Module 1: Brief Definition of “Trust” and “Social Capital”

Francis Fukuyama, a political economist to whom you were introduced earlier, defines “trust” and “social capital” in the following quotation, and illustrates that the two phenomena are not mutually exclusive.

“Trust is the expectation that arises within a community of regular, honest, and cooperative behavior, based on commonly shared norms, on the part of other members of that community … Social capital is a capability that arises from the prevalence of trust in a society or in certain parts of it. It can be embodied in the smallest and most basic social group, the family, as well as the largest of all groups, the nation, and in all the other groups in between. Social capital differs from other forms of human capital insofar as it is usually created and transmitted through cultural mechanisms like religion, tradition, or historical habit.”(1)

As an example of how trust influences build-up of social capital—and how social capital influences build-up of economic competence and, consequently, an opportunity for empowerment and growth—Fukuyama offers the example of Italy. Northern and southern Italy, despite being under the same national regulations, have developed quite differently. Trust and social capital, Fukuyama believes, are the factors that have spawned the industrial success of the North.

“It is clear that the high degree of social capital in northern and central Italy has been critical in explaining their greater economic prosperity ... [E]conomics does not predict the degree of spontaneous sociability … that exists in a society; rather, spontaneous sociability predicts economic performance, better even than economic factors by themselves. At the time of unification in 1870, neither northern nor southern Italy was industrialized; indeed, a slightly higher %age of the population worked the land in the North. But industrial development took off rapidly in the North, while the South actually became slightly less urban and industrial between 1871 and 1911. Per capita incomes in the North moved steadily ahead, and the gap between regions remains high today. These regional variations cannot be explained adequately by differences in government policy, since that has (for the most part) been set nationally since the emergence of a unified Italian state. They do, however, correlate very strongly with the degree of civic community or of spontaneous sociability that prevails in the respective regions. There are family firms in all parts of Italy, but those in the high-social capital center have been far more dynamic, innovative, and prosperous than those in the South, characterized by pervasive social distrust.”(2)

For a more comprehensive understanding of the embedded relationship between trust and social capital, let us examine the philosophical history of how the term “social capital” came about, and how it became associated with trust.

Footnotes

(1) Fukuyama, F. Trust: Social Virtues and the Creation of Prosperity. (Simon and Schuster, 1996): 26.

(2) Ibid, 104.