Much of the interest in social capital stems from the view that the absence of social capital represents one of the major impediments to economic development; Woolcock (1998) provides a wide ranging conceptual analysis of the role of social capital for developing societies and economies; a range of applications of social capital to economic development are collected in Dasgupta (2000) and Grootaert and van Bastelear (2002). One of the major claims in these literatures is that social capital can facilitate the solution of collective action problems.
This perspective will lead to major disparity on development policy in each place. Rather than put an effort on all place or regions, development policy will favor the place or regions which has abundant amount of social capital. Not only will the perspective of the government be influenced by social capital determinism, but also the project planned by international agency.
In the decentralization process, there is a risk that decentralization could trigger ethnic and sectarian conflicts in the regions as local elites compete for sources of advantage in the bureaucracy, using ethnic or sectarian terms to rally support rather than focusing on the underlying administrative issues. Such conflicts have already happened in some regions, including Maluku and West Kalimantan. Social capital can be used by certain groups to overtake others, generating between-group inequality and political tension.
To the extent that between-group inequality itself favors crime and riots and deters investment, promoting social capital by promoting specific groups may, in the long-run, be counterproductive. It is very important in case of Indonesia which has many group cleavages. Investing in social capital by promoting groups can thus have serious equity repercussions
Finally, while social capital concepts abundant, there are limited examples regarding how to apply these concepts for better result. Unless we know under what conditions social structures generate beneficial outcomes, we cannot orient policy.
Dasgupta, P., (2000), .Economic Progress and the Idea of Social Capital, in Social Capital: A Multifaceted Perspective, P. Dasgupta and I. Seragilden eds., Washington DC: World Bank.
Grootaert and T. van Bastelear, (2002), The Role of Social Capital in Development: An Empirical Assessment, Cambridge: Cambridge University Press.
Woolcock, M., (1998), .Social Capital and Economic Development: Toward a Synthesis and Policy Framework, Theory and Society, 27, 151-208