Disadvantages, Downsides of Social Capital

The same characteristics of social capital that enable beneficial, productive benefits have the potential to cause negative externalities. Potential downsides of social capital include: fostering behavior that worsens rather than improves economic performance; acting as a barrier to social inclusion and social mobility; dividing rather than uniting communities or societies; facilitating rather than reducing crime, education underachievement and health-damaging behaviour (Aldridge et al. 2002)[1] .

The same orchestrating mechanisms that reduce transaction costs in market exchange can have negative consequences (Carroll and Stanfield 2003[2] ; Fine 1999[3] ; Torpe 2003).; Erickson (2002, p. 547) supports this identifying the following paradox: ‘every feature of social structure can be social capital in the sense that it produces desired outcomes, but also can be a liability in the sense that it produces unwanted results’. The kinds of groupings and associations which can generate social capital always also carry the potential to exclude others (Hunter 2000[4] ; Morrow 1999[5] ; Szreter 2000[6] ).

Social capital can become a constraint to individuals’ actions and choices (Wall et al. 1998)[7] . For example, there is a particularly high risk of negative social capital in urban poverty situations (Small 2002)[8] . The importance of the negatives of social capital was first documented by Portes and Landolt (1996)[9] but now is synonymous with our understanding of social capital theory. A stock of social capital is simultaneously productive and perverse. Simplistically speaking, the make up of these types determines the structure of the overall social capital present. As this is highly context specific further research is required to understand the causal relationships that determine the realization of productive, or perverse, social capital.


  1. Aldridge, Stephen, David Halpern, and Sarah Fitzpatrick. 2002. Social Capital: A Discussion Paper. London, England: Performance and Innovation Unit. ^
  2. Carroll, Michael C, and James Ronald Stanfield. 2003. ‘Social capital, Karl Polanyi, and American social and institutional economics.’ Journal of Economic Issues 37: 397-404. ^
  3. Fine, Ben. 1999. ‘The Developmental State Is Dead-Long Live Social Capital?’ Development Change 30: 1-19. ^
  4. Hunter, Boyd. 2000. ‘Social exclusion, social capital and Indigenous Australians: Measuring the social costs of unemployment.’ Canberra: Centre for Aboriginal Economic Policy Reserach, ANU. ^
  5. Morrow, Virginia. 1999. “Conceptualising social capital in relation to the well-being of children and young people: a critical review.” The Editorial Board of The Sociological Review: 744-765. ^
  6. Szreter, Simon. 2000. “Social capital, the economy, and education in historical perspective.” Pp. 56-77 in Social Capital: Critical Perspectives, edited by Tom Schuller. Oxford: Oxford University Press. ^
  7. Wall, Ellen, Gabriele Ferrazzi, and Frans Schryer. 1998. “Getting the goods on social capital.” Rural Sociology 63: 300-322. ^
  8. Small, Mario Luis. 2002. “Culture, cohorts, and social organization theory: Understanding local participation in a Latino housing project.” The American Journal of Sociology 108: 1-54. ^
  9. Portes, Alejandro, and Patricia Landolt. 1996. “The downside of social capital.” The American Prospect 26: 18-23. ^
10 comments on “Disadvantages, Downsides of Social Capital
  1. Habomugisa Erias says:

    I appreciate your marvelous piece of literature. Keep it up!

  2. Assampong Lawrence says:

    I need merits and demerits of social capital

  3. Kofi Apau says:

    Is a nice one. the only downside I have with it is that, is not in Point. Thank you

  4. Fadli says:

    The best notes

  5. Louise says:

    Cant find the reference for Erickson (2002)? could you send me a link for it please?

    • Tristan Claridge says:

      I believe I have made an error with source of that reference and omission from the reference list – the quote comes from a book review of the book in question written by B.H. Erickson.

      “Corporate Social Capital and Liability” edited by Roger Th. A. J. Leenders and Shaul M. Gabbay

  6. John Oakley says:

    The indices for my academic library are hand-written in large leather-bound volumes. It doesn’t make them easier to use. Intelligent paragraphing makes any material easier to read and absorb. Being an academic is not a virility test.

    Nevertheless, this is a significant contribution and is as relevant today as it was at first “publication”.

  7. Kim Reddy says:

    Brilliant interpretation….

  8. Darek Johnson says:

    Shorter paragraphs would make all this text easier to read.

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