The Good Oil by Rod Brown *
There’s been long overdue recognition of the importance of social capital. It was therefore significant when the Australian Treasurer, Peter Costello, spoke on the subject to the Sydney Institute in July. He said, “You know, I am not going to sort of lay down huge markers here and now, but I have just sort of indicated that I am interested in this area. I think it is the next big area for consideration – over periods of time I will try and make my contribution to that debate.”
A few commentators picked up on this, and his brother, Reverend Tim Costello, spoke on the same subject at the WALGA Annual Conference (see Local Government FOCUS – August edition). Being a little intrigued, I rang the Treasurer’s office. A staffer explained that the Treasurer has a personal interest, and that aspects of a Productivity Commission (PC) report then in preparation were included in his speech. The staffer did suggest, however, that building social capital lies with communities, and that the role of government is limited – or words to that effect!
So I spoke to the main author of the PC report. As you may know, the PC has a well deserved reputation as the driest of the Federal economic agencies. Anyway, the PC report is worth a read (see www.pc.gov.au).
Although couched in bureaucratic language, it says, “Although devising policies to create social capital generally is problematic, there could be benefits in integrating social capital considerations into mainstream policy analysis. This would help ensure that government policies, programs and regulations do not unnecessarily or unintentionally erode social capital”.
Benefits of social capital
What are these benefits? Rosenfeld & Williams in the US explain the benefits of social capital as follows.
- Reduces the cost of transactions of conducting day to day business. The known customer does not need to establish his/her credit every time. People who know and trust each other speak a similar language.
- Facilitates the spread of knowledge and innovation. Word of mouth, gossip or endorsement from your next door neighbour is worth much more than an impersonal advertisement. Many people get a job, or hear about an opening, through friends.
- Promotes cooperative and socially minded behaviour when narrow self interest alone does not generate good outcomes for society. It is not fear of a fine that makes people pick up their litter, but a feeling that it is the thing to do.
- People with good access to social capital tend to be more ‘hired, housed, healthy and happy’.
- Strong, stable institutions, with known rules and ways of operating, underpin social capital. They might be banks, schools, churches, hospitals, golf clubs, social clubs or the system of government.
When social capital weakens
Social capital is best understood when it weakens. Communities with less social capital tend to have lower educational performance and more teen pregnancy, child suicide, low birth weight, and prenatal mortality. The evidence is that social capital is also a strong predictor of crime rates and other measures of neighbourhood quality of life. Low social capital in depressed communities can reinforce existing inequalities.
Robert Putnam, in his best selling book, Bowling Alone, observed that Americans once bowled in leagues, usually after work. This has now declined as people have become increasingly disconnected from family, friends, neighbours, and social structures, whether it be the PTA, church, recreation clubs, political parties, or bowling leagues. Putnam argues that the shrinking access to social capital – the reward of communal activity and community sharing – is a serious threat to our civic and personal health. He argues that social bonds are the most powerful predictor of life satisfaction.
Gippsland as an example
Now I must fess up – Moe appears on my passport. So I took note when it was reported that Moe and the Gippsland region have the highest suicide rates in Victoria, with unemployment listed as the likely explanation (Sunday Age, 24 August 2003). But it wasn’t always like that. In the 1950s and 1960s, Moe and its neighbours – Morwell and Traralgon – were energetic towns with strong social capital. Their problems became acute with the massive retrenchments from the privatisation of the Latrobe Valley power stations around 1993–95.
The environmental squeeze on the forestry sector provided a double whammy. The result is unemployment stuck at 14–18 per cent (depending whose data you believe) and the distinction of being the only region in Australia to have recorded a fall in gross regional product as a result of National Competition Policy reforms (source: Productivity Commission).
Implications
There are significant implications arising from the above.
- Regional recovery – The invisible hand of the market clearly hasn’t worked in Gippsland, despite its competitive advantages (oil, gas, coal, beautiful scenery, plentiful water, proximity to markets, skilled labour). I would argue that the Federal Government has a responsibility given that the NCP reforms were a major factor (admitted by the Productivity Commission) and that the Feds have been joint venturers in this agenda. A proper role would be to intelligently mesh its programs with the State and local programs around a development precinct.
- Innovation – Leaving Gippsland aside, social capital is a vital ingredient in the innovation process. Governments invest substantial amounts in research and development to stimulate innovation. It therefore follows that governments can get better outcomes from their R&D expenditure if they foster social capital. Innovation rarely results from an individual idea – it is usually a collective and social process.
- Social cohesion – The World Bank notes that the social capital of a society includes the institutions, the relationships, the attitudes and values that govern interactions between people and contribute to economic and social development. It argues that social capital is also the glue that holds things together.
Will our social capital keep us glued together? Can we maintain the sense of mateship that is regarded as one of Australia’s defining features? This is a huge long term issue for Australia.
Where to now?
The Australian Bureau of Statistics is developing a survey instrument on social capital, the results of which must wait until 2007 – the ABS says it takes time and resources to put these surveys together. Well, I don’t believe we can wait four years to understand which regions are low on social capital.
Let’s dream for a moment:
- The Prime Minister announces next month that the Federal Government is going to help build social capital at the grass roots.
- A Taskforce has been established – with representatives from State and Local Government, social welfare agencies, philanthropic groups, big business and the ACTU.
- Ten communities are to be targeted for immediate attention, pending the ABS survey results available in 12 months.
This should not be a dream. It only needs some champions to trigger things – why not the Costello brothers?
Finally, the PC/Treasury line, that policies to build social capital are problematic, should not go unchallenged. The Feds have major responsibilities in housing, employment, health and education policy. These are core elements of social capital.
* Rod Brown’s Canberra based consultancy group, Australian Project Developments Pty Ltd, specialises in industry/regional development and government liaison. For further information telephone (02) 6231 7261 or email apd@orac.net.au
