Is Social Capital the New Socialism?

Article excerpt

THE last century of world history has revealed the results of governments' efforts to regulate the economic behaviour of individuals. But as socialism is retreating, new theories of regulation are emerging. These new theories don't aim to regulate the economic relations between individuals; instead, they seek to regulate the social relations between them.

The desire to increase the community's 'social capital' is the justification used by the advocates of the new theories of regulation, in recent years, politicians and public policy experts have considered how governments can increase social capital. Few, however, have paused to ask whether governments can create social capital. Even fewer have considered whether governments should create social capital.

An important research paper by the Productivity Commission Social Capital: Reviewing the Concept and its Policy Implications published in July this year provides a valuable antidote to the 'there's a problem and the government should fix it' school of policy-making. The report quotes Fukuyama:

States do not have many obvious levers for creating many forms of social capital. Social capital is frequently a by-product of religion, tradition, shared historical experience, and other factors that lie outside the control of any government.

If 'social capital' is defined as norms and networks which encourage co-operation and trust between individuals, then the existence of social capital can be beneficial. Social capital reduces transaction costs, assists the diffusion of knowledge, and can enhance the sense of community well-being. Numerous academics around the world have been active finding connections between levels of social capital and everything from a country's economic performance to the incidence of the common cold.


Whether governments can create social capital is questionable. The 'crowding out' effect of government action has long been recognized, and nowhere is it more apparent than in the area of social capital. As in recent decades governments have taken over the provision of health, welfare and education, so the voluntary services sector has been reduced.

Given that social capital is determined according to the quality of relationships between individuals, a vast array of legislation and policy positively destroys social capital. …