Social capital is more than economic efficiency and divisive leadership

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.

They contribute to local economic development by providing goods and services that the market or the public sector are unwilling or unable to provide: developing skills; creating employment; providing low-cost personal loans; and enhancing civic involvement through the number of volunteers involved.

They help to drive up economic productivity and competitiveness, they contribute to socially inclusive wealth creation and they enable individuals and communities to work towards regenerating their local neighbourhoods.

When I was federal Labor spokeswoman on employment I incorporated social enterprises into the party's election platform. Now I am continuing that work at the School for Social Entrepreneurs in the east end of London. Most of the students here have a record of successfully harnessing the social capital of the deprived areas in which they live.

They have set up and run, among other things, an employment cafe, a fair trade coffee roasting business for disabled employees, a nationally organised, locally delivered scheme of assistance for the homeless, mobile food co-operatives producing fresh fruit and vegetables accessible to public housing tenants without transport or child care.

Their solutions to community need are often unique and their passion and energy to build community networks and trust is inspiring. Unlike conservatives, they believe that building strong communities, first, enables the growth of strong individuals. They don't believe in trickle down; life hasn't delivered it to them!

A recent evaluation shows that 75 per cent of our students have created between one and five jobs, eight per cent have created between six and ten jobs, and eight per cent have created more than 21 jobs.

There's more than the John Howard model of corporate philanthropy (give money to do "good") at work here. There are genuine partnerships between business and the local community, where money builds capacity, not sponsorship or naming rights, and where bridging social capital (connections between those with differing levels of power or social status) is created and sustainable social enterprises supported.

All this is not separate from, but rather an important component of, good economic management.