Capital investment

Social capital has been a topic of debate and research over the last few years, with attention focused on the non-economic causes of poverty and exclusion. This is a welcome development. There has, however, been confusion over how to interpret the data and therefore significant divergence about appropriate remedies.

There is more to well-being than having a fat bank account, and there is more to poverty and exclusion than having no bank account at all. What people living in poverty and isolation really need is the right to self-determination: the capacity both individually and with others to determine their own future and gain control over their lives. This applies to neighbourhoods as much as it does to individuals and families. Self-determination can only be realised by individuals through their relationships with others. Money is just one avenue towards realising this goal and merely a contributing factor which may allow people to realise autonomy.

The debate about social capital is hampered by the skewed assumptions that some hold about the relationship between economics and humanity. Instead of approaching the problem of poverty by looking beyond economics, and subjecting economic theory and policy to practical criticism from this broader perspective, proponents broaden the scope of economics by casting human life as a form of capital (rather than capital as a form of human life), as a resource which can be converted into cash or used for self-advancement. The concept claims, confusingly, to subsume political and moral problems under economic science.

Such is the view taken by Mark Latham, in his latest book From the Suburbs, which focuses on capital accumulation as the sole route to self-determination, a ‘ladder’ which people climb alone. He poses one solution to the problem of building social capital to the exclusion of all others, and what is more, this is a solution whose capacity to overcome the anomie and injustice of modern society is problematic.

Tony Vinson, whose report on community adversity and resilience was reviewed in Eureka Street (April 2004), reflects a contrasting view. He reports on a number of projects in which Jesuit Social Services have participated. Each project begins with efforts to find out the concerns of as broad a range of residents as possible. A public forum is then called, in which people are encouraged to step forward to take responsibility and gain a mandate from the wider community. This group then drafts an action plan, makes further consultation with the community and implements decisions. The outsiders take on the role of supporting and resourcing the efforts of the community. The outcomes reported are many and varied, including new small businesses, new voluntary projects and new initiatives for local management of public sector service delivery. This is a widely supported approach, one which recognises the need for a community to ‘own’ the project and emphasises self-help and self-determination.

Mark Latham however, passes a rather harsh judgment on this kind of project: ‘In the past, governments have provided a huge amount of money to community development projects, but with little success. These programs have followed a familiar pattern of failure: the formation of local co-ordinating committees; the involvement of residents enthusiastic about a new approach; some capital works and physical changes; scepticism and resistance from central government agencies; a gradual loss of effort and enthusiasm at a local level; demands for further government funding; and, ultimately, the collapse of the program.’

Despite the fact he concurs with Tony Vinson’s observation that ‘some authorities have no sooner embarked upon a renewal plan than they are devising an “exit plan”,’ Mark Latham places the blame for failure not with government (which, if he is elected, will be his responsibility), but on the idea of directly promoting community cohesion.

Mark Latham’s featured case study is the work of Brian Murnane of the Brotherhood of St Laurence in the Western Sydney suburb of Claymore. I do not share Latham’s wish to counterpose the approach used in Vinson’s case studies to that used by Murnane; I believe that Mark Latham counterposes them solely in order to make his own point.

Latham quotes Murnane as summing up his approach with the words: ‘every time someone said let’s do something, we backed them’, a sentiment which expresses the same orientation to supporting self-determination as Vinson’s.

Thus there is an essential common thread between Murnane and Vinson, namely the need to support and reinforce local initiative. I don’t believe either would want to be seen as prejudiced as to whether people organise themselves along private-sector models in the form of a company, along ‘third sector’ models in the form of voluntary associations, or in the form of a ‘micro-public sector’. The point is that people need to get organised, building connections along lines of trust with others in pursuit of common aims, and there are many different ways of doing that.

Whereas Vinson and Murnane appear to have a very broad approach which encompasses whatever is appropriate and favoured by members of a community, Mark Latham is promoting a single road out of poverty, that of becoming a capitalist and accumulating wealth in the form of capital. He is willing to withdraw funds from other projects in order to promote this perspective.

Mark Latham proposes to move government funds out of community development into start-up capital for social entrepreneurs, through Social Venture Capital Funds, bodies reminiscent of the Cain Government’s ill-fated Victorian Economic Development Corporation. According to him, ‘[Social entrepreneurs] operate on increasing returns on investment ... Social venture capital would aim to back this kind of success. It would allow social entrepreneurs to move poor communities back into the real economy’.

Latham is advocating profit as the preferred way to combat poverty and achieve self-determination. Making a profit is what he calls ‘the real economy’. Charities and government alike are, according to Latham, not qualified to act within this real economy. In fact, communities which get organised and place demands on government are deemed to have a ‘culture of dependency’, and even government itself appears as a form of dependency, subordinated to the needs of business. But I believe that, for example, people forming themselves into a political lobby group to force the government to upgrade medical services is just as effective a way of building social solidarity and helping people move towards controlling their own lives, as setting up a company.

Latham’s idea is part of a larger vision of social policy characterised as asset-based welfare, which is premised on the assertion that we live in a period of mass capitalism in which a claimed 60 per cent of the population are already capitalists. It aims to lift people out of poverty by making everyone a capitalist.

But this is a very narrow view of the factors highlighted by social capital data—networks, norms of reciprocity, trust, etc—which are self-evidently relevant to the problem of self-determination. If we conceive of the problem as one of self-determination, we can see why capital investment, philanthropy and state welfare services all fail in their own ways to address the situation. And we understand what Brian Murnane means when he said, ‘every time someone said let’s do something, we backed them’, and why the Jesuit Social Services workers were so concerned that the community ‘owns’ a project. If we ask ourselves: What builds social cohesion? Then the answer is social solidarity, that is, lending unconditional support to worthy projects defined by people themselves (including strangers), rather than subordinating them to one’s own program.

In relation to state delivery of welfare, given that the very raison d’être of a bureaucracy is control, it is easy to see why they are reluctant to aid in the self-determination of communities.

While Latham’s claim that channelling government funds intended for relief of poverty through tax-incentives to corporations ‘can save the public sector vast amounts of money’ may be true, this kind of privatisation of welfare will contribute little to extending solidarity to those who are struggling to drag themselves out of poverty. In reality it is just substituting one form of subordination for another.
Instead of threatening to withdraw funds from community development, Mark Latham should be tackling the problem of why authorities want to pull the rug out from under such projects as soon as communities begin to find their own voice.

The whole point of social capital is that poverty is not just an economic question and that well-being and wealth can be neither defined nor achieved by the accumulation of capital alone. In a sense, even a company is a vehicle of collective self-determination just like any other association in modern society—people establish lasting relations of trust and collaboration in order to make a living together. Accumulation of capital and employment of wage labour are really incidental functions of a company, which may as well employ voluntary labour and dedicate itself to the public good.

I believe the best way to move towards greater clarity is to recognise self-determination as the basic need of all people, and consequently to see poverty as just one factor that may hinder people from attaining self-determination and wealth as just one of the objectives people may seek through self-determination.

Change can only be effected through the efforts of those working within all these bodies—charities, government agencies, corporations, and so on—to extend solidarity and support the self-determination of poor and excluded communities, even if that means, at times, swimming against the stream. 

Andy Blunden’s book For Ethical Politics was published by Heidelberg Press in October 2003.



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