions), to social cohesion (in sociology), or to well-being or even economic growth (in economics). For example, the World Bank defines social capital in its research project on social capital and poverty as "the institutions, the relationships, the attitudes and values that govern interactions among people and contribute to economic and soci al development" (1998, 1). Earlier, I have suggested a more neutral definition of the concept, recognizing negative economic effects of social capital for the economy as a whole or for certain groups (van Staveren 2000, 7). In this definition, which I will extend a bit here, I understand social capital as a shared commitment to social values as expressed in the quantity and quality of social relationships, which may enable or constrain dynamic efficiency. Generally speaking, we find three different ways in which social capital is integrated in economic analysis:
* A preference in utility functions (Becker 1996; Glaeser, Laibson, and Sacerdote 2000).
* A resource next to other capitals (Fukuyama 1995a and 1995b; World Bank Social Capital Initiative 1998, summarized by Dasgupta and Serageldin 2000). (1)
* A mechanism to address market failures due to imperfect information and risk (Moore 1999; Dasgupta 2000; Grabowski 1998; Szreter 2000).
The economic literature on social capital and the closely linked notion of trust has become so extensive that I cannot even try to do justice to the literature on social capital and poverty in developing countries.2 My review below on the use of social capital in poverty research therefore necessarily draws on a small selection of the empirical literature, focusing on the more frequently cited publications, edited volumes, and evaluative publications.
Social Capital in Poverty Research
Economists have shown an eager interest in transforming the abstract idea of social capital into measurable variables, for which often secondary data are found outside the trodden paths of economic databases. A much-used macro-level data source is the World Values study (Inglehart 1990 and 1994). At the micro-level, we see primary data collection, predominantly through surveys. Empirical research on social capital employs one or more of the following three types of variables for the measurement of social capital:
* Trust and trustworthiness or credibility.
* Membership in formal and/or informal groups.
* Acceptance of moral rules and norms or adherence to certain values,
An empirical study at the macro level that I will briefly discuss here made use of all three of these types of social capital variables, drawing on the World Values study. (3) Stephen Knack and Philip Keefer (1997) did a sample of twenty-nine mostly developed countries for which data were available on trust and civic norms. They found that the variable of group membership has no impact on growth. But they also found that the variables of trust and civic norms have a significant and positive impact on the economic performance of countries, with more explanatory power for countries with more (income) equality. "A one-standard-deviation change in trust (fourteen percentage points) is associated with a change in growth of more than one-half (.56) of a standard deviation, nearly as large as the standardised coefficient for primary education (.64)" (1260). For trust, they measured what is called generalized trust, that is, the percentage of people who assert in surveys that "most people can be trusted," while the c ivic norms variable used was a mean value for answers to five questions on typical prisoners' dilemma problems like tax evasion, free riding, and holding back information.
Micro-studies of social capital tend to focus on poverty of households and in organizations. For households, two widely quoted survey studies at the village level for Tanzania and India are available; I will briefly discuss their methods and findings. The study on Tanzania was done by the World Bank (Narayan 1997) as part of its effort to move toward a more explicit poverty orientation. The study entails a participatory poverty assessment among 6,000 people living in 87 villages in Tanzania. Social capital was measured particularly but not exclusively as membership of formal and informal groups. The study found a large quantitative effect of group membership: "a one standard deviation increase in village-level social capital predicts a 20 to 30 percent increase in expenditure per person for each household in the village" (65). In a follow-up publication, Narayan and Pritchett (1999, 890) tried to explain the statistical relationship they found between membership of groups and household income. They suggested that higher group membership rates imply more enjoyment of public services, the use of more advanced agricultural practices, joining in communal activities, and participation in credit programs.
A survey done in Rajasthan, India, in sixty villages, did actually attempt to include variables that link social capital to poverty in households. Operarionalizing social capital at village level, the following variables were selected: membership of labor-sharing groups, dealing with crop disease and natural disasters, trust in sharing land, solidarity, and reciprocity. In addition, the study included variables on individual agency capabilities, measuring hierarchical and patriarchal power in each village through the importance of caste, patron-client linkages, panchayats as well as informal village councils, political parties, and finally barriers to newcomers among village leaders. The study concluded that it is only through the combination of social capital with individual agency that social interaction impacts positively on household well-being: "Social capital represents a potential--a propensity for mutually beneficial collective action. But potential needs to be activated, and agency is important for this purpose. Local-level resources, however plentiful, need to be marshalled strategically and directed toward incentives available within the broader institutional environments of state and market. When the intermediate links are weak, as they are when agency is not capable, social capital does not translate readily into good performance" (Krishna 2001, 934).
Such intermediate links become more visible in studies on social capital at the level of organizations. In Paraguay, survey data from 104 peasant co-operations have shown that the level of co-operation depends on social capital, where social capital is measured in terms of characteristics of group membership. Variables selected considered the poverty focus of groups, attendance rates of meetings, satisfaction with the organizations performance, and a dummy variable to measure whether an organizational experience was copied elsewhere and, hence, deemed successful by others. The survey did also take gender differentiation into account. It was found that women s role in the community appeared to be particularly important (Molinas 1998) for the success of the co-operation, but the study did not go into possible inequalities in contributions and benefits for men and women. The study concluded that the social capital accumulated in the peasant co-operations compensated for government failures in the provisioning o f public goods and market failures in the supply of credit.
The empirical studies on social capital and poverty briefly reviewed above do seem to broaden traditional poverty research in economics. But the social capital studies are not uncontested, which we will see in the next section. Moreover, they appear to be deeply problematic and lead to disturbing policy advice, as I will point out in the conclusion.
Social capital has been criticized at three levels: the capital metaphor, the integration in economic theory, and its measurement (see, for example, Edwards and Foley 1997; Harriss and de Renzio 1997; Baron, Field, and Schuler 2000; Fine 2001). The capital metaphor suggests that it is a resource like physical capital or human capital. However, social capital is very different from other types of capital, a critique shared among neoclassical economists as well as heterodox economists. Kenneth Arrow (2000), for example, argued that it is no capital at all since it does not extend in time; it does not involve a deliberate sacrifice in the present for future benefit, and it is inalienable. Ben Fine (2001) argued that the understanding of the social in the economy as capital does no justice to the social dimensions inherent in economic processes. "Rather, the reintroduction of the social has the troubling dual aspect both of rhetorically smoothing the acceptance of broadening the scope of justifiable intervention from the economic to the social in order to ensure policies are successful. Social, and covert political, engineering is to complement economic engineering, with social capital producing a client-friendly rhetoric" (20).
More fundamental critiques of the social capital concept are leveled against its integration into economic theory, as either instrumental or functionalistic, and sometimes both (van Staveren 2000). The instrumental view of social capital reflects the idea of social capital as an individual preference and analyzes its accumulation in a cost-benefit manner, assuming that individuals will accumulate more social capital as long as the marginal returns on their investment are positive. First, this view disregards the feature of social capital that it is not an individual asset but inter-personal: the investment by one depends on the investment by others (Baron, Field, and Schuller 2000). Secondly, the instrumental view of social capital disregards the intrinsic motivation of social relationships: friendship or church membership may indirectly help economic activity, but they have their own intrinsic value (van Staveren 2000; Schmid 2002). The functionalistic view of social capital reflects the idea of social capi tal as a resource or as a mechanism to address market failures, focusing only on the effects of social capital, not explaining why it accumulates. However, this view tends to disregard the causal mechanisms leading to possible economic benefits. At the same time it tends to ignore that sometimes social capital has perverse effects and does not lead to aggregate economic benefits at all, as is the case, for example, with cartels or organized crime.
The third type of critique is concerned with measurement. How does one measure trust in a society or to weigh differences in trust between different groups? How does one measure the role of group membership--which groups does one include, and how does one account for differences between and within groups? How does one measure norms and values and how does one deal with contested values in a society and group norms?
Together, the three problems that I have summarized above point at a fundamental gap in the analysis of social capital in poverty studies: the denial of social structures like hierarchies, exclusion, repressive norms, and power, in short, the denial of inequality. The conceptualization of social capital as a preference, a resource, or a mechanism that would counter market failure ignores the social construction of individual choices, differences in access to and control over resources, and negative effects of certain norms for certain groups. The measurement of social capital ignores inequalities in trust and trustworthiness, inequalities within and between groups, and inequalities expressed through dominant norms. Hence, there appears to be a "missing link" in the social capital literature itself: the interaction of inequality with what is understood as social capital (Edwards and Foley 1997; Baron, Field, and Schuller 2000; Fine 2001; Harriss 2001; Molineux 2002). In the remainder of this section, I will r efer to the poverty studies reviewed earlier in order to point out how the denial of inequality leads to a misunderstanding of poverty in the social capital approach.
The macro-level study by Knack and Keefer (1997) suggested a negative relationship between inequality and social capital, but the study did not go into the characteristics of this negative relationship. A critical survey of World Bank poverty projects in Mexico and the Philippines, drawing on the social capital notion, has shown the fallacies of the lack of understanding of this negative relationship (Fox and Gersman 2000). It was found that only three of ten World Bank projects had a pro-poor impact and potentially social capital building effects. They ascribed the failure of most projects to a lack of attention and understanding by World Bank project managers of community-based organizations. For example, in rural finance projects private commercial banks were chosen as partners rather than community-based financial organizations. Hence, while it is nor yet understood how social capital translates into economic growth, it is not at all clear from the poverty studies reviewed when social capital has benefic ial effects and when it puts limitations on economic development.
The micro-level studies on the contribution of social capital to poverty reduction concluded that social groups in villages and co-operations provide the poor with access to resources and, hence, help them to increase their well-being. The World Bank study on Tanzania found that the higher group membership, the higher household well-being, as if there is a linear relationship between group membership and income. The study does not question differences in types of groups (for example between more and less influential groups), entry barriers and mechanisms of exclusion for some groups of people, or hierarchies within groups which influence who contributes what and who gets what benefits. In contrast to this neglect, the village level study in India acknowledges the role of power and hierarchies in groups. But these are analyzed in a methodological individualist way as individual agency, ignoring the fact that inequalities, for example, in access to education or to credit, affect the capability of individual ag ency.
Social Capital and Gender Inequality
Some critical studies on social capital have particularly focused on gender inequalities, pointing out how these may either lead to differential well-being effects of social capital for men and women or to limited overall gains from social capital. In order to illustrate the possible negative linkages between social capital and inequality, I will briefly discuss here two studies on the use of social capital as collateral through group lending in micro-credit programs. The studies argue that group lending does not necessarily lead to more gender equality or to women's empowerment, since it does not address gender discrimination in finance outside the program. The programs themselves often ignore intra-household inequalities that may lead to a lack of control over loans by female borrowers because of appropriation of loans by male family members (Goetz and Sen Gupta 1996). The problem is, according to Linda Mayoux (2001, 454) in her study on Cameroon, that "the strength of men's social capital within communiti es frequently serves to reinforce gender subordination in relation to access to resources and markets as well as within the household." For example, she found that while customary norms in Cameroon urge women to contribute to household needs by growing food crops, nowadays men also expect women to provide cash for the family. Women's participation in credit programs only reinforces the pressure on them to contribute to the household's finances, even though they face serious inequalities in terms of access to and control over land, agricultural inputs, means of transport, and education to mention only a few gender inequalities in access to and control over resources. In her study on Nepal, Katherine Rankin (2002) found that groups of borrowers are divided along lines of gender and caste, leading to solidarity within the groups but exclusion of lower castes and women. Moreover, she found that group status depends on honor, which is a property of men but very much depending on their control over women, in partic ular over women's sexuality. She therefore concluded that "without due attention to the cultural politics of social change, microfinance programs may in fact serve to defend existing hierarchies along the lines of class, caste, and gender" (2002, 18). Extending the analyses on gender and social capital from microfinance to development in general, Maxime Molyneux (2002) pointed at two perverse effects of social capital for women. Molyneux detected the first perverse effect in the fact that women are often targeted for voluntary work in civil society, based on an underlying assumption that women's labor time is infinitely elastic. So, social capital investment through women actually increases their unpaid work burden and hence their time-poverty. The second perverse effect is that social capital tends to be treated as the panacea for poverty, as a substitute for access to and control over resources by women, and as a substitute for regulatory policies and an effective legal and protective environment. Again, th is leads not to more gender equality or women's empowerment but rather the opposite. On the basis of research on women, poverty, and civil society in Latin America, she warned against too naive and optimistic expectations of the benefits of social capital. "If we omit the background indicators on poverty, unemployment, malnutrition and child mortality, we get a too rosy picture of associational life in which social capital--in this case the unpaid labor of women--is mobilized as the safety net for irresponsible macro-economic policies and poor governance" (2002, 179).
Given the problems in the analysis of social capital, it is worrying to see that the concept has found its way to policy makers. The main policy message appears to be that governments can leave part of poverty reduction policy making to civil society initiatives, substituting public goods and regulatory policies with services provided by the poor, drawing on their labor in community groups, networks, and associations, and in particular drawing on poor women's unpaid labor in households and communities. This, however, puts the burden of poverty reduction policies on the poor themselves. (4) This is, as Harriss (2001, 8) has put it, as if to expect "the most disadvantaged people to pull themselves up by their own bootstraps, in a way which is remarkably convenient for those who wish to implement large-scale public expenditure cuts."
Instead, Fine (2001) preferred to study the social dimensions of economic processes from the perspective of political economy, which rejects methodological individualism, utility maximization, and the concern with market imperfections. Also, Baron, Field, and Schuller (2000) suggest alternative routes for the analysis of the social dimensions in the economy, emphasizing inter-disciplinarity, the role of values, and a focus on the inter-personal level and the meso-level of the economy. Such an approach would go beyond what is currently understood under the misnomer of social capital, while engaging with the positive and negative effects of social structures and underlying values--indeed, an approach that is reflected in the tradition of institutional economics.
(2.) In the electronic version of EconLit 1969-2002/09 on CD-Rom, the economic literature reference guide of the American Economic Association, the combination of the words 'social" and "capital" generated 917 hits, while the word "trust" generated 1,537 hits.
(3.) Paul Collier (1998), as part of the World Bank initiative on social capital, has made various suggestions to incorporate social capital variables in macroeconomic models, such as civic liberties, the percentage of people with a telephone connection, population density, ethno-linguistic fragmentation, and the number of courts and lawyers.
(4.) Or as the title of a book has it: Social Capital as a Policy Resource (Montgomery and Inkeles 2001).
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The author is Senior Lecturer in Labor economics of developing countries at the Institute of Social Studies in The Hague. She is a member of the board of the International Association for Feminist Economics. This paper was prepared for the annual meeting of the Association for Evolutionary Economics at the Allied Social Science Association meetings in Washington, DC., January 3-5, 2003.…
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Publication information: Article title: Beyond Social Capital in Poverty Research. Contributors: Staveren, Irene Van - Author. Journal title: Journal of Economic Issues. Volume: 37. Issue: 2 Publication date: June 2003. Page number: 415+. © 1999 Association for Evolutionary Economics. COPYRIGHT 2003 Gale Group.
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