
The Varieties of Capital: It’s Not Just Money
Imagine you’re at a bustling farmers market in Ottawa. You see a vendor selling beautiful, handcrafted jewelry. You’re drawn to a stunning necklace, but it’s a bit pricey. You decide to buy it anyway, using your financial capital. As you chat with the vendor, you discover you both grew up in the same small town in British Columbia, creating an instant connection – that’s your social capital coming into play. The vendor, impressed by your knowledge of gemstones (a hobby you picked up from your geologist father), offers you a discount. Your knowledge is a form of cultural capital. Finally, your friendly personality and negotiation skills, part of your personal capital, convince the vendor to give you an extra bracelet for free. This simple transaction is a microcosm of how different forms of capital — financial, social, cultural, and personal — are expressed in our everyday lives.
Today’s blog post is inspired by a book I just began reading, A Wealth of Well-Being by Meir Statman, Professor of Finance at Santa Clara University.
Financial Capital
Financial capital refers to the funds that we have at our disposal. This can include savings in bank accounts, investments in stocks, bonds, mutual funds, real estate, retirement accounts, and any other financial assets we may have.
Financial capital is multi-faceted in its importance to our lives:
- Security: This is the oft-recommended “emergency fund.” Having financial capital provides a safety net for unexpected expenses or loss of income. It can help cover costs in case of events like uninsured medical expenses or car repairs.
- Future Planning: Financial capital is crucial for long-term goals like retirement. The more capital we accumulate during our working years, the more comfortable and secure our retirement can be. This capital is often stored in Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), and Registered Pension Plans (RPPs) to which we may have contributed at work. I will temper this comment with the caveat that we also need to make room for a degree of financial comfort in our working years, too. We need to know when we have enough.
- Education: It can fund education expenses, providing individuals with opportunities for personal growth and better job prospects. For those with young children, this often comes in the form of saving inside a Registered Education Savings Plan (RESP).
- Home Ownership: Financial capital can make it possible to buy a home, which is often a significant financial goal for individuals and families. This capital can be built within RRSPs and later withdrawn under the Home Buyers’ Plan, TFSAs, and most recently the First Home Savings Account (FHSA).
- Quality of Life: Financial capital can also enhance our quality of life by allowing access to experiences and goods that might otherwise be out of reach. Travel is an example of one such experience.
- Wealth Generation: When wisely invested, financial capital can generate more wealth, leading to financial growth and stability.
In summary, financial capital plays an essential role in providing security, enabling future planning, and improving the overall quality of life for individuals and households.
Social Capital
Social capital refers to the networks of relationships among people who live and work in a particular society, enabling that society to function effectively. It involves the effective functioning of social groups through interpersonal relationships, a shared sense of identity, a shared understanding, shared norms, shared values, trust, cooperation, and reciprocity.
In the context of individuals and households, social capital can be understood as the value that we gain from our social relationships. These relationships can provide access to resources, information, emotional support, and other forms of assistance.
In Canada, like in many societies, social capital can vary greatly among different income groups, even among those who identify as middle class. Here are some distinctions that can be observed:
- Networks and Connections: Higher-income households often have access to more diverse and powerful social networks. These can include professional connections, affiliations with prestigious institutions, and relationships with influential individuals. Lower-income households, while they may have strong community ties, often lack access to these types of influential networks.
- Community Participation: Higher-income households may have more resources (such as time and money) to participate in community activities, volunteer work, or civic organizations, which can further enhance their social capital.
- Trust and Reciprocity: Trust in institutions and reciprocity within communities can also vary. In some cases, lower-income households may have higher levels of trust and reciprocity within their local communities, but lower trust in institutions.
- Access to Information: Higher-income households often have better access to valuable information, such as information about job opportunities, investments, and education. This can further enhance their social capital.
It’s important to note that these are general trends and individual experiences can vary greatly. Social capital involves many different aspects of social life, and it can both affect and be affected by our financial capital. It’s also worth noting that while social capital can provide numerous benefits, it can also lead to exclusion and inequality if certain groups are systematically denied access to valuable networks and resources.
Cultural Capital
Cultural capital, a term coined by sociologist Pierre Bourdieu, refers to the knowledge, skills, education, and other cultural assets that a person possesses. It’s a form of wealth that can influence a person’s social mobility, but unlike financial capital, it’s not centred on economic resources. Instead, it’s about the non-financial social assets that promote social mobility.
Bourdieu identified three forms of cultural capital:
- Embodied: This includes knowledge and skills that a person acquires over time. It’s not transferrable and is integral to a person’s identity. For example, the ability to speak multiple languages or play a musical instrument.
- Objectified: This refers to physical objects that are owned, such as books, artwork, or scientific instruments. These objects represent a form of cultural capital to the extent that they reflect cultural knowledge and understanding.
- Institutionalized: This refers to institutional recognition of cultural capital, often in the form of academic credentials or qualifications.
Daniel Laurison and Elizabeth Currid-Halkett have further expanded on Bourdieu’s work. Laurison’s research highlights how cultural capital can affect one’s career trajectory, particularly in fields like the arts or media where knowing the right people and “fitting in” can be crucial. Currid-Halkett, on the other hand, has explored the concept of “conspicuous production” and “inconspicuous consumption” in her book, The Sum of Small Things. She argues that the elite in society today distinguish themselves through cultural knowledge and experiences, rather than conspicuous consumption of goods.
In Canada, cultural capital might be reflected in things like digital literacy, global awareness, bilingualism (particularly English and French), and higher education.
Cultural capital may look different elsewhere. For example, Japan, with its strong tradition of the tea ceremony, will grant cultural capital to those with knowledge of and participation in these ceremonies. Indeed, some Japanese who have been recognized for their high mastery of a certain art or craft have been named Living National Treasures. To have met with or apprenticed under one of these Treasures would convey enormous cultural capital.
Cultural capital is not inherently ‘better’ or ‘worse’ than other forms of capital. It’s simply different, and its value can vary depending on the context. Cultural capital can open doors and provide opportunities, but like all forms of capital, it can also serve to reinforce existing social hierarchies and inequalities.
Personal Capital
Personal capital refers to the collection of all the resources a person has at their disposal, including their physical attributes, mental abilities, and personal characteristics. It’s the total of an individual’s assets that can be leveraged in some way for personal or professional gain. Here are some subcategories:
- Physical and Mental Features: This includes a person’s health, physical abilities, mental acuity, and talents. For example, a person with a strong physique might have an advantage in physically demanding jobs, while someone with a high degree of emotional intelligence might excel in roles that require empathy and understanding. Extraversion and optimism are associated with higher degrees of well-being.
- Gender and Sexual Orientation: In many societies, gender and sexual orientation can influence a person’s experiences and opportunities. For example, women have historically been underrepresented in certain fields, such as Science, Technology, Engineering, and Mathematics (STEM), but efforts are being made to address these disparities. Similarly, the LGBTQ+ community has fought for recognition and equal rights, and these struggles and achievements contribute to their personal capital.
- Race: A person’s race can also contribute to their personal capital. This can be a complex and sensitive issue, as racial identity can impact a person’s experiences and opportunities in profound ways.
- Nationality: A person’s nationality can influence their personal capital by affecting their cultural perspective, language skills, and access to certain opportunities or resources.
In Canada, these aspects of personal capital can manifest in various ways. For instance, Canada’s multicultural society tends to value diversity, and this can influence how personal capital is accumulated and utilized.
For example, Canada’s commitment to multiculturalism and bilingualism can mean that individuals who speak both of Canada’s official languages (English and French) may have more job opportunities. However, it’s also important to acknowledge that systemic issues such as racism and sexism still exist, and these can impact how personal capital is experienced. For instance, racialized individuals or those who display visible markers of religious identity may face barriers that others do not.
Overall, personal capital includes many aspects of an individual’s identity and abilities. It changes over time, and it plays a crucial role in shaping a person’s life experiences and opportunities.
Using our Capital Resources
Understanding the different forms of capital – financial, social, cultural, and personal – can be a meaningful resource in navigating life’s many challenges and opportunities. Each form of capital is a unique asset that we can build on to improve our lives and the lives of those around us. Capital is not just about money. It’s about the relationships we build, the knowledge we acquire, and the personal attributes we develop. You might wish to take a moment to reflect on your capital. What are your strengths? Where can you grow? Perhaps some forms of capital that you have developed can be utilized to improve other forms of capital. Not all forms of capital move together. How can you use your capital to not only enrich your own life but also make a positive impact on your community?
This is the 245th blog post for Russ Writes, first published on 2024-04-29
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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions