Social capital in India

When I read about social capital and how diamond merchants in Antwerp choose members of their own community to partner with them, to work for them, in the book, ‘Righteous Mind’ by Jonathan Haidt, something clicked in my mind.

These are some of the references to social capital in Jonathan Haidt’ book, strewn across a few chapters:

  • The term social capital swept through the social sciences in the 1990s, jumping into the broader public vocabulary after Robert Putnam’s 2000 book ‘Bowling Alone’.
  • Social capital refers to a kind of capital that economists had largely overlooked: the social ties among individuals and the norms of reciprocity and trustworthiness that arise from those ties.
  • In fact, discussions of social capital sometimes use the example of ultra-Orthodox Jewish diamond merchants, which I mentioned in the previous chapter.
  • More recently, research on social capital has demonstrated that bowling leagues, churches, and other kinds of groups, teams, and clubs are crucial for the health of individuals and of a nation. As political scientist Robert Putnam put it, the social capital that is generated by such local groups “makes us smarter, healthier, safer, richer, and better able to govern a just and stable democracy.”
  • Putnam and Campbell’s work shows that religion in the United States nowadays generates such vast surpluses of social capital that much of it spills over and benefits outsiders.

I had read about social capital in articles by Mr. S. Gurumurthy in India. I immediately did a search and came across two articles. You can see them here and here. He has not written a detailed paper on it.

Then, when I searched on the web for ‘Social Capital Theory of Economic Development’, I found that there are plenty of papers on the topic. It is widely researched and the phenomenon is widely acknowledged. It has been in the literature for quite sometime now.

What came out clearly for me from perusing that literature (cursorily, of course) is that social capital enhanced economic outcomes, welfare and improved the effectiveness of public policy, but it was not a substitute for macro-economic policies nor did it allow a suspension of laws of economics in countries that have abundant social capital. Rare these days, as societies have become more atomised.

Second, one cannot engineer social capital or artificially enhance it. It is mostly organic. Of course, if it exists in societies, governments do not have to work to reduce them wittingly or otherwise.

In his book, ‘India’s new capitalists’, Harish Damodaran too refers to social capital. But, his conclusions are more sobering and more realistic than that of Mr. Gurumurthy’s:

As communities get entrenched in economic space and capital accumulates and reproduces on an expanding scale, the atomistic calculations of individual capitalists tend to override the ideals of collective enterprise.

All these indicate how sharpening internal differentiation and stratification exert a weakening influence on community solidarity, with well-to-do members being drawn towards new functional and class alignments cutting across caste lines.

A Kamma sugar magnate ultimately identifies his interests with other mill owners and not with fellow Kamma cane growers or workers. While community feelings continue to be strong among less successful members, these, if at all invoked by the elite, usually take opportunistic forms.

Indeed, Harish even mentions in one place how the Tirupur Hosiery manufacturers used their social capital to thwart environmental regulations on the discharge of effluents into water bodies:

The industry has also demonstrated its clout by repeatedly stalling official moves to impose stringent effluent discharge norms on bleaching and dyeing units, which are seen to be primarily responsible for polluting the Noyyal river. Although there was a setback in the form of a High Court judgment in July 2005, requiring compulsory installation of reverse osmosis plants for secondary treatment of effluents, the units have managed to rally political opinion seeking financial assistance from the state and union governments to enable them to conform to the ‘unfair’ order.

So, in my view, this ‘social capital’ theory has been bandied without too much thought as to what it means practically for policymaking in India and without any demonstration or proof of how it exempts India from conventional macroeconomic policies or principles.

Sound and well meaning policymakers have been sacrificed at the altar of their supposed ignorance of ‘social capital’ in India which, as it turns out, is not unique to India.


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