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April 16, 2021

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Social capital as key source of growth

The COVID-19 pandemic has damaged the stock of physical and human capital. Firms have postponed or canceled investment projects, and laid-off or furloughed workers’ skills have deteriorated. The crisis, however, has boosted the oft-overlooked variable of social capital, elevating its role as a key source of economic growth.

Popularized in the 1990s by Harvard University political scientist Robert Putnam, social capital refers to “the features of social organizations, such as networks, norms, and trust that facilitate action and cooperation for mutual benefit.” A somewhat nebulous concept, it comprises the shared values, behavioral conventions, and sources of mutual trust and common identity that allow a society to function. The more social capital a group has, the greater its willingness and ability to act collectively in pursuit of valuable objectives.

In other words, social capital is the glue that holds communities and nations together. Under the right conditions, repeated and mutually beneficial social interactions lead to faster economic growth, better health outcomes, and greater stability.

In the case of the pandemic, social capital provided the first line of defense against the virus when vaccines and effective medical treatments had not yet become available. Here, individuals taking steps to prevent contagion provided a public good. Each conscious act aimed at reducing exposure to the virus lowered the probability of infection for the rest of the community. In the jargon of economists, those who reduced their mobility and social interactions internalized a negative externality that they otherwise would have imposed on society.

Sense of attachment

A sense of attachment to a larger group induces people to tolerate the high individual costs of cautious behaviors. A large and growing body of academic research has shown that spontaneous social distancing is more likely in places with better-developed civic cultures.

In today’s hybrid workplace, social capital is clearly one of the most important factors behind such results.

In normal circumstances, our connections and relationships evolve and expand over time. Yet without appropriate measures to reactivate and reopen social networks, months of lockdowns and restrictions could exhaust some relationships or result in group segregation. Owing to what Putnam calls “bonding social capital,” people might become so attached to a specific group that they succumb to clannishness or tribalism. Indeed, populism and nationalism are social capital’s degenerate forms, and they have been resurgent in some places during the pandemic.

Governments and corporations thus should try to build more “bridging social capital,” by leveraging the sense of responsibility, solidarity, and altruism developed during the COVID-19 crisis. This form of social capital links people across different groups, and will be necessary to prevent the next pandemic and to combat climate change.

Viewed in these terms, COVID-19 could leave a positive legacy: a firmer base of social capital to underpin the responsibility and altruism that the world will need as it faces the challenges ahead.

Edoardo Campanella is a fellow at the Center for the Governance of Change at IE University in Madrid. Copyright: Project Syndicate, 2021. www.project-syndicate.org




 

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