The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [73]
The technological and social changes that have given us a globalized and weightless economy are placing immense new pressures on social ties, and I describe what some of these pressures are. The structural changes in the economy resulting from new technologies have increased the importance of trust. A high value economy is a high trust one. At the same time, though, the structural changes taking place in the global economy make building trust difficult and indeed create some social fragility. The simultaneous strengths and social tensions are apparent for example in the megacities that are hubs of the global economy.
Trust is built by and expressed in the institutions that govern the economy and society. As I go on to describe, many of the institutions we have at present, in all their variety right up to the international organizations responsible for the global economy, are not up to bearing the new pressures. This book isn’t the place for a thorough exploration of the role and inadequacies of economic governance, a huge subject. Here I simply want to make the link between an emerging shortfall in trust and weaknesses of governance. In the case of trust in our societies, we are currently in an unsustainable situation—just as with our exploitation of natural capital and the unfairness of the distribution of income today and the demands we’re making on living standards in future.
This will lead us into the second half of this book, looking at policies that might start to address the challenges set out in the first half.
WHY TRUST MATTERS FOR THE ECONOMY
Although it is intuitively obvious, I think, that trust underpins economic growth, it is not so obvious why, or how much it matters compared to anything else, such as education or ideas or roads and bridges. Measuring the importance of trust would require a clear definition, too, and like any abstract concept it proves quite hard to define with enough precision for empirical research. So social scientists have tried to analyze trust using the concept of social capital. This term is usually used as a straightforward substitute. As name suggests, by analogy with physical capital or financial capital, social capital is a stock of wealth. It is something that can be accumulated over time, invested in, but a form of wealth linked to society rather than just an individual.
An important book in stimulating the recent interest in the idea of social capital was a classic study of towns in Italy by Robert Putnam, the eminent Harvard sociologist. He noted from his field research that something intangible but vitally important distinguished towns in the north of the country from the south, making the former prosperous and dynamic places, and the latter persistently poor and suspicious.6 The “something” in those northern Italian towns comprised civic mindedness, an openness and willingness to help people outside the immediate family group, a sense of being part of a community whose success would bring collective and individual benefits. This “something” Putnam labeled social capital. His definition is: “Features of social life—networks, norms and trust—that enable participants to act together more effectively to pursue shared objectives.”7
A more recent definition is that social capital consists of the set of relationships between the individual members of a society. Some of the connections between us are impersonal and take place through a monetary transaction; others are “nonmarket” relationships, that is nonfinancial and personal ties of various degrees of importance and strength. The stronger these nonmarket mutual relationships are between different people in a particular society, the greater the social capital.8
Social capital defined in this way brings benefits to the people who make up the society in question, but not necessarily to those outside it. So depending on the context, it can be good or bad for the economy as a whole. In the Italy of the 1970s,