A primer on social capital and Canadian credit unions


The concept of social capital has its roots in the work of French diplomat, historian, and writer Alexis de Tocqueville. In the early 1800’s, de Tocqueville wrote of what he saw as the unique character of American society with its emphasis on social gathering and grassroots democracy (de Tocqueville, 1835; 1840).  The term social capital was not used and defined in academic literature until the 20th century.  Putnam (2000) notes that “[t]he term social capital itself turns out to have been independently invented at least six times in the twentieth century” (p. 19).  One early definition of social capital suggested by Hanifan (1916) is that social capital is not real estate, personal property, or monetary capital but: 

that in life which tends to make these tangible substances count for most in the daily lives of people, namely, goodwill, fellowship, mutual sympathy and social intercourse among a group of individuals and families who make up a social unit (p. 130).

While the phrase was used intermittently throughout the twentieth century, the term did not become entrenched in any literature until the work of Bourdieu (1986) and Coleman (1988; 1990) gave the term staying power in the literature.  The work of Harvard based researcher Robert Putnam (1995, 1996; Pharr & Putnam, 2000; Putnam, Feldstein & Cohen, 2004) – was imperative to further establishing the term as relevant in sociology and related disciplines.  The ongoing work of Harvard Kennedy School’s Saguaro Seminar is one noteworthy contemporary project that continues to further develop the body of research on social capital (Harvard, 2016). 

Of particular importance in the development of social media as a concept was Putnam’s 2000 book Bowling Alone. Putnam says of social capital: “the core idea of social capital…is that networks have value…social capital refers to connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them” (p. 19).  In Bowling Alone Putnam diagnoses a growing social capital crisis in America.  As his central illustration, Putnam notes the decline of bowling leagues in America as a sort of ‘canary in the coal mine’ while presenting extensive research about the decline of civic, cultural, and religious gatherings and affiliations – all of which would function as a dual expression of, and method of accumulating, social capital.  The death of bowling leagues – among a plethora of other examples of social capital decline – is the work of a range of technological, economic, and social changes.  Putnam suggests that this decline will carry with it considerable social and economic challenges for the nation.  Building from Putnam’s sociological focus, the academy has found broad applications for this term.  Currently, social capital is used in academic discourses ranging from sociology (Walters, 2002) to psychology (Wood & Giles-Corti, 2008) to media studies (Fieseler & Fleck, 2013) to Anthropology (Schrauwers, 2011) to development (Uphoff & Wijayarantna, 2000).  

So while social capital has been broadly applied in a variety of literatures, there has been little research on the question of social capital in cooperatives generally and credit unions specifically.  In an industry where remaining ‘well capitalized’ is an ongoing priority, it seems possible that credit unions are unexpectedly uniquely well [social] capitalized.  Exploring social capital in Canadian credit unions, particularly with an emphasis on the notion that there is an inherent – though non-quantitative – value to the social capital that undergirds many credit unions, is the aim of this project.


While the term has found a plurality of contexts and applications (Grootaert, et. al., 2004), one major difficulty in social capital discourses is a lack of consensus on its conceptualization (Rupasingha, et. al., 2006).  As Guillen, et. al. (2011) say, “[n]o single definition is widely accepted in the literature.” (p. 331). That is not to suggest that the term is meaningless or entirely chaotic; rather, there are certain fault lines where the definition is still emerging and resolving.  These fault lines include the role of trust (Halpern, 2005), the importance of social participation (Fitzpatrick & LaGory, 2002; Freitag, 2003), the distinction between bonding and bridging capital (Burt, 2000; 2007), and whether social capital should be thought of as an individual characteristic or a community characteristic (Coleman, 1990; Knack & Keefer, 1997).  In addition to these fault lines, social capital has come to have nuanced meanings within dissimilar academic discourses (e.g. public health and economics).   Given the contested and emerging nature of social capital, it is important to offer a definition to ground this project.  The definition given here highlights social capital as a shared, communal resource made up of pro-social norms and beliefs that exist between people and institutions. My working definition of social capital for this project is as follows: ‘Social capital is the networks of relationships that afford, encourage, and engrain pro-social, altruistic, and mutually beneficial behaviours, attitudes, and beliefs within a group.’ 

In this orientation toward social capital there are two potential entropic forces that threaten social capital. In the absence of more compelling terms we may tentatively call these entropic forces 'negative social capital' and 'social deficit'.  Negative social capital may be thought of as the networks of relationships that reject, discourage, or poison mutually beneficial behaviours, attitudes, and beliefs.  These networks of dysfunction (i.e. networks of crime and corruption) may mirror social capital, but their ultimate draw on society makes them a negative social capital.  Conversely, social deficit can be thought of more basically as a lack of social intercourse.  Where negative social capital builds poisonous behaviours, attitudes, and beliefs, social deficit is an absence of networks of relationships.  Social deficit need not be absolute (i.e. complete hermitry); rather, the social deficit can be thought of as a force eroding social capital.

This working definition of social capital along with the two entropic forces may be at odds with the views of some researchers and writers who see all connections – even connections that are explicitly non-pro-social – as social capital.  However, I hope it remains instructive in identifying the two competing challenges to social capital.  In the literature there is competing notions about whether all social networks are social capital, even if that social capital is in service of crime, war, corruption, exploitation, etc.  Alternatively, some researchers feel that social capital is only a source of capital when it is directed toward socially beneficial ends.  I agree with this notion, though the challenge of determining what is a 'socially beneficial end' remains a highly contested question.  A full resolution to this question is beyond the scope of this project; however, hopefully this examination of the challenges of social capital as an emerging term offers the reader a more clear sense of the tensions that exist with social capital theory as well as a general understanding of the author's worldview.


Social capital is frequently broken into two sub-groups –bonding and bridging.  Putnam refers to bridging capital as inclusive whereas bonding capital he refers to as exclusive (Putnam, 2000, p. 22).  Bridging capital is “outward looking and [attempts to] encompass people across diverse social cleaves” (p. 22).  By contrast, bonding capital is “inward looking and tend to reinforce exclusive identities and homogeneous groups” (p. 22).  Putnam is careful to point out that not all social capital is purely bridging or bonding.  As one example, “The Knights of Columbus was created to bridge cleavages among different ethnic communities while bonding along religious and gender lines” (p. 23).  One may intuitively notice the similarities between bonding capital and the more nefarious concept of ‘othering’ (Kirschner, 2012; Jensen, 2011).  The critique that bonding capital may rely on – or at least be susceptible to – social processes that are inherently flawed and dangerous is a fair one.  Social capital is not an inherently benevolent force.  Strong bonding social capital may be as present in gangs and terrorist organizations, as it is in a community watchgroup.  As Putnam says, “[s]ocial capital…can be directed toward malevolent, antisocial purposes, just like any other form of capital” (p. 22). So bonding capital is the networks of close knit social groups which potentially exist in contrast to other social groups.  By contrast, bridging capital are the networks that allow individuals to connect into new networks for social, economic, political, or other purposes.  

Social capital is best thought of as a perishable good which needs to be used to sustain itself and grow (Bailey & Brown, 2004).  Social capital requires regular investment or the networks begin to weaken (Bourdieu, 1986). Given that social capital is inherently based on the norms of reciprocity of goodwill and mutual sympathy, it is intuitive that a failure to renew these norms will cause the decline of social capital.  While these norms may be weakened through an active violation such as crime (Neal, 2011) or corruption (Banerjee, 2016) - these norms may also be weakened by a simple withdrawal from the activities which produce them.  Atrophy is a subtle, and perhaps more insidious, pervasive risk to social capital in stable, economically advanced communities.  

Social capital is frequently confused with human capital.  Whereas human capital is found within individuals, social capital is found within relationships (Coleman, 1988).  Human capital can be increased through an increase of individuals and the development of those individual’s talents.  Each individual is a repository of human capital which in turn can be mobilized towards projects which may require expending human capital, often in exchange for financial capital.  Human capital is formally defined as “productive wealth embodied in labor, skills, and knowledge” (Tan, 2014).  In short, in human capital the relationships between individuals are not directly relevant.  By contrast, social capital is made up by the relationships between the individuals rather than the individuals themselves.


It may be asked, “can institutions generate social capital?”  Some economic programs have shown great promise at generating social capital. In Dowla’s (2006) research at Grameen Bank in Bangladesh he was principally interested in showing the benefits microfinance can have socially as economically.  Grameen Bank in Bangladesh showed enormous ability to “enable creation of social capital” (Dowla, 2006, p. 119). Grameen was not interested in creating social capital, but rather in “providing credit to mostly poor women” (p. 119) – social capital came as a latent effect.  We can extrapolate that there are often social relationships that are impacted by economic relationship – whether intended or not.  The structures, institutions, and incentives of the economy encourage or discourage social capital. This is not to suggest that Grameen’s microfinance model is necessarily the best model for providing economic or social capital development (Bateman, 2011), but rather to simply illustrate the way in which institutions are able to develop or destroy social capital.

Research on social capital and economic development demonstrates a myriad of positive effects that come with social capital.  Social capital plays a positive role in accessing formal credit in an imperfect market (Dufhues, Buchenrieder & Munkung, 2013), in reducing poverty and facilitating rural development (Fafchamps, 2004; Hayami, 2009), facilitating trade unionism (Whaites, 2005; Johnson & Jarley, 2005; Jarley, 2005), in the efficient functioning of financial markets and institutions (Calderon, et. al, 2002; Guiso, 2010), in accessing other types of capital (Dinh, Dufhues & Buchenrieder, 2012), and fostering local economic and community development (Holyoke, 2004).  As Putnam (2000) says, “[a] society characterized by generalized reciprocity is more efficient than a distrustful society…Trustworthiness lubricates social life….Civic engagement and social capital entail mutual obligation and responsibility for action” (p. 21). 

So while social capital is a public good, in the sense that it is a non-monetary benefit to the well-being of the public at large, it may be actively discouraged through systems that encourage self-interested, non-democratic decisions over community-interested decisions.  In Habbermasian terms, systems that fail to embody democratic principles suffer a legitimation deficit or legitimation crisis (Habermas, 1975). Perhaps 2016 dual political shocks – Brexit and Trump – are initial signs of a growing legitimation crisis in the western world.  As Dobrohoczki (2006) says about global capitalism in his excellent article on the parallel term ‘social cohesion’: “

The fall of communism is one example of this, the delegitimation of a state dominant system that wielded coercive power over the lifeworld; but so too is the growing angst over free trade and global capitalism as manifest in the anti-globalization movement against market dominated systems (p. 143). 

Building social capital may become an increasingly important goal for municipal, provincial, and national communities as an increasingly polarized political sphere presents practical problems for communities. The echo-chamber effects of social media, which erode the former unifying role of agreed upon sources of information; the decline of institutions that brought people face-to-face; and the rising opportunities and threats of globalization all pose radical new challenges to social capital.  Economic institutions which further undermine social capital add further stress to a social and political body which relies upon goodwill, trust, and some degree of affinity between its citizens.


Social capital has played an important role in credit unions throughout their history.  As Mangan (2009) says of Irish credit unions, “Membership of a credit union is determined by the ‘common bond’ of occupation, residence in a locality, employment by a particular employer or membership of an organization” (p. 95).  This “common bond” is analogous to social capital.  It is this common bond that has defined many Canadian credit unions which trace their history to a failure of market and state solutions for their community.  Credit unions generally take as there base “a group of people sharing some intangible bond of association such as employment, religion, trade, profession, politics, hobby, or locality.” (Griffiths & Howells, 1991, p. 204).  Credit unions “develop...closely alongside communities” (Thomas, Cryer, & Reed, 2008, p. 107).   

However, despite the intuitive connection between credit unions and social capital there is a considerable gap in the credit union literature.  While there is a literature that explores the relationship between credit unions and social capital (Catturani, et. al, 2016), it is fairly modest and emergent.  There is a more sophisticated literature that explores the connection between cooperatives and social capital (Kasabov, 2016; Melece, 2013; Nilsson, et. al., 2012; Ruben & Heras, 2012; Simmons & Birchall, 2008; Tregear & Cooper, 2016); however, that literature only applies to credit unions in a general way.  There may be systemic differences related to a credit union’s structure that go beyond the general relationship explored between cooperatives and social capital.  Further, there may be specific differences to the way the Canadian credit union system approaches and cultivates social capital. 


This project attempts to break ground on this gap in the literature through a series of interviews, presented in podcast form, with leaders in the Canadian Credit Union system.  

The unstructured interview style of this project is qualitative in nature, and not intended to function an empirical study producing objective findings.  The research style, questions, and research participants are intentionally chosen to give a snapshot of the state of social capital in the Canadian credit union system. It is my hope that, using these podcasts as a springboard, future thought leaders in the credit union system can advance a more nuanced understanding the role that social capital plays in the creation, maintenance, and development of credit unions as well as the role credit unions play in generating social capital.  

There are four areas of interest this project seeks to explore.  First, do credit unions conceptualize social capital?  If so, what language and measures do they use?  Second, how do credit unions maintain, develop, and facilitate social capital?  What resources are dedicated to it and what success and/or failure has been experienced?  Third, credit unions are not alone in building or benefiting from social capital.  What other intuitions, structures, and conditions build social capital and how ought a credit union to interact with these institutions, structures, and conditions?  Fourth, what challenges do credit unions face in maintaining, developing, and facilitating social capital? What role will social capital play in credit unions in the coming decades?  

 It is my hope that these podcasts will be accessible, interesting, and valuable to a wide audience of co-operators. Ideally, there will be value for practitioners, academics, and the credit union member in this project.  For the practitioner– practical tools for enhancing business.  For the academic – an addition to the literature on credit unions and social capital.  For the member – a clear sense of the movement they are a part of.    





Works Cited 

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