BONDS AND BRIDGES:

SOCIAL CAPITAL AND POVERTY

BY
DEEPA NARAYAN*
POVERTY GROUP, PREM
WORLD BANK

*Deepa Narayan is the Principal Social Development Specialist in the Poverty Group of the
World Bank. Send comments to [email protected]; telephone 202-473-1304
 Table of Contents:

SECTION 1:INTRODUCTION ................................................................................................................................ 1

SECTION 2: DEFINITIONS AND KEY CONCEPTS ...................................................................................... 3

Social Capability..............................................................................................................3
Social Exclusion...............................................................................................................4
Social Capital...................................................................................................................6
Civic Engagement............................................................................................................7
Theoretical Foundations...................................................................................................7
SECTION 3: THE ANALYTICAL FRAMEWORK........................................................................................13
Cross-cutting Ties ..........................................................................................................13
Functioning of the State .................................................................................................15
Complementarity and Substitution................................................................................15
SECTION 4: THE EMPIRICAL EVIDENCE....................................................................................................20

SECTION 5: CONCLUSIONS AND POLICY IMPLICATIONS ................................................................35

BIBLIOGRAPHY........................................................................................................................................................44
 SECTION 1: INTRODUCTION 1

Increasing attention is being paid, in the World Bank and elsewhere, to the social aspects
of development. A countrys economic development is embedded in its social organization, and
addressing structural inequities requires not only economic changes but also societal
transformation (Stiglitz, 1998). But social phenomena are so all-pervasive, and often so vaguely
defined, that taking them into account in a systematic way is actually very difficult. One approach
to untangling and analyzing some of the social forces at work in development is through the
concept of social capital. 2 The term refers in general to the glue that holds groups and societies
together bonds of shared values, norms and institutions (see Section 2, page 4 below for a fuller
discussion). This paper concentrates on two aspects of social capital, cross-cutting ties and the
interaction between informal and formal institutions. This interaction is characterized as one of
complementarity or substitution. Although the focus is narrow, the paper argues that these
elements of social capital and their interrelationship help explain a number of puzzles, and have
important implications for policy. The argument, in brief, is as follows.

All societies are built from social groups rather than individuals, and these groups determine
attitudes, beliefs, identities and values, as well as access to resources and opportunities and
ultimately access to power. Since most societies are not homogeneous, but are divided by
class, caste, religion and ethnicity, groups differ in their access to resources and power. There
may be high social capital within a group (bonding social capital) which helps members, but
they may be excluded from other groups (they lack bridging social capital) 3.
Cross-cutting ties between groups open up economic opportunities to those belonging to less
powerful or excluded groups. They also build social cohesion, a critical element in social
stability and economic welfare over any extended period. Social cohesion requires not just

1
The framework for this paper was discussed at a two-day research workshop held at the World Bank in June
1998. Michael Walton, Gloria Davis, Ishac Diwan, Emmanuel Jimenez, and Christiaan Grootaert made valuable
comments on an earlier (November 1998) draft. Michael Woolcock, Mike Edwards, Anirudh Krishna and John
Blaxall contributed useful comments on the present version. Veronica Nyhan and Magdalena Syposz provided
valuable research assistance.
2
The term dates back at least to 1916, but was popularized in the last decade by the work of James Coleman
(1988) and Robert Putnam (1995). A thorough review of the history and main concepts covered under the rubric
of social capital can be found in Michael Woolcock (1998).
3
See Gittell and Vidal (1998) and Warren et al. (1999) for a discussion of bonding and bridging social capital.

1
 high social capital within groups. It also requires dense, though not necessarily strong, cross-
cutting ties among groups.
Formal institutions grow out of and are embedded in societies, and they typically reflect the
interests of the more powerful. Political systems have usually evolved to introduce some
degree of restriction on their power.
State and society interact in particular through relationships of complementarity and
substitution. A simple framework of analysis is offered in which the institutions of the state
vary from ineffective to well-functioning along the vertical axis, and the extent of cross-
cutting ties varies from low to abundant along the horizontal axis. The four resulting
quadrants are characterized as well-being (well-functioning government complemented by
abundant cross-cutting ties), exclusion (well functioning government, low cross-cutting ties),
conflict (poorly functioning state and low cross-cutting ties), and coping (abundant cross-
cutting ties substituting for poorly functioning government).
The four types represented by the quadrants are shown to correspond reasonably closely to the
empirical evidence available about the situation in a number of countries (and communities
within countries).

Some of the policy implications for governments, the private sector and civil society
organizations are then sketched out. First, it is vital to invest in the organizational capacity of the
poor. This requires investment at the micro level, and also changes in rules and laws at the macro
level, in order to support associational activity. A second critical area of investment is in fostering
cross-cutting ties (or bridging social capital) among groups. The paper suggests that sensitively
designed interventions would be especially valuable in seven areas:
Information
Inclusive participation
Conflict management
Education and values
Economic restructuring
Governance and decentralization
Demand-driven service delivery

Section 2, immediately following this introduction, provides some definitions and key
concepts as background to the argument. Section 3 then presents the analytic framework, and
Section 4 reviews the empirical evidence supporting it. The paper concludes in Section 5 with a
discussion of policy implications.

2
 SECTION 2: DEFINITIONS AND KEY CONCEPTS

A human becomes a human because of other humans.

African proverb.

Concepts like social capital and social exclusion have gained wide currency, as evidence
accumulates that the same policies implemented in different national institutional environments
have different impacts. Indeed, the same policies have differential impact even within the same
nation. Moreover, because of the inherent power asymmetry between social groups, social capital
leads to negative as well as positive outcomes, ranging from social exclusion, corruption, and co-
option of the state to conflict and violence. The challenge is to understand better the nature of
social capital, and the circumstances under which it is likely to lead to the public good.

For this purpose it is necessary first to define and distinguish some of the social terms
currently used to focus attention on the importance of social relations in economic development
and poverty reduction. These include social capability, social exclusion, social capital and civic
engagement. There is considerable overlap among these concepts, all of which have to do with
social arrangements. The next few paragraphs describe each of these concepts briefly, and explain
why the concepts of social capital and a particular form of social capital, cross-cutting ties, are
used in this paper. The remainder of Section 2 then addresses the theoretical basis for the
framework proposed later, in Section 3.

SOCIAL CAPABILITY

The term social capability was coined by Adelman and Morris in the 1960s, and has been
popularized by Nobel Laureate Amartya Sen to mean the aggregate version of human capability,
which includes basic human necessities such as food, shelter, health, education. Their absence
leads to human deprivation. Sen has framed his work on human capability and deprivation around
the importance of broad freedoms, such as freedom of the press, freedom of individual
expression, freedom to participate in public discussion, a fair judiciary, in effect, social justice.
But his great contribution to poverty reduction strategies has been focusing attention on individual
capabilities and deprivation, and on human development indicators (Sen 1992, 1997). Despite the

3
use of the word social, the concept remains in essence an aggregation of individual capabilities.
Only in his most recent work does he outline how the concept of social capability could be useful
in framing the debate around relational issues such as social exclusion. Social capability is the
ability to take part in the life of the community, to participate in social activities, to have a sense
of belonging in the larger groups (Sen, 1997). However, this work is at an early stage of
conceptual development and empirical application, and the mechanisms for moving from an
aggregate of human development indicators to social relational measures remain unspecified. The
term social opportunity used by Sen and Drze may be the closest approximation to what other
researchers mean by social capital (Drze and Sen, 1995).

SOCIAL EXCLUSION

Broadly defined, social exclusion refers to the societal and institutional processes that
exclude certain groups from full participation in the social, economic, cultural and political life of
societies. The concept goes beyond the focus on income deprivation as a cause for
marginalization of individuals or social groups (Gore and Figueiredo, 1997), since people can be
poor without being socially excluded or excluded without being poor. Like social capital, social
exclusion has quickly become an umbrella concept to highlight the role of social factors and
institutional processes that lead to exclusion and deprivation. Like social capital, the contribution
of the concept is the debate and attention it has focused on social structures, social and political
processes and how these impact access to power, resources and the lives of different social
groups. However, unlike social capital, because the focus is on broad processes, a unified
conceptual framework has not yet emerged. Indeed, social exclusion seems to have gained
currency in part because it has no precise definition and means all things to all people (Atkinson
and Hills, 1998, p. 13). Atkinson and Hills draw attention to three aspects of social exclusion.
First, it is relative -- exclusion is from a particular society, at a particular place and time. Second,
it implies an act of exclusion and hence an agent or agency. And finally it has a dynamic aspect --
people are excluded not just because they are currently without a job or income, but because they
have little prospect for the future. While the conceptual debate continues, there is extensive

4
empirical work highlighting the range of social, political, institutional, and cultural processes that
lead to the marginalization of sizeable groups in society. 4

There are overlaps between the terms social exclusion and social capital. Both include
participation or involvement in decision making, including political decision making, and both
focus analytically on those included or excluded. As will be seen in the discussion of social
capital below, social groups and networks only work by including some and excluding others.
The challenge in using both concepts is to differentiate between exclusion which is voluntary and
exclusion which is involuntary or coercive -- based on criteria such as age, race, caste, tribe,
gender, location, class or income. The importance of this difference is central in the sociological
literature. Weber (1947) characterizes social relations as open where participation is not limited
or denied, and as closed where outsiders are excluded.

Both concepts, social exclusion and social capital, raise implicitly the question of power
differentials, although this was mostly absent from the early social capital debate as it evolved in
the US. Social capital can explain much social exclusion, because the same ties that bind also
exclude. The non-overlapping nature of social networks of different social groups results in
unequal opportunity to participate. Hence those who belong to social networks which already
have access to the resource allocation decisions of the state or the private sector (jobs, location of
industry) are much more likely to continue to be included in societal processes than those who do
not have such access. This interpretation is strengthened by the finding that income inequality
remains quite stable across time, even during periods of economic growth (Li, Squire, and Zou,
1998). Recent critics have highlighted the fact that in socially differentiated or unequal societies,
social capital can lead to maintaining the status quo of exclusion. All focus on such structural
factors as power, political opportunity, location of elite businesses and leadership, and
institutional constraints to mediate the impact of social capital. Clearly, the composition of social
capital and these institutional factors need to be taken into account in recommending policies to
foster equality of opportunity. 5

4
See for example Silver (1994), Figueroa et al (1998), Hashem (1996), de Haan and Nayak (1995), de Haan and
Maxwell (1998), Kudat (1997), and Dudwick (1998).
5
See further Tarrow (1996), Kentworthy (1997), Levi (1996), Heying (1997), and Skocpol (1996).

5
SOCIAL CAPITAL

While the term social capital was used by several scholars 6 before Robert Putnam, the
public and academic debate is directly linked to the publication of his book Making Democracy
Work: Civic Traditions in Modern Italy (1993), which links the differences in performance
outcomes of 20 regional governments in Italy to the extent of horizontal civic associations. His
publication of Bowling Alone: Americas Declining Social Capital (1995), and the controversy it
generated, ensured that the debate continues.

The debate on social capital has brought together sociologists, anthropologists, political
scientists and economists. While differences remain, there is agreement that in contrast to all
other concepts central to the development debate, social capital is unique in that it is relational.
Whereas economic capital is in peoples bank accounts and human capital is inside their heads,
social capital inheres in the structure of their relationships. To possess social capital, a person
must be related to others, and it is these others, not himself, who are the actual source of his or her
advantage (Portes, 1998). As an attribute of the social structure in which a person is embedded,
social capital is not the private property of any of the persons who benefit from it (Coleman,
1990). It exists only when it is shared. Social capital is embedded in social structure and has
public good characteristics (Narayan, 1997).

While the debate is vigorous on whether social capital is really capital, whether it should
be widely or narrowly defined, and whether it can be constructed or is an endowment, the active
engagement of scholars and practitioners has moved the field forward in terms of conceptual
development and empirical results. 7 Hence the value of this term rather than others to explore the
impact of social relations. For the purposes of this paper, social capital is defined as the norms
and social relations embedded in the social structures of society that enable people to co-ordinate
action and to achieve desired goals.

6
Such as: Lyda J. Hanifan (1916) The Rural School Community Center Annals of the American Academy of
Political and Social Science 67: 130-138; Bourdieu (1985); Loury (1977); Coleman (1988).
7
This debate and the characteristics of social capital are discussed in Deepa Narayan (forthcoming 1999). See
also Paul Collier (1998) and Michael Woolcock and Deepa Narayan (forthcoming 1999).

6
CIVIC ENGAGEMENT

The term civic engagement is used by some writers interchangeably with social capital,
and hence adds no value. Others restrict the notion primarily to the use of social capital for
community and political engagement. Recently, Varshney (1998) made a strong case for
differentiating between social capital within a particular social group and forms of engagement
that cut across groups. In his case study of communal riots in India, Varshney uses the term civic
engagement to refer to voluntary associational networks which include both Hindus and Muslims,
such as those formed for specific professional or issue purposes, communal and political interest
groups, and supported by everyday social interaction. But because the term civic engagement is
sometimes used with a wider meaning, this paper has adopted the term cross-cutting ties. In this
paper, the term is used to characterize social relations in informal or formal voluntary groups and
networks characterized by heterogeneity of membership -- that is to say, ties that cut across
ethnic, gender, caste, class, wealth, religion, location or any other characteristics which
distinguish social groups.

THEORETICAL FOUNDATIONS

With the definitions clarified, it will be useful to introduce certain propositions from
sociological and political theory as a foundation for the analytic framework presented in Section 3
below. In a recent article, Alejandro Portes (1998) reviewed the sources and consequences of
social capital, and sketched out a conceptual framework to understand social capital and its
function in different contexts. Portes differentiates two sources of social capital, and two kinds of
consequence. One source he calls consummatory, deriving from socialization processes in
families, kin networks, class and occupational groups; and the other he calls instrumental,
entailing purposive exchanges based on expectations of reciprocity. 8 He also points out that the
outcomes can be either positive or negative.

Portes and many others have shown how positive outcomes operate through and include
social control or norm observance, family support and benefits mediated through extra-familial
networks. These affect a broad range of outcomes from education to income, to health, to

8
Consummatory sources can be seen as related to the endowment of social capital, while instrumental sources
exemplify the constructability of social capital. Obviously, long term changes in social processes affect the
nature of the underlying endowment, and what was considered exogenous becomes endogenous in the long run.

7
performance of firms, to collective action at the community level. 9 The value of social control
lies in making formal or overt controls unnecessary. Examples include not violating the law
simply because no one is watching, and family expectation for children to do well in school to
avoid bringing shame on not only the family but the whole community (Zhou and Bankston,
1996). The positive benefits of solidarity networks can also be seen in the opening up of
economic and employment opportunities within ethnic groups, poverty reduction, and increased
gender and racial equality. 10

There are, however, also negative consequences to consider. The same ties that bind also
exclude. Powerful networks can restrict access to opportunities, for example the caste system in
India, with its rigid boundaries. Social capital restricts individual freedom (women in purdah in
northern India), and can lead to excessive claims on successful group members -- so excessive
that successful individuals are sometimes driven to break off ties with the larger ethnic group.
Solidarity networks can also lead to downward leveling mechanisms (Portes, 1998). Researchers
could find only one explanation for differences in academic performance between white and black
students from the same middle to upper income groups in a suburban school in Ohio -- the peer
pressure on black teenagers who took schoolwork seriously. They were labeled as trying to be
white, and ridiculed by their peers (Fletcher, 1998). And sometimes the negative impacts of
social capital are manifested in powerful, tightly knit social groups, that are not accountable to
citizens at large, and practice corruption and cronyism (Evans, 1989; Mauro, 1995; World Bank,
1997).

Thus societies can be rich in social capital within social groups, and yet experience
debilitating poverty, corruption and conflict. To understand why, it is necessary to examine three
other phenomena: first, the connectedness or cross-cutting ties between groups; second, the nature
of the state; and third, how the state interacts with the distribution of social capital.

9
References include: for education outcomes Teachman et al (1997), Knaul and Patrinos (1998), Braatz and
Putnam (1998), and Francis et al (1998); for income outcomes (Burt, 1997), Montgomery (1991), Belliveau et al
(1996), Narayan and Pritchett (1997), Grootaert (1998), Robison and Siles (1997), and Simpson et al (1992); for
health outcomes Kawachi et al (1997a, 1997b): for performance of firms Barr (1998), Fountain (1997), Kantor
(1995), Brautigam (1997), Fafchamps (1996), Weidenbaum and Hughes (1996), Gulati (1995); for collective
action at the community level Narayan and Nyamwaya (1996), Molinas (1998), and Grootaert (1998).
10
See, for example, on ethnic groups Zhou (1992) and Nee, Sanders and Sernau (1994); on poverty Narayan
(1997); on gender Blackwood (1997) and OConnor (1990); and on race Jiobu (1988) and Waldinger (1995).

8
 On the subject of cross-cutting ties, several writers have pointed to the importance of ties
outside the primary network as a means to access resources and power outside the group. Two
authors stand out for their contributions in this area. Granovetter (1973) is renowned for his
phrase the strength of weak ties. He also drew attention to the importance of ties beyond the
immediate circle and of coupling and decoupling from tightly knit small family or ethnic based
economic groups to more expansive, loosely knit networks, with richer resources to achieve social
and economic mobility (Granovetter 1995). The other is Glen Loury. The main conclusion from
his now famous study (1977) of black youths is that youth from minority groups are
disadvantaged by lack of information on job opportunities and parental connections to the labor
market rather than discrimination by employers. Put simply, their parents are much less likely to
know where the jobs are or whom to call.

Turning to the nature of the state, its core characteristics are a geographically defined
community and a government comprised of formal institutions that embody political authority. A
government is considered legitimate to the extent that its claim is grounded in moral or political
principles generally acceptable to its people and so long as its actions remain consistent with those
principles (Magstadt and Schotten, 1984). When states collapse, they lose their ability to fulfil
three basic functions: as sovereign authority (the accepted source of identity and the arena of
politics); as an institution (a tangible organization for decision making and an intangible source of
identity); and as the security guarantor for the population within a defined territory (Zartman,
1995).

Several theorists have pointed to social relations, informal norms and expectations to
explain the performance of very different types of state regimes. For example, ODonnells
analysis of state performance in Argentina, Brazil and Peru is based on the premise that states are
embedded and interwoven in complex ways with their respective societies (ODonnell, 1993). In
other words, a state is not just the state apparatus, but a set of social relations which establishes
social order and backs it up with a centralized coercive guarantee within a given territory. Many
of these relations are codified in the legal system. The laws and the underlying norms provide
society with the most important public goods, namely generalized social predictability and broad
equality among citizens (not just political rights, but the right to fairness from the state and the
legal system). This is not to say that the social order is in fact socially impartial. On the contrary,
recent research has demonstrated systematic class bias in the administration of justice (ODonnell,

9
1993), and current news stories continue to draw attention to the problem11. Schattscheiner
(1963) captured the reality in his now famous observation that in the pluralist heaven, the
heavenly chorus sings with a strong upper class accent.

Many studies have shown that democracy has numerous variants, and does not
automatically lead to state effectiveness12. Another critique comes from those who point to the
problems of transferring Anglo-Saxon democratic institutions to other parts of the world, when
their core assumption is homogeneous societies, consisting of autonomous individual citizens
(Lijphart, 1991). On the contrary, the defining characteristic of many modern societies is
heterogeneity of ethnicity, caste and religion. In countries with deep societal divisions, majority
rule is totally immoral, inconsistent with the primary meaning of democracy, and destructive of
any prospect of building a nation in which different peoples may live in harmony (Lewis, 1965).
Making democracy work in these circumstances requires mechanisms and processes to reconcile
conflicts among major social groups, as well as among individuals or smaller and narrowly
focused interest groups.

But no national level political model adequately explains variations in state performance,
or variations in inter-ethnic collaboration or ethnic violence within a country. To do this requires
examining more deeply the nature of civil society within countries, and the state as shaping and
being shaped by the action of civil society actors. While the debate about precisely what
constitutes civil society continues, it can be broadly defined as the space that exists between the
family and the state, which makes interconnections between individuals and families possible, and
which is independent of the state. It is defined in terms of its purpose, the public good, rather than
its form (Varshney, 1999). It includes interactions in everyday social life as well as interactions
within associations, based on ascriptive, traditional or modern characteristics such as education or
civic or political interests.

The emergence of associational forms of civil society is shaped by citizenship rights.

When political and state institutions are seen as sets of social relations, citizenship rights acquire a
much broader meaning than the right to vote or political representation. Social citizenship, a term

11
Among many recent examples in the press is the shooting of Amadou Diallo, an immigrant from Guinea and a
street vendor in New York. He was killed on February 4 1999 by two white police officers, who fired 41 bullets
at him. Mr Diallo was unarmed and had no criminal record. (Washington Post, February 12, 1999)
12
See, for example, Isham, Kauffmann and Pritchett (1997), Kohli (1990), Whitehead (1993), and Przeworski et
al (1996).

10
emerging from Townsends studies of poverty (1995), refers to the rules and customs that govern
de facto equal participation in the society in which one lives. Inclusive citizenship, a term used by
Kitschelt (1993) or low intensity citizenship (ODonnell, 1993) also draws attention to the fact
that presence of voting rights does not ensure equal access or equal participation in society. Basic
freedoms are of fundamental importance in all societies. Political scientists and economists such
as Sen have particularly noted the importance of a free press, free information flow and the
freedom to associate in informal or formal groups, associations and networks for full participation
as citizens in society.

It is the exclusion of many from equal participation in society, even when they have equal
political rights, that at some points in history gives rise to social protest movements. While
modernization theory had predicted the disappearance of solidarity groups based on religious,
ethnic, national or cultural identities, the reality is that such social movements (sometimes
including armed conflict) have actually increased in the last few decades. One of the few valid
generalizations in the literature on social protest and collective mobilizations is that social
movements arise when aggrieved groups cannot work through established channels to
communicate new claims into the political process of authoritative decision making (Kitschelt,
1993). The closure of existing avenues of participation, such as those provided by political parties
or interest groups, is a necessary though not sufficient condition for the emergence of collective,
sometimes violent, mobilization of groups. The intensity of deprivation, the resources of the
mobilizing actors, the leaders strategic skills and the counter strategies of opponents all
contribute to the success of mobilization efforts.

To analyze the nature of state-society interactions, Peter Evans (1996), drawing upon the
work of several others,13 introduces the idea of synergy between government and citizen action.
This synergy is based on complementarity and embeddedness. Complementarity means mutually
supportive relations between public and private actors. Examples might include a framework of
rules and laws which protect rights to associate, freedom of assembly, or the state providing
public information or transportation to facilitate associations. Embeddedness refers to the ties that
connect citizens and public officials. The classic examples are from irrigation, in which local
irrigation officials are from the community being served, and hence are enmeshed in local social
relations and pressures to perform. Note, however, that this enmeshment only works positively
when the overall institutional context is performance oriented and accountable.

13
In particular Tendler (1997), Fox (1996), Heller (1994), Ostrom (1996), and Wade (1985).

11
 Woolcock (1998) takes these ideas further, and proposes a framework linking the micro
and macro more firmly together to make predictions about outcomes of local levels of social
capital. He uses the terms embeddedness and autonomy at both levels. At the micro level,
embeddedness refers to intra-community ties and autonomy refers to extra-community networks.
At the macro level, embeddedness refers to state-society relations and autonomy to institutional
capacity and credibility. The important contribution of Woolcocks framework is its emphasis on
linkages outside the community, and linkages between communities and the state.

In brief, the structures, rules and norms of institutions of the state and political systems are
in dynamic interaction with the social organization of society, being both affected by it and over
time effecting change in it. The state creates the political and social space for the emergence of
civil society and citizen action that provide checks and balances on the power of the state, so
subjecting itself to public accountability. It is civil society that in interaction with the state
through contentious politics and public policy measures attempts to create new opportunities for
those previously excluded from full participation in society. Hence nurturing social capital for the
public good requires far more than volunteerism and public policy support of voluntary
associations.

It is in this area that the present paper concentrates. Its central thesis is that all societies
and all social groups have social capital. However, for societal well being or the collective good,
a transition has to occur from exclusive loyalty to primary social groups to networks of secondary
associations whose most important characteristic is that they bring together people who in some
ways are different from the self. Social relations underlie all social institutions and in turn feed
back and reinforce the organization and functioning of a countrys formal and informal
institutions. Section 3, immediately following, presents an analytic framework to explore these
propositions.

12
 SECTION 3: THE ANALYTICAL FRAMEWORK

This section presents a simple analytic framework of relationships growing out of the
concepts and theories discussed in Section 2 above. The framework highlights the interaction
between two key dimensions, cross-cutting ties and state functioning. The framework permits a
structured examination of how different combinations along these two dimensions affect the
social and economic performance of countries, or regions or communities within countries. The
framework is sketched in Figure 1.

CROSS-CUTTING TIES

The underlying dynamic reflected in the framework is that voluntary cross-cutting

networks, associations and related norms based in everyday social interactions lead to the
collective good of citizens, whereas networks and associations consisting of primary social groups
without cross-cutting ties lead to the betterment of only those groups. Primary social group
solidarity is the foundation on which societies are built. The impact of primary social groups
depends on their resources and power. But when power between groups is asymmetrically
distributed, it is cross-cutting ties, the linkages between social groups, that become critical to both
economic opportunity and social cohesion.

While primary groups and networks undoubtedly provide opportunities to those who
belong, they also reinforce pre-existing social stratification, prevent mobility of excluded groups,
minorities or poor people, and become the bases of corruption and co-option of power by the
dominant social groups. Cross-cutting ties which are dense and voluntary, though not necessarily
strong as in the right-hand half of Figure 1 -- help connect people with access to different
information, resources and opportunities. In addition, as people get to know others who are
different from themselves, there is less likelihood that social differences will grow into divisive
social cleavages.

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 Figure 1: Relationship Between Cross-cutting Ties and Governance
C
O
M
P
WELL FUNCTIONING STATES L
E
M
E
2. EXCLUSION 1. SOCIAL AND ECONOMIC N
(LATENT CONFLICT) WELL-B EING T
A
R
I
T
Y
LOW CROSS- HIGH CROSS-
CUTTING TIES CUTTING TIES S
INSULAR SOCIAL GROUPS CIVIC ENGAGEMENT U
B
S
3. CONFLICT 4. COPING T
I
T
U
T
I
DYSFUNCTIONAL STATES O
N

14
 On the other hand, the social fabric of a country may consist of primary social groups
with few inter-connections between groups, or consist of groups with inherent power
asymmetries such as the caste system in India as in the left-hand half of Figure 1. These
societies are likely to be characterized by social exclusion and polarization at the best, and at the
worst by corruption, violence and economic stagnation, where the majority copes by depending
on informal social mechanisms for livelihoods, security and insurance.

FUNCTIONING OF THE S TATE

The state consists of a geographically defined community and a government comprised of

formal institutions that embody political authority. The functioning of government institutions
can be described in various ways, but most authors focus on two aspects that determine
government performance. First is the overall governance environment which fosters the rule of
law, citizen rights and freedom to associate, since these create the societal norms which influence
the emergence, and subsequent performance, of a range of societal institutions.14 The second
aspect is the competence, authority, resources and accountability of government organizations
working within the overall governance environment 15

The vertical axis in the framework depicted in Figure 1 indicates the level of state
functioning. In the top half are states which function effectively, maintain order, collect taxes,
and so on, while in the bottom half are states where institutions are ineffective, or at the extreme
which have collapsed altogether.

COMPLEMENTARITY AND S UBSTITUTION

The framework is especially helpful in capturing some of the dynamic aspects of the
relationship between social capital and the formal institutions of the state. Social capital has an
impact on the overall governance environment and the efficacy of government institutions. Under
conditions of good governance, the functioning state complements the functions of the informal
social groups. In societies in which primary social groups are connected through cross-cutting

14
See for example Isham et al (1997), Rodrik (1997), Evans (1996), and Fedderke and Klitgaard (1998).
15
See for example Stern and Stiglitz (1997), Manor (1991), and Knack and Keefer (1995).

15
ties, economic prosperity and social order are likely. But when a societys social capital inheres
mainly in primary social groups that are disconnected from one another, the more powerful
groups dominate the governance structures, to the exclusion of other groups. Such societies are
characterized by latent conflict. As governance deteriorates, and government efficacy
deteriorates, the informal social groups become substitutes for the state. People struggle to
survive in a context of violence, crime and war in societies with isolated social groups, or try to
cope in an economically stagnant situation to earn a livelihood. The following paragraphs use
Figure 1 to explore this broad dynamic further.

The two critical dimensions along which countries (or regions or communities within a
country) vary are in the level of functioning of the state and the extent of cross-cutting ties among
social groups. In the ideal scenario (Quadrant 1, labeled Well-being), good governance and high
levels of government functioning complemented by high levels of cross-cutting ties among social
groups lead to positive economic and social outcomes. Countries that belong in this quadrant will
include the Scandinavian countries and the Netherlands. All are characterized by high economic
development, social cohesion, and the relative absence of crime, violence, conflict and exclusion.

In Quadrant 2 (labeled Exclusion) are found countries (or regions or communities) with
well functioning governments that have been taken over or unduly influenced by the dominant
primary social groups. They are characterized by relatively few cross-cutting ties across social
groups, leading to exclusion of the non-dominant groups. The chief characteristic of Quadrant 2
is latent conflict. Countries in this quadrant might include South Africa under apartheid, Latin
American countries with large indigenous populations such as Peru and Mexico, some well
performing Indian states which exclude lower caste and tribal groups, the USA with high
exclusion of minority groups, Germany and many of the countries in Eastern Europe. Excluded
groups may eventually organize across communities, leading to social movements that challenge
the status quo and the power of the state. If these societies open up to the excluded and explicitly
build bridges across social groups, they may prosper and eventually move into Quadrant 1.

Alternatively, they may degenerate into Quadrant 3 (labeled Conflict), becoming

embroiled in prolonged conflict, violence, civil war or anarchy with gradual dissolution of the
functioning state. As the state ceases to fulfil its functions, the primary social groups become
informal substitutes for the state, and power and authority are taken over by warlords, the mafia,
guerrilla movements and other groups which use guns, violence and coercion.

16
 When societies are characterized by social groups with abundant cross-cutting ties and
poorly functioning governments, as in Quadrant 4 (labeled Coping), the informal networks
become substitutes for the failed state and form the basis for coping strategies. These include
informal credit, informal contractual arrangements, increased informal activities and self-
employment, barter and gray economies, community-run basic schools and health clinics, and
so on. In Kenya, a participatory poverty assessment in six districts documented approximately
30,000 self-help groups in rural areas, with no or little contact with any government agencies
(Narayan and Nyamwaya, 1996). In Russia, Richard Rose (1995) has documented the informal
coping networks that emerged with the collapse of the communist state. With increasing conflict
and lawlessness, Russia may be moving into Quadrant 3.

The current development paradigm focuses exclusively on reforming the state or markets
to help countries prosper, and has had mixed success at best. The framework outlined above
suggests that interventions aimed at economic prosperity need to take into account underlying
social organization, and actively facilitate cross-cutting social interactions of previously isolated
and even warring groups. This does not mean government mandating heterogeneity of
membership in formal groups and associations. But it does mean creating economic, political,
institutional and social incentives to help build physical and social space in which cross-cutting
linkages among people from different social groups can begin to emerge.

Table 1 lists a number of important factors that contribute to well being and the relevant
informal and formal institutions. It also underlines the relationships of substitution and
complementarity between institutions. In the ideal, complementary relationship, there will be
close collaboration between informal and formal institutions. Conversely, when the
corresponding institutions are far apart, substitution will predominate. Suppose, for example, that
Trust were the contributing factor in question. In the best of circumstances, informal institutions
regulate trust through social mechanisms, rewarding trustworthy behavior and applying social
sanctions such as ostracism and shame to those who violate the norms. Formal institutions
strengthen the overall environment of trust through equitable access to justice, the rule of law,
enforceable contracts, and a police force that protects citizens. Values of trust and mutual respect
can also be reinforced through appropriate school curricula. When the formal system fails,
vigilante groups or gangs accountable to no one may emerge.

In addition, the Table reminds us that not all forms of traditional social capital are benign,
and that some state actions are required to negate the effects of exclusionary or conflictual forms

17
of social capital. For example, gender differentials in feeding and taking care of sick children are
widely biased against girls. Public policy interventions that increase the status of girls, for
instance through scholarship programs, could over time change local norms about the respective
value of boy and girl children.

18
 Table 1. Role of Formal and Informal Institutions in Promoting Well Being

Contributing Informal Institutions Formal Institutions

Factors
1. Information: Families, friends, peers, Newspapers, trade journals, magazines, books,
Markets, prices, neighbors, kin, ethnic networks, radios, television, internet, freedom of press,
product informal groups, work related information disclosure laws; regulations
innovations networks; festivals, rituals, Provision of infrastructure; roads, post offices,
Values, opinions, sports events, story telling, electricity, telephones
beliefs religious activities, civil society Schools, school curriculum
Political leaders, groups Political competition, citizenship rights, freedom
state to associate, independent audits, civil society
performance participation and other accountability
mechanisms
2. Trust Norms, values, interpersonal Rule of law, independent judiciary, equity before
relations, social sanctions law, enforceable human, consumer and property
rights and contracts at low personal and financial
cost;
Secure financial institutions
Schools, school curriculum, educational
institutions, values education
Citizen participation in state activities and
accountability mechanisms
3. Managing Risk: Differential health care Health insurance policies; subsidized healthcare
Health spending, and selective feeding for the poor in clinics and hospitals; education;
to optimize chances of survival positive investment in girls
of the breadwinners;
Home-based care Investment in human capability; stimulating
Livelihood Within family diversification; livelihood opportunities; unemployment
kin or social group network; insurance, social security, safety net schemes;
inter-generational transfer; work pensions; laws enforced for open and fair hiring
related networks, civil society based on merit; investment incentives for private
groups sector
4. Credit Ethnic groups, kin networks, Banks, credit rating bureaus, training and
friends, money lender, revolving marketing
credit societies, civil society
groups
5. Local public Community groups and Co-production with local groups through direct
goods, basic services committees or indirect representation
and common
property resources
6. Child care and Families, neighbors, friends, Day care, nursery schools, schools, school based
socialization religious institutions clubs, media; parent education, counseling

7. Dispute Family, extended kin, ethnic Lawyers, courts, tribunals, dispute resolution
management and network, traditional council, bodies, small court claims, mediation centers,
resolution church, community groups police, social worker, alternative dispute
resolution mechanisms
8. Security Norms, self-policing, Police, armed forces, security personnel, laws
neighborhood or social group about carrying arms by citizens, law enforcement
based security systems and fairness in law enforcement, zoning laws,
investment incentives to private sector

19
 SECTION 4: THE EMPIRICAL EVIDENCE

As traditional growth models have failed to explain satisfactorily differences in growth

rates between countries, researchers have increasingly turned to non-economic variables for
explanations. However, this extension of interest to social characteristics has been limited by
extremely weak data sets. Fedderke and Klitgaard (1998), for instance, use a series of social
outcome measures such as divorce and rape rates that are beset with underreporting problems. In
addition, divorce rates are a reflection of both culture and laws, and are not necessarily a good
proxy for judging marital discord. Despite data problems, the pattern of findings that emerge
from the recent literature supports the picture emerging from the four quadrants of Figure 1, and
the underlying relationships posited between associationalism, government performance and
economic and social outcomes.

Quadrant 1 Well-Being: Well-Functioning Government, Abundant Cross-Cutting Ties

Several authors examine the relationship between economic development of nation states,
government quality and social capital. Given the limited quality of existing social capital
measures, all authors use proxy indicators. Fedderke and Klitgaard (1998) examined the
relationship between the level of per capita GDP in 1960 and 1985 as well as the average growth
of per capita GDP and an exhaustive list of political and social institutional indicators. They
found that higher levels of GDP were associated with greater civil and political rights. This
included protection of human rights, tolerance for diversity and compromise in conflict. They
also found that higher levels of GDP were associated with lower levels of political instability and
higher levels of efficiency in public institutions, as measured by the efficiency of the judiciary and
civil service bureaucracy and lower corruption. Within these three clusters, various measures
were highly correlated. The relationship was stronger for levels than for growth rates. Of some
interest is that the authors found a negative correlation, albeit not particularly strong (-.36),
between ethno-linguistic fragmentation and growth. A one-standard deviation increase in ethno-
linguistic fragmentation (equivalent to ranking Korea, the most homogenous country in the
sample, next to Mexico or Panama) would result in a .7 percent decrease in the average annual
growth rate. However, the cluster of political, social and institutional efficiency measures are all
positively associated with GDP levels.

20
 Making creative use of the Adelman-Taft (AM) index of socio-economic development,
Temple and Johnson (1998) demonstrate that social capability measured in the 1960s predicted
more accurately than conventional indicators which countries would grow in the 1980s. They
conclude that over a period of 25 years, a one standard deviation increase in this variable would
raise the annual growth rate by 1.8 percentage points. As an illustrative example, if India had
achieved the same level of social development on this measure as South Korea by 1960, then its
income per capita would have grown at just about three percent a year instead of 1.3 percent.
Indias income per capita in 1985 would then have been almost 60 percent higher.

These findings have been criticized because the AM index included some economic
indicators rather than pure social indicators. For further analysis, Temple and Johnson use four
social indicators, to capture underlying social arrangements. They are: kinship (dominance of the
immediate family over the extended family or clan and tribal allegiances); modernization of
outlook (which included an assessment of social and political participation through voluntary
associations and also the support for political and economic modernization); the extent of mass
communications (newspaper circulation and number of radios per head); and the importance of an
indigenous middle class (proportion of men employed in the professions in contrast to number of
expatriates in these professions). They run regressions using these four components.

All the social variables except outlook have statistically significant relations with growth.
The relationship between mass communications and growth remains robust even after controlling
for a range of human capital, trade policy, political stability and ethnic fragmentation. The
authors conclude by suggesting that the extent of mass communication maybe a good proxy for
the strength of civic communities, as reflected in trust and membership of associations.

Temple and Johnson (1998) also examine the relationship between measures of trust and
associational activity as measured in the World Values Survey and their social indicators.
Although the overlap in countries from the two data sets was only 10, the results are suggestive.
They find negative or insignificant relations between the two sets of social measures except when
they divide up the associational activity measure into groups that are likely to be distributional
coalitions (negative correlation) and groups that are Putnamesque (positive correlation).

La Porta and colleagues (1997) once again used the trust data from the World Values
Survey to examine the thesis that trust or social capital determines the performance of societys
institutions through cross-country regressions. Trust is the propensity to co-operate. They argue
that trust is needed more to support co-operation between strangers or between those who

21
encounter each other infrequently, as in large organizations not involved in co-production. One
such large organization is the government, in which bureaucrats have to co-operate with a large
number of other bureaucrats and citizens whom they may never see again to deliver public goods.
This argument holds equally true for the performance of large firms who must trust their
employees (Fukuyama, 1995).

La Porta et al (1997) find the effects of trust on government performance (as measured by
efficiency of the judiciary, corruption, bureaucratic quality, tax compliance and civic
participation) to be both statistically significant and quantitatively large. In addition they test
Fukuyamas thesis that family loyalty is detrimental to the growth of large corporations, and that
trust beyond the family has to become the basis for co-operation for this transition to occur. La
Porta et al find a positive coefficient between the relative share of the top 20 firms and trust in
people, 0.654 (t=4.1), and a negative coefficient with trust in family, -.563 (t=-3.1). This appears
to confirm Fukuyamas thesis that for the development of large corporations, trust has to
transcend the primary group of the family. The authors also found a small but significant effect of
trust on infrastructure quality and adequacy, infant mortality and on educational achievement.

Expanding Putnams (1993) argument that the Roman Catholic church lowers trust in
society by imposing a hierarchical structure on society, La Porta et al include two other
hierarchical religions, the Eastern Orthodox church and Islam. They find a strong negative
correlation between hierarchical religions and trust (-0.61). Holding per capita income constant,
they find that countries with more dominant hierarchical religions have less efficient judiciaries,
greater corruption, lower quality bureaucracies, higher rates of tax evasion, lower rates of
participation in civic activities, lower importance of large firms in the economy, inferior
infrastructure and higher inflation. The results remain unchanged when hierarchical religion is
used as an instrument for trust. Developed industrialized countries are over-represented in the
sample.

Finally, Knack and Keefer (1997), also using the same World Values Data set from 29
market economies, conclude that trust and civic co-operation are associated with stronger
economic performance. However, associational activity is not correlated with economic
performance, contrary to Putnams findings about Italy. They speculate that any positive effects
of groups may be balanced by the damage done by distributional coalitions - the Olson (1982)
thesis. This speculation is not borne out by their analysis, however, since the measure of
associations is weak and does not include intensity of participation in groups or the nature of

22
groups. They also conclude that trust and civic co-operation are stronger in countries with formal
institutions that effectively protect property and contract rights, and in countries that are less
polarized along lines of class and ethnicity. It is important to note that ethnic diversity does not
necessarily mean polarization. 16 The ethnic polarization measure the authors use, the percent
belonging to the largest ethnic group, is different from the ethno-linguistic fractionation measure
used by Easterly and Levine (1995) in their study of the tragedy of growth in Africa. The latter
measure the probability that two randomly selected persons from a given country will not belong
to the same ethno-linguistic group.

Quadrant 2 Exclusion: Well-Functioning Government, Poor Cross-Cutting Ties

This section examines the relationship between income inequality, which in the absence of
more direct measures is used as a proxy for exclusion; growth, inequality and government
performance; and ethnic heterogeneity, growth and government performance. Despite limitations
of proxy indicators for social capital, the patterns of results which emerge point to the importance
of cross-cutting ties across social groups for engendering co-operation, trust and social and
economic well-being and better government performance.

Dani Rodrik broke new ground in a 1997 paper, Where Did All the Growth Go? External
Shocks, Social Conflict and Growth Collapses. In it, he examines the interactions between social
conflict and external shocks on the one hand, and the domestic conflict-mediating institutions on
the other to explain the persistence of growth and the magnitude of growth collapses in the 1970s.
Rodrik argues that when social divisions run deep and the institutions of conflict management are
weak, exogenous shocks trigger distributional conflicts. Such conflicts diminish the productivity
with which a societys resources are utilized and divert activities from the entrepreneurial sphere
to the political sphere. Using econometric evidence, he concludes that the countries that
experienced the sharpest drops in growth after 1975 were those with socially divided societies as
measured by indicators of income inequality, ethnic and linguistic fragmentation and/or conflict
and social trust). These countries also had weak institutions of conflict management measured by
the quality of governmental institutions, honest and non-corrupt bureaucracy, rule of law,
democratic rights and institutionalized modes of social safety nets.

16
Rather than using the more neutral term of ethnic heterogeneity or diversity, most authors use more loaded
terms such as fracturation or fragmentation.

23
 Rodrik found that ethno-linguistic fragmentation was not strongly linked to income
inequality (r=0.13), but remained significant even after controlling for institutional quality. Hence
the evidence suggests that ethnic cleavages matter in the ability to manage shocks even after the
quality of institutions is controlled for. To test the robustness of this conclusion, he uses
additional measure of social divisions, such as home language, the proportion of people who
speak the countrys official language at home, racial tension, lack of trust, and the Gini coefficient
for land. The relation between these social conflict proxy measures and the growth differential
between 1960-75 and 1975-89 was negative and significant. The correlations between the
measures varied, thus each measure is capturing a different social characteristic. For example, he
found that no trust is highly correlated with income inequality, but not with ethnic and linguistic
measures.

Fedderke and Klitgaard (1998) found significant correlations between income inequality,
degree of hierarchical steepness in society and degree of individualism (Hofstede cultural
variables) and levels of per capital GDP, but not with growth. Knack and Keefer (1997)
demonstrate that the Gini coefficient for income inequality is strongly associated with lower trust
and civic co-operation. They also demonstrate that limits on executive power increase trust.

When income inequality is considered a proxy (albeit imperfect) of social cleavages and
social exclusion, two findings are worth noting. First is the fact that measures of income
inequality are quite stable, even during periods of rapid growth. A possible interpretation is that
since the dominant social groups make policy and resource allocation decisions, these decisions
reinforce their power and prosperity, and hence policy interventions do not result in major
changes for those excluded. The second consistent finding is that countries with initial unequal
income distributions experience slower growth. This finding is even stronger for initial unequal
distribution of land in developing countries (Deininger and Squire, 1997). Birdsall and Sabot
(1994) come to similar conclusions in comparing high inequality and low growth in Latin
America and low inequality and high growth in East Asia, but they turn to political economy
considerations to explain the different strategies in the two regions. In Latin America, the
political elite has little incentive to invest in the well-being of the poor, but in East Asia the threat
of communist insurgency led to government investment in the rural poor, in education and health
and in rural infrastructure. Larran and Vergara (1997), using data for 45 developed and
developing countries, conclude that distributive inequalities give rise to social pressures and
conflict, and these in turn generate greater instability in economic policies and lower investment.
Rodrik (1997) also concludes on the basis of cross-country regressions that severe income

24
inequality is a threat to political and economic stability. When people see some living in luxury
while others are impoverished, it creates social unrest that typically culminates in the overthrow
of government, disruption of the local economy and collapse of foreign investor confidence.

Negative associations between the ethnic diversity of societies and growth have been
reported by authors such as Easterly and Levine (1995) and Mauro (1995). Collier and Gunning
(1997) demonstrate that ethnic fractionalization negatively affects policy and reduces productivity
more directly. They also show that the correlations are stronger with the delivery of public
services such as schools and telephones, and weaker for macroeconomic policy. The wide use of
the ethno-linguistic fragmentation indicator has created a mindset in which equates ethnic
diversity with economic and political disaster, particularly in Africa. In an important study,
Collier and Hoeffler (1998) establish that the relationship between civil war and ethnic
fractionalization is not linear. The most unstable societies are those in which the index is around
45-50, societies with two fairly equal ethnic groups. On the other hand, highly fractionalized
societies, such as are found in many countries in Africa (average score of 67.6), are as stable as
the most homogenous societies.

In Latin America, by contrast, if one groups all the non-Spanish indigenous people
together and all the Spanish speakers together, many Latin American countries then consist of two
large groups with little interaction across groups, a situation rife with latent conflict. A recently
completed poverty study in Peru found that the overall poverty levels had declined in Peru.
However, the non-Spanish speaking population had not been integrated politically, socially or
economically. In fact it had fallen further behind in income terms even after controlling for
education, location, access to services, land and or house ownership (Hentschel et al, 1998).

To complement findings from cross-country data, and to understand the importance of

cross-cutting ties in reducing exclusion even in multi-racial, multiethnic industrialized countries,
it is useful to examine within-country data. Sustainable economic development requires
reciprocal on-going relationships and networks beyond narrow geographic, ethnic or political
communities in order to ensure access to additional resources (Portes and Sensebrenner, 1993).

Verba et al (1996) in Voice and Equality: Civic Voluntarism and American Politics
address the issue of inequality and the decline in civic engagement in the last three decades in the
United States. They demonstrate that politicians listen primarily to those with college education
and those who make contributions to political campaigns, which leads to selective hearing of
interests of those who are educated, wealthy and organized. Their findings are based on a

25
nationally representative sample of 15,000 Americans. They argue that citizen participation is the
heart of a functioning democracy in which politicians respond to citizen concerns, interests,
preferences and needs. This presumes that the voice of citizens is clear, understood, and loud so
policymakers have an incentive to pay attention to what is being said. In the US, as dollars have
substituted for time as inputs into the political campaigns, Verba et al show how participation in
the political process becomes skewed to the wealthy and is responsive to their priorities and
concerns. When money replaces time as the principle form of political currency, the playing
field is no longer level (1997, p.21). The voice of the poor gets drowned out, which leads to
their greater exclusion. The figures show that the top 3 percent of the sample with family incomes
over $125,000 produce more than their proportionate share of the vote, protests, campaign hours
and 35 percent of the money contributed. The top two income groups, with annual incomes over
$75,000 account for more than half the money contributed to political campaigns, while the
bottom 20 percent of the income distribution, with incomes less than $15,000 produce only 14
percent of the vote and 2 percent of the campaign dollars.

These distinctions are important because there is limited overlap of concerns and interests
between these two groups. The disadvantaged, roughly one-sixth of the public with no education
beyond high school, are more than twice as likely, and those receiving means-tested welfare
benefits are four times as likely, to focus on basic human needs, poverty, jobs, housing and health.
The concerns of the more advantaged are linked to economic issues, such as taxes, government
spending, budget, and social/moral issues, such as abortion or pornography. In sum, public
officials hear many more messages from the advantaged than from the poor because the former
belong to many more organizations that mobilize voice and resources. The authors conclude that
the only way to have the voices of the poor heard is through creating organizations of the poor.
These organizations can be political or non-political or religious. Working within these
organizations, the disadvantaged can learn new civic skills and networking that provides the basis
for the emergence of social and political movements. The civil rights movement is a case in
point.

Although the norms about racial equality have changed in the US since the civil rights
movement, exclusion based on race is still common, subtle in the higher echelons of society and
more blatant against those who live in low income areas. The disadvantaged may be excluded
not because of active discrimination, but because of non-overlapping social networks. What is
striking about US society is the lack of interconnectedness in social and civic life between whites
and blacks. Varshney (1998) argues that the different degrees of civic connectedness among

26
blacks and whites explain why race riots in the 1960s occurred in many northern cities and in Los
Angeles, but not in southern cities. Studies showed that income inequalities between black and
white Americans explained neither the timing nor the location of riots (Horowitz, 1983). Rather
the explanation appears to lie in degree of contact and integration of black Americans into local
life, in this case local government structures (Liberson and Silverman, 1965). This lack of over-
lapping social networks has many negative consequences for those excluded.

Friedman and Krackhardt (1997) come to similar conclusions in a very different context.
They conclude that Asian Chinese and Asian Indians do not rise to high and influential positions
in the US computer industry, despite high educational achievements, because they are excluded
from the social networks of the dominant group, in this case European Americans. The authors
use network analysis to study five workgroups in the computer industry in the U.S. Similarly, a
recent study in the United Kingdom by Gordon and Swift (1993) examines whether social status
and occupational attainment are based on merit or on the social status of ones family. They find
that, after controlling for education, an individual whose parents are in high service occupations is
more likely to be in a high service occupation than an individual from a working class
background. They conclude that occupation is not determined solely or even primarily by merit,
but is determined to a large extent by ones parents social class or occupational background.

The exclusion of large numbers of people from participation in the benefits of

development, in a governance environment of some degree of law and order and protection of
basic human rights, creates an environment of political opportunity, contentious politics and the
emergence of social movements linked to institutional politics. Three political scientists stand out
in the field of social movements, namely Charles Tilly (1978); Theda Skocpol (1979); and Sidney
Tarrow (1998). Tarrow uses two terms to frame a broad theory of social movements: contentious
politics, and political opportunity structure. Contentious politics occur when ordinary people,
often in league with more influential citizens, join forces in confrontation with elites, authorities
and opponents. Contentious politics are triggered when changing political opportunities and
constraints create incentives for social actors who lack resources on their own. When their
contention is backed by dense social networks and galvanized by culturally resonant symbols,
contentious politics lead to sustained interaction with opponents. The result is a social movement.

Tarrow (1998) defines a social movement as collective challenges, based on common

purpose and social solidarities, in sustained interaction with elites, opponents, and authorities.
Unlike corporate interest groups or political parties, social movements especially in the early

27
stages lack money, organization and access to the state, and hence depend on the collective
challenge to gain attention and create constituencies. While it is commonly accepted that
collective action is based on shared purpose or interest, social movements also tap deeper feelings
of solidarity or identity, that which gives shared meaning. Social movements persist when they
are embedded in dense interlocking social networks. It is only when there is connective
structure between members of groups that the action of one can incite another. Social
movements have to go beyond isolated incidents before they become a movement that persists in
time and space.

While most collective action is based on physical proximity and face to face interaction,
the advent of the press resulting in newspapers and pamphlets (Chartier, 1991) and more recently
of the internet, created the possibility of connecting people in different places in a movement
(Castells, 1997). Most importantly, newspaper readership helped link people across class
boundaries and resulted in powerful national movements, such as the abolition of slavery in
Britain, the French revolution and American independence. The loose ties created by print and
association, by newspapers, pamphlets and informal social networks, made possible a degree of
coordinated collective action across groups and classes that the supposedly strong ties of social
class seldom accomplished (Tarrow, 1998, page 51). Hence the strengthening of social capital
among groups and across groups, and shifts in societal power structure, are a complex function of
politics, political opportunity structures and access to communications technology.

Using Tarrows concepts of contentious politics and political opportunity, Fox (1996)
shows how some indigenous groups can successfully organize to challenge the power of a
repressive state. Mexico has the largest population of indigenous groups in Latin America, a
population of 10 million, comprising 56 officially recognized ethno-linguistic groups. Fox
demonstrates that indigenous communities are high in social solidarity and horizontal decision
making, i.e. high in social capital, but still among the poorest in Mexico. He shows that these
communities of scattered population can be successful when they network with other
geographically spread out communities, find allies in political elites, or are supported by other
non-political elites, such as the Catholic church. Only then do they have sufficient bargaining
power to successfully challenge local power structures, overcome the repression imposed by
authoritarian regimes, and access the power and resources of the state to meet their basic needs.

If national policies become inclusive, and co-production with the state or other allies
becomes commonplace, countries (or regions within countries) can move into the first quadrant.

28
Heller (1996) argues that underlying Keralas development transformation in recent years has
been a transformation of primary caste and community ties and identity to more universalistic
principles and identity, achieved by political party activists. He notes that the natural outcome of
a vigorous civil society rooted in interests bounded by parochial loyalties is not development, but
a kind of demand overload. In recent years, strategic use of the internet and the global media has
also facilitated social movements which successfully challenged the power of exclusionary states
in countries characterized with limited protection by the law or law and order agencies. This is
true for the Philippines, for the indigenous movements in Chiapas, Mexico (Castells, 1997) and
more recently in Indonesia.

Quadrant 3 Conflict: Dysfunctional or Collapsed State, Limited Cross-Cutting Ties

Income inequality, isolated primary groups and a governance structure which is co-opted
by a few, unaccountable to the majority, can lead to violence, conflict and high levels of crime.
The effective power of the state can be taken over by those who exercise the most force and
coercion, and in effect run parallel economies and substitute governance structures. When the
state authority, law and order extend irregularly across territory and functional relations (including
class, ethnic and gender relations), power centers shift away from the state to extra-legal
authorities that co-exist with the state but remain autonomous of it. In many countries emerging
from war, the authority of the state remains limited to the center, with loss of control and
legitimacy over the periphery. Power gets usurped from a weak state and used for personal rule
and control. The impunity of drug trade, unlawful treatment of the poor by the police or local
mafia, high crime rates, rich communities behind high security fences are all examples of the
crisis of the state.

Haiti provides ample evidence of the degeneration into violence and civil war when social
cleavages deepen, and formal institutions become instruments for control and private riches for
one social group while others live in poverty and personal insecurity. White and Smucker (1998)
trace todays social cleavages and failure of the state to the colonial days. In 1804, when Haiti
became the first nation to gain independence from a European colonial power, two social groups
emerged with different interests. One was a large number of newly freed slaves, who fought for
personal freedom from bondage, and the other was a small class of freed people of color (which
included the wealthy) who fought for economic and political freedom. These sharply defined
social distinctions where neither class assumed responsibility for providing the national public

29
good set the stage for Haitis evolution as an independent but deeply divided society. White and
Smucker describe social capital as truncated, rich at the local level but weak at regional and
national levels. Peasant social groupings are local, stable, autonomous, self-governed and based
on reciprocity. These social groups feel insecure, fear and actively avoid the state, and establish
furtive agricultural units on the margins of society. In the presence of an oppressive state and
the absence of state provided services, these informal social relations become substitutes and
serve as the primary social safety nets for the poor. The Haitian state, despite recent changes, is
marked by political intolerance, patronage, extraction of wealth and lack of protection for the
majority of its citizens.

Mauricio Rubio (1997) shows how in Colombia the existence of a large and growing
illegal and underground economy run by powerful criminal organizations has resulted in parallel
institutional environments that reward and favor opportunistic and criminal behaviors. Rubio
shows how high levels of social capital within criminal organizations are directed to extra-legal
activities, rent seeking and high returns exclusively for those involved in such activities. The
organizations that run in parallel with government institutions actually provide higher returns to
those who participate than a regular career would offer. He estimates that between 1980 and
1993, the average remuneration for minor criminal activities, excluding drug trafficking and
kidnapping, tripled in real terms, while returns for formal work remained stagnant. Currently, the
annual income of a petty criminal in Colombia is around $20,000 per year, about 10 times the per
capita GDP. Two surveys, National Survey of Quality of Life, and Quality of Life in Bogota
provide some sobering statistics. In addition to the staggering statistics on homicides in
Colombia, 54 percent of the barrios reported problems with conflict, drugs, gangs or prostitution
(Knaul and Patrinos, 1998).

Based on a study of persistent inter-communal violence in India in particular cities,

Varshney (1998) argues that there is an integral link between the structure of civic life in a
multiethnic society and ethnic conflict. Inter-ethnic networks become agents of peace because
they build bridges and manage tensions, but if communities are organized only on intra-ethnic
lines and the interconnections with other communities do not exist, ethnic violence is quite likely.
He divides both inter- and intra-ethnic networks into associational forms of engagement (formal)
and everyday forms of engagement. Associational networks include professional organizations,
reading clubs, cadre-based political parties, film clubs, NGOs. Everyday forms of engagement
consist of simple, routine interactions such as families visiting each other, children playing
together, joint participation in festivals, or eating together. He concludes that while both forms of

30
social interaction are important, in large cities associational forms are sturdier than everyday
forms of engagement, especially when confronted with attempts by politicians to polarize people
on ethnic lines.

Quadrant 4 Coping: Poorly Functioning State, Abundant Cross-Cutting Ties

Societies with higher levels of cross-cutting ties rather than deep social cleavages and
ineffective or co-opted states are characterized by the substitution of the formal system by
informal systems. If the state is not totalitarian or coercive, societies may not disintegrate into
widespread crime, violence or war, but large segments of society are left to their own devices to
cope in the best ways they can.

Richard Rose (1995) uses the term hour-glass society to describe such societies, like
Russia during the transition. There is a rich social life at the base, consisting of strong informal
networks relying on trust between friends, relatives and other face-to-face groups and which may
include friends of friends. At the top of the hour glass, there is rich political and social life, as
elites compete for power, wealth and prestige. There is co-operation within and between elites
and formal institutions as the elites use the resources of the state for their own betterment. The
narrow mid-point of the hour-glass insulates individuals from the influence of the state, and
citizens can be described as negatively integrated from the demands of potentially oppressive
state. The state on the other hand tolerates small-scale rogue organizations as long as they do
not interfere with the affairs of the state.

Using data from the New Russia Barometer, a nation-wide survey, Rose documents that
only one in eight reported that they earned enough from their official jobs to meet their basic
needs. The majority get by because in addition to the official economy, they rely on a multiplicity
of unofficial economies such as growing food, exchanging help and services with friends, having
a second job or depending on tips and bribes. There is a vast disconnect between the rich social
mechanisms and exchanges at the bottom and local formal institutions. Three-quarters of the
people also said that they never participated in local level formal institutions. The same
proportion said that most people cannot be trusted and that one had to be careful in dealing with
people. The level of distrust in political parties, parliament, police, court and civil servants ranged
from 71 percent to 83 percent. When asked if they expected fair treatment, 70 percent responded

31
no of the local government and the police. Distrust in the formal institutions combined with high
inflationary pressures in Russia results in 100 friends being worth more than ten million rubles.

This hour glass metaphor fits many developing countries, in which formal institutions are
marked by high levels of corruption, and the informal systems of coping become the primary
sources for safety, insurance and livelihood for the majority. These networks can become
overextended, and unless there are strong allies outside the communities the informal groups
remain isolated and economically stagnant. It is in these environments, when there is political
space to organize, that civil society emerges and often begins to function as a shadow
government, providing services that the state is incapable of providing. Civil society movements
may be crushed by the political regime, or may alternatively become forces for transformation of
the state. In effect, this means moving from a role of substitution to one of complementarity with
the state. The case of BRAC (the Bangladesh Rural Advancement Committee) is an example of
the latter. As a Bangladeshi NGO, BRAC provided an extensive network of schools for the poor
without any state involvement, and was initially perceived to be a competitor and threat to the
power of the state. In fact, it was a substitute for the failure of the state to provide basic education
services to poor children. Over time, however, the state has become a partner with BRAC in
reaching the poor with these services.

Collier and Gunning (1997) characterize most African governments as being run by small
educated elites, who are neither accountable nor responsive to the needs of the large majority of
the population, who send the wrong incentive signals and thus discourage private investment, who
spawn high levels of corruption, who draw most of their support from urban areas, and who
suppress civil liberties so as to prevent those excluded from organizing protest. This governance
environment results in poor returns to public investment, poor performance of publicly provided
infrastructure services (roads, railways, electricity, telephones) and low expenditure on social
security transfers.

Kenya, for example, has a strong tradition of self-help, harambee. Overuse of this
tradition has left people exhausted and disinclined to participate in any harambee initiated by the
government. A participatory poverty assessment in Kenya estimated that there are over 30,000
small self-help groups, primarily of the poor. The activities of these groups range from raising
chickens to helping with school and hospital fees, or revolving credit and savings. Yet the vast
majority of these groups, especially among the poor, remain isolated solidarity groups caught in
poverty traps. Those groups with membership extending across income groups are able to benefit

32
the poor more because of their greater ability to mobilize resources (Narayan and Nyamwaya,
1996). Despite outbreaks of state initiated tribal violence in recent years, ethnic tension was not
mentioned as a problem by people in any of 30 communities across the country.

Similarly, in neighboring Tanzania composed of over 300 ethnic groups, years of

socialism and villagization programs have led to a strong sense of national identity which appears
to supersede ethnic identity. Tanzania, despite acute poverty and a bankrupt state, has not
experienced ethnic violence or polarization. In a participatory poverty assessment conducted in
87 communities across Tanzania, people explicitly linked peace and community economic levels
to informal groups with cross-ethnic membership (Narayan, 1997).

In a study on entrepreneurship in Ghana, Barr (1997, 1998) finds that the small, cohesive
solidarity networks of the Ghanaian entrepreneurs seem to function as a substitute for formal
institutions and markets, while the larger more diverse networks of non-Ghanaian entrepreneurs
provide better access to information about markets and technologies.

Several recent studies conducted as part of the World Banks Local Level Institutions
Study (Grootaert and Narayan, 1999) confirm the importance of heterogeneity in group
membership and economic outcomes. This pattern of results is found in rural Tanzania (Narayan
and Pritchett, 1997) in Indonesia (Grootaert, 1998), and in Burkina Faso (Grootaert, Swamy and
Oh, 1999).

Other studies, particularly from Latin America, show time and again that despite high
ratings in community solidarity, indigenous communities remain poor with few connections to the
powerful within or outside the community. While they may manage to attract government
provided basic social infrastructure, this does not result in production opportunities. There is little
evidence that indigenous social organizations are providing the foundation for indigenous groups
to mobilize either for fundamental rights or for greater access to economic and political
participation (Junho Pea and Lindo-Fuentes, 1998; Gacitua-Mario, 1998). In the absence of
outside allies, indigenous social capital of poor communities remains a substitute for the resources
and services that are normally provided by the state.

All over the developing world, the poor and the middle class survive and have developed
ingenious strategies to survive. Self-provision in water and sanitation services is still the norm, as
one billion people remain without access to safe water and two billion people without adequate
sanitation. Informal child care arrangements in urban slums as mothers go to work abound,

33
community based schools and sometimes health care, management of forest resources and
common property resources, informal credit mechanisms and saving strategies all these work,
but they trap people in low productivity, and make them risk averse.

Improvements in service delivery are possible within segments of society, even when
many aspects of the state are dysfunctional. This is evidenced in the widespread success of
demand-oriented service delivery, in which government agencies have successfully redesigned
themselves away from delivering services to working with local groups as partners in co-
production. Examples include government provision of teachers, textbooks, curricula and
training for community managed primary schools in Baluchistan, Pakistan. Elsewhere in Pakistan
(Orangi in Karachi) as well as in Recife, Brazil, governments are providing main trunk and
secondary sewers in low income urban neighborhoods, while communities raise resources for and
manage household connections. In West Bengal, India, the government is providing technical
know how, and sharing benefits through joint management of forests with community groups. In
all parts of the world, there are government programs providing the capital costs for rural water
systems, relying on communities for their local knowledge, management, and operation and
maintenance. In Taiwan, Indonesia, India, Mexico and Turkey there are irrigation schemes
following the same principles. And there are micro-credit programs for the poor all over South
Asia, Latin America and Africa, with groups monitoring performance and helping clients to
graduate out of the program to starting using local banks. All these examples succeed when the
overall rules of the game are fair and transparent, and when the needs, priorities, skills and
organizational capacity of local groups are complemented by timely technical, financial
assistance, organizational know-how provided by government agencies, civil society or the
private sector.

34
 SECTION 5: POLICY IMPLICATIONS

Two sets of policy implications flow from the foregoing analysis. The first set deals with
how countries (or communities within countries) can strengthen cross-cutting ties and governance
to improve economic and social well being (movements towards Quadrant 1 in the framework).
The second set includes practical social policy interventions that are likely to be helpful.

M OVEMENT TOWARDS WELL-BEING

Cohesive family, clan or tribal groups lay the foundation for social and economic well-
being, but it is only when these groups develop ties (both weak and dense) with other social
groups that societies can build cohesive webs of cross-cutting social relations at all levels.
Societies in Western Europe, particularly the Scandinavian countries and the Netherlands, have
achieved high levels of social inclusion, peace and economic prosperity, which would place them
in Quadrant 1 of the framework presented in Figure 1. In the Netherlands for example, adoption
of consociational forms of democracy has been given credit for achieving the social cohesion
necessary for economic development (Lijphart, 1969, 1977).

Power is unequally distributed in all societies, but societies differ markedly in the degree,
extent and permanence of power asymmetries and social exclusion. When the networks of those
excluded or disempowered, consist primarily of people like themselves, and are not linked to
outside groups, information, power, and resources, the networks serve an important insurance and
solidarity function. However, they do not become agents for transformation into high return
production groups or into powerful social movements which challenge the powers of the state. In
Latin America, it is only when indigenous groups become included in local governance structures,
or when they form alliances with other indigenous groups in the country that are they able to
claim attention and resources of the state. The same is true for lower caste groups in India or for
the inclusion of African Americans in US society. Similarly, successful strategies for service
provision to excluded groups, such as micro-credit schemes, initially take advantage of social
solidarity among small groups of the poor to extend credit to those without formal collateral. But
over time, as a deliberate strategy, they socialize poor clients in the methods of formal institutions,
and actively help connect the poor to the formal banking systems.

35
 Latent conflict between the dominant groups and those excluded is a characteristic of
Quadrant 2 (Exclusion) in Figure 1. To move towards economic and social well-being, states
have to:

develop mechanisms for inclusion of those previously excluded into the formal systems of
finance, education and governance
promote change in values and norms to support inclusion
create economic opportunities
encourage social connectivity between the excluded and those in power in different spheres of
activity.

Education and special support in the form of training and mentoring is likely to be needed
during the transition, so that previously excluded groups gain the capacity to interact effectively
with local governance, educational and financial institutions. This has, for example, been a key
element of policy in post-apartheid South Africa.

When the web of cross-cutting linkages across primary social groups is weak or non-
existent, and interests of the excluded groups cannot be channeled through formal institutions of
the state, conflict and violence between groups based on religion, caste, race, or ethnicity may
escalate. Dominant or militant groups co-opt the power of the state to their own ends and become
substitutes for the state. A militarized or collapsed state characterizes Quadrant 3 (Conflict) in
Figure 1. Because of the absence of cross-cutting ties, the reconstruction of society and state
(movement from Quadrant 3 to Quadrant 1) must include participatory processes to create social
cohesion, reconciliation, and peace between former enemies; and reintegration of former soldiers
into society. Particular attention needs to be paid to mechanisms for power sharing, consultation,
justice, governance and provision of security for all. Equally important is equitable distribution of
resources among former enemy groups for reconstruction of infrastructure, education, economy
and governance across territories inhabited by different groups. Mass media that portray mutual
respect, reconciliation and tolerance among previously warring groups can help provide the
support needed to heal wounds and increase the probability of re-knitting society.

Widespread economic stagnation and use of coping strategies characterize Quadrant 4

(Coping) in Figure 1. These are societies with dense cross-cutting ties, but when the formal
institutions are co-opted by special interest groups, the informal networks and connections
between those excluded become overloaded by the burden of trying to offer services previously

36
(or possibly never) provided by the state. The result of such overloading is that networks of
association are reduced to coping strategies. Because of weak reciprocal connections among
many different social groups, the collapse of the state need not degenerate into widespread
violence and crime. But in this regressive environment, the informal institutions become poor
substitutes for formal institutions, whether in provision of credit, education, infrastructure, legal
protection, security or other basic services. To make progress in this environment, civil society
must move beyond the delivery of services, and take on the role of mobilizing social movements
to demand changes in governance.

POLICY INTERVENTIONS

To design the right policy intervention, it is vital to understand the nature of a societys
formal and informal institutions. Moving from a relationship of substitution to complementarity
between informal and formal institutions may involve interventions by the state, the private
sector, civil society groups, or all three. Interventions may be at the community level or at the
level of national laws, or changes in rules and regulations. Expansion of cross-cutting ties may be
promoted through incentive schemes for the private sector or civil society groups supported by the
government, or directly through improved communication channels such as roads, telephones and
media. Policies need to be tailored to take into account both the level of functioning of the state
and the current strength of cross-cutting ties.

It is important to note that the role played by civil society, and the contribution it makes,
will differ in the different quadrants of the framework. In Quadrant 1 (Well-being), the key role
for civil society groups is to keep the state accountable, and support processes that balance the
power of various interest and social groups in society. In Quadrant 2 (Exclusion), the key role is
in facilitating the organization and mobilization of excluded groups, identifying potential allies in
powerful groups to challenge the states exclusionary practices. In Quadrant 3 (Conflict), the key
roles shift to peace mediation, reconciliation, and reintegration of previously warring and possibly
armed groups into society. Finally in Quadrant 4 (Coping), in the absence of an effective state,
civil society groups have important roles in service delivery, while at the same time mobilizing
society to demand better governance. This means, of course, that civil society organizations will
sometimes face the need to transform themselves (e.g. from service delivery to advocacy), a task
fully as difficult as transforming society.

37
 In practical terms, the most promising interventions are likely to be of two kinds. First,
investments in the organizational capacity of the poor are crucial, both at the micro level in direct
support of poor people, and at the macro level through changes in laws and rules so as to support
associational activity. For example, in Bolivia the Law of Popular Participation established a
framework for decentralization with two important components. One was the devolution of fiscal
resources and authority to the municipal level, the other was assignment of an oversight role to
local communities. The government recruited NGOs to mobilize local communities to fulfil their
new role. The NGOs provide training to community groups in how to conduct participatory needs
assessments, formulate priorities, collaborate across communities, and monitor municipal decision
making and expenditures (Faguet, 1998).

Second, cross-cutting ties can be fostered directly, through a variety of mechanisms that
fall under seven broad headings:

Information
Inclusive participation
Conflict management mechanisms
Education and values
Economic restructuring
Governance and decentralization
Demand-driven service delivery

Information

Whether one views social capital through a sociological, political or economic lens, all
perspectives lead one to the conclusion that a free information flow is essential for equal
opportunity, consensus building, keeping the state accountable, and challenging the state when
necessary. Making access to information about employment or investment opportunities widely
available helps to offset the information isolation of excluded groups. Information is a public
good that can be fostered through easy and equal access to communication channels and public
information disclosure laws. Civil society organizations have an important role in informing
people about their rights to information.

38
 Perhaps the biggest revolution in the century just ending is the information revolution.
The power of newspapers, books, post offices, telephones, cellular telephones, faxes, and the
internet to disseminate information quickly is immense. A Nobel prize was won by the organizer
of a campaign for the signing of an international treaty on land mines, who conducted the
campaign largely from a cabin in the woods in Vermont, U.S.A. Poor, landless women in
Bangladesh have become the ones with cellular telephones and the power to connect people to
relatives, friends or businesses anywhere in the world, through a program sponsored by Grameen
Telecom. Telephones already link poor buyers and sellers to daily market prices for commodities
in cities, thus changing their negotiating power with middle-men in fundamental ways, and the
internet has the potential for far more. It is clear that government investment in physical
infrastructure can play a critical role in supporting connectivity across space and social groups.
Examples include roads, power supply, telephones, post offices and community halls that ease
communication and movement of people and information, and provide space for different social
groups to come together. Civil society organizations may not be much involved in infrastructure
investment, but they have an obvious part to play in promoting connectivity, and in educating
people about their rights to information.

Inclusive participation

Citizen voice, participation and representation of all social groups in state decision making
generate consensus, trust and social learning. Citizen and civil society participation challenges
the state, and at the same time keeps the state accountable. It is essential for citizens and civil
society groups to have access to timely and reasonably independent information about state action
and performance, for example through citizen-led audits of government. A good recent example is
the independent report produced by citizen groups in India on the state of primary education in
that country. The findings of the report have been made widely available, with issues and
findings reported and debated in the national media. In some areas in Rajasthan, India, civil
society pressure for information disclosure has led to village governments posting in a public
space information on all government funds received and detailed accounts of expenditures. This
has led to widespread knowledge of fraudulence, and in many cases to corrective action.

Freedom to associate is a prerequisite for open participation and shapes the emergence of
civil society organizations. In many countries, restrictive and regressive civil society laws and
regulations prevent the emergence of such groups and restrict the mobilization of local resources

39
to support civil society action. Tax exemptions and other incentives for the private sector to invest
in and connect with local communities, invest in poor areas, support local initiatives and
leadership development, all nurture civil society development and action without loss of
independence.

State accountability and citizen choice are supported by political pluralism and
competition at all levels. When citizen groups have the right to elect local and national officials,
they have the potential power to have their interests represented in local governance. The interests
of excluded groups rarely get represented without contentious politics and collective action by
those excluded. But without political pluralism there is rarely any opportunity for recourse. In
this area, action by civil society organizations to help excluded groups organize and mobilize is
especially important.

Conflict management mechanisms

Every society has conflict resolution mechanisms to protect human and property rights.
These are critical to create societies that are socially cohesive, in which people feel secure and are
willing to invest. Laws, regulations and fair treatment of all social groups are critical in generating
trust and social and economic stability. Access to the judiciary and expectations of quick and
cheap justice help promote trust and use of the formal system. Alternative dispute resolution
mechanisms are also important, so that disputes can be resolved quickly and less formally.

It is obvious that conflict prevention is better than conflict resolution. The problem, as
diplomats and mediators attest, is that there is very little incentive to invest in conflict prevention.
The best strategy is to increase social interaction among those social groups that have little do
with one another. This could involve use of public space in ways that encourages people from
different social and ethnic groups to live, work or engage more frequently together, particularly in
multi-ethnic societies. Providing high quality public transportation which all social groups use,
and safe public parks, places of worship, community halls, recreational and sports facilities which
encourage common civic life will lead to much needed weak ties across social groups. Inclusion
of excluded groups in local governance structures is a powerful way of creating new social ties.

The family (however defined) lays the social foundation of societies. But the state has
important role to play in providing social and economic safety nets to protect families from
breaking apart in the face of violent conflict, and as they adjust to transitions from violence to

40
peace. These measures might include childcare, health care, counseling, demilitarization and
reintegration of soldiers into community life, retraining, and economic cushions for men and
women to cope with the transition into new lives. Civil society groups can obviously play a key
role in such programs.

Education and values

Many children and youth in rich societies spend the ages between 4 and 22 years in
educational institutions. And in all countries the goal includes at least free primary education for
everyone. It is clear from the literature on social capital, as well as that on development, that
education and literacy matter for economic development. But schools are also critical for the
socialization function they perform. Together with families, schools instill values that promote
nationhood, citizenship, and ethics, and that recreate societies. While education is important for
livelihood issues, its importance in generating social cohesion has been underestimated and
overlooked. The language of instruction, the extent of segregation (official or unofficial) of social
groups in schools, the extent to which the school curriculum portrays different social groups fairly
so as to promote mutual respect and tolerance all these affect the probability of inter-group
harmony, even while each group maintains its distinctive identity.

The state usually takes primary responsibility for education, but civil society organizations
can have a major influence on curricula and ensuring adequate performance.

Economic restructuring

Economic restructuring, like civil service reform or the construction of large dams,
displaces large numbers of people. Depending on the pre-existing distribution of power and
connectivity among social groups, access to new opportunities will also be unequally distributed.
Unless careful attention is paid to the existing social institutions, even nominally redistributive
programs may reinforce current or create new social and economic cleavages. To create
opportunities for the inclusion of previously excluded groups means achieving a new alignment of
social actors, and requires an investment in understanding the existing social structures, processes
and values.

41
 Civil society organizations, including social research institutes, can be valuable partners in
understanding the political and economic context within which reform has to be shaped.

Governance and decentralization

The impetus behind current decentralization efforts in more than 70 countries is to bring
governance and government resources closer to people. The goal is governments that are
responsive to local needs and accountable to local citizens. However, this will only work if two
types of institutional mechanisms exist to connect ordinary citizens and their local governments in
a two-way flow of information. First, mechanisms are needed for channeling information about
government resources, programs and performance to ordinary citizens. Second, mechanisms are
needed through which local people can channel their preferences while maintaining their
independence of government, so that they can voice dissent without repercussions for their
families or social group. The interests of the poor and other marginal groups are not represented
unless such groups mobilize and organize.

Few countries embarking on decentralization programs have such mechanisms in place,

and even fewer invest resources to educate and mobilize local people to perform their new roles as
informed citizens asserting their new rights. The focus is usually on the creation of devolved state
structures rather than on the structure of the society in which these new organizational forms have
to function. The Law of Popular Participation in Bolivia is one of the few cases where these
institutional mechanisms have been thought through. Bolivian civil society organizations are
mobilizing efforts to build strong peoples organizations, so as to ensure that the Participation
Law works for the benefit of indigenous groups.

Demand-oriented service delivery

Co-production between the state and community groups creates synergy and
complementarity in the management of local public resources. It also creates local ownership, an
essential ingredient of sustainable projects. Collective action for the provision of local public
goods, in partnership with agencies external to the community, is important at all levels of
development, even though the form of participation may change over time. For example, a
persons involvement in a water supply scheme might evolve over the years from collective labor

42
to dig trenches and lay pipes, through membership on a committee, through belonging to a
cooperative venture, eventually to being a paying customer.

Introducing participation and collective action in the management of local resources

usually requires fundamental shifts in agency mission, roles, values and indicators of success.
Instead of seeing themselves as suppliers of inputs (pipes, sewers, seedlings, electricity), agencies
have to become supporters of inclusive local organizations and enablers of resource flows. The
necessary shifts in culture and the incentives facing agencies are difficult to bring about, but
essential if changes are to be sustained over time.

Civil society organizations have a long history of helping communities to obtain and
maintain services that were theoretically provided by state agencies. They can be helpful to state
agencies as the latter feel their way in their new roles.

In summary, using the lens of social capital, and especially the concepts of cross-cutting
ties among social groups and governance, leads to some interesting new insights for policy design.
Interventions can stem from civil society, the private sector, or the state, and cover a wide range
of fields, including: changes in rules so as to include those previously excluded in formal
governance structures, at local, regional and national levels; political pluralism and citizenship
rights; fairness for all social groups before the law; public access to mediation, conflict resolution
or negotiation councils; availability of public spaces that bring social groups together;
infrastructure that eases communication; education, media and public information policies that
reinforce the norms and values supporting tolerance and respect for diversity. But whatever the
sector or topic, interventions need to be designed explicitly to enhance complementarity. That is,
they need to take into account not only their immediate impact on a particular sector, but also their
contribution to fostering a rich network of cross-cutting ties within society and between societys
informal and formal institutions.

43
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