Questions and answers about coronavirus and the UK economy
Questions and answers about coronavirus and the UK economy

How has coronavirus affected social capital in the UK?

Social capital – a measure of the strength of our communities and society as a whole – has been declining in the UK in recent years. Rebuilding these bonds will be vital to meet the challenges of inequality, climate change and recovery from the crisis.

The strength of a country’s network of social relationships – what can be described as its stock of ‘social capital’ ­– has a significant influence on a broad range of socio-economic indicators, including measures of health, inequality, productivity and economic growth.

Data for the UK as a whole and for Scotland indicate that, going into the crisis, social capital was declining. It is unclear whether or not the pandemic will exacerbate this trend. But given widespread evidence of the positive effects of social capital and the dramatic effects that Covid-19 has had on so many parts of our lives, it is likely to play an important role in the post-pandemic recovery.

It is therefore worthwhile examining how Covid-19 has affected these vital networks in the UK and what policies might be needed to strengthen or rebuild them.

What is social capital?

Social capital means different things to different people and there is no single widely accepted definition. But there is a commonality of the relevant factors and concepts that underpin the various interpretations.

For example, social capital has been described as ‘an instantiated set of informal values or norms shared among members of a group that permits them to cooperate with one another. If members of the group come to expect that others will behave reliably and honestly, then they will come to trust one another’ (Fukuyama, 1999).

Similarly, it is argued that social capital ‘generally refers to trust, concern for one’s associates, a willingness to live by the norms of one’s community and to punish those who do not’ (Bowles and Gintis, 2002). For others, ‘social capital refers to connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them’ (Putnam, 2000).

Trust seems to be the key word that captures the central element of what social capital is all about.

What are the benefits of social capital?

Mutual trust underwrites our interactions, whether they are private, social, economic or political in nature. From an economic perspective, firms can benefit from the cooperative trust embodied in various types of networks, since this can reduce transaction and monitoring costs, and help to facilitate an efficient allocation of resources.

In contrast, society wastes resources when people distrust each other and are dishonest. For example, management may have to introduce complex monitoring and surveillance systems in the workplace to ensure staff to fulfil their work time obligations.

At the macroeconomic level (in other words, looking at the economy as a whole), it has been demonstrated that inter-personal trust is strongly linked to GDP growth (Knack and Keefer, 1997). It has also been shown that ‘trust-based cooperative relations’ between different organisations have contributed to the competitive advantage of manufacturing enterprises in Germany and Japan, as well as in parts of Italy (Humphry and Schmitz, 1998).

Further, a variety of studies have demonstrated that social capital is positively associated with improved health outcomes along a number of dimensions, as well as reduced inequality and a reduction in crime rates (OECD, 2000; OECD, 2010). When there is trust embedded in our communities, individuals and society as a whole benefit.

What are the recent trends in social capital in the UK and Scotland?

The most recent study of social capital in the UK by the Office for National Statistics (ONS) was published in February 2020 and included data for the year up to the end of Autumn 2019 (ONS, 2020). The ONS measures social capital in terms of personal relationships, social network support, civic engagement, and trust and cooperative norms – using 25 indicators of social capital in total.

Figure 1: Trust (%) in national government in the UK, 2004-2019

Source: Office for National Statistics

A number of indicators show a fall in social capital going into the pandemic. First, there was a dramatic decline in the general public’s trust in national government from 2017 to 2019 – from 32% to 21%, as shown in Figure 1.

Second, the proportion of those saying that they feel they ‘belong’ to their neighbourhood has also fallen since 2014. In terms of individual engagement, which includes interactions with their personal environment and networks, people are less likely to connect with wider interests through organisational membership of clubs, community trusts, religious networks and social service groups, both in the short and longer term.

Finally, and corresponding to the falls in actual community engagement, there has been a sharp rise (53% in 2013 to 68% 2019) in the use of the internet for social networking in the recent past. This is shown in Figure 2 and is discussed further below.

Figure 2: Proportion who used the internet for social networking in the last three months in the UK, 2011-2019

Source: Office for National Statistics

The Scottish government’s social capital index is based on four themes: social networks, community cohesion, social participation and community empowerment (Scottish Government, 2020). Under these headings, data from 18 survey questions asked in the Scottish Household Survey are tracked over time and used to create an overall measure of the national change in social capital since 2013.

The latest data were published in February 2020 (but the next publication is not scheduled until October 2021). The Scottish social capital measure was stable at the 100 mark between 2013 and 2017 but fell in the two subsequent years, to 93 points by 2019. The change between 2017 and 2019 has been driven by the decrease in the social capital themes of ‘empowerment’ (feeling able to influence decisions), ‘networks’ (neighbourhood help and support) and ‘participation’ (volunteering).

What has happened to social capital during the pandemic?

The pandemic has dramatically changed the way in which many people work and enjoy their leisure time, with working from home becoming a new norm for many. This shift, when considered alongside the millions on furlough and those that have become unemployed, raises important questions about the impact of the pandemic on the UK’s stock of social capital.

The effects can be seen at different levels. Trainees in various sectors are most likely to have found it difficult to build good network relationships, despite access to the internet. Many may have started jobs but never met their colleagues. This is something their employers may need to address after the pandemic. In workplaces where good trust-building networks were not built-up pre-pandemic, enforced working at home may have exacerbated existing inefficiencies.

Given the behavioural changes that have resulted from the pandemic, its effect on trust is likely to have had wider implications and affected how people interact outside the workplace. For example, the risk of catching Covid-19 from other people is likely to have changed levels of trust. This may limit people’s ability to sustain the kind of network relationships that are essential to building and maintaining social capital.

As noted above, the UK-wide survey of social capital indicates a dramatic fall in trust in national government going into the pandemic, and it is unclear at this stage whether or not this trend will continue. The UK government’s handling of the first phase of the pandemic perhaps suggests that the loss of trust will continue, although the impressive speed of the rollout of the vaccine in the second phase may counter this. The overall effect on government trust is likely to be dependent on how gradual relaxation of the current lockdown pans out.

With the significant increase in the use of the internet and social media platforms during the pandemic, it could be argued that virtual networks have substituted for actual networks. But there is growing evidence that it is the ability of the internet to create in-person meetings and foster ‘real-world’ relationships that are the most important means through which it can bring about change (Putnam and Skocpol, 2018).

Another aspect of working from home is that commuting times have fallen significantly. This has allowed people to interact more at their local community level, thereby potentially building social capital in a different direction.

One of the key ways this has been demonstrated during the pandemic is the large number of local voluntary community groups that have been formed to assist the most vulnerable with deliveries of food and other essential supplies. It is estimated that ten million adults in the UK have volunteered for community activities or organisations for, on average, three hours per week. This would be equivalent to approximately £400 million worth of labour at the median UK wage.

What are the potential policy responses to changes in social capital?

Whatever the actual outcome for social capital that results from the pandemic, we know that there will be inferior outcomes for health, inequalities and economic growth. This means that there is a strong case for rebuilding social capital. What policy changes and other factors could bring about positive change?

Comparisons have been made between the end of the so-called ‘Gilded Age’ in the United States (1870-1900) and the current period in terms of persistent inequality, polarisation and cultural self-absorption (Putnam, 2020). In reaction to the large inequalities in the Gilded Age, a diverse group of progressive reformists became prominent in civil society. These reformers created a huge range of groups, such as the Rotary Club and other societies with a community-based focus on socialising, service and mutual aid. This movement created a vast store of social capital, which helped to foster widespread support for legislation to address such issues as labour reform, the monopoly power of corporations and inequality.

In order to achieve a comparable reform today, policy-makers may need to follow the lead of the progressive reformers of the Gilded Age and engage in an ‘immense collaboration’. Perhaps post-pandemic, other pressing concerns such as climate change or global inequality will be the galvanising focus that creates such collaboration, with the internet and social media playing a supporting role.

Another way in which the UK’s stock of social capital could be improved is in terms of reforming the objectives of companies. The idea that the modern-day corporation is only about maximising shareholder value has created huge inequalities, leading many to call for a move away from the shareholder-based model to a system where firms have responsibilities to the societies they operate within.

Such a change could be achieved by a change in corporate law that would alter the governance of modern companies and refocus their objectives to include taking account of the undesirable side-effects of maximising shareholder value. Specifically, this could be done by ensuring that the costs of maintaining social, human and natural capital are taken into account when determining profits.

It is widely accepted that the UK is over-centralised. As a result, in many communities, the level of perceived influence over local decision-making has been consistently low in recent years. Decentralisation of decision-making could therefore give people in local communities a greater incentive to get involved in local governance, building stronger local-level social networks in doing so.

Further, policies that support the greater use of information and communications technology could be used to help connect people with their local neighbourhoods, as well as more distant communities. Electronic networks can also serve to communicate information and ease market transactions, especially where matching information is lacking (OECD, 2000). There are undoubtedly inequalities in the ability to access technology, for example high-speed broadband, and policy should therefore recognise the special need to target disadvantaged groups.

Other initiatives could include fiscal support, in the form of tax relief, for families that encourages or facilitates more parental involvement in the lives of children. These policies could work alongside government support for voluntary initiatives on the ‘demand-side’, with measures that encourage funding of organisations that make effective use of volunteers. There could also be ‘supply-side’ measures that encourage employers to offer time off for some sorts of community activity (OECD, 2000).

Finally, government could empower citizens by supporting co-production models in communities. This could help ensure that health and social care, for example, are embedded in local communities (Scottish Co-production Network). Such initiatives would enable elderly and other groups to stay closer to their families, sustaining social ties and reaping positive health benefits. Research has shown that such benefits are closely linked to social capital – a finding that has particular resonance in light of the pandemic, given the severity of Covid-19 outbreaks in care homes.

In the wake of the financial crisis, the pandemic has again highlighted the overemphasis of financial capital in our society at the expense of other forms of capital, such as natural capital and social capital. Given the considerable evidence that social capital has a pervasive effect on a wide variety of socio-economic indicators – such as health, wellbeing and productivity – if we are to rebuild a post-pandemic society that addresses the key issues of inequality and climate change, and create a sustainable and resilient recovery, there has to be a greater emphasis on rebuilding and strengthening social capital.

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Author: Ronald MacDonald
Photo by Manuel Peris Tirado on Unsplash
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