Social Capital: The Critical Factor for Developmental Success

Posted by on Jun 9, 2014

Social Capital: The Critical Factor for Developmental Success

Developmental success of nations, broadly speaking, depends on two forms of capital. One is the natural and inherited capital, the other ‘made-capital” accumulated over time.


As important as the natural resources are the human-made resources and capabilities too collectively constitute a critical and dynamic ingredient of the nations’ success. In econometric literature this is often referred to as the “made-capital” of a nation, in contrast with the natural endowment of the country. For each generation, then, the national resource (or capital) endowment is made of the natural endowment plus the inherited “made-capital”.


In this regard each generation’s heritage subsumes vital components such as culture, knowledge, socio-economic and political institutions, logistical infrastructure, and the effective governing legal paradigm. It may be argued that without this mad-capital, the development process is doomed to dawdle or even fail.  Social capital is a critical component of made-capital.


Much like the other forms of capital, social capital is subject to a dynamic evolutionary process, and over time it may be augmented or destroyed, depending on the choices that a given nation makes. More specifically, each generation’s political economy and ethical choices either builds upon the historic stock of social capital or dilutes it to the detriment of the developmental process.


The reality of the social structure and its evolution over time is that both benefits and costs of political economy decisions are, more often than not, externalised. This means, neither the full benefits nor the entire costs of a given generation’s decisions are born by it or by its members. Thus, the substance of sustainable development and intergenerational equity is complex, and its operational requirements are made of both tangibles and intangibles. Importantly, the implications are not merely theoretical and academic: the future trajectory of the society’s developmental path is largely defined by an appropriate mix of the two forms of capital. Therefore, sustained commitment to the augmentation of social capital is indispensable.


Prosperity of nations thus requires a blend of pecuniary and non-pecuniary            variables. Important as the pecuniary variables are, so too are the                                 non-pecuniary investments for the sustainable of development and prosperity. At one end non-pecuniary variables pertain to foundational institutions of               the socio-political and economic institutions, and at the other end, they relate   to the significance of promoting social and personal value systemsthat help lay      the ground for defining the nation, its  social culture, its  internalised moral and ethical codes,  and its national welfare objectives.


Through the interplay of these two sub-systems of the non-pecuniary network of variables, social capital, may be created or destroyed. Contemporary research has underscored the importance of social capital as a critical ingredient of a sustainable political economy framework. The promotion of trust among diverse stakeholders is a key ingredient in the process of social capital formation. This is particularly so in heterogeneous societies where religious, tribal, cultural and racial differences abound. The accumulation of social trust augments intergenerational social capital via an array of interrelated processes that, inter alia, include trans-generational conversations within the family structures, the workplace, the community initiatives and not-for-profit enterprises. The promotion of reciprocity for the common good is a vital element of intra-generational and intergenerational social capital accumulation.


A significant contributor with long term impact on sustainability of social development and human prosperity is the embedded value system that prevails within society’s operations. Such values and codes of conduct need not be legislated or somewhat formalised; rather they need to be internalized within the society’s political economy organs.  With the help of such values, social trust is engendered and over time social capital is created, maintained and augmented. Intergenerational prosperity is dependent as much on social capital as on financial and technological capital. The co-evolution of these forms of capital ultimately leads to, and is required for, sustainable development across generations. Significantly, whereas financial and technological capital may be imported, the stock of social capital can only originate and accumulate from within the society.


Four protagonists then emerge as the primary contributors to sustainable development. These are: a) the national resource (capital) endowment (both natural and made), b) the individual, c) the political economy institutions, and;

d) the society as defined by the embedded value system which is, formally and informally, espoused. For Africa’s developmental success, careful and simultaneous attention to these ingredients of sustainable development is an imperative.