Jun 02 2009

The Potential for Social Capital

by at 2:41 pm under Uncategorized

Given the current global financial crisis, the continuation of conflicts abroad and the dire state of development in certain pockets of the world, it is, perhaps, too easy to be pessimistic about the adaptability of national and global institutions today. Yet, crisis demands action. The state of the global economy now can be seen as a result of incremental changes that brought the world to punctuated disequilibrium—something that will force nations into a phase transition to adapt, innovate and re-organize institutions so that interdependently beneficial opportunities can open up to all global networks in spite of asymmetric power relations.

In the case of the United States, its stock of social capital plummeted on both the national and international level due to the inflexible actions of the previous administration. What has happened since the Obama Administration took over is an effort to re-build social capital, for the benefit of civic communities within the country, and to foster relations with other international governments. The US appears to be adapting to social context and history by restructuring organizations within the country in a horizontal network in which community cohesion and collective action can benefit the interests of citizens, all while bridging across global network clusters to manage global conflict. As Robert Putnam writes, social capital provides the institutional harmony and cooperation that is essential to economic development.

But as Deepa Narayan emphasizes, social capital is far from being a panacea, as it can result in destructive networks of exclusion, corruption and violence. This is reminiscent of Douglass North’s analysis of the self-reinforcing prophecies of institutions that lead to inefficiency, as well as Paul Collier’s thesis on the negative externalities that will result from neglecting the world’s poorest countries. One also can’t help but think of the terrorist networks of the Middle East that are threatening the peace of global outcomes.

At the same time, paths to reducing poverty and managing dysfunctional states do exist through efforts to bridge social capital—a form of intervening that Narayan terms “cross-cutting ties.” According to Narayan, the key to building social capital is to learn how to foster the “circumstances under which it is likely to lead to the public good.” In other words, government structures must implement policies that can promote the crossing of structural holes. Narayan identifies a networking problem that institutions must restructure—by taking advantage of the strength of weak ties.

The future holds many prospects, but at least network analysis and an overview of historical changes has made us more vigilant of avoiding patterns of poor performance, divergence, and inefficient path dependence. As shown by Putnam’s studies of the Italian regional experiment, civic equilibrium holds immense promises for collective action as long as institutions can adapt to the building of social capital for government effectiveness and economic progress. Maintaining awareness of utilizing the lens of social capital and networks infrastructure is the first step in getting institutions to attain adaptive efficiency—and we can already see this in contemporary calls to innovate and to be open to new perspectives in the face of financial crisis.

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