Intangibles and Iraq

From today’s “Department of Human Behavior” column in the Washington Post — One Thing We Can’t Build Alone in Iraq:

Ideas related to social capital have many applications to U.S. domestic challenges but are especially instructive to the situation in Iraq, because they suggest that the model of reconstruction the United States has pursued there is fundamentally flawed.
The problem with an external agent handing down largesse — building bridges, roads and schools, for instance — is that it runs counter to everything known about how social capital grows, [Robert] Putnam said. And without social capital, societies fall apart, even if the roads are smooth and the trains run on time.

(Note: Putnam is the author of the influential book on social capital – Bowling Alone)
But the problem of building social capital is not unique to Iraq (although the process is under more stress there than elsewhere). Intangibles like social capital are often overlooked, I feel, in most development projects. Even macroeconomic policies don’t take these human intangibles into account (after all, even the idea that institutions matter is a relatively new idea in modern, mainstream economic thought). For example, the shock therapy that worked in Poland’s return to capitalism failed in the Russian case where social capital is seen to be much lower.
The situation with respect to social capital and development is slowly changing, as the story points out:

Michael Woolcock, a sociologist at the University of Manchester in England who worked for years at the World Bank, said one development project in Indonesia suggested that external agents might be able to help build social capital.
The trick, he said, was to make no centralized decisions at all, whether in Jakarta or, even worse, Washington. The Kecamatan Development Project has aimed more than $1.3 billion at more than 40,000 villages, but every decision about how to use the money has come from democratic decisions at the village level, where funds are released only if diverse groups can show they are willing to work together. It has sometimes been described as a democracy project disguised as a development project.

The World Bank has been thinking about how to build social capital. In fact, they have done a lot of research on the subject and have a website devoted to the topic. The problem, as with many things, is implementation. Bricks and mortar (roads, bridges, and buildings) are easy to measure and show off. Making progress in building social capital, like other intangibles, is more difficult. But ultimately, it is the intangibles that make the bricks and mortar work.

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