SOCIAL CAPITAL AND ECONOMIC RESOURCES

The word of ‘capital’ is the key word that has a supporting capacity of the movement and the progress of economic activity. In economic capital, there are at least three types of capital: liquidity, land, and energy.
Social capital can open a business opportunity by taking the advantage of information exchange to make the dynamic allocation of product or resources, minimize the risk by taking the advantage from non-economic network. The highest risk in the economic is coming from non-economic factor, and social capital can be operated to suppress these risk factor optimally.

Definition, Types, and Social Capital Characteristics

The sociological approach to the economy introduces the concept of social capital which was initially developed by Coleman. Coleman defines the social capital as an entity with two characteristics; consist of several aspects of social structures that facilitate the action in these structures.

Types and Characteristic of Social Capital

1. Value Interjections

• Operating Principle: Socialization into consensual established beliefs 
• Individual Motivation for Compliance: Principled 
• Classical Referents: Durkheim’s (1984) analysis of the social underpinnings of legal contract 
• Modern Application: Functionalist economic sociology (parson and Smelser) 

2. Reciprocity Exchange

• Operating Principle: Norm of reciprocity in face-to-face interaction 
• Individual Motivation for Compliance: Instrumental 
• Classical Referents: Simmel’s analysis of exchange in dyads and trials 
• Modern Application: Exchange and power in social life 

3. Bounded Solidarity

• Operating Principle: Situational reactive sentiments 
• Individual Motivation for Compliance: Principled 
• Classical Referents: Marx and Engels’s analysis the emergence of working class consciousness 
• Modern Application: Solidarity bond in immigrant and ethnic communities 

4. Enforceable Trust

• Operating Principle: Particularistic Reward and Sanction linked to group membership 
• Individual Motivation for Compliance: Instrumental 
• Classical Referent: Weber’s analysis of substantive rationality in economic transaction 
•  Modern Application: Dynamic of entrepreneurships 

World Bank gives high attention by studying the capital role and implementation especially for poverty reduction in developing countries. The ideologies that developed by the World Bank employ social capital that is based in the following assumptions:
1. Social capital is in the economic, social, and political linkages, believing that social relationships affect the way the market and the state works.
2. A stable relationship among the actors can promote the effectiveness and efficiency of both collective and individual behavior.
3. Social capital in a community can be strengthened and that requires the support of a particular resources
4. In order to create good social relationships and institutional, the community members must support it give their support.

Social Capital Categories

The categories of social capital may be specified in several forms, namely: experience, network, connection, and honesty. As described in the previous chapter, economy is embedded to the social aspect; social capital is also equivalent to the economic capital.

Education

Hypothesis: the higher the education a person has, the greater economic opportunity he has, which affects the level of income.
In general, according to functionalist’s perspective, the principles of education contribution to the advancement in industrial are:

1. Change of technology has made the works in industrial society requires education, because of two things:

• The proportion of works that require high skill increases, while on the other hand, the low skill works have been diminishing.
• The same jobs continue to require increase in skill.

2. Formal education provides the necessary training to the people in getting the higher skilled job.

3. Education requirements in the labor market continue to increase and more people are required to study longer.

Experiences

Hypotheses: the more experienced a person in a person in a particular job, the more needed he is in labor market, thus will affect the level of income.

Networks

Hypothesis: the more extensive the network a person establishes, the easier for him to face the job competition. Two advantages can be obtained from the network:

• The information benefit. The existence of this mutual network has support its members by providing access, employment references or in other words, giving the informal information and security.
• The ability to control. Someone can identify the structural opportunities that exist in the network such as exploiting the specific contacts in the negotiation process.

Connection

Hypothesis: the more connections one has, the easier for him to enter the labor market. As a strategy of labor candidate recruitment, some corporations have been practicing connectivity. To obtain new employment, the company allows its workers to recommend someone who have a relationships with him.

Honesty

Hypothesis: the more honest a person in his workplace, the greater the market trust him, and the longer working relationship is established. The basic of relationship, both social and economic, are honesty. The prevailing values in the social reject all forms of fraudulent behavior. Similar to the prevailing values in the economy, it also intolerant all forms of fraud and cheating.