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Investing in community: It’s the new capitalism (07/06)

The Government of Canada is doing it. The Government of Australia is doing it too. Let’s do it here in Northern Ontario. And just what is it? Governments are trying to figure out how to use a new economic concept to promote economic development.
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The Government of Canada is doing it. The Government of Australia is doing it too. Let’s do it here in Northern Ontario.
   

And just what is it? Governments are trying to figure out how to use a new economic concept to promote economic development. Since we in the North need an economic development strategy, let’s see what this new idea can do for us.

And what is this new concept? It is social capital. I have a dozen reports and studies open on my computer right now showing a kind of desperate enthusiasm for the new approach.

Even using the idea is a small victory for business thinking and the capitalist way. Economists originally stole the concept of capital from business people and applied it to a new way. In the business world, capital really meant working capital, the money that a businessperson had to work with. With good management, the working capital would grow and eventually make the capitalist wealthy. Early economists stretched the word to include all the productive physical assets that the businessperson bought with the capital. Factories were capital. Trains were capital.

Naturally, the businessperson who was making the capital grow was a capitalist. The word capital was an intellectual version of wood pulp – assets are all mashed together into a kind of paste.

Capital has a special feature. You invest up front and you get a stream of benefits later. As a result, capitalists are always looking to the future. About 40 years ago Gary Becker, who won the Nobel Prize in Economic Science in 1992, popularized the idea of human capital. The analogy is pretty obvious: you invest in education early and it provides a stream of income over your entire working life.

The concept of human capital worked so well that it was only a matter of time until someone came up with the idea of Social Capital. And it turns out that the idea works pretty well here, too.

Social capital is another “wood pulp” idea. Researchers lump very different things into a kind of mental paste. Some focus on social rules, others on organizations, or networks, and even trust between people or groups. They are all “capital” because they take time to build up and they produce benefits downstream.

Trust and well-developed organizations and personal networks all help to make a community more productive. The problem is that unlike the physical or human capital, no one really owns social capital. It is hard to make money by investing in social capital. That explains many of the non-profit organizations that seem to be important but don’t seem to be driven by “bottom line” thinking. Many of them are producing social capital that the rest of us profit from.

A report from Canada’s Policy Research Initiative says that “social capital has particularly important implications for three key areas of public policy: helping populations at risk of social exclusion, supporting key life-course transitions, and promoting community development.”

Unfortunately, none of the reports has found reliable ways for central governments to invest in social capital. To build social capital we have to invest time, and to do it well we have to invest time in bringing people into our groups, making connections, and generally reducing the cost of getting things done. Service clubs like Rotary International and the Lions that do so much for our communities have always done this. Effective city councillors do it. The author of The Tipping Point, Malcolm Gladwell, emphasized the role of the “connectors” people who put other people together.

To build social capital in Northern communities we should all become Angel Investors. We should find the time to introduce one young person to someone every week. We should make a point of inviting newcomers to social events and business meetings. We should take time to organize gatherings to discuss community problems. These are the kind of investments that build community networks. Networks are an important kind of social capital.

Investing in other people’s networks is really investing in the foundations that we need for economic development. So be an angel –cast your own social capital upon the waters and watch what it does. And take somebody else’s kid to lunch.
 

Dave Robinson is a professor of economics at Laurentian University. He can be reached atdrobinson@laurentian.ca.




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