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Social capital: Do we understand it?

By Jim Cavaye - posted Wednesday, 29 December 2004

Many community workers and citizens have understood, perhaps intuitively, the importance of networks, trust and co-operation in communities for decades. Yet, social capital still has many interpretations and expectations. It remains hard for policy analysts to grasp, because government and the private sector often struggle to see it as part of core business. Measuring social capital requires sophistication and flexibility and the service delivery culture in many agencies and businesses struggle to incorporate it.

Social capital involves participation in networks, reciprocity, trust, social norms, a sense of the “commons”, co-operation and being proactive. It has been described variously. as “'inhering' in the structure of relations between actors and among actors”; as entrepreneurial social infrastructure consisting of diversity; resource mobilisation and the quality of networks in communities; and, “weak ties” between people as social networks develop in communities.

Communities have large reserves of latent social capital in its forms of bonding, bridging and linking. For example, during crises such as bushfire or flood, community members readily participate and interact: Social capital increases as community people “use” it and decreases if they don't. It is both a means and an end. As a means, it mediates relationships and participation. As an end, the relationships and networks that mediate action become strengthened in themselves. Social capital fundamentally involves values. Social capital supports the values that community members want to uphold in their community.


Social capital interacts with other forms of capital. For example researchers have found that social capital affects prices, the acceptance of risk, the choice of leasing contracts, loan approval and bank loyalty. And it has been suggested by some (and disputed by others) that social capital tends to be polarised with communities moving towards opposite ends of a spectrum of social capital. 

On the minus side, social networks are embedded in different sectors of communities and social capital can support unhealthy norms. It can reinforce existing cleavages in communities and lead to social cartels prone to corruption. Social networks can also lock people into declining social sectors such as ethnic groups involved in low-wage informal work. In communities with a culture of illicit drug use, social norms can serve to ostracise community members acting to change their circumstances.

Social capital can also sanction the civic action of community members and fortify unjust community power structures. For example it has been suggested that the declining racial discrimination in middle-class America since the 1950s may well be related to the erosion of social capital that upheld discriminatory norms.

Social capital could be considered at four levels: individual; group; community and or institutional level, and state or national level - which is the cumulative total of networks, norms and trust across regions, states or even nations. For example, conclusions made about social capital in regional towns involve measurements of the mosaic of relationships and trust between individuals, families, and groups, together with people’s broader perceptions of society.

Social capital can be confounded with the existing social and economic wellbeing of communities. Residents of communities of high social capital may have the ability to build relationships and functional organisations, further building networks and trust. Indeed, one researcher made the argument for self-reinforcing cycles of interaction that allow social capital to build on itself.

The confounding question becomes far less clear when considering economic status. The confounding argument would say that more wealthy communities have the resources to organise and co-operate, and poor communities don’t. An association between social capital and economic wellbeing was observed in the rich north and poor south of Italy. It was found that the limited resources of minorities and the poor restricted the representation of citizens in neighbourhood organisations.


Yet, social capital appears to have more to do with power and participation than financial resources. There are many examples of poor communities that have become remarkably empowered and built high levels of social capital

Social capital is not just a matter of having stronger networks and “soft” outcomes. It can lead to “hard” outcomes such as improved community infrastructure, employment and services. In turn, better facilities and economic prospects can foster social interaction, confidence and community organisation.

Social capital can contribute to economic outcomes in a range of ways:

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Article edited by Betsy Fysh.
If you'd like to be a volunteer editor too, click here.

This is an edited version of a paper published by Observatory Pascal in May 2004.

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About the Author

Jim Cavaye is an accomplished practitioner, educator and researcher in community development with 20 years experience working with rural and regional communities.

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