Saturday, May 20, 2017

Social Capital Requires A Primary Economic Context

Compared to other aspects of our lives, the forms of economic association which contribute to social capital, are not always considered. Yet in order to remain viable, both formal and informal association require a strong economic context. In cities, many aspects of this process appear as though spontaneous, for a diverse economic core has room for both profit and non profit efforts in this regard. But when communities lack a primary economic core, their citizens tend to lose common purpose, and may revert to more tribal forms of association which - instead of encouraging trust and mutual cooperation - become more authoritarian in nature.

Indeed, it is difficult for people to effectively engage with one another, without an economic context which reinforces social capital. Fortunately, the encouragement of social capital is not always beyond the realm of corporate possibility, as I'll explain shortly. In recent years, my main "beef" with some free market defenders, is the fact too many appear to believe economic prosperity occurs so spontaneously, it requires little forethought or planning preparation. How, exactly, does one set about utilizing resource capacity in more productive settings, without careful preparation?

Meanwhile, this free market "hands off" approach, continues to be encouraged. Nevertheless, a word of caution: that same hands off approach on the part of private enterprise, likely contributed - alongside the monetary mistakes of the Fed - to the severity of the Great Depression. And "do nothing" crony capitalism, has meant more governmental control over the economy, by default. Over time, that centralized control has lead to less economic dynamism at local levels.

A recent OECD paper asks "What is social capital?", to which Timothy Taylor responds:
The concept of "social capital" is slippery to measure or analyze, but the OECD, for example, defines it as "networks together with shared norms, values and understandings that facilitate co-operation within or among groups."
And he muses:
...while I can easily believe that social capital is generally important, the specific processes by which it is created and reinforced are not clear to me. It would be peculiar and anachronistic to yearn after the good old days of 1840. If the people of 1840 had radio, television and the internet, not to mention the ability to hop in a car or plane and travel, then the "associations" observed by Tocqueville would have looked rather different. 
Taylor goes on to describe changes (and losses) in association, in a post which is well worth the reader's time. Is there a simple way to think about what has happened, over the years?

For one, consider the earlier associations of rural life, which revolved around agriculture. Even though many interpersonal relationships were of an informal nature, they shared a common economic (seasonal) core of mutual coordination. This interconnected context, provided means for citizens to observe the behaviors and habits of their neighbors, which provided important clues for trust and mutual commitments.

Part of the reduced trust of the present, results from the fact many citizens no longer have a shared local economic core, by which to observe one another and build trust. And the "trust" mechanisms provided by big data are increasingly coming up short, so far as the mutual trust which is possible between individuals. K-12 schooling is the main partial coordination mechanism, that many small communities still have. Yet even this important social context is largely lost, upon graduation. While local retail still provides limited settings for community social capital, much of this has dwindled further, with the advent of online retail.

Associations aren't as simple as they once seemed. Looking back, I realize how fortunate I was, to spend my youth in an environment which greatly benefited from the intentional efforts of a corporation. I grew up in a neighborhood that felt a lot more real than many of the neighborhoods I've experienced, since.

Normally, one would expect a community with a population in the hundreds, to have little to offer. Hence how could an oil refinery tempt people with reasonably good skill levels, from more prosperous regions? Yes, planning was involved, and some of it long term, because they knew they would eventually need to expand into the areas where they would provide accommodations for the medium term. Hence the housing they built for their employees in the forties, would be sufficient to last four decades. Further, rent was set so low, most employees had little trouble saving for home ownership - often without need of a mortgage.

Of course, the rental houses were just the beginning, as the local refinery also built a club house for employees and their families, along with a pool and playgrounds for the children. These areas served as places where the whole community could meet. The club house hosted everything from barbecues, dances, bingo games and of course the annual Fourth of July fireworks.

Even though the population of this little town was only in the hundreds, all the amenities provided by the local refinery went a long way to encourage locals to spend quality time with one another. Certainly, no one "owed their soul" to a company store, as the local grocery stores were privately owned and run. Alas, it is the latter aspect of corporate rural life which is more likely to be remembered in history books, which is quite a contrast to the positive memories of my youth.

Despite the fact it isn't practical for traditional corporations go the extra mile to generate social capital in the present, a new corporate structure could focus on a different form of resource capacity, altogether. The intentional community of my childhood, still serves as inspiration in the present. Given today's abundance of human capital, why not "process" this skills potential, in the form of value added time based product. Doing so, would mean much needed primary economic context, and a solid core from which to build new community. While this approach could help many locales, it would especially mean a new start for rural communities, where so much earlier economic coordination and social capital, remains all but forgotten.

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