Rethinking development—VIII Human capital cannot flourish without social capital

Schools can produce skills; they cannot by themselves create the trust, cooperation and equal institutional treatment that turn knowledge into shared prosperity. Where rules bend for organised power, talent exits, hides or serves privilege.

Part VIII argued that education is national economic infrastructure and that Pakistan must convert every stage of learning into capability, social mobility and citizenship. That argument needs one more step. Human capital is held by individuals; development is achieved collectively.

A child may become literate, healthy and technically competent, yet her capabilities will be wasted if recruitment depends on connections, contracts on influence, taxes on bargaining power and public decisions on institutions citizens cannot hold to account.

Economists often treat schooling, health and skills as inputs that raise productivity. They do, but only within a social order. The OECD distinguishes human capital—knowledge, skills and health embodied in people—from social capital: networks, norms and shared understandings that facilitate cooperation.

The distinction matters for Pakistan. Building one while allowing the other to decay produces educated frustration, capital flight, informality and an economy in which private survival substitutes for public progress.

Social capital is not a moral slogan

Social capital is sometimes reduced to the advice that citizens should trust one another. That is poor theory and worse policy. Trust cannot be commanded where experience teaches caution. It may be a cause of cooperation, an outcome of fair institutions, or both.

Steven Durlauf and Marcel Fafchamps warn that the literature contains serious problems of definition, measurement and causal identification. An association between trust and growth does not prove that a campaign for civic virtue will produce either.

Nor are all networks socially beneficial. Simon Szreter and Michael Woolcock distinguish bonding, bridging and linking social capital. Bonding ties join people within families or close groups; bridging ties connect different communities; linking ties connect citizens to institutions and people exercising authority.

Bonding can provide care, credit and protection where the state fails. It can also organise cartels, patronage, sectarian exclusion and dynastic privilege. A society may therefore possess strong private networks while lacking the cross-group and state-citizen relationships needed for inclusive development.

Daron Acemoglu’s recent argument about collective knowledge sharpens the point. Knowledge includes not only science and technology but the norms and institutional adaptations through which communities decide how knowledge will be used.

The Dutch response to recurring floods emerged through local experimentation and cooperation, not the mechanical import of a universal blueprint. The gains of industrialisation became more widely shared only after organisation, democratisation and institutional change altered who possessed voice and bargaining power. Technology can enlarge common prosperity; under unequal power it can also enlarge control and rent extraction.

Networks san an equal civic compact

Pakistan’s problem is not a simple absence of social capital. Families, biradaris, professional bodies, religious organisations, commercial groups and state institutions maintain dense networks. The political-economic question is which networks can convert organisation into public privilege, and which citizens must approach the state as isolated petitioners.

Hamza Alavi’s classic analysis of the post-colonial state identified the exceptional weight of the bureaucratic-military apparatus. Ayesha Siddiqa later documented the military establishment’s economic reach in Military Inc.. The purpose of recalling these studies is not to substitute a conspiracy for analysis.

It is to recognise a structural asymmetry: when an unelected institution has predominance over elected authority and extensive economic interests, linking social capital cannot rest on equal citizenship. Cooperation with power becomes access; distance from power becomes vulnerability.

The UNDP’s Pakistan National Human Development Report on inequality organised the problem around three drivers—power, people and policy—and estimated privileges accruing to powerful groups at Rs2.66 trillion in 2017–18. That is a historical estimate, not a current fiscal total, but its institutional lesson remains testable. Citizens rationally distrust a system when comparable income, property or commerce receives different tax, regulatory, credit and procurement treatment according to the identity of the holder.

Education itself can reproduce this fragmentation. Elite schools, ordinary private schools, public schools and madrasas may issue credentials while placing children in separate social worlds.

A curriculum that rewards obedience and memorisation cannot by itself cultivate reasoned disagreement, cooperation across difference or democratic citizenship. The result is not too little bonding but too little bridging—and too little confidence that public institutions will treat unlike citizens by the same rule.

Build cooperation through equal rules

The World Development Report 2017 treats commitment, coordination and cooperation as conditions of effective policy, while identifying exclusion, capture and clientelism as manifestations of power asymmetry. This reverses a common prescription.

The state should not first demand trust and then consider reform. It must earn trust through credible commitments: rules that survive changes of office, taxes that reach powerful incomes and assets, procurement that discloses beneficial ownership, courts and regulators that act without status-based exceptions, and commercial entities subject to the same competition and accountability standards regardless of institutional parentage.

Pakistan should also restore the constitutional meaning of Article 140A: elected local governments with political, administrative and financial authority. Local budgeting, school councils, water-user organisations and social audits can allow citizens to solve visible problems together.

Participation, however, is not automatically democratic. Ghazala Mansuri and Vijayendra Rao show that local projects can be captured and that representative voice does not emerge organically. Pakistan therefore needs inclusion rules, published budgets, independent facilitation, grievance mechanisms and random or staggered pilots whose outcomes can be compared with credible baselines.

Schools should be part of this reconstruction. Alongside foundational literacy and numeracy, students should practise evidence-based argument, group problem-solving, elected representation and service projects across social boundaries.

Public universities should protect inquiry and student association rather than confuse discipline with silence. Exchange programmes across provinces, languages and school systems would create bridging ties that a divided labour market will not produce on its own.

Measure cooperation, not merely credentials

International reports routinely count enrolment, years of schooling, tax ratios, loans and roads. Pakistan also needs an empirical account of the relationships through which these inputs succeed or fail. The Pakistan Bureau of Statistics should add a stable, repeated Social Cooperation and Institutional Trust module to the Pakistan Social and Living Standards Measurement Survey.

It should measure generalised trust; confidence in elected, administrative, judicial and security institutions; participation in associations; cross-group ties; experience of discrimination and bribery; grievance resolution; perceived equal treatment; and the ability of communities to act collectively.

Results must be disaggregated by gender, income, province, rural or urban location and education, with anonymised microdata available for independent research. The purpose is not to manufacture a league table or a single “trust score.” It is to test mechanisms.

Does transparent procurement improve institutional confidence? Do functioning local councils increase participation across groups? Do equal tax rules raise voluntary compliance? World Bank research on tax compliance rightly links revenue to trust, politics and the fiscal social contract; Pakistan should make those relationships observable.

Every IMF, World Bank and domestically financed reform should consequently report not only expenditure and output targets but its distributional and institutional effects. Who bears the adjustment? Who receives discretion? Which groups gain voice?

Does the intervention strengthen cooperation across citizens or merely finance another protected network? These questions do not reject economic science. They make it more scientific by specifying power, context and testable outcomes.

Part VII showed why Pakistan must develop minds. Part VIII shows why educated individuals cannot transform a captured order alone. Development is not the accumulation of credentials under concentrated power. It is the collective capacity of equal citizens to learn, cooperate and govern institutions that remain subject to them.

The concluding part will bring the series together in a Pakistan-specific constitutional development compact, with measurable obligations for power, prices, production, equality, childhood, debt, education and institutional trust.

References

Acemoglu, Daron. 2026. “We Have the Knowledge to Build a Better World. But Is That Enough?” Big Think, September 2. Adapted from What Happened to Liberal Democracy? Remaking a Politics of Shared Prosperity.

Alavi, Hamza. 1972. “The State in Post-Colonial Societies: Pakistan and Bangladesh.” New Left Review 74.

Durlauf, Steven N., and Marcel Fafchamps. 2005. “Social Capital.” In Handbook of Economic Growth, vol. 1B, 1639–1699.

Mansuri, Ghazala, and Vijayendra Rao. 2013. Localizing Development: Does Participation Work? Washington, DC: World Bank.

OECD. 2001. “The Well-being of Nations: The Role of Human and Social Capital.” Paris: OECD.

Siddiqa, Ayesha. 2007. Military Inc.: Inside Pakistan’s Military Economy. London: Pluto Press.

Szreter, Simon, and Michael Woolcock. 2004. “Health by Association? Social Capital, Social Theory, and the Political Economy of Public Health.” International Journal of Epidemiology 33 (4): 650–667.

United Nations Development Programme. 2021. Pakistan National Human Development Report 2020: The Three Ps of Inequality—Power, People, and Policy. Islamabad: UNDP Pakistan.

Woolcock, Michael, and Deepa Narayan. 2000. “Social Capital: Implications for Development Theory, Research, and Policy.” World Bank Research Observer 15 (2): 225–249.

World Bank. 2017. World Development Report 2017: Governance and the Law. Washington, DC: World Bank.

World Bank. 2022. Innovations in Tax Compliance: Building Trust, Navigating Politics, and Tailoring Reform. Washington, DC: World Bank.

(To be continued)

Dr. Ikramul Haq, Advocate Supreme Court, writer, literary critic, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.