BOWLING ALONE
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At the individual level, social connections affect one’s life chances. People who grow up in well-to-do families with economically valuable social ties are more likely to succeed in the economic marketplace, not merely because they tend to be richer and better educated, but also because they can and will ply their connections. Conversely, individuals who grow up in socially isolated rural and inner-city areas are held back, not merely because they tend to be financially and educationally deprived, but also because they are relatively poor in social ties that can provide a “hand up.”2
Economists have developed an impressive body of research suggesting that social ties can influence who gets a job, a bonus, a promotion, and other employment benefits.3 Social networks provide people with advice, job leads, strategic information, and letters of recommendation. In his pioneering work on job searchers during the 1970s, Mark Granovetter documented the counterintuitive fact that casual acquaintances can be more important assets than close friends and family for individuals in search of employment.4 My closest friends and kin—my “strong ties”—are likely to know the same people and hear of the same opportunities I do. More distant acquaintances—my “weakties”— are more likely to link me to unexpected opportunities, and thus those weak ties are actually more valuable to me.
Granovetter’s “strength of weak ties” finding has been replicated and expanded upon by other researchers interested in social mobility. Recently studies have found that such “weak ties” have an especially strong impact on the fortunes of people at the margins of mainstream economic and social institutions.5 As is usually the case, there is a lively debate over precisely how much job networks—or isolation therefrom—really influence the employment prospects of inner-city residents. Skeptics have argued that employer racism,6 the educational requirements of new urban jobs,7 and city dwellers’ lack of access to suburban growth centers8 are equally or more important obstacles. Yet a mounting body of evidence suggests that social capital does matter, and its presence may help to surmount these employment barriers.9
For example, researchers have shown that when social networks and institutions are present, unemployed people take advantage of them to good ends. One sees this most in ethnic immigrant communities, where employers rely on their employees to recruit and train new workers. This social-capital approach is said to speed training, improve employee morale, and enhance loyalty to the company. The practice of using ethnic networks as employment networks goes a long way to explain why certain ethnic groups perennially dominate certain services and industries, the Chinese “rag trade” in New York being a good example. One study of niche economies found that for most ethnic groups such solidaristic hiring practices actually boosted immigrants’ wages to the level of similarly skilled whites. Immigrant networks also provide financing to entrepreneurs, whether in the form of gifts from family members or loans from rotating credit associations.10 (A rotating credit association is a group, often ethnically based, in which members make regular contributions to a common fund, which is then made available, in whole or in part, to each contributor in rotation. Such self-help microlending arrangements are widespread throughout the world wherever formal credit institutions are unwilling or unable to provide credit to small borrowers.) A study of Korean business owners found that about 70 percent used debt financing to start their enterprises and that of those who borrowed, 41 percent got their money from family and 24 percent from friends (compared with 37 percent from a financial institution).
The economic advantages of social ties extend beyond ethnic enclaves. Surveys of unemployed people have found, for example, that they look first to friends and relatives for leads on job openings. Fully 85 percent of young men in one survey used personal networks to find employment, compared with just 54–58 percent who said they used state agencies and newspapers. In Los Angeles two-thirds of white and black women who had looked for a job in the past five years landed their latest or current position with the help of someone they knew in the firm. Interestingly, for most of these women, the person who was of the most direct help lived outside their own neighborhoods.11 All told, data from diverse surveys suggest that roughly one-half of people get their jobs through a friend or relative.12 Other studies have examined the importance of institutionalized social-capital networks for job attainment. For example, the frequency of church attendance is one of the strongest predictors of whether inner-city black youths will become gainfully employed. The youths’ religious beliefs have almost no impact on employment, suggesting that it is the social networking aspect of churchgoing, not the religious aspect, that is behind these youths’ economic success.13
Nor is the economic value of social networks limited to the have nots. Sociologist Ronald S. Burt has demonstrated that the social and organizational ties embodied in a business executive’s Rolodex are at least as important in determining her career success as her educational qualifications and experience. Dozens of studies from Albany to Singapore and from Dresden to Detroit have found that at all levels in the social hierarchy and in all parts of the economy, social capital is a powerful resource for achieving occupational advancement, social status, and economic rewards—perhaps even more important than human capital (education and experience). Studying banking in Chicago, Brian Uzzi found that “firms that embed their commercial transactions with their lender in social attachments receive lower interest rates on loans.” Even in buying and selling, especially for major purchases or risky transactions, we prefer to deal with people we know. Sociologists Paul Dimaggio and Hugh Louch found that “people who transact with friends and relatives report greater satisfaction with the results than do people who transact with strangers.”14
These studies provide solid evidence that social capital matters because our networks, if they are extensive enough, connect us to potential economic partners, provide high-quality information, and vouch for us.15 Moreover, for many white-collar jobs, our connections—our access to other people and institutions—is what our employer actually is hiring us for. In short, social networks have undeniable monetary value.
One problem, as the leading scholars of urban life have noted, is that these social networks are absent in precisely the places where they are needed most. In Chicago, for example, blacks who live in extreme poverty—Wilson’s “truly disadvantaged”—were substantially less likely than blacks in low-poverty areas to have a current partner or best friend. If the extreme poverty resident did have a partner or best friend, that partner/friend was substantially less likely to have completed high school or to have steady work than the partners and friends of blacks in less destitute neighborhoods. The data suggest “that not only do residents of extreme-poverty areas have fewer social ties but also that they tend to have ties of less social worth, as measured by the social position of their partners, parents, siblings, and best friends, for instance. In short, they possess lower volumes of social capital.”16 Scholars in other cities have reached similar conclusions. A study of the impoverished and socially isolated Red Hook section of Brooklyn, for example, has documented the deterioration of neighborhood associations and church activities. Their decline has inhibited the growth of social networks just as employers were making most of their hires through “word of mouth.”17 And a study of Los Angeles County found that neighborhood poverty kept workers’ wages down not because they lacked transportation to well-paying jobs, but because these workers lacked access to networks of people who could tell them about good job opportunities in the first place.18 Social contacts can be extremely lucrative in theory—an Atlanta study found that each employed person in one’s social network increases one’s annual income by $1,400.19 But networks tend to be more lucrative for whites than for members of minority groups. Blacks who gain job information from their neighbors tend to earn less than blacks who obtain their jobs through contacts outside the neighborhood.20 This suggests that among the disadvantaged, “bridging” social capital may be the most lucrative form. All told, people in economically di
sadvantaged areas appear to suffer doubly. They lack the material resources to get ahead, and they lack the social resources that might enable them to amass these material resources.
In some ways social capital may be economically counterproductive. Some scholars who study ethnic “niche” economies—retail, manufacturing, or service sectors dominated by one immigrant group—have questioned whether their tight bonds of trust and solidarity might restrict growth and mobility. Although ethnic enclaves provide start-up capital and customers to their own entrepreneurs, the pressures of solidarity can drag down individuals and businesses that succeed “too much” or that try to expand beyond the immediate ethnically based market.21 Some sociologists have also noted that less successful members of the community sometimes take advantage of the bonds of obligation and responsibility felt by more successful members. Thus, fast-rising entrepreneurs often face excessive demands for jobs, money, and other favors from struggling family members and neighbors. To realize their full potential, entrepreneurs may have to reach beyond their own ethnic groups or neighborhoods and forge ties to the broader world—customers, financial institutions, and civic associations.22 Where social capital is not productive, it must be sought elsewhere.
Tight networks also may be exploited by commercial concerns seeking easy profits. For example, Amway and other businesses rely on quasi-independent agents to recruit others into merchandising. In these cases agents are asked to call upon friends and neighbors to buy and sell products, a situation that some view as anathema to the tacit norms of reciprocity and altruism that govern good social relations. These exceptions aside, however, most researchers agree that social capital does help individuals to prosper. The only real debate is over how big a role social capital plays relative to human or financial capital.
Given that social capital can benefit individuals, it is perhaps no surprise that it also can help neighborhoods, and even entire nations, to create wealth. This happens in many different ways. At the neighborhood level social capital is a marketable asset for homeowners. A Pittsburgh study found that, other things being equal, neighborhoods with high social capital were far less likely to decline than were low-social-capital areas.23 In areas where residents vote, sustain vibrant neighborhood associations, feel attached to their neighborhood, and see it as a good place to live, other people want to move in, and housing values therefore remain comparatively high. The positive impact of social engagement held even after accounting for other factors that might affect housing prices, such as proximity to downtown, racial composition, and residents’ socioeconomic status. The lesson is clear: Homeowners who are also good neighbors take their social capital to the bank.
At the local or regional level, there is mounting evidence that social capital among economic actors can produce aggregate economic growth. This is not to say that having more bowling leagues and PTAs will necessarily cause the town economy to prosper. But it is to say that, under certain conditions, cooperation among economic actors might be a better engine of growth than free-market competition. Consider two telling examples.
In 1940 Tupelo, Mississippi, was one of the poorest counties in the poorest state in the nation.24 It had no exceptional natural resources, no great university or industrial concern to anchor its development, no major highways or population centers nearby. What was worse, in 1936 it had been ravaged by the fourth deadliest tornado in U.S. history, and the following year its only signifi-cant factory closed after a deeply divisive strike. A university-trained sociologist and native son, George McLean, returned home around this time to run the local newspaper. Through exceptional leadership he united Tupelo’s business and civic leaders around the idea that the town and surrounding Lee County would never develop economically until they had developed as a community. Concerned about the dim prospects of the county’s cotton economy, McLean initially persuaded local business leaders and farmers to pool their money to buy a siring bull. That move proved the start of a lucrative dairy industry that improved local incomes and therefore made businesses more prosperous. To create a less hierarchical social order, the town’s elite Chamber of Commerce was disbanded and a Community Development Foundation open to everyone was started in its place. The foundation set to work improving local schools, starting community organizations, building a medical center, and establishing a vocational education center. At the same time, businesses were welcomed into town only if they paid high wages to all employees and shared this as a goal. Rural Development Councils were set up in outlying areas to encourage self-help collective action—from technical training to local cleanup campaigns—in a setting in which cooperative action for shared goals had been countercultural.
Over the next fifty years under McLean’s and his successors’ leadership Tupelo has become a national model of community and economic development, garnering numerous awards and attracting a constant stream of visitors eager to copy the town’s success in their own communities. Since 1983 Lee County has added one thousand industrial jobs a year, garnered hundreds of millions of dollars of new investment, produced arguably the best school system in Mississippi, constructed a world-class hospital, and kept unemployment and poverty rates well below the state (and sometimes even the national) average. The community’s success was based on its unwavering commitment to the idea that citizens would not benefit individually unless they pursued their goals collectively. Today it is unthinkable that one could enjoy social prominence in Tupelo without also getting involved in community leadership. Tupelo residents invested in social capital—networks of cooperation and mutual trust—and reaped tangible economic returns.
Another, slightly different “social-capital approach” is at the root of the economic miracle in California’s Silicon Valley. Led by a small group of computer entrepreneurs, and aided by a resource-rich university community, Silicon Valley emerged as the world capital of high-tech development and manufacturing. The success is due largely to the horizontal networks of informal and formal cooperation that developed among fledgling companies in the area. Although nominally competitors, these companies’ leaders shared information, problem-solving techniques, and, perhaps just as important, beers after work. They developed trade associations, industry conferences, and even a “Homebrew Computer Club,” a hobbyists’ group from whose ranks came the leaders of more than twenty computer companies. In an industry where job turnover is high, the key players had repeated interactions with one another in a variety of settings: “a colleague might become a customer or a competitor; today’s boss could be tomorrow’s subordinate.” Far from producing anxiety and distrust, this “continual shuffling and reshuffling tended to reinforce the value of personal relationships and networks.”25 These informal networks expanded to include firms on the periphery of the high-tech nexus: lawyers specializing in intellectual property and business incorporation, venture capitalists, suppliers, and so forth. In the early 1990s, when Silicon Valley’s economic condition began to slip, local businesses under the aegis of the San Jose Chamber of Commerce traded on their existing stock of social capital and created Joint Venture: Silicon Valley. That nonprofit networking organization helped to enhance public-private cooperation on everything from taxes to building permits to literacy.26
Silicon Valley’s major U.S. competitor, the route 128 corridor outside Boston, did not develop such interfirm social capital. Rather it maintained traditional norms of corporate hierarchy, secrecy, self-sufficiency, and territoriality. Employees rarely went out after work with one another or with people from other firms. Route 128’s “I’ll succeed on my own” philosophy is largely responsible for its poor performance relative to Silicon Valley’s, according to the leading study of the two high-tech centers. “The contrasting experience of Silicon Valley and Route 128 suggests that industrial systems built on regional networks are more flexible and technologically dynamic than those in which experimentation and learning are confined to individual firms.”27 The great British economist Alfred Marshall long ago recognized the adv
antages of such “industrial districts,” which allow for information flows, mutual learning, and economies of scale.28 Even before Silicon Valley, the model had succeeded in north-central Italy (crafts and consumer goods), western Michigan (furniture), and Rochester, New York (optics).
These are cooperative models for an increasingly competitive global economy. Social commentator Francis Fukuyama has argued that economies whose citizens have high levels of social trust—high social capital—will dominate the twenty-first century. When we can’t trust our employees or other market players, we end up squandering our wealth on surveillance equipment, compliance structures, insurance, legal services, and enforcement of government regulations.29 Conversely, studies of the biotech industry by organization theorists like Walter Powell and Jane Fountain have shown that social networks that embody a norm of reciprocity—that is, social capital—are “key enablers” of innovation, mutual learning, and productivity growth, as important as physical and human capital, particularly in rapidly evolving fields.30
Understanding the detailed linkages between social capital and economic performance is a lively field of inquiry at the moment, so it would be premature to claim too much for the efficacy of social capital or to describe exactly when and how networks of social connectedness boost the aggregate productivity of an economy. Research on social capital and economic development in what we once called the “Third World” is appearing at a rapid rate, based on work in such far-flung sites as South Africa, Indonesia, Russia, India, and Burkina Faso. Similarly rich work is under way on how Americans might improve the plight of our poorest communities by enabling those communities to invest in social capital and empowering them to capitalize on the social assets they already have.31 For the moment, the links between social networks and economic success at the individual level are understood. You can be reasonably confident that you will benefit if you acquire a richer social network, but it is not yet entirely clear whether that reflects merely your ability to grab a larger share of a fixed pie, or whether if we all have richer social networks, we all gain. The early returns, however, encourage the view that social capital of the right sort boosts economic efficiency, so that if our networks of reciprocity deepen, we all benefit, and if they atrophy, we all pay dearly.