Social Capital – a trendy concept, or a real form of capital?

The popular debate about the value or usefulness of social capital is a relatively recent one – popularised by Robert Putnam, who wrote a book called Bowling Alone, in which he looks at the decline in popularity of bowling clubs in the US, as people stay at home to watch TV, and how this is symptomatic of a decline in social capital in that country. Putnam sees social capital as consisting of features of social organisation that depend on trusting relationships and networks that facilitate business and cooperative activity in society.

One of the challenges in building an understanding of social capital is that it appears to be very intangible and is hard to pin down and measure. How can we put an objective measure on the value of our relationship with our next-door neighbour? While we may instinctively understand and appreciate the importance of that relationship, it may only provide real or significant returns in times of crisis or when we need each other, and the importance of that relational social capital is not given a value by society.

While it may not be easily visible, we instinctively create and invest in these social relationships, knowing that they may also be useful for us and provide returns at some point, as with other forms of capital. The ‘returns’ may simply be the value we gain from having social contact (friendship), but may also be more (practical assistance in times of hardship, business engagement etc).

It is useful to think of the trust and networks that constitute social capital as constituting a real form of capital, similar to human, physical and financial capital – even if it is less easy to measure.

Paul Adler and Seok-Woo Kwon, writing in the prestigious Academy of Management Review (Adler, P.S. & Kwon, S. 2002. ‘Social capital: Prospects for a new concept’, Academy of Management Review, 22(1): 17-40) examine whether social capital is actually a real form of capital, and they argue that social capital is similar to other types of capital in that it represents an asset that one can invest in with expectations of future returns, that it can be used for a range of different purposes and that it can substitute for other resources, and that it requires maintenance (similar to human and physical capital, but unlike financial capital).

As such, social capital can be understood as a real form of capital with meaningful value that can be exploited in similar ways to other forms of capital, even if it cannot be seen and measured easily.

If it is a real form of capital, then it is perhaps surprising that we as a society do not invest more in creating and stimulating social capital. I will explore this question further in future blog posts.