51Networks and the British World (economic, cultural or symbolic) possessed in his own right by each of those to whom he is connected’.26 To understand social capital, one needs to know about networks.
Network dynamics
If social capital is created and realised through networks, what factors influence the efficiency of this relationship? It is evident that the existence of social interaction in itself is insufficient to guarantee beneficial results: some networks just prove more fruitful than others. What, then, is the source of these differences?
The social science literature provides us with some guidance. It shows how the benefits derived from networks depend upon the opportunities that individuals have to turn their personal relationships to pecuniary gain. There is no hard and fast rule here, though. The ‘value’ extractable from network relationships varies considerably across time and contexts. Questions of network size, composition and nature matter. Information technology, attitudes to outsiders and the sophistication of the economic system in which the network operate all affect the ultimate payoff from social engagement as well. Nor are such factors always mutually reinforcing; indeed, some may be contradictory. In seeking to construct the ‘perfect’ network, one needs to realise that arrangements and structures that are optimal in one context need not necessarily be so in others. There are, moreover, implicit trade-offs to be made. As Kurt Annen has explained: There is a trade-off between self-enforcement and the magnitude of gains from trade that depends on the inclusiveness of the network, the complexity of the exchange setting in which the network operates (complexity constraint), and the network’s capacity to communicate information about members’ identity (communication constraint). In a developing economy with increasing complexity, social capital is valuable if networks are able to soften the communication constraint without reducing inclusiveness.27
This situation exists because as inclusiveness (the relative willingness of the network to welcome new members, irrespective of their background) grows, the range of contacts and potentially productive outcomes that the
26 Bourdieu, ‘Forms of Social Capital’, p. 249. More recently N. Lin, Social Capital
(Cambridge: Cambridge University Press, 2001), pp. 24–5 likewise concluded that
social capital is ‘resources embedded in social networks and accessed and used by
actors for actions’. On this point, also see Durlauf and Fafchamps, ‘Social Capital’,
p. 61; and P. Dasgupta, ‘Social Capital and Economic Performance: Analytics’,
Faculty of Economics Working Paper, University of Cambridge (2002).
27 Annen, ‘Social Capital’, p. 449.
52network provides broadens. But this is true only if the information coursing through the networks about business opportunities and the character of fellow members remains reliable. A key characteristic of trans-national social networks is their capacity to generate information quickly and accurately, and to deploy it effectively.28 However, both increasing membership and the growing complexity of economic exchange place considerable strain on the ability of networks to communicate. If this communication constraint is not steadily eased with the regular introduction of new technologies or more information-efficient forms of organisation, ever-greater inclusiveness only serves to further complicate and confuse information flows within the network and to reduce the net gains of membership. Likewise, in societies where the levels of economic and technological development are low and communication proves problematic, restricting entry to one’s network to a small band of individuals whom you know makes economic sense.29 These considerations aside, the literature emphasises the relative superiority of more inclusive networks. The difficulty is that inclusive networks are hard to construct. In fact, once established, networks can become increasingly exclusive, as existing members begin to fear their present advantages being denuded by newcomers. For those on the inside of the network, the simplest response to these pressures is to slam the door closed. Such exclusion can certainly be effective in holding onto the privileges of those fortunate enough to be ‘club’ members. Viewed from the perspective of society, however, it is a counter-productive move, which blocks off new opportunities for economic activity, accentuates income inequalities, and dampens incentive for the development of more formal, secular institutions of exchange.30 Thus, over the longer term, experience indicates that successful networks survive by expanding membership and cleverly utilising new technologies to overcome communication barriers, initially within their own regions and countries, but later internationally. Central to almost all analysis of networks is the integral role played by trust. For co-operative exchanges to endure, network members need to be confident that they are acting upon reliable information. Here one needs to be able to trust not only the people with whom one is directly
28 M. E. Keck and K. Sikkink, Activists beyond Borders: Advocacy Networks in International
Politics (Ithaca, NY: Cornell University Press, 1998), p. 10.
29 Annen, ‘Social Capital’, pp. 460–3.
30 A. Grief, ‘Cultural Beliefs and the Organization of Society: A Historical and
Theoretical Reflection on Collectivist and Individualist Societies’, Journal of Political
Economy 102 (1994), 912–50; Durlauf and Fafchamps, ‘Social Capital’, p. 15; and
Glaeser, Laibson and Sacredote, ‘Economic Approach’, p. 14.
53Networks and the British World dealing but also those elsewhere in the network who, although unknown, are likewise crucial links in the information chain. Peter Mathias notes that this interdependence of individuals within a network necessitates the cultivation of strong notions of obligation and reciprocity between members, irrespective of their actual personal closeness. If businessman A had bonds of trust and mutual confidence with businessman B, then A could recommend a third party C, in whom he placed his own personal confidence, to B – with B having an obligation through his friendship with A to oblige C, provided that this was within the limits of prudence and reasonableness (in his view). A, for his part, would not wish to put his friendship with B under strain by seeking an ‘unreasonable’ favour on behalf of C. C then had the obligation of dealing honourably with B or risking his friendship with A, who had intermediated on his behalf. Networks of mutual trust and obligation were built up on such personal recommendations to mutual advantage. Of course, the chain of personal trust might be broken if obligations were not fulfilled, and this could then ramify through the network as the reverse dynamic took hold.31 This need to instil trust and a mutual sense of obligation among network members explains why many of the more successful networks are based around individuals sharing similar origins, culture, background or outlook on life. It is well known that individuals imbued with a sense of group identity tend to act with greater community spirit and less opportunism, and are more prone to altruism.32 Such identity-induced behaviour is particularly common in co-ethnic groupings. Thus, according to the statistical evidence, bravery was most prevalent among those Union soldiers in the American Civil war who happened to serve in companies comprising recruits with the same ethnic and occupational identity.33 These types of ‘close’ networks tend to be particularly effective in promoting trust and co-operation, for two reasons. First, since network participants share similar backgrounds, values and expectations, social distance and misunderstanding between individuals in the network tends to be reduced. Insiders, after all, have more information
31 P. Mathias, ‘Risk, Credit and Kinship in Early Modern Enterprise’, in J. J. McCusker
and K. Morgan (eds.), The Early Modern Atlantic Economy (Cambridge: Cambridge
University Press, 2000), pp. 15–36 (p. 31). For a more theoretical treatment of the
complementarities and ‘social multiplier’ effect of networking, see Glaeser, Laibson
and Sacredote, ‘Economic Approach’, p. 11.
32 G. A. Akerloff and R. E. Kranton, ‘Economics and Identity’, Quarterly Journal of
Economics 115 (2000), 715–73; C. Fershtman and U. Gneezy, ‘Discrimination in a
Segmented Society: An Experimental Approach’, Quarterly Journal of Economics 116
(2001), 351–77.
33 D. Costa and M. Kahn, ‘Cowards and Heroes: Group Loyalty in the American Civil
War’, Quarterly Journal of Economics 118 (2003), 519–48.
54(explicit and implicit) about other members’ behaviour and history than outsiders.34 Second, established communities and groups, whether ethnic, religious or otherwise, have their own well-defined value systems, behavioural expectations, hierarchies and, crucially, methods of dealing with those who break group conventions and customs. The prospect of community disapproval and punishment or even ostracism provides a very powerful incentive against anti-social and opportunistic behaviour. What makes the threat of communal retribution all the more credible is the fact that in all societies there exists a considerable proportion of the population (called ‘strong reciprocators’ in the literature) who feel that it is their duty to hold transgressors to account whatever the personal costs.35 These community-imposed checks on individual behaviour are significant because they present co-ethnic and co-religious networks in particular with powerful, ready-made enforcement mechanisms.36 There is little need for these networks independently to design and enforce rules of conduct themselves. The possibility that misdeeds may lead to punishment by one’s own community (both inside and outside the network) automatically induces many to moderate their behaviour within the network. An additional factor, which enhances network efficiency, is the presence of individuals in the network whose role is to ensure that information circulates as freely and widely as possible. Such individuals are in many ways the true architects of social capital. There is no specific background or training that singles people out for this role. They can be politicians, bureaucrats, entrepreneurs, professionals, spiritual teachers or just highly motivated individuals. Yet, whatever their origins, their work, if embedded within a conducive institutional environment, can be pivotal in making networks work well. Crucial to the functioning of medieval fairs of Champagne, for example, were the private judges that operated under the Law Merchant. According to Paul Milgrom, Douglass North and Barry Weingast, one of the duties of these judges was ‘to transmit just enough information to the right person in the right circumstances to enable the reputation mechanism to function
34 Glaeser, Laibson and Sacredote, ‘Economic Approach’, p. 13; Bowles and Gintis,
‘Community Governance’, p. 423.
35 Bowles and Gintis, ‘Community Governance’, p. 425.
36 A. Cohen, Customs and Politics in Urban Africa: A Study of Hausa Migrants in Yoruba
Towns (Berkeley: University of California Press, 1969); A. Grief, ‘Reputation and
Coalitions in Medieval Trade: Evidence on the Maghribi Traders’, Journal of Economic
History 49 (1989), pp. 857–82; A. Grief, ‘Contract Enforceability and Economic
Institutions in Early Trade: The Maghribi Traders’ Coalition’, American Economic
Review 83 (1993), 525–48.
55Networks and the British World effectively for enforcement’.37 As we will see in subsequent chapters, such individuals played similarly prominent roles in a variety of nineteenth-century British World networks.38 While these network ‘leaders’, ‘architects’ or ‘agents’ could appear in any type of network, given the pre-existence of community leaders and hierarchies and notions of responsibility, co-ethnic, co-national and co-religious networks started out with distinct advantages in this regard.39
Are networks then simply creations of particular regions and communities – organisations that lose their vitality when taken from their places of origin? How does the movement of peoples across boundaries and borders, for example, influence their effectiveness? Turning to the literature, one finds that the relationship between migration and effective networking is rather nebulous. Since social capital is community-specific, emigration is generally regarded as deleterious to its formation. Leaving one’s home, after all, breaks ties and connections. The costs borne by the emigrant are both financial and psychic.40 As Alfred Marshall noted back in 1890 when discussing the failure of labour markets to respond as rapidly as other markets to price signals, the destruction of ‘old associations . . . will often turn the scale against a proposal to seek better wages in a new place’.41 By extension, emigrants who do opt to make that break face significant challenges in their new homes. The social capital and networks they need for survival have to be reconstructed de novo. Thus, migration and national borders have the potential to fragment networks and limit their inclusiveness.
Such a pessimistic assessment derives from an assumption that the emigration of each individual is, in effect, an isolated event. The historical reality, of course, is different. One person’s emigration is typically part of a much larger movement of people from one location to another. Emigrants rarely select their departure date or destination randomly; rather they closely follow the paths beaten by others before them. As we
37 P. R. Milgrom, D. C. North and B. R. Weingast, ‘The Role of Institutions in the
Revival of Trade: The Law Merchant, Private Judges, and the Champagne Fairs’,
Economics and Politics 2 (1990), 1–23 (p. 3).
38 See for example Edward Jenkins, W. T. R. Preston, Alexander Begg, Archer Baker
and Christopher Holloway in Chapter 3; Joseph Nathan, W. H. Ritchie, William
Westgarth, A. W. Wright (and, more generally, the Crown Agents) in Chapter 4; and
the Fourth Earl of Grey, Robert Nivison and Edgar Vincent in Chapter 5.
39 Durlauf and Fafchamps, ‘Social Capital’, p. 23.
40 L. A. Sjaastad, ‘The Costs and Returns of Human Migration’, Journal of Political
Economy 70 (1962), 80–93; B. P. McCall and J. J. McCall, ‘A Sequential Study of
Migration and Job Search’, Journal of Labor Economics 5 (1987), 452–76; Putnam,
Bowling Alone; van Dijk, Social Ties, pp. 182–3; B. Routledge and J. von Amsburg,
‘Social Capital and Growth’, Journal of Monetary Economics 50 (2003), 167–94.
41 A. Marshall, Principles of Economics (New York: Macmillan, 1948), p. 567.
56will see in Chapter 3, this was especially true for the British emigrants of the nineteenth and early twentieth centuries, who disproportionately migrated to the settler societies of North America and Australasia. The choice confronting these emigrants, therefore, was not as stark as between staying in Britain and enjoying the fruits of their social connections, or migrating to the social vacuum of the New World. The prior migration of family, friends, fellow believers and acquaintances meant that many emigrants could look forward to a warm welcome and that it was easier for them to integrate into their new surroundings. This fact in itself could act as a strong lure to relocate. Moreover, over the course of the century, as information technology increased the ability of individuals in different parts of the world to keep in touch, the potential for Old and New World networks to intertwine steadily grew. Thus, rather than signalling the end of old associations, emigration often provided the means by which those associations could expand