What You Need to Know About the World’s Social Capital

Social capital is such an integral part of a nation’s wellbeing that it is measured each year in the Legatum Institute Prosperity Index. The Legatum Institute strives to determine what pathways successfully enable a country to move from poverty to prosperity, and then promotes policies that assist in that transformation.

However, the institute doesn’t believe that prosperity is solely about material wealth; but, instead, recognizes that it also must include personal and social wellbeing.

For this reason, out of the nine pillars included in their annual Prosperity Index, one of them focuses explicitly on social capital. As the institute explains, “social networks, and the cohesion a society experiences when people trust and respect one another, have a direct effect on the prosperity of a country.”

Therefore, by measuring how countries have changed with regard to social capital, the index illustrates how specific approaches or circumstances move a state toward or away from prosperity.

Read on to learn more about the rising and falling levels of social capital in the world.

1. A nation’s social capital is linked to its economic growth.

One of the most critical takeaways from the Prosperity Index findings indicates that nations with lower levels of trust generally also encounter more moderate levels of economic growth. For this reason, the Legatum Institute believes that creating and maintaining strong social networks are necessary for the generation of financial returns and an improvement in overall wellbeing.

Their findings, along with other current research, deviate from the common belief that growth can only be brought about by the traditional outputs of capital, labor, and natural resources.

In fact, due to its ability to boost economic growth by emphasizing the value of cooperation and trust within institutions, companies, the state, and among individuals, social capital is considered essential to maximize social welfare. Plus, it functions as an internal engagement apparatus to solve the social dilemma of free-riding and solely self-interest-focused motives.

2. There are three aspects of social capital.

Within the pillar of social capital, the Legatum Prosperity Index 2018 breaks it down into three sections – personal and social relationships, social norms, and civic participation. These three sections have their own indicators and help to bring a more thorough and well-rounded understanding of the state of the world’s social capital. Here are the indicators:

• For Personal and Social Relationships: perceived level of opportunity to make friends, ability to count on family/friends for help, frequency of helping strangers, frequency of giving informal financial help.
• For Social Norms: perceived level of respect, confidence in the local police force.
• For Civic Participation: frequency of donations to charity, frequency of volunteering, frequency of voicing opinions to public officials, voter turnout.

3. There isn’t just one model.

A thorough read through the findings of the Legatum Prosperity Index 2018 demonstrates that while there is a lot of improvement being made around the world in all nine pillars, the level of development is by no means universal. On the one hand, numerous countries in Sub-Saharan Africa are progressing, earning a higher ranking in the areas of Business Environment, Governance and, of course, Social Capital.

However, the five countries with the most significant declines in their scores were also in the Sub-Saharan Africa region, with Tanzania dropping the most due to a drastic decrease in levels of voluntary financial help.

Additionally, according to the report, the last decade has seen global improvement in social capital thanks mostly to the increased strength of personal and social relationships, especially in the Asia-Pacific region.

Often, countries will rise in one area, while lowering in another, such as Malaysia where there are continuous declining levels of respect and police trust, while also drastic improvements in personal relationships and civic participation have been observed. Inversely, in the Czech Republic, confidence in the police has improved dramatically, while civic participation has dwindled.

Whatever the patterns of development (or regression, for that matter) in terms of social capital, there is no denying the fact that genuine total development in a country can never be divorced from social wellbeing.

Have you ever considered the social capital of where you reside? How do you think that these aspects of social capital affect your life?

Let us know your thoughts and ideas in the comments below!