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Part - II

Issues

Is labour and social capital a source of finance?

Capital pertains to man-made goods, which are an aid in production of other commodities. Looked at differently, capital is value created in the past which is congealed in some physical form and which aids in further creation of value. Extending the argument further, value emerges out of human labour (both mental and physical) and is congealed /embedded/stored in the form of capital.

Now, when one talks of financing rural development it pertains to resources which help in acquisition or creation of infrastructure, social support systems, provision of educational and health facilities etc. The source of finance is hard cash or provision in kind. But each of these (hard cash or capital in kind) is value created and congealed in the past.

Since the primary benefactors of development initiatives in the rural sector are resource starved, the potent way of providing these resources is by creating them through labour. Hence hard work, physical labour performed by the beneficiaries themselves can be said to be a mode of financing rural development to the extent it reduces the quantum of financing that would be needed for capital thus created.

Looked at differently, in the absence of provision of labour by beneficiaries themselves, funds would have to be foregone by way of compensation to labour. Hence the labour performed can be construed as a means of financing rural development.

There is yet another intangible called social capital, the existence of which demonstrably reduces the magnitude of finances required. Social capital pertains to the networks, relationship, norms of trust and reciprocity that exist between members of the society. The existence of social capital reduces transaction costs and costs arising out of information asymmetry and thus is an indirect source of finance to the extent it reduces the amount of capital needed.

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* Contributed by -
Reena Narula,
2nd Year - PGDRM,
Institute of Rural Management, Anand.