Social capital: Do we understand it?

Many community workers and citizens have understood, perhaps intuitively, the importance of networks, trust and co-operation in communities for decades. Yet, social capital still has many interpretations and expectations. It remains hard for policy analysts to grasp, because government and the private sector often struggle to see it as part of core business. Measuring social capital requires sophistication and flexibility and the service delivery culture in many agencies and businesses struggle to incorporate it.

Social capital involves participation in networks, reciprocity, trust, social norms, a sense of the “commons”, co-operation and being proactive. It has been described variously. as “'inhering' in the structure of relations between actors and among actors”; as entrepreneurial social infrastructure consisting of diversity; resource mobilisation and the quality of networks in communities; and, “weak ties” between people as social networks develop in communities.

Communities have large reserves of latent social capital in its forms of bonding, bridging and linking. For example, during crises such as bushfire or flood, community members readily participate and interact: Social capital increases as community people “use” it and decreases if they don't. It is both a means and an end. As a means, it mediates relationships and participation. As an end, the relationships and networks that mediate action become strengthened in themselves. Social capital fundamentally involves values. Social capital supports the values that community members want to uphold in their community.

Social capital interacts with other forms of capital. For example researchers have found that social capital affects prices, the acceptance of risk, the choice of leasing contracts, loan approval and bank loyalty. And it has been suggested by some (and disputed by others) that social capital tends to be polarised with communities moving towards opposite ends of a spectrum of social capital. 

On the minus side, social networks are embedded in different sectors of communities and social capital can support unhealthy norms. It can reinforce existing cleavages in communities and lead to social cartels prone to corruption. Social networks can also lock people into declining social sectors such as ethnic groups involved in low-wage informal work. In communities with a culture of illicit drug use, social norms can serve to ostracise community members acting to change their circumstances.

Social capital can also sanction the civic action of community members and fortify unjust community power structures. For example it has been suggested that the declining racial discrimination in middle-class America since the 1950s may well be related to the erosion of social capital that upheld discriminatory norms.

Social capital could be considered at four levels: individual; group; community and or institutional level, and state or national level - which is the cumulative total of networks, norms and trust across regions, states or even nations. For example, conclusions made about social capital in regional towns involve measurements of the mosaic of relationships and trust between individuals, families, and groups, together with people’s broader perceptions of society.

Social capital can be confounded with the existing social and economic wellbeing of communities. Residents of communities of high social capital may have the ability to build relationships and functional organisations, further building networks and trust. Indeed, one researcher made the argument for self-reinforcing cycles of interaction that allow social capital to build on itself.

The confounding question becomes far less clear when considering economic status. The confounding argument would say that more wealthy communities have the resources to organise and co-operate, and poor communities don’t. An association between social capital and economic wellbeing was observed in the rich north and poor south of Italy. It was found that the limited resources of minorities and the poor restricted the representation of citizens in neighbourhood organisations.

Yet, social capital appears to have more to do with power and participation than financial resources. There are many examples of poor communities that have become remarkably empowered and built high levels of social capital

Social capital is not just a matter of having stronger networks and “soft” outcomes. It can lead to “hard” outcomes such as improved community infrastructure, employment and services. In turn, better facilities and economic prospects can foster social interaction, confidence and community organisation.

Social capital can contribute to economic outcomes in a range of ways:

• By reducing costs - for example Neighbourhood Watch can reduce policing costs;
• increasing production - such as a person starting a business relying on networks and contacts to establish a clientele and supply chains; 
• increased efficiency - individuals or companies sharing inputs or marketing co-operatively; 
• transfer of information and knowledge - better decisions from greater sharing of information and innovation; and, 
• external benefits - heath benefits of people being involved in their community.

The Productivity Commission in 2003 described a range of economic and social outcomes of social capital including in education and child welfare, government efficacy, health, crime reduction and economic performance. A previous Productivity Commission report outlined benefits such as increased productivity of firms, more effective production units and access to employment and regional innovation. However, macro-economic benefits from social capital were less clear.

A word of caution is needed here. Social capital is a component of a broad process of change in communities and will not, of itself, overcome fundamental disadvantages in communities. A much broader realignment of power, opportunity and social change is required. Moreover, evidence shows that effects are localised. It may be inappropriate to expect investment in social capital to have wide societal benefits.

Social capital requires a broader holistic understanding of community dynamics rather than a deficit-needs approach. Traditionally, service delivery has been based on a needs or deficit model. Applying a similar model to social capital may lead to inappropriate benchmarks for social capital and a focus on intervention to “improve” low social capital.

This raises two apparent risks. First, there is a risk that conclusions can be based on an overall measure of social capital for a community, which can mask a great deal of variation and community dynamics. A second risk is assuming that deficits in social capital should be improved almost independently of community goals and ownership. Networks and relationships in different communities and groups may well be at different points with little ownership or motivation for improving social capital.

Social capital requires different assumptions and approaches beyond service delivery. This involves a cultural change where government, business and communities see social capital as “core work”, and where a community strengthening agenda is more fully “owned”. At present, the conceptual understanding of social capital outstrips the practical consideration of it in government, business and communities. Because social capital is difficult to measure (and understand) it is often seen as less important than “bricks and mortar” Many agencies also continue to address social capital using the assumptions of service delivery and struggle to see its relevance to core business.

This cultural change will require “champions” in the rank and file of government, business and communities; repeated affirmation by key leaders and “real world” demonstrations of social capital and its benefits.

Social capital involves value judgements, rather than absolute truths. For example, anecdotally there is some evidence of people relocating to relatively prosperous coastal areas and not engaging in the local community. A major reason appears to be personal motivation and active disengagement from communities. Can this individual choice be described as poor or undesirable? Is it weak social capital, or is it simply the values and goals of a sector of the community? Cleary community engagement and social networks are desirable values in communities. However, to suggest that people should be involved in their community, and should build networks and participate, is nonetheless a value judgement.

Social capital requires a different approach from traditional measures of performance. Yet many of the principles of traditional evaluation still apply. Many frameworks for the measurement of social capital and community well-being have been developed, following the generic logic of evaluation and involving the extent of community networks, using indicators and measuring variables and using appropriate methods for gaining information about variables.

But there is a risk of having comprehensive measurement but not having the assumptions and processes to interpret and act on the information. How do policy makers and practitioners respond to social capital issues identified by measurement? Do governments and communities have the policy, service delivery or community building responses, or ways to develop them?

A service delivery culture has largely driven a high level of interest in evaluation and performance measurement. Yet, it brings with it assumptions that do not necessarily suit the measurement of social capital.

The evaluation of service delivery is largely based on measuring clear inputs and outputs, has a focus on quantitative information, has quite specific performance indicators, and measures change over a relatively short time period (often based on funding cycles). In contrast, the measurement of community change and social capital attempts to assess relatively ill-defined outcomes based on flexible processes. It relies on largely qualitative information with differences seen over long periods of time

Moreover, while a lot of effort has gone into developing rigorous and accurate indicators, there is a risk that they will still be interpreted using the assumptions of service delivery. These assumptions could easily create inappropriate conclusions, such as if social capital has not changed after an intervention, then the intervention could be deemed unsuccessful, when longer term changes are indeed happening. 

Many factors influence the social situation of communities. Where possible, the effect of activities on social capital needs to be isolated from other effects. For example, feedback from community members can be focused on the extent to which community changes were due to a particular activity, rather than other influences.

The starting point for activities aimed at fostering social capital is often taken to be the benchmark for comparison to measure impacts on social capital. However, the real comparison is not against what social capital was at the start, but against what social capital would have been if no intervention had occurred. It is clearly very difficult to measure this future “without intervention” baseline but it needs to be considered in the interpretation of social capital impacts.

Changes to networks, norms and trust are likely to occur first within particular sectors of the community directly involved in community building activities. Broader community impacts are likely to occur indirectly as networks flow from these groups and cultural change gradually occurs. Hence measured changes are likely to be different between those directly affected and community members involved more indirectly.

In many circumstances it is appropriate for community members themselves to be engaged in the measurement of social capital. Measurement can be a social capital building exercise in itself with community members reflecting on how their community has changed.

Changes in social capital often involve long-term cultural change. Yet, in many cases, the timeframe for measurement is determined by funding arrangements or project timelines of one or two years in which the changes may be minimal. Evaluation needs to be more long-term. Other measurement issues involve social capital indicators not being independent, and the need for two-way measurement of variables.

The challenge is to develop consistent indicators that can allow conclusions to be drawn across local, state and national frameworks. They need to have the flexibility to incorporate local values and what community members may want to measure.

Given the complexity of social capital, it is not a matter of “discovering” ideal indicators of social capital. Rather, measurement involves using indicators that are often imperfect and developing the confidence to work with inherent imperfections and uncertainty.

Evaluation can be a social capital building exercise in itself. The measurement of social capital can help community members rethink local issues, make better planning decisions and build ongoing community cohesion. Measurement can also be part of a cultural change process allowing government and business to better appreciate and incorporate social capital.

Despite considerable knowledge of social capital and its measurement (to the point of developing state and national frameworks) many questions remain. Why does social capital operate the way it does? Why do different sectors of communities have such different social capital characteristics? Why do networks and norms change in the way they do?

The challenge for measurement is not only to develop consistent rigorous ways to assess social capital but to also provide further insight into these questions.