Despite increasing definitional clarity, however, measurements have continued to proliferate in numerous Australia surveys, with items such as safety, proactivity and tolerance of diversity, citizenship and disposition, assistance and confidence in support, and many potential others being included. Some headway towards consensus is being made, however. The most specific survey on social capital within Australia, the Australian Institute of Family Studies’ ‘Social Capital and Citizenship Project’ focuses solidly upon networks and norms. The Institute avoids the ‘rush to measurement’ by premising their investigation upon a thorough review of the theoretical social capital literature, and their findings³ do much to map the social capital landscape of Australia, and lay the groundwork for the development of a national social capital initiative.

The need for any kind of national strategy to consolidate the role of govt and long-term stake holding in social capital building may be legitimately questioned. The importance of a role for government will be discussed in relation to theory in the first section of this paper. A review of the major theoretical contributions to social capital is undertaken to suggest the necessary characteristics for any potential social capital strategy. Following this, a brief non-comprehensive examination of social capital strategies and policy debates within Australia will be provided, in order to demonstrate the weaknesses inherent in present policy strategy. Issues of fundamental importance to any alternative national social capital policy strategy will be discussed in conclusion.

Following Anhier’s⁵ useful typology, social capital can be seen to have developed from three major disciplines:
1.    sociology,
2.    political science, and
3.    economics.

Some authors claim social capital is an important synthesis of these disciplines, whilst others note that the separation between economics and sociology has always been somewhat ‘artificial’; norms and markets are very much interrelated. Findings from each discipline cut across all the facets of social capital, networks (closed and open) and norms (into their historical/cultural derivations, and the rational motivations that accompany and underlie them). Networks and norms/rationality will each be discussed here in terms of their theoretical considerations.

Networks can be both closed and open. Network theorists have examined the different types of social interactions, information flows, and levels of advantage that adhere within these types. Bourdieu⁶ gives probably the most critical perspective of social interaction centred upon networks. He notes that social networks are based upon shared habits and cultural understandings, but also that such networks are almost by definition finite and contested by warrant of their exclusion of others; thus the analogy with capital:

Coleman⁸, like Bourdieu, notes the importance of closed networks and of reputations in maintaining them. However, unlike Bourdieu, he emphasises the influence not of the individual capital holder within the network, but of the trusted intermediaries that facilitate a network, creating specific networks of connections between individuals and institutions, which settle down over time to become social structures. Both Coleman and Bourdieu thus locate social capital within networks. However, they tend to focus on the advantages simply of being an insider versus an outsider in the networks.

However, Burt’s ‘organisational’ focus precludes a stronger focus upon society as a whole, with two drawbacks. Firstly, completely open networks – such as those that make up the loosest levels of civil and economic society – are not appropriately accounted for. Without closure, there can be no barriers, no holes, and no brokerage. Wherein lies the advantage to be gained? This will be discussed further below. Secondly, the idea of ‘zero-sum society’ – that capital levels are finite, and one person’s capital loss is another’s gain – is not sufficiently engaged with. This is one of Marx’s most powerful points originally, and is reinforced with specific reference to social capital by Bourdieu. From the broader society's point of view, there are only a finite number of places within any closed network, and each position occupied prevents someone else in society from taking it. ‘Reorganising’ society to encourage brokerage without reducing closure is akin to promoting economic reform without redistribution. At best, it can promote direct capital gains for some and ‘trickle down’ gains for others, resulting in ambiguous effects upon the absolute disadvantage and detrimental effects upon the relative disadvantage (heightened inequality) of those at the bottom it seeks to help. At worst, it can encourage distrust, and erode social capital; this phenomenon will be addressed in the discussion of norms, below.

Again, whilst not an exact overlap, this orientation brings it closer in definition to the open networks depicted as characterising civil society, and it can defined as a more ‘infinite’ network cultivating ‘public’ good resources, un-depleted by use.

Woolcock¹⁵ also asserts the existence of ‘linking’ capital, or links formed by communities with economic, political, and social institutions. Such a conception is intended to ‘politicise’ bonding and bridging, and emphasise the role government can play in the development of either. However, such linking capital overlaps with both bonding and bridging capital and is not so easily distinguished from them in concept. The effects of linking capital are opaque and measured only by such means as levels of confidence in government.¹⁶ This might be appropriate if the desire was to measure public perception concerning the effectiveness of government. However, perceptions do not necessarily translate into effective governance.

The idea of distinct bonding and bridging dimensions is indeed being increasingly accepted in Australian policy formulations.¹⁸ However, the bonding/bridging distinction remains largely unincorporated within policy strategies. Certain of the normative properties underlying such networks remain largely unrecognised and likewise unincorporated; these will now be discussed.

Of the norms or values most relevant to social capital, the most propitious is trust. From sociology, theorists such as Luhman¹⁹ and Giddens²⁰ have argued about the primacy of trust to everyday life. Luhman notes that trust’s primary ‘function’ is to cope with the increasing social complexity and uncertainty characteristic of post-industrial/modern society. If we lack information, we must trust. Trust becomes for Luhman a necessary ‘force’ that moves to fill the information vacuum of modern society, and enable decision-making. This is not to suggest that trust is antithetical to information – it is easier to trust those we know well (it is just that we can never know them completely). Trust is mandatory under conditions of uncertainty – but decreases as uncertainty increases.

Giddens, amongst others, argues that under increasingly complex post-industrial conditions, trust is becoming particularised to intimate interpersonal conditions, and confidence – or trust in expert systems – has become a more generalised variant. Trust is intimate and experience-based; confidence is general, and either normative-value or expert-contract based. The generalised normative-value dimension of trust is the most commonly studied dimension of social capital within political economy.

Trust has been studied by a host of experts in the context of economic decision-making and political patronage.²¹ The most popular views, however, place trust as a culturally distinct, historically based entity. Fukuyama,²² whose work on trust is in relation to economic development, sees trust as the basis of healthy political and economic institutions, and that such trust is culturally founded. Putnam, who promotes trust, also notes that social capital works on historically derived norms of trust and reciprocity:

However, such conceptions bode ill for policy seeking to alleviate broadband declines in voluntary activities and organisational memberships contemporary society. What is the cause of such decline and how can it be arrested, if social capital is rooted so strongly in history? Political science, steeped in normative conceptions, offers little clarity to the question of trust formation. For this, we must turn to rational choice theory.

Coleman formalises trust as a conscious rational process. He reduces the uncertainty inherent in decision-making to time and ‘rational’ risk solutions. The problem though is that ‘trusting’ is more often than not an irrational action. Coleman notes that according to the famous Prisoner’s Dilemma scenario – a trust game where two prisoners are separated and asked to confess their mutual crime, knowing that if they do so and their partner does not, they receive a bigger sentence than if both confess, (shared sentence) or neither confess (both get off free) – it is rational to distrust (confess), as the risk (cost) of getting sold out by the other is too great to trust. However, research from economics –despite rejection of the social capital conception by some, and acceptance by a sufficiency of others – has made headway into solving this dilemma. Dasgupta²⁴ asserts the roles of credible punishment and network expectation in trust-building, reinforcing Coleman’s conceptions of sanctions and ‘intermediary’ connections and networks. Her ideas on trust, like most from economics, stem from an additional avenue of solution for the Prisoner’s Dilemma. A ‘one-shot’ Prisoner’s dilemma game sees trust as irrational, as costs of defection are low (given insufficient sanctioning) and the long-term rewards are low (given insufficient information concerning the other) to encourage trust. However, as so pertinently pointed out by Axelrod,²⁵ reiterated Prisoner’s Dilemma games produce a different result, with experiments suggesting that a repeated Prisoner’s Dilemma develops into a cooperative equilibrium. Why is this?

The requirement to repeatedly interact – based on sufficiently harsh penalties for defecting in the present and substantial rewards in the future – offers long-term incentives to cooperate. In addition, such interaction induces players both to learn of each other’s commonalities and common interests, which serves to reduce the risks and costs of trusting. This principle of ‘iterated prisoner’s dilemma’ has been applied to areas as diverse as the biological evolution of cooperation²⁶, the reciprocal relation between trust and volunteering²⁷, and development issues²⁸. Mansbridge²⁹ criticises the concept as being insufficient to instigate cooperation when compared to altruistic behaviour. However, her approach simply shifts the problem back a stage – if trust comes altruism, where does altruism itself derive from? It is likely that altruism and trust are caught up in the same nexus of mutual causation – altruism being recognition of both the value in trusting and the possibility of stimulating it in others – which leads us back to trust development and rational choice.

Ideally then, we should have distinct policies for developing bonding and bridging social capital containing effective sanctions and long-term reward structures aimed at fostering iterated prisoner dilemmas. Policies concerning the different network types should complement each other, so as not to crowd out local distinctiveness and value (structure and holes), whilst redressing entrenched inequalities.

A second possibility rendering bonding and bridging incompatible is the adverse risk effects of extreme poverty. This situation is described in Edward Banfield’s study of the southern Italian town of Montegrano,³¹ where the slightest risk means losing all, so only nuclear family arrangements are considered trustworthy. It becomes more common to prey on one’s neighbours for scraps than to combine to seek an overall improvement in resources – equilibrium of distrust results. If such equilibrium evolves into a cultural institution, the ‘dark side’ of social capital emerges, whereby reiterated interactions involving expectations of rewards and sanctions are associated with completely closed networks, creating the exclusionary ‘mafia’ like networks identified by many authors.³²

A third possibility is that bridging and bonding are in competition for the same resources, and that policies designed to stimulate one type of capital (eg bonding capital, through promotion of self-reliance and local investment initiatives) might come at the cost of the other sort of capital (bridging capital, in terms of wealth transfers, or external investment). Implicitly tied up in this third possibility is the role of government and investment in building social capital. This will be discussed in more detail below.  

Some policy strategists see government as a corrosive influence upon social capital. Such persons are keen to point out the failings of the welfare state. Norton sees social capital as a convergence of liberal and communitarian action against a welfare state that has sought to replace the ‘natural’ institutions of business’, schools and families with inferior government products³³. Stewart-Weeks promotes social capital as part of the necessity of developing autonomous communities with decentralised organisations.³⁴ Prominent political commentaries exhibit some of the strongest tendencies towards promoting self-reliance.³⁵ The underlying assumption behind perspectives such as these is that the welfare state erodes the ‘natural’ associations between community members, and destroys trust.

An examination of social capital theory and evidence does not support these perspectives. In terms of evidence, studies by Putnam show no link between welfare states and erosion in trust;³⁶ in fact Scandinavian countries, with some of the highest levels of social expenditure as a percentage of GDP in the world, also exhibit the highest level of trust world-wide.³⁷ Commentators in Australia supporting a balanced approach between government and community are also numerous.³⁸ Latham³⁹ in particular defends the welfare state against its social capital detractors, noting a need to balance the ‘actuarial’ strength and universality of the welfare state against interpersonal ‘spontaneous’ trust and social capital that builds up in local areas through non-interference – in effect, although he does not use the terms, a balance between bridging and bonding social capital.

What is the link between material prosperity and social capital? Empirically, social capital bears strong positive relations to growth.⁴¹ In terms of regressions of individual demographic characteristics to social capital, income, employment, and particularly education are all strong predictors of trust and volunteering.⁴²

the Democratic State: On the Historical and Contemporary Sources of American Distrust.' In Democracy and Trust, edited by Mark E Warren, pp.151-207. Cambridge: Cambridge University Press, Putnam, Bowling Alone: The Collapse and Revival of American Community.

An important additional finding by a number of authors is that economic inequality is negatively related to trust.⁴³ This makes implicit sense, in that all the incentives work towards persons who are party to increasing disparity of gains ceasing to trust one another. In the short term, the less well off become less trustful, in that despite their best efforts they fall seemingly further behind, whilst the more well-off become protective of what they have, and suspicious of those who might try to take it from them. In the long term, consumption, values and lifestyles split and polarise around two disparate set of means, and class relations become accented (with all the accompanying hostility and stigma).

Grieg et al⁴⁴ stress the negative effects of business and industry closures upon local communities in terms of heightening inequality. Such closures deal social capital a double blow. On the one hand, the loss of personal income and employment in an area, and the subsequent loss of tax income to spend on local services, education and infrastructure weakens local bonding capital. And on the other hand, the simultaneous rise in prosperity of other regions (relatively, and quite possibly, in real terms) fosters inter-regional suspicion and bifurcation of values (eg country-city), and creates incentives for the movement of what resources remain from struggling to more prosperous regions (eg from country to city) - this constitutes a weakening of bridging capital. There would seem to be a need, therefore, for government involvement in rectifying increasing inequality, in order to preserve and create both bonding and bridging social capital – not least by producing a stable and human-capital-sufficient environment in which to do business. Financial investment is needed then in key areas, to redress inequalities and improve social capital both locally and nationally. The question is, what is the role of government policy in this process?

Are social capital strategies in Australia mostly oriented towards ‘blaming victims’? Do they erode particular community situations, and/or redress inequalities sufficiently? It is not the purview of this article to provide a comprehensive review of social capital and community building strategies within Australia. However, certain examples will be cited for the purposes of exemplifying the points made here and above.

The Productivity Commission⁴⁵ report into social capital recommends a host of general social capital policy building suggestions into areas such as work, urban planning, schools, devolution of welfare, local input, juries, corporations, family, education, volunteering, IT, corporate responsibility, community services, and participative rights. However, the report provides no comprehensive strategy for integrating and instituting these various policies. Its overall conclusion seems to be that social capital should be ‘considered’ but not targeted within regular policies and business activities.

More active policies have been pursued by a number of state governments however. The ‘Neighbourhood Renewal Project’, a component of the Victorian Government's Community Building Program, deserves particular attention. It involves collaborations between an exhaustive list of stakeholders, including residents, local communities, local councils, state and commonwealth government agencies, police, and range of voluntary groups. Its stated aim is to bridge the gap between the most disadvantaged neighbourhoods and their surrounding communities. Its distinction lies in its targeting of specific communities of place – public housing sites – for a range of interventions and social capital building responses. Six areas are targeted for improvement in each project:

What is noteworthy about this project is that it targets the key areas of social capital and trust formation – providing investment funding, and building up long-term stake-holding and reward structures. Money is invested through processes decided upon in great part by local stakeholders, residents and community groups. Jobs are localised, and where possible, program participants are encouraged to care for and invest in their local area, through house-buying and other initiatives.

The approaches of encouraging long-term stake holding and engaging in direct investment through a dispersion of local networks are correct. However, two problems arise. Firstly, is the level of stake-holding high enough? Coming to own one’s own home is a significant long-term stake holding in a local community, but is this common, and do residents remain for significant amounts of time after buying? Secondly, are the levels of investment high enough? Are they sufficient to stimulate local business, and create a business environment that will hold onto existing social capital, and attract new human and economic capital from elsewhere? Are they sufficient to halt or reverse the growing gap in prosperity between poor and richer communities? All of these factors must be addressed and overcome, if the community is to develop a steady, self-supporting equilibrium of trust and high social capital.

These questions cannot be answered in this paper; there is insufficient information and evaluation completed at present to do so. However, let us proceed briefly on the assumption that greater financial investment is required to redress these concerns and establish social capital. The question then arises as to where the funds will come from. Higher returns in more prosperous regions will discourage investment from private external business and (slight philanthropic gestures aside) local residents. Third sector and community groups can provide some funding. However most of their support is in services rather than direct cash injections. Micro-credit can provide more of the requisite funding. The Victorian Community Support Fund is an example of one such source, whereby community organizations and local government make program submissions for a diversity of community building projects. Community credit co-ops and the Bendigo Bank are other potential sources. But, in each of these cases, reliance is upon a ‘trickling down’ of resources to areas competing against others more flush with funds. Micro-credit is most likely insufficient to redressing inequality. Such funding would almost have to come from government.

Frankel⁴⁷ questions the possibility of broad government investment in private (and increasingly public) infrastructure in the neo-liberal age, however, noting that government must be seen to be ‘revenue neutral’ budget balancers. Indirect investment is the preferred option in contemporary policy, encouraging the private sphere to invest in Australia and specific regions within Australia with the use of tax breaks and subsidies. However, in doing so, Frankel notes two problems. Firstly, the possibility of ‘bidding wars’ emerges, with companies ‘shopping around’ for the best deals, locally and internationally. Secondly, such payments serve as a drain on the tax base and resources available for local investment in public services. In effect, amounts of bonding capital – an area’s tax-based funds that could be used for self-development – are traded for increased amounts of bridging capital. Funding therefore is needed, but in order that it avoids the bonding/bridging trade-off of ‘taxes for investment’, its sources should be local, but paradoxically, non taxation-based. Some form of regulation of local investment funds would appear to be necessary to achieve these goals. This would require legislation and strategy at the national level of government. This paper is of insufficient scope, however, to outline the details of such a form of regulation here.

Social capital is a useful concept to incorporate the value of social interaction into society, community and economy when it -
*    takes account of links to financial investment in employment and education within impoverished communities,
*    links the long term interests of locals and the nation,
*    emphasises the need to balance bonding and bridging capital, and
*    emphasises the maintenance of equality as an important outcome.

Some degree of regulation of local investment is one potential means to build social capital accounting for these issues.

If instituted with sufficient scope – as a federal government policy - and in a manner that incorporates ethical and pragmatic auditing concerns (overseen by a body with sufficient powers of audit and punishment), some degree of investment regulation offers the best solution to balancing, rather than crowding out, the different and often competing forms of social capital.

Such a strategy, properly conceived, would also have the benefits of greater efficiency than tax and spend solutions, and a greater sense of local and public ownership of the workings and results. More research into the effects of investment upon (the different types) of social capital and evaluation of existing social capital initiatives is needed, at any rate.