46tion, and to what effect? In taking up this question we turn to recent research in the social sciences. Two concepts of particular relevance are explored: ‘social capital’ and ‘network dynamics’. The significance of these ideas for our understanding of the British World economy is then spelt out, and the resulting framework subsequently applied to the British World of the later nineteenth and early twentieth centuries with respect to migration (in Chapter 3), material culture and trade (Chapter 4), and overseas investment (Chapter 5).
Social capital
Recent work in the social sciences shows how investment in community can bring the potential of economic reward. Realising that potential, of course, is not automatic: it depends upon the existence of social capital: that is, on the prior accumulation of an appropriate set of social knowledge, skills and relationships. Although first coined by the economist Glenn Loury to capture the intangible resources utilised by families and communities to advance the social development of their children, the concept of ‘social capital’ proved attractive to sociologists, who were quick to recognise that its significance extended beyond an understanding of the rearing of the young.4 Its leap to the centre stage of
4 G. C. Loury, ‘A Dynamic Theory of Racial Income Differences’, in P. A. Wallace and
A. M. LaMond (eds.), Women, Minorities, and Employment Discrimination (Lexington:
47Networks and the British World both empirical and theoretical research in the social sciences followed closely in the wake of Robert Putnam’s seminal study of the positive relationship between civic engagement and economic performance in Italy and the United States.5 Putnam, a political scientist, has perhaps done more than anyone else to popularise the term. He defines social capital as those ‘features of social organization, such as trust, norms, and networks that can improve the efficiency of society by facilitating coordinated actions’.6 This idea – that wide-ranging individual and societal benefits can flow from normal social interaction – has lately become all the rage in public policy circles. Put simply, social engagement is said to matter, and investing time in the community pays off not only in personal satisfaction, but in terms of economic rewards.7 Practically, therefore, social capital can be understood as a concept that attempts to capture the value of community-based methods of problem-solving. As such, it arises from and satisfies the normal human need to belong, and consists of many of those things that make life bearable.8 As one public policy analyst explains, at its essence social capital is a highly personal concept: Whether you are seeking support in hard times, looking for a night on the town with friends, or searching for a new job opportunity, who you know matters. Moreover what is true for individuals is also true for communities: those with a stronger stock of social capital are able to negotiate the various challenges they may face more effectively.9 In recent years the literature exploring the different dimensions (and benefits) of social capital has blossomed.10 For example, we now know
University of Michigan Press, 1977), pp. 153–186; P. Bourdieu, ‘The Forms of Social
Capital’, in J. G. Richardson (ed.), Handbook of Theory and Research for the Sociology of
Education (New York: Greenwood Press, 1986), pp. 241–58.
5 R. D. Putnam and R. Leonardi, Making Democracy Work: Civic Traditions in Modern
Italy (Princeton: Princeton University Press, 1994); R. Putnam, Bowling Alone: The
Collapse and Revival of American Community (New York: Simon and Schuster, 2000).
6 Putnam and Leonardi, Making Democracy Work, p. 167.
7 More formally, social capital can be defined as ‘the sum of the resources, actual
or virtual, that accrue to an individual or a group by virtue of possessing a durable
network of more or less institutionalized relationships of mutual acquaintance and
recognition’. See P. Bourdieu and L. Wacquant, An Invitation to Reflexive Sociology
(Chicago: University of Chicago Press, 1992), p. 119.
8 R. F. Baumeister, ‘The Need to Belong: Desire for Interpersonal Attachments as a
Fundamental Human Motivation’, Psychological Bulletin 117 (1995), 497–529.
9 R. Judge, ‘Social Capital: Building a Foundation for Research and Policy Develop
ment’, Policy Research Initiative 6 (2003), 3. Accessed at http://policyresearch.gc.ca/
page.asp?pagenm=v6n3_art_03 on 10 May 2004.
10 A good survey of the literature can be found in M. Woolcock, ‘Social Capital and
Economic Development: Toward a Synthesis and Policy Framework’, Theory and
Society 27 (1998), 151–208.
48that past accumulation of social capital has inter alia enhanced economic growth rates;11 promoted the development of high-schooling in the American Midwest;12 ameliorated the effects of individual-specific economic shocks in South Africa;13 provided protection to local economies from the onslaught of globalisation;14 fostered good governance;15 and predicted mortality rates in Chicago neighbourhoods,16 and levels of educational attainment in Toronto (and elsewhere).17 While some maintain that social capital might also hinder aspects of economic development,18 most of the literature has found its effects on balance to be salutary.19 What, then, is the mechanism by which the potential of social capital is realised? Since community involvement is typically a matter of individuals acting, independently or collectively, within highly personalised contexts, researchers believe that social capital is in practice most commonly accessed through participation in, and engagement with, informal associations and networks.20 As we will see in Chapters 3 to 5, individuals were able to tap into an amazing variety of such networks in the nineteenth-century British World – networks characterised by
11 S. Knack and P. Keefer, ‘Does Social Capital Have an Economic Payoff? A Cross-
Country Investigation’, Quarterly Journal of Economics 112 (1997), 1251–88.
12 C. Goldin and L. Katz, ‘Human Capital and Social Capital: The Rise of Secondary
Schooling in America, 1910–1940’, Journal of Interdisciplinary History 29 (1999),
683–723.
13 M. Carter and J. Maluccio, ‘Social Capital and Coping with Economic Shock: An
Analysis of Stunting of South African Children’, World Development 31 (2003),
1147–63.
14 J. Helliwell, Globalization and Well-Being (Vancouver: University of British Columbia
Press, 2002).
15 S. Bowles and H. Gintis, ‘Social Capital and Community Governance’, Economic
Journal 112 (2002), 419–36.
16 K. Lochner, I. Kawachi, R. Brennan and S. Buka, ‘Social Capital and Neighborhood
Mortality Rates in Chicago’, Social Science and Medicine 56 (2003), 1797–805.
17 J. Hagan, R. MacMillan and B. Wheaton, ‘New Kid in Town: Social Capital and the
Life Course Effects of Family Migration on Children’, American Sociological Review
61 (1996), 368–85; C. R. Leana and F. K. Pil, ‘Social Capital and Organizational
Performance: Evidence from Urban Public Schools’, Organization Science 17 (2006),
352–66.
18 A. Portes, ‘Social Capital: Its Origins and Application in Modern Sociology’, Annual
Review of Sociology 24 (1998), 1–24 (pp. 15–18); A. Portes and P. Landolt, ‘The
Downside of Social Capital’, American Prospect 26 (1996), 1–24 (pp. 1–5); D. Stolle
and T. R. Rochon, ‘Are All Associations Alike?’, American Behavioral Scientist 42
(1998), 47–65; and K. Annen, ‘Inclusive and Exclusive Social Capital in the Small-
Firm Sector in Developing Countries’, Journal of Institutional and Theoretical Economics
157 (2001), 319–30.
19 S. N. Durlauf and M. Fafchamps, ‘Social Capital’, National Bureau of Economic
Research Working Paper 10485 (2004), p. 11.
20 Ibid., p. 5.
49Networks and the British World voluntary, reciprocal patterns of communication and exchange, and yielding various types of social and economic advantage.
Social capital itself can take a variety of forms. Some researchers distinguish between bonding, bridging and linking capital, where bonding social capital is that which holds homogeneous groups together (i.e. the connections that exist between, for example, members of the same ethnic or religious associations); bridging social capital that which brings heterogeneous groups together horizontally (i.e. the connections that exist between, for example, members of different ethnic communities); and linking social capital that which acts to unite heterogeneous groups vertically (i.e. the connections that, for example, bring people of different strata of wealth and status together).21
While each of these categories is analytically distinct, it is important to note that, as we shall see later, each type of social capital in fact co-exists, interacts with and feeds off the others. Thus, the information that a middle-class Anglican professional person might acquire from an aristocratic acquaintance (via linking social capital) may be shared with members of his or her church (via bonding social capital), some of whom then may in turn pass it on to business friends in the Quaker community (via bridging social capital). One of the outcomes of this process of networking is that a Quaker, unknown to our Anglican professional, has benefited from that professional’s personal connections with the aristocracy. Thus part of the ‘magic’ of social capital is that its fruits are often enjoyed more widely than one might expect. Expressed more formally, an important characteristic of social capital is that the social rate of return on investment in it tends to exceed the private rate.
One area of ambiguity in social capital theory is whether the concept itself is describing an attribute of the individual or of society. Researchers who subscribe to the latter view typically emphasise the roles of rules, values, laws and organisations in promoting social cohesion. They maintain that it is structures that overcome problems of collective action and unleash social efficiency.22 Such an approach, however, has difficulty in disentangling the effects of social capital from other social features like institutional form and culture. Indeed, it tends to merge all of these factors together into a single analytical mass: something
21 J. Frank, ‘Making Social Capital Work for Public Policy’, Policy Research Initiative 6
(2003), 2–3. Accessed at http://policyresearch.gc.ca/page.asp?pagenm=v6n3_art_02
on 10 May 2004.
22 See for example Putnam and Leonardi, Making Democracy Work, p. 167; J. S. Coleman,
The Foundations of Social Theory (Cambridge, MA: Harvard University Press, 1990);
and F. Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York:
Penguin, 1995).
50that complicates matters for those seeking to isolate the contribution of social capital alone. By contrast, others prefer to stress the role of individuals in seeking to optimise the benefits they derive from social interaction. From the individual’s perspective, social interaction and networking are said to pay off because they deter the opportunism of others and, in the absence of reliable market institutions, provide a mechanism through which some economic activity can safely take place. Gaining access to financially rewarding networks is thus imperative for individual advancement. If the private incentives are strong enough, even the most selfish of individuals will invest in social interaction. In a nutshell, the key to this approach is the belief that social capital is possessed and exploited by individuals, not society. As Edward Glaeser, David Laibson and Bruce Sacerdote have pointed out, it is ‘a person’s social characteristics – including social skills, charisma, and the size of his Rolodex – which enable him to reap market and non-market returns from interactions with others. As such, individual social capital might be seen as the social component of human capital.’23 Moreover, an individual’s ability to enjoy the benefits of social capital is understood at all times to remain contingent on maintaining a good public image; when that is lost, so is everything else. This threat of exclusion and lost earning potential provides powerful and credible checks against short-term opportunistic behaviour. Naked self-interest in social contexts where there is memory is simply self-defeating.24 Yet, how can such an individualistic approach be reconciled with the societal dimension of the concept? The answer lies in the duality of social ties that are at the same time both a resource accessible to individuals and, when aggregated, the stuff out of which community is built. By examining the nature of social ties, the individual and societal effects of social capital can both be brought into focus in a consistent manner.25 Unsurprisingly, then, most recent literature has come to view social capital as primarily a network-based phenomenon. Pierre Bourdieu expressed the prevailing opinion neatly: ‘the volume of social capital possessed by a given agent depends on the size of the network connections he can effectively mobilize and on the volume of the capital
23 E. L. Glaeser, D. Laibson and B. Sacerdote, ‘The Economic Approach to Social
Capital’, National Bureau of Economic Research Working Paper 7728 (2000), p. 4.
24 For good examples of this approach to social capital see Glaeser, Laibson and
Sacerdote, ‘Economic Approach’, pp. 2–4, 29; and K. Annen, ‘Social Capital, Inclusive
Networks, and Economic Performance’, Journal of Economic Behavior and Organization
50 (2001), 449–63.
25 F. van Dijk, Social Ties and Economic Preference (London: Springer, 1997), p. 182.