Social Capital and Crowdfunding

What is the relationship between morning sport and crowdfunding?
This morning, I participated in a sporting event that made me reconsider the importance of social capital and its indirect benefits.

I have been in Taipei, the capital of Taiwan, for some time as a visiting researcher at National Taiwan University.

I had long wanted to get up early in the morning to go to the nearby Daan Park and watch people playing sports there. When I set off, I thought it was a bit early, but I was sorely mistaken. By 6.37am, the park was packed with people doing sports or yoga. Even the traffic had already started.

In fact, what caught my attention more than anything else was the fact that people were doing sports together in harmony. Groups of at least 10 people each came together in different parts of the park. Some of them formed a circle, some were lined up behind a host and were doing traditional body movements. You could join any of these groups and do exercises yourself.
I had the opportunity to do my morning exercises accompanied by traditional classical music emanating from a small radio hung from a tree by our host. The average age of the people around me was not less than 40. Especially the number of elderly aunts was undeniably high. When our group’s exercise was over, I started to walk around the park and observe other exercise groups.

It was surprising to see dozens of different exercise groups in other parts of the park. In the largest group I could see, around 90 people were doing their exercises with the guidance of a small speaker attached to a tree. It was admirable to see a large group of people, regardless of language, religion, income or gender, working together for a common cause. I would later learn that this was a traditional form of meditation, a practice that was repeated daily in other cities in Taiwan and considered part of daily life.

This image of city dwellers acting in harmony and trust was a good example of how the concept of social capital appears in daily life.

So what does social capital mean in terms of Crowdfunding?

Basically, social capital supports crowdfunding in two different ways: social connections/networks and trust.

Many thinkers and researchers see social capital as one of the building blocks of a healthy society and long-term development.
Social capital consists of four main elements: trust, shared values and goals, social connections/networks and the ability to co-operate.
The title of a comprehensive study by the World Bank was exactly as follows: The missing link in development: Social Capital. This means that a country may have well-developed human resources (more well-educated people), material wealth, underground or above-ground resources, but these are not sufficient for development. If social capital is insufficient, the development adventure cannot proceed successfully.

The most important building block of social capital is undoubtedly “trust”. In fact, the most important place where social capital and crowdfunding intersect is the issue of trust. The fact that the problem of trust has been overcome to a great extent in countries where social capital is developed requires us to investigate the formation of social capital in countries such as Taiwan and its contribution to crowdfunding.

The most important problem that crowdfunding platforms face is undoubtedly the problem of trust. However, there are large differences in the funding rates of projects of the same quality across countries. In this case, we can observe that the quality of the project makes a significant difference as well as how much the public trusts the project owner or the platform.

“Trust”: this word is also the title of a brick-thick book by the famous thinker Francis Fukuyama. The subtitle of the book is: Social Virtues and the Creation of Prosperity. The book tries to explain the adventure of economic development by dividing countries into two categories according to high and low levels of trust. Let us not forget that according to the “World Values Survey” Turkey is categorised as a country with a very low level of trust. In fact, trust is not low everywhere, it is high within the family or among individuals within the same group (see In-group and Out-group biases). However, Turkey ranks quite low among 55 countries in terms of the level of trust between people outside the family.

The practical negative effect of low levels of trust is that it leads to a decrease in the ability to “come together and unite” for a certain purpose in our economic or political life. One of the issues that can suffer the most from this situation is undoubtedly crowdfunding. In countries where social capital is low, it is not easy for the crowdfunding mechanism to reach a good place.

One of the issues that came up in our interview with Dr Mars at Ching Chu University in Taipei was the trust among the Taiwanese people in crowdfunding platforms. Before going into the details of the subject, when I asked about the trust of individuals in Taiwanese society in general, Dr Mars’ answer was enlightening for me. He stated that in case of any injustice in daily life or shopping, the laws work quickly in favour of the citizens. The effective and fair functioning of the legal system created the following perception in people: If the other person is in a wrong attitude, he/she will be punished, both I and that person know this, in this case I can trust that the other party will not do injustice to me.

Trust, which is the building block of social capital, is a multi-dimensional concept. In the literature, trust between 4 different building blocks is mentioned. These four main pillars that sustain society are called the state, citizens, private firms, and non-governmental organizations. The element we call trust is a social virtue that must exist between each of these four building blocks. If one of them is missing, it damages the rest of the system.