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Social capital is more than economic efficiency and divisive leadership

By Cheryl Kernot - posted Wednesday, 10 September 2003

There's nothing really mysterious about the "social capital" that Peter Costello recently highlighted in a speech seeking to recast him as having a social agenda.

Social capital was formally identified as early as 1916 and revisited in the World Health Organisation description of 1998 as representing "the degree of social cohesion which exists in communities". Work-based networks, diffuse friendships and shared or mutually acknowledged social values are also forms of social capital.

It's just that successive governments lost sight of its value and allowed it to be eroded in an era dominated by rigid rationalist economics. Evidence shows that social capital has been declining in the United States and Australia but stable or rising (from different base levels) in the Netherlands, Germany, Sweden and Japan.


Victorian Liberal Kevin Donnelly reckons the "natural home of social capital is on the conservative side of politics". Don't think so! Not unless the Howard conservatives have abandoned policies that promote narrow self-interest over the collective.

Looking over your shoulder all the time to see if your colleague has won the extension to the short-term individual contract ahead of you fosters suspicion and competition and undermines the formerly co-operative ethos of the production line. The employer/employee mutual relationship is lost and productivity affected. This is just one way in which government policy can erode social capital.

Divisive public leadership can weaken social capital whereas accountable and transparent governance provides a basis for trust and social inclusion, which can in turn strengthen it.

Children-overboard deception, weapons of mass destruction deception, core and non-core promises, a war of attrition to destroy public trust in the ABC - these and a litany of other examples rather diminish Donnelly's thesis.

Divisive public leadership can weaken social capital; accountable governance provides a basis for trust.

"In fact his use of the education system as an example, and the flight of the middle class to non-government schools, where, according to Donnelly, parents can “shape their children's education in a way that best suits their needs, abilities and interests," is an example of middle-class parents using social capital to pass on privilege to their children."


There are strong economic efficiency, equity and civic arguments in favour of government intervention (not usually espoused by conservatives) to promote the building of social capital. That's why other countries have moved on to the wider debate about the way social capital can build community capacity and the role of government in enabling or facilitating this.

Because individuals and communities can be "social capital poor", often as a result of the socio-economic level of their neighbourhood, the Blair government has taken the decision to influence the level and distribution of social capital within the community. And fostering social enterprises is one important way of achieving this.

Social enterprises are businesses with primarily social and environmental objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.

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Article edited by Merrindahl Andrew.
If you'd like to be a volunteer editor too, click here.

This article was first published in The Age on 5 September 2003.

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About the Author

Cheryl Kernot is Director of Social Business at the the Centre for Social Impact, UNSW Sydney. She was a Senator for Queensland and Leader of the Australian Democrats from 1993 to 1997 before joining the Australian Labour Party and becoming the Member for Dickson (Qld) in 1998.

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Chery Kernot's home page
Feature: How to engage with citizens
School for Social Entrepreneurs
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