Social Capitalism

The role of social capital became obvious during the pandemic, which has fallen hardest on those countries and communities with the least amount of mutual trust and solidarity. With many of the crisis-era changes in working arrangements likely to persist, social connections will hold the key to future growth.

MILAN – The COVID-19 pandemic has damaged the stock of physical and human capital. Firms have postponed or canceled investment projects, and laid-off or furloughed workers’ skills have deteriorated. The crisis, however, has boosted the oft-overlooked variable of social capital, elevating its role as a key source of economic growth.

Popularized in the 1990s by Harvard University political scientist Robert Putnam, social capital refers to “the features of social organizations, such as networks, norms, and trust that facilitate action and cooperation for mutual benefit.” A somewhat nebulous concept, it comprises the shared values, behavioral conventions, and sources of mutual trust and common identity that allow a society to function. The more social capital a group has, the greater its willingness and ability to act collectively in pursuit of valuable objectives.

In other words, social capital is the glue that holds communities and nations together. Under the right conditions, repeated and mutually beneficial social interactions lead to faster economic growth, better health outcomes, and greater stability.

In the case of the pandemic, social capital provided the first line of defense against the virus when vaccines and effective medical treatments had not yet become available. Here, individuals taking steps to prevent contagion provided a public good. Each conscious act aimed at reducing exposure to the virus lowered the probability of infection for the rest of the community. In the jargon of economists, those who reduced their mobility and social interactions internalized a negative externality that they otherwise would have imposed on society.

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