Social capital

Subject of economics is vast and contains innumerable terms and phenomenon that have an impact on creation and determination of physical wealth. When you delve into the subject of wealth creation that is imperative for any economy, there are two types of elements, which are involved. Thus, there are input factors, such as those of capital, labour and other physical factors of production; then there are output elements, which also have a significant impact on final product or service. Capital is one of the most important factors of production; and depending n the type of elements involved, they are classified as individual capital, infrastructure capital, finance capital and Social capital.

Each component of the term capital is not only unique, but is also responsible for generation of economic value, contributing to production process in some way or the other. Out of above types of capital, Social capital is more of sociological concept, which is difficult to be measured in quantifiable terms, or monetary terms. Generally speaking, it is a term given to people networking, through which some economic value would be generated either directly or indirectly. There are many industries that thrive primarily on social networking and people skills, such as those of public relations, advertising, media, and sales of various products. Each of above industries or companies depends heavily on social skills of their employees for generation of revenue and reaping of profits therein.

Social skills used would not just imply a one-on-one interaction or a mere two-party interaction; but may also be stretched to include multi-party exchange of ideas and services. It is thus evident, that an important component in above process would be that of human capital or individual capital: for it is an individual’s unique and non-transferrable capability and ability to perform an action to perfection, for which he/she would be hired or his/her services sought. As a strictly economic term, Social capital was recognized way back in 1916 when L. J. Hanifin coined it, in his article.

Though it is not a quantifiable term and may not be directly expressed in monetary figures, there are some obvious processes that may only be executed through social skills and networking within and outside of people-groups. Over the years, many economists have defined social capital in different ways; speaking either of its advantage or its disadvantage. However, its role in formation of economic wealth remains indisputable.

This may be exemplified by the fact that there are many business transactions carried out, solely on the basis of social networking skills of company’s employees; and their capability to build goodwill and trust in the market. There are in fact many figures and records that state that a majority of sales of a product (financial or otherwise), has been through employment of social skills of trust and good faith. Therefore, irrespective of the sector in which company is operating, it should undertake measures to ensure that employees are adequately trained in social skills of handling clients and solving internal grievances. There are, in fact many organizations (both private and public) that have no qualms in spending huge amounts in extending adequate training to their employees.