Locally Grown, Not Centrally Engineered

Social Capital:  The Individual, Civil Society and the State
by Andrew Norton, Mark Latham, Gary Sturgess, Martin Stewart-Weeks
Centre for Independent Studies, 1997, 413 pages, $14.95

What do democratic societies need if they are to survive and prosper?

One common answer emphasises the economy:  high rates of growth, being internationally competitive and full employment are all seen as important indicators of a healthy and robust society.

Since the late 1970s, governments around the world have measured their success in this way.  Reducing debt, stimulating economic growth and adjusting to the imperatives of a global financial market have been the priorities for national leaders, both Left and Right.

Increasingly, though, many have come to realise that man does not live by bread alone.  Equally as important as the economic debate is the question of the social bonds that hold communities together.

US President Clinton, in his 1995 State of the Union address, talked about "a new social compact" and the need for Americans to stop relying on government to solve their problems.  Instead of being dependent on top-down authority, Clinton stressed the need for community action.

UK Prime Minister Blair, in his address to the Labour Party annual conference last year, also asked citizens to rediscover such civic virtues as responsibility and obligation.  New Labour was not about centralised control, it was about empowering the community and giving individuals the opportunity to act together for the common good.

In Australia, Prime Minister Howard is also talking the language of mutual obligation and trust.  In a recent speech to the Australian Institute of Company Directors, the Prime Minister argued that a strong economy was dependent on such habits as "honesty, trust, self-reliance, cooperation [and] civility".

In fact, the Prime Minister's statement that "economic policy is central, but it is not an end in itself, only a means to an end" clearly signals that debates about national policy will increasingly focus on the health of civil society as well as the state of the economy.

The recent launch of Social Capital by the Sydney-based Centre for Independent Studies (CIS) is further evidence that policy debates will increasingly focus on social imperatives as well as economic.  The book contains a number of essays exploring the nature and significance of social capital and its relevance to Australia.

The term "social capital", made popular by the American academic Robert Putnam, refers to those stocks of social trust, norms and networks which people draw upon to solve common problems.  Such networks occupy the space between the individual and government and, according to the CIS publication, are an important indicator of the health of democratic societies.

Whether it be the local bowling club, the Country Women's Association or a community self-help group, by working in such groups individuals develop the ability to work collaboratively for the good of all.  Qualities like trust, co-operation and reciprocity are also developed;  the very values on which democracy depends.

As noted by one of the contributors to the CIS book, Martin Stewart-Weeks, social capital is also vitally important for the successful operation of free-market economies.  Markets operate best where there is a high degree of trust, openness and honesty and where individuals work on the assumption that agreements entered into will be honoured.

Ironically, at the very times that there is widespread agreement about the benefits of social capital, research suggests that it is on the decline.  Whether because of television, the growth of government and the welfare state or the breakdown of the family, the conclusion is that fewer people are involved in community groups and voluntary organisations.

The adverse consequences of declining social capital are many.  The American academic Francis Fukuyama, in his book Trust:  The Social Virtues and the Creation of Prosperity, refers to high rates of crime and juvenile delinquency.  Robert Putnam also refers to a lack of trust and argues that young people, in particular, are adversely affected.

As outlined in Mark Latham's essay in the CIS publication, ways to bolster social capital are difficult to find.  Contrary to the arguments normally accepted by the old guard of the Labor Party, the Federal Member for Werriwa argues that governments cannot create social capital by "top-down" action.

In the same way that the Right's belief in the invisible hand of the market is misplaced, Latham argues that the Left's commitment to government intervention is also wrong.  In areas like welfare, increased government assistance promotes a dependency mentality where individuals and communities lose the ability to take control of their own lives.

Ever since Paul Keating's remark about the "banana republic", much of the policy debate in Australia has centred on matters economic.  More recently, the debate has included the questions of the health of the society at large and what sort of civic community we want after the year 2000.  The CIS publication provides a valuable introduction to this debate and, as such, should be widely read.