The Outstater: Social Capital

April 4, 2019

by Craig Ladwig

When a business looks to relocate in your community, the economic-development types will make its owners aware of favors that the political establishment can bestow. These will represent fixed or political capital — tax-increment financing, rebates, zoning exceptions, access to the mayor’s office, an inside track to municipal contracts, that sort of thing.

But a willingness to spend someone else’s money on strategies of legal corruption is hardly in demand. Everybody does it. Nobody is going to be that impressed with another taxing district or the promise of a sweetheart deal for an out-of-state corporation.

What will set your town apart is social capital. It is a declining commodity many places, and if you have a good amount you will shine in a labor market short on the so-called soft skills, i.e., getting along with co-workers, taking advice constructively, requiring minimal supervision, etc.

This social capital is defined by economist Maryann O. Keating in the current issue of The Indiana Policy Review. It is “the existence of a certain set of informal values, norms of behavior and skills shared among members of a group permitting cooperation between them regardless of socio-economic characteristics.”

That’s clinical, but you get her meaning. In its positive sense, social capital is an economist’s way of saying that your town, big or large, rich or poor, has good people. And Dr. Keating, who has constructed an index to measure it in each Indiana county, argues that it is a learned thing, taught over generations, practiced.

You can check out your county’s social capital here by consulting an index of four variables: 1) per-capita religious, business, political, professional, labor and recreational organizations; 2) percentage voting in elections; 3) percentage responding to the U.S. Census; and 4) number of nonprofit organizations.

No, this is not Joe Biden’s “invisible moral fabric” that magically holds up a society. Sound public policy and wise leadership can augment it. You can see it at work, even give it an award. Let me explain.

My first job was with a small daily newspaper in a rural Midwest town of about 10,000. Let’s call it Hicksville. An annual tradition there was to invite a hometown success story back to be honored at a banquet.

Over the years, I was left in awe by the titles, credentials and accomplishments of those returning from the wider world. The town, after all, was nothing to brag about — a brick-paved main street with a single stop light, two banks, a couple of dozen shops, restaurants and taverns, a manufacturing plant at the edge, oh yes, and 20 or so churches.

Yet, not every Indiana town knows how to do develop such a valuable, exportable supply of social capital. And sadly, most of us can guess which ones they are. For the degree a community is short of social capital depends on the degree it has succumbed to what Charles Murray calls “the Great Disruption,” the “Coming Apart.”

For some, the damage stemmed from misuse of medical technology (birth control, abortion, drugs). For others, it was the movement of women into the paid labor force and the attendant difficulty in forming homes and families. For still others it was the decline of transcendental religious faith.

Most often, it was a combination stretching back decades and decades.

Again, the wisdom to immunize, to counteract all of this is something for which to be grateful. The honorees at the Hicksville banquet invariably ended their speeches with the most sincere, often emotional, expressions of thanks for what had been given them there — that is, the social capital loaned in their youth so they could finance the venture that was their life.

The applause for the boy or girl who made good was to demonstrate, to remind, that their town had plenty more from where they came. And just as important, that it didn’t require bankrupting those who chose to stay.

Craig Ladwig is editor of the quarterly Indiana Policy Review.


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