Social capital/ism

Last Thursday, Noreena Hertz gave a talk at the "debate temple" LUX in Nijmegen, the Netherlands. She is one of the leading intellectual spokespersons of the alternative globalization movement, having gained prominence with her book "The Silent Takeover: Global Capitalism and the Death of Democracy" (2001). Thursday was an important moment for the new world order-inclined, as it was the day of the London G20 summit. Some of the rhetoric coming from the world leaders at the close of the summit even resembled demands coming from their fiercest critics. For example, the summit attendants declared an end to the "Washington consensus", meaning that unfettered globalisation and deregulation is now outmoded, and that a more balanced approach to regulating markets is called for rather than letting them run free. Of course, these are only lofty words and their translation into messy real world practice will turn out to be difficult as always. Still, one should not underestimate the import of having the world's most powerful jointly declaring a much needed change of paradigm.

Hertz saw in all this hopeful signs for a changing world order. She was cautiously optimistic that a new, more people-centered and more sustainable era of capitalism is on its way, after the harsh "there is no society" Reagan/Thatcher-inspired ideology of ultra-free markets which has been dominating the globalizing world in the past three decades. She saw five reasons for why things may now really change to a significant extent:

1. People are mad. People are really, really angry with the irresponsible ways of big business, its excessive bonuses, the ease with which it shifts capital and jobs for no other reason than increasing profits (and those bonuses), their failure to really address environmental and social issues at the levels and with the urgency needed (think global warming), and so on.
2. The end of the ultra-free market dogma. The general public no longer believes that the global free market will take care of all of society's ills just by itself  (meaning: by the excessive bonus recipients).  The majority of people are now in favor of curbing the excesses and (re)introducing real, rather than imaginary regulation.
3. Expectations of government are different. No longer the mantra "business is good, government is bad" prevails. Responsible business is a cornerstone of society, however, citizens expect their governments to intervene when corporate abuses occur.
4. Economics as a scientific discipline is bankrupt. Economics when reigned by the grand names like Smith, Keynes, and Schumpeter was a serious scientific discipline, that paid much-needed attention to history and context. In the past 30 years, economics has become dishonest and mainly produced neo-con ideologues, who wielded an excessive, unbalanced influence on societal decision making. However, the intellectual basis for "Gucci capitalism" is gone, economists are no longer calling the shots.
5. A more cooperative ethos is emerging. In the past decades, it was everybody for himself. However, perhaps most important for truly effecting change is that the age of super-individualism seems to be over. An era of communitarianism is dawning in which we are pulling together worldwide.

Hopeful Hertz may be, but not naive. There are many vested, and very powerful interests which will do their best to derail these processes of societal innovation. Also, we don't really know what are the limits of cooperation. There are many, very big issues like migration, climate change, poverty, and international security which will stress the willingness to work together, such as demonstrated by the increased levels of xenophobia displayed everywhere. An increased sense of community is not necessarily good. Our "belonging" is their "being outcasts".  It is clear that no rosy future awaits the world. Much, very hard work is needed, with many conflicts remaing to be resolved.

Communities are crucial to accomplish societal change, provided they are involved wisely. One issue that intrigues me is whether there is a direct link between the more humane, social capitalism that is being called for at the macro-level and the idea of social capital being one of the engines of dynamics in communities at the micro or meso-level. Social capital is a concept under construction, with many definitions. Robert Putnam, one of the leading scholars on social capital, considers it to refer to features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit (Putnam, 1995). This, according to him, and many others is essential component to building and maintaining democracy, only to be strengthened by the many new forms of Internet-based social networking emerging these days (Shih, 2009).  Definitely a field worthy of study for economists looking to find a new focus for their research efforts... 

Postscriptum: The above argument is of course exaggerated in order to make a point. Globalization does have its positive sides, such as increased wealth for many and international collaboration, travel, and exchange of ideas. There are many serious and good-willing economists who have contributed to realizing the benefits of globalization and redressing some of its failures. However, Noreena's overall point is well taken: too many people still believe that if the free market is left to its own devices it will take care of itself. Any shortcomings, if perceived at all, are allegedly either caused by too little, rather than too much market or by not giving it enough time to produce its full, wholesome effects. This, I think, is of a dangerous naivety and lack of concern about those who suffer the full force of the downside of those effects.

References

- N. Hertz (2001). The Silent Takeover: Global Capitalism and the Death of Democracy. The Free Press, Simon and Schuster, New York.
- R. Putnam (1995). Bowling Alone: America's Declining Social Capital. Journal of Democracy 6(1):65-78.
- C. Shih (2009). Social Capital from Networking Online, in The Facebook Era: Tapping Online Social Networks to Build Better Products, Reach New Audiences, and Sell More Stuff. Prentice Hall, New York.