Restoring Social Capital for a Brighter Post-Crisis Future
Andy Haldane, Chief Economist at the Bank of England, talks about “Reweaving the Social Fabric Post Crisis” in an article for the Financial Times. He notes that whilst a pandemic destroys almost all forms of capital — economic, financial, human etc. — one form of capital bucks the trend, social capital.
Social capital refers to the effective functioning of social groups through interpersonal relationships, a shared sense of identity, shared norms and values, trust, cooperation and reciprocity. It is regarded as the form of capital that contributes to the common good.
Haldane says, “We see this daily on our doorsteps through small acts of neighbourly kindness. We see it in the activities of community groups, charities and philanthropic movements, whose work has risen in importance and prominence. And we see it too in the vastly increased numbers of people volunteering to help”.
Haldane speaks of its importance in relation to the economic and social progress that followed the Industrial Revolution, suggesting that “came courtesy of a three-way partnership among the private, public and social sectors. The private sector provided the innovative spark; the state provided insurance to the incomes, jobs and health of citizens; and the social sector provided the support network to cope with disruption to lives and livelihoods”.
He adds, “back then, social capital (every bit as much as human, financial and physical capital) provided the foundations on which capitalism was built”. And he estimates the value of the social sector to the UK, or Third Pillar as it has been called, to be more than £200bn, or around 10 per cent of UK gross domestic product.
Haldane’s recommendations include:
- Changing how societies and companies keep score, to better recognise all of the capitals and all of the paid and unpaid contributions citizens make
- Strengthening the infrastructure that underpins the social sector
- Embedding for good the new model army of volunteers the crisis has spawned
- Establishing a national civic service as a goal for everyone, young and old, rich and poor, supported and recognised by government and businesses.
Haldane is right about the importance of social capital but does not explain how and why so much has been lost. To be fair, doing so would not be easy in one short article. The trend has been long-term and the reasons numerous. But to restore social capital we will need to understand these reasons.
In the last decade the government imposed austerity measure after the global banking crisis and the great recession. The measures decimated local government budgets and their ability to support the institutions and organisations that create social capital. But other factors, political, economic, social, technological, legal and environmental must also be considered.
The many changes have an impact on level of social capital and the degree of social cohesion. Together they are also reflected in the dynamics that gave rise to populism and produced Brexit, for example. And such events then further impact on levels of social capital and cohesion in vicious spiral.
Rising levels of job insecurity, the gig economy and growing inequality are all factors we need to reflect upon. An increasing number of people no longer believe ‘the system’ works for them. They have lost trust in both the system and all the institutions that are part of it, as the Edelman Trust Barometer findings make clear each year.
Underlying all the concerns is the threat to that which everyone values most, dignity — our sense of self-worth as individuals and as social groups. Dignity, trust and social cohesion are all wrapped up with the concept of social capital.
In advocating for the changes I refer to collectively as Valueism, I have been suggesting the next evolution of capitalism must be focused on value-creation, rather than value-extraction (rent-seeking in the language of economists). By value-creation I mean value as measured in terms of contribution to sustainable and widely shared prosperity, measured in terms of prosperity and human flourishing.
To achieve these goals Business and all other organisations should focus on creating social capital and contributing to the common wealth of society, by addressing our real needs. They should do this to fulfil their social contract obligations, to earn the license to operate that society grants them. And because any smart executive understands that doing so creates a society with operating conditions that are also beneficial to them.
Valueism is a form of capitalism based on an updated version of some earlier models of capitalism. One example was capitalism as practiced by the Quaker industrialists. They consciously invested in social capital and the creation of shared value. They built model villages with schools, libraries, hospitals and other social goods. They helped people realise their potential and live with greater dignity.
Dignity is a value that is central to the concept of Valueism. Almost every nation on the planet recognised dignity is the inalienable right of every person more than seventy years, when they ratified the United Nations Universal Declaration of Human Rights.
For this reason, and because it is the right every person values the most, and fears losing most — and which far too many people have still never enjoyed — ensuring it for everyone must be the primary focus of every organisation and institution.
The social capital and social fabric that Haldane speaks of are essential if we are to achieve the kinds of society the vast majority of us aspire to. Valueism is a philosophy and an approach to the management of businesses, organisations and institutions that will help build this brighter tomorrow.