Social Capital and Regional Economies in Britain
| Published date | 01 March 2004 |
| DOI | 10.1111/j.1467-9248.2004.00466.x |
| Date | 01 March 2004 |
| Author | Terrence Casey |
| Subject Matter | Article |
Social Capital and Regional Economies
in Britain
Terrence Casey
Rose-Hulman Institute of Technology
Is social capital a prerequisite for prosperity? This paper analyzes social capital and economic per-
formance in the British regions. Like Italy, Britain has a north–south economic divide. Are these
differences caused by unequal stocks of social capital? This paper provides limited support for the
hypothesized relationship between some indicators of social capital (especially trust and civic asso-
ciations) and economic performance. Economic associations, however, are negatively correlated.
This highlights shortcomings in social capital theory in terms of transferring the concept to new
settings, the mechanisms linking social capital to production and the translation of social capital
into public policy.
Is social capital a prerequisite for prosperity? Defined as networks of association
and trust, social capital gained prominence through the works of Robert Putnam,
particularly his seminal Making Democracy Work (Putnam, 1991) and his more recent
Bowling Alone (Putnam, 2000). In the former, he contends that poor governance in
southern Italy resulted from a lack of civic community. Transferring these ideas to
the United States, he documents the overall decline of social capital, as well as the
correspondence between low social capital and crime, poor health, low educational
attainment, poverty, etc. (Putnam, 2000, pp. 287–363). Social capital is portrayed
as an undersupplied tonic for a wide range of social ills.
Putnam’s work has opened a Pandora’s box of research, the concept being used to
understand everything from families and youth behavior, to education, health,
social welfare, etc. (Woolcock, 1998). Perhaps the most intriguing of all of these
applications is the connection between social capital and economics, especially as
its focus on non-market relations contrasts sharply with the neoclassical emphasis
on market efficiency. Putnam, for his part, is unequivocal on the connection
between social capital and prosperity (Putnam, 1993). Economic growth requires
mutually beneficial cooperation – it is a collective action problem. A society char-
acterized by generalized trust and reciprocity will be adept at addressing such prob-
lems, increasing aggregate economic gains. Viewed as such, social capital is a general
prerequisite for effective collective action.
Despite the outpouring of research, few studies have directly replicated Putnam by
measuring social capital and economies at the sub-national level. Helliwell and
Putnam (1995) analyzed Italian regional economies and social capital, not surpris-
ingly finding a positive and significant association. Schneider et al. (2000) tested
Putnam’s hypothesis for the regions of the European Union, finding economic
factors more significant in determining growth than social capital. However, they
POLITICAL STUDIES: 2004 VOL 52, 96–117
© Political Studies Association, 2004.
Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
SOCIAL CAPITAL AND REGIONAL ECONOMIES 97
gauged social capital through political engagement and knowledge, excluding the
crucial factors of associations and trust. That such an influential study has not been
directly replicated in multiple contexts is unfortunate in itself, especially as the orig-
inal case study, the north–south question in Italy, is primarily of interest because
of the economic stagnation of southern Italy.
If we look beyond Italy, will we still find a connection between social capital
and regional economic performance? Like Italy, Britain is also noted for a
‘north–south economic divide’, with a rich south and less prosperous areas in
northern England and in Scotland and Wales. Analysis of this was much in vogue
in the 1980s, as employment and output outside of southern England plum-
meted under Thatcher. However, the depth of recession in the south (with the
collapse of the housing market) in the early 1990s led many to conclude that
the north–south divide had been an aberration: the Blair government declared the
idea outdated, obscuring variations within regions as great as those across regions
(Cabinet Office, 1999). There are, of course, pockets of poverty and prosperity
in all parts of the UK, but the broader trend is undeniable: southern England is
consistently more prosperous than the rest of the country (House of Commons,
2000; Oxford Economic Forecasting, 2000, pp. 9–12). The government concedes
as much by specifying economic factors as a rationale for creating English regional
governments (DTLR, 2002). Moreover, far from narrowing in the 1990s, the rela-
tive gaps have continued to grow (Casey, 2002). The north–south divide is alive
and well.
The key question is why these trends persist. Social capital theory suggests that we
should find a surfeit of social capital in the south and a shortage elsewhere. I
explored the validity of this thesis by examining social capital and regional
economies in Britain. In the first section of this paper, I will situate social capital
theory with other models of growth. Next, I will present regional economic and
social capital data. The results from this analysis are mixed: some elements of social
capital correlate with economic performance, whereas others show no association
or a negative relationship. In the final section, I will explore the implications of
these results for social capital theory.
Social Capital Theory and Economic Performance
Why are some areas prosperous and others poor? The theoretical baseline for this
question is the neoclassical growth model, in which changes in income are a func-
tion of levels of physical capital, labor (both quantity and quality, or ‘human
capital’) and technology (Solow, 1956). Thus, neoclassical models capture how
changes in savings and investment alter growth trajectories. Unfortunately, this
only accounts for a small percentage of the variations across countries. Underlying
factors determining divergent growth rates (for example rising productivity and
improving human capital) are exogenous. Neoclassical growth models also assume
diminishing returns, implying convergence across areas over time. Neither predic-
tion has been supported empirically (McCallum, 1996).
These shortcomings led to two refinements. Endogenous growth models attempt
to bring technology and human capital into the ‘growth equation’ (Romer, 1990,
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