The following guest post from Paul C. Godfrey is the third in a series of blog posts reflecting on the War on Poverty, half a century after its inception. See the rest of the series here.
Scientists love natural experiments; something happens to one group of people but not to another group with the same basic characteristics. Natural experiments allow scientists to clearly see how interventions impact divergent outcomes between otherwise similar groups. The Great Smoky Mountains study of mental health among rural North Carolina residents was just such an experiment; one that came to powerful conclusions.
The study began in 1993 and followed a cohort of Cherokee and non-Cherokee children until they were all 19 or 21. Each Cherokee received a share of the profits from the reservation’s casino, which by 2006 totaled about $9,000 per person. Non-rural study participants received no such payment. Dr. Jane Costello and her team wondered “did the increased income have any effect on the mental health of Cherokee children?”
The Great Smoky Mountain Study
In 2003, the team reported their first results; the extra income improved the mental health of Cherokee children, they showed lower levels of mental health disorders than non-Cherokee children. The team found that one characteristic in particular mediated the link between increased income and mental health: the level of family supervision. When parents actively watched over and cared for the children, they experienced significantly fewer mental health challenges but families with lax parental involvement exhibited no difference from the non-Cherokee cohort. Increased income only helped those families already committed to the welfare of their children!
Costello and her team published more results in the top-drawer Journal of the American Medical Association in 2010. These findings showed the lasting impact of the extra income as those children became adults. The mental health of the Cherokee continued to exceed that of the non-Cherokee cohort. The question of interest this time was the differences among the Cherokee children themselves. Would those who enjoyed the additional income the longest (the youngest at the time of the initial study) have a lower incidence of mental health challenges than the oldest children? The answer was a clear yes!
Were there mediating factors, just like in the first study? Yes, particularly in terms of substance abuse problems. The team wrote: “In adulthood, fewer delinquent friends mediated the relationship between the family [income] supplement and adult substance use disorders. Possibly, the increased supervision in adolescence, while no longer exerting a direct influence on adult psychopathology, helped keep young adults away from delinquent friends and thence exposure to drugs as adults.”
It wasn’t just the money that made the difference! Over time, a strong family and good friends—two manifestations of social capital—significantly influenced whether increased income improved mental health. For youth, involved parents meant that the extra income had a positive impact. For adults, good friends made the difference. The family’s influence seems to extend into adulthood; strong parents teach their children how to select good friends.
Why Social Capital Matters
Social capital provides access to important resources through associations and relationships. Those resources may be economic such as access to seed capital or customers from family and friends. They may be knowledge or skill, such as learning to budget by watching one’s parents. Relationships provide psychic resources, such as the sense of love and belonging that come from affectionate connections. Finally, social capital provides moral resources, such as the values of honesty, hard work, perseverance, and self-discipline that help individuals improve their lives and flourish.
How does social capital help eliminate poverty? Social capital matters because our associations help form and reinforce the types of attitudes and behaviors that people need to succeed. Social relationships create a “turbocharger” effect that amplifies the impact of money. Second, the world in which we live is so complex and difficult that none of us can succeed on our own. It takes a village to raise a child—or to help an adult raise himself out of poverty. The resources we access through our social networks extend the impact of money and other resources.
Costello’s work shows that it takes more than money to move from poverty to prosperity: social capital counts. Where have you seen the power of social capital? How has it helped you amplify and extend the value of money?
Paul C. Godfrey is Professor of Strategy and Associate Academic Director of the Melvin J. Ballard Center for Economic Self-Reliance at Brigham Young University's Marriott School of Management. He has recently pursued projects in Ghana, the Navajo Nation, and with disadvantaged populations in the United States.
His new book More than Money is a timely guide on how organizations can create prosperity for people at the base of the pyramid in the developing and developed world.