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.

Low Trust Globalisation

I have indulged myself somewhat in recent posts with my thoughts on the Open Doors and Flags scenarios developed by the Shell scenarios team in 2005, in which they explore possible future worlds in 2025.

To complete the picture, the third scenario they imagine is ‘Low Trust Globalisation’. This scenario is perhaps closer to a representation of the world as it is today, and less idealistic than ‘Open Doors’ and less fatalistic than ‘Flags’.

These 3 Shell scenarios were developed through a process of exploring the results of trade-offs and choices that can be made in managing the interplay between powerful forces that exist in the global business environment. The forces derive from a drive for efficiency and the power of the market, the need for security (in the broadest sense) and the consequent push for coercion and regulation, and the push for social cohesion that arises from the human need for community.

So, while the Shell team emphasises that these three forces will continue to shape our world for the next number of years, it is the business choices and political trade-offs that will impact on the balance of these forces and lead to the scenario alternatives. So ‘Flags’ represents a world where the balance is found between the needs of security and community, with free markets playing a less significant (but not absent) role. ‘Open Doors’ emphasises the balance between community (social cohesion) and the market, with less concern about security and higher levels of regulation. And the ‘Low Trust Globalisation’ scenario is a world that finds itself concerned primarily with market efficiency and security, and in which community power and the drive for social cohesion struggle to make as big an impact.

The current global economic ‘crisis’ has had interesting consequences, with western ‘capitalist’ governments effectively nationalising banks and propping up the motor industry. It was Karl Marx of course who in the Communist Party Manifesto called for the nationalisation of the commanding heights of the economy. Come back you Reds – all is forgiven!

And it seems to be agreed, amongst economic commentators in the Western media, that much tighter regulation is needed of the banking system and the behaviour of senior banking, auditing and other financial directors and CEOs.

If this represents a fundamental shift away from the values of the market, it could lead us towards the ‘Flags' scenario, in which national interests take precedence over the globalisation trends of the last 30 years. My sense, however, especially after following what has been happening in Davos, is that the leading economic powers will seek to re-establish the power of the markets as drivers of economic growth and that Western governments will have little appetite for running banks for very long, even if new regulatory systems are negotiated and put in place.

The prime challenge facing those who see the need for a more environmentally and ecologically sustainable world system at peace with itself then remains. As the forces of globalisation reassert themselves, how can companies, organisations, communities and governments, especially those in the developing world, create innovative, practical and dynamic products, services and initiatives that stimulate more sustainable ways of living and lift people out of poverty?

We certainly live in interesting times, and the world and South Africa seem to change markedly even in the time between my blogposts! But these times are times of great opportunity and optimism, even as we face deep and sustained crises of one kind or another. Seamus Heaney, one of Ireland’s leading poets, wrote of the time when ‘hope and history rhyme’:

from The Cure at Troy

Human beings suffer,
they torture one another,
they get hurt and get hard.
No poem or play or song
can fully right a wrong
inflicted or endured.

The innocent in gaols
beat on their bars together.
A hunger-striker's father
stands in the graveyard dumb.
The police widow in veils
faints at the funeral home.

History says, Don't hope
on this side of the grave.
But then, once in a lifetime
the longed for tidal wave
of justice can rise up,
and hope and history rhyme.

So hope for a great sea-change
on the far side of revenge.
Believe that a further shore
is reachable from here.
Believe in miracles
and cures and healing wells.

Call the miracle self-healing:
The utter self-revealing
double-take of feeling.
If there's fire on the mountain
Or lightning and storm
And a god speaks from the sky

That means someone is hearing
the outcry and the birth-cry
of new life at its term.

~ Seamus Heaney ~

Fresh air!

I write this while watching the announcements by Hillary Clinton of George Mitchell and Richard Holbrooke as special envoys for the US to, respectively, the Middle East and Pakistan and Afghanistan. A ‘dream team’ in terms of their combined experience, although Al Jazeera commentators are tonight sounding notes of caution about Clinton’s perceived Zionism. Nonetheless, it is refreshing is to hear a new language coming from the US State Department about peace, and the possibility for peace, and the vital need for intensive processes of diplomacy and development as critical to achieving these goals. The presence of President Obama and Vice President Biden at the event on the second day of the new administration emphasises the momentum and energy behind this new approach.

Without getting starry-eyed about US foreign policy, this marks at least a different articulation from the recent past. A new approach to policy based on diplomacy rather than military strength is consistent with the Open Doors scenario discussed in my recent blogs, and a move away from the more nationalist Flags scenario.

This new wind will hold a mirror to the rest of the world. Can South Africa bring a new and urgent focus to efforts for peace and development in Zimbabwe? Where is our Special Envoy to Harare? We need to be doing much more to address the humanitarian crisis on our northern border.

The inauguration of President Obama leads us to recall the day that Madiba was inaugurated as our first democratic President. The ANC government, in my view, still represents the best continuing hope for peace and development in South Africa. Nonetheless, the ANC needs to retain a sense of humility and humanity in these tasks. It was saddening for me to hear the response of ANC Secretary General Gwede Mantashe to the defection from the ANC of former President Mbeki’s mother to the new COPE political party. He described this as a “non-event”, saying that she had not campaigned for the ANC since the 1950s. The implication is that individuals are not important unless they have power, and that individuals leaving the ANC are of little concern to the party. This is unfortunate for a party that has always been grounded in the people of this country, and I hope does not represent a shift away from the idea that South Africa belongs to all the people who live in it.

more scenarios, and working through the crunch

In contrast to the Open Doors approach, Shell also offers us the Flags scenario. This is probably the most gloomy prospect, and represents a retreat into nationalism, local community, tribalism and a backtracking on processes of globalisation. It is the opposite of an interconnected world.

And of course, there are examples around us of how this plays out. The conflict in the Middle East, and the particular conflict in Gaza at present, shows how the Flags scenario unfolds. The real tragedy is that the Israeli approach is likely to be counter-productive in the medium to long-term. As Jonathan Freedland has written, the danger of destroying the Hamas leadership is that more sinister forces arise in their place. This has happened before – the intensive and illegal bombing of Cambodia by the US in the 1970s (in an attempt to disrupt the Ho Chi Minh trail – along which weapons were transported into what was then South Vietnam) created fertile conditions for the rise to power of the genocidal Khmer Rouge. Of course, the Khmer Rouge posed no direct threat to the US, whereas Gaza is on the doorstep of Israel.

As Harold Macmilan (not Winston Churchill) once said, “jaw jaw is better than war war”. In South Africa, it is good to see that the Chief Rabbi Dr Warren Goldstein and Muslim Theologian Moulana Ebrahim Bham can sit together and debate Middle Eastern politics in a civilised way on Radio 702. We do not expect them to agree, but the fact that they are able to talk at least keeps alive the prospects for dialogue – this is more consistent with the Open Doors approach and should be welcomed. And, similarly, the talks held between French President Sarcozy and the Syrian President Assad also demonstrate the importance of dialogue, even when people may disagree or not be on the same side.

One of the most outstanding war poets was Wilfred Owen. He wrote many poems about the futility of war, and was killed, aged 25, 7 days before the end of the First World War, shot dead whilst arranging some duckboards at a river crossing. One of his poems Dulce et decorum est scoffs at the idea of finding glory in dying for one’s country. Here he reflects on the smallness of nationalism and imagines a better human purpose:

Oh, Death was never enemy of ours!
We laughed at him, we leagued with him, old chum.
No soldier's paid to kick against His powers.
We laughed, -knowing that better men would come,
And greater wars: when each proud fighter brags
He wars on Death, for lives; not men, for flags.

from The Next War, Wilfred Owen, 1893-1918

With looming elections in South Africa, we need to be mindful of the lessons for us. Arguing about flags and symbols leads nowhere. We need real civilised debates about issues, and the forward direction for our country. We have big problems to solve, and need to put aside arguments about party names and logos.

The present global economic climate is one that may not seem conducive to boosting foreign direct investment into South Africa and for stimulating expanding economic activity. But there are opportunities. The approach we take in Kessels & Smit (see our new website) is to support companies to focus on what works and those strengths and core competencies that already exist in the organisation, rather than trying to identify gaps and failings. By leveraging existing capacity, in an appreciative way, we are able to help create real value.

My Dutch colleague, Paul Keursten, puts it like this:

“The current crisis is caused by a search for financial gain without adding value: packaging bonds and loans into big bundles, cutting them into pieces again and selling them on does not add any value, it only creates margins that have to collapse at some point.. A stock market where investors are not shareholders but share speculators, eager to sell shares at a higher prices, where you can win money by gambling on shares going down, and where hedge funds are looking to buy companies to break them up and sell the pieces at a higher prices – this is no longer a useful market in which capital is invested and available for companies to grow and add real value, and where banks exist to provide access to finance and insurance, and to provide financial security.

At Kessels and Smit, we work on the basis what is already there, what is possible (in stead of what is lacking and what is not possible). In these times of limited resources companies need to mobilise what they have to make it and to build on it. They need all their strength and creativity to avoid downsizing or closing as their only option. Our approach is also means less out-of-pocket costs (we work with them and connect with their strengths, which is cheaper and quicker)”.

So we are looking forward to an exciting year, working with existing and new clients. Our work will include supporting personal growth of employees and teams, through coaching, mentoring, team building and creating feedback cultures. We will be supporting strategic processes, for companies, NGOs and government departments. And we will also be creating new partnerships with other organisations that leverage our complementary capacities.

more on Open Doors

The appointment of Justice Edwin Cameron as a judge of the Constitutional Court is very much to be welcomed, and is also an example of an Open Doors approach (see my last blog). Justice Cameron is eminently qualified from a legal perspective, but is also an interesting choice because of his openness about his sexuality and his HIV status – he has been living openly with HIV for some years. This means that he brings an important human rights perspective to his new role, and strengthens confidence in the Constitutional Court as an institution that is able not only to defend the Constitution but also to articulate and stimulate our emerging human rights culture in South Africa.

Beyond the implications for our Constitution, his appointment is also an expression of tolerance and an embracing of diversity in public life that sends a wider message. How many judges, or other high public officials, around the world have ever been able to declare their HIV status, let alone done so in a country where this does not hold back their promotion. We should celebrate his appointment for what it means for South Africa at the start of 2009, and hope that the ANC government in the run up to and beyond the upcoming election can continue to promote diversity, openness and transparency in its governance of the country and its tolerance of differing and even opposing opinions.

Of course, the Open Doors scenario is about much more then political tolerance. It is the Shell scenario that appears to offer the best prospects for enhanced economic growth over the next 15 years. As such, it is useful to think about it as a template for democracy and development, whilst also engaging critically with the insights we gain from the Open Doors perspective in addressing South Africa’s challenges.

We tend to take for granted the idea that economic growth needs to be pursued almost at any cost. We know, from what happened with the power crisis last year, that a growing economy needs to be fuelled with oil, water and electricity, so we immediately need to think about how we create a sustainable growing economy – one that addresses both the demand and supply side of the economic equation. The Open Doors scenario is the one that places the greatest demand on oil reserves as rapid economic growth, particularly in the developing world, means that millions more people buy cars and seek middle class lifestyles.

In consequence, if we seek to create the open and accountable society envisaged in the Open Doors scenario, we need also to focus on issues of sustainability and think creatively about strategies to address energy needs. And the issue of poverty, and the associated consequences, risks falling from the agenda. I will share further thoughts in future posts. Meanwhile, a happy new year!

Open Doors

As we move into 2009 should we be optimistic or pessimistic? There are plenty of reasons for both perspectives, in South Africa and elsewhere. The ‘credit crunch’ and associated market impact has left millions of middle class people around the world feeling anxious and uncertain, not least about their savings and investments for retirement years. Those millions of poor around the world, who have little to start with, are less vulnerable to the immediate impact, but are likely to see a slow-down in whatever development assistance may have reached their communities.

Conflict, in Africa, the Middle East and elsewhere continues to stand in the way of prospects for democracy and development and in many ways appears to become more intractable. We face significant environmental and security challenges globally, and HIV and AIDS, TB and other diseases ravage families and communities particularly in southern Africa.

But there are signs of hope. We have a new President in the US who seems committed to multilateralism, signalling a possible break from the policies of George W Bush (now the most disliked US President in American history). A withdrawal of US troops from Iraq and the closing of Guantanamo Bay would be a good start.

Zimbabwe is still in crisis, but is probably moving into the end-game phase, with Mugabe slowly losing his grip on power and signs of disaffection within the military and his own Zanu-PF party.

In South Africa, we have a new political party (the Congress of the People) that, while it still has to articulate some policy directions that differentiate it from the ANC, offers hope that a realignment of the opposition can offer prospects of a credible alternative government in the future. We have a general election in 2009 from which a changed political landscape will emerge, and while the ANC will likely be the winners, we will also see a more ‘normal’ political dispensation coming about in which people cast their votes less along historically determined racial lines of allegiance, and more to reflect real political choices.

For now, the government led by Motlanthe, has shown prudence and caution in managing the country and the economy. The Minister of Health, Barbara Hogan, has won support from civil society and the media for her commitment to seriously addressing HIV and AIDS and moving away from the denialism of Thabo Mbeki and her predecessor.

But these are really just straws in the wind! In 2005, Shell produced a set of Global Scenarios for the year 2025, continuing a 30-year process of developing future scenarios for the global and business environment. The 2025 scenarios were developed as a consequence of changed thinking on global questions following 9/11.

Exploring issues of market efficiency (or lack thereof), social cohesion or disconnects, and global security (defined broadly to include terrorism, poverty, environmental degradation etc), and the trade-offs that will have to be made as the world grapples with these issues, the Shell scenario team identified 3 possible scenarios: Low Trust Globalisation, Open Doors and Flags.

Low Trust Globalisation is characterised by legalism, increasing regulation, intrusive controls and oversight – a kind of ‘big brother’ scenario. Open Doors envisages increasing cross-border integration, voluntary regulation, a growth in public-private partnerships, and global networks addressing policy issues. Flags offers a retreat into nationalism and ‘laagers’, conflict over values, ideology and religion, and a break on globalisation.

These scenarios are offered as likely trends in a global ‘jet stream’, that recognises the existence of localised ‘weather systems’ in which particular parts of the world may gravitate more to one scenario than another, and which also recognises the potential for different ‘navigation’ strategies.

The scenario team worked with economic forecasting units in Oxford and Washington to project economic growth rates under each scenario. The Open Doors scenario provides the highest likely growth rate of 3.8%, leading to 40% higher levels of economic prosperity under this scenario than in Flags, and 17% higher than suggested by Low Trust Globalisation. While these are not forecasts, they nonetheless provide food for thought and a degree of incentive for anyone concerned with creating a better world.

The Shell Scenarios recognise the particular challenges in Africa as well as the opportunities that exist here. Institution building is identified as a critical variable for Africa if resources are to be effectively harnessed to development. This means building government capacity and accountability, improving donor-recipient engagement, and improving the prospects for public-private partnerships that can contribute to development.

'Born frees' complete primary school

Today the first of the ‘born free’ generation in South Africa completed their primary school education. I attended the final assembly at my twin boys’ primary school. It was moving to see the children, many in tears, bidding farewell to each other as they all depart to go their separate ways to high school in January. These children, now teenagers, are the children born in 1995 – the first full year of democracy in our land.

They entered primary school in 2002, and, then, it was hard to predict what kind of children they would turn out to be. Now we can tell! Different generations have been broadly categorised over the years in terms of their values, ideas and characteristics. These categories are based mainly on middle class urban generations over the past 100 years or so, and have been broadly defined (in American/European terms):

GI generation (born 1930-1945), Baby Boomers (born 1945-1960), Flower Power (born 1960 – 1975), Generation X (born 1975 – 1990), Millenium Generation (born 1990-2005). In South Africa, the millenium generation are seen as ‘born frees’ – those urban, generally middle class children growing up after the end of apartheid.

So what can we say about this generation? They very much represent the future of our country. From 2015 onwards they will be entering the workplace, bringing with them new ideas as a result of having come through a (relatively) non-racial education system. The exciting thing is that these young people are generally free of the prejudices and perverse norms that were encouraged in the apartheid education system. They are comfortable with diversity and cherish the values of our Constitution that support non-racism and non-sexism.

Further, they value strongly their individual identities as people, their unique talents, and their distinct but frequently overlapping cultural and religious identities. They see themselves first as South Africans, whether Indian, Muslim, Jewish, Afrikaans, Zulu, Chinese or whatever.

They are courteous and polite, and respectful to their teachers and to each other. At the same time they are not afraid to ask questions, be critical and to assert their own ideas. They are ingeneous and very computer-literate - indeed when they enter the workplace they will be the first employees to have been using computers since they were 5 years old! They are AIDS-aware and can become an HIV-free generation.

These teenagers appreciate the history of their country, although they cannot fully understand what it would have been like to go through an apartheid education system and not to have friends and school mates from different backgrounds. They do feel privileged to have been alive in the time of Mandela.

They are incredibly brand-aware (Ama Kip Kip!) and mediate their relationships via Mixit and Facebook - for the most part doing so responsibly.

So what does this mean? Perhaps my overriding sense is one of huge hope and optimism for the future. Our country will be safe in their hands as they grow up and take their responsibility as citizens and leaders of the future. There is no doubt that they will face huge challenges in continuing the process of rebuilding and developing the country. They will also have to play a leading role in ensuring that the whole continent of Africa is able to move beyond poverty and conflict, and walk the world stage in addressing global challenges, particularly relating to the environment.