DISCUSSION PAPER Institute of Agricultural Development in Central and Eastern Europe SOCIAL CAPITAL, TRANSITION IN AGRICULTURE, AND ECONOMIC ORGANISATION: A THEORETICAL PERSPECTIVE

Social capital is defined as the shared knowledge, trust, and culture, embodied in the structural forms of networks and other stable inter-agent relationships. Social capital has been shown to be more difficult to build than economic capital, and to have greater beneficial effects for community as a whole. The relevance of the social capital concept for transitional agenda is explained by the increasing responsibility of private collective action and grassroots decisions in managing the business activities in agriculture, since this is required by the more democratic foundations of the market economy. Different forms of business organisations are shown to be differentially but consistently associated with social capital, with the major social capital dependent organisational form being the cooperative. The growing complexity of inter-agent relations (particularly in transitional context) causes the increasing amount of economic responsibility being transferred from authority-based to social capital-based forms of economic organisation, i.e. from markets and hierarchies, based mainly on economic capital, to networks with their primary accent on social capital. The social capital-based organisation in agriculture is particularly important in view of its industryspecific limitations and is represented mainly by cooperatives and farmers’ associations. The optimal role of the government is to invest in social capital in order to enable rural communities to solve their problems by means of private collective action (self-organisation), rather than attempt to substitute the latter. JEL: D23, P31