Reputation, Social Capital, and the Industrialization of Credit: The Experience of One Mid-American City
Eric John Abrahamson

In Bowling Alone, Robert Putnam famously documented the decline of membership-based, civil society institutions, which he asserted represented a concomitant loss of social capital in the United States. A variety of factors had contributed to this decline, he wrote, including generational change, the rise of the two-income household, suburban sprawl, and the privatization of entertainment via television. He ruled out other factors including changes in family structure, racial integration, and the rise of big government. He left open the question of whether the “accelerating nationalization and globalization of our economic structures” had some role to play and suggested “delocalization” of business had diminished the role of business elites in local communities.

A more interesting question asks how the market economy of postindustrial capitalism invaded the social economy to undermine local institutions and diminish social bonding. This paper focuses on the role civil society institutions played in the social construction of reputations and the resulting patterns of bank lending in one small Midwestern city (Rapid City, South Dakota). It shows that loan officers and managers, as well as customers, participated heavily in civil society organizations to gauge and establish bankable reputations. The development of industrialized credit scoring, like many new information technologies of the Third Industrial Revolution, diminished the importance of the banker’s personal knowledge of an individual’s character or social connections in favor of quantified calculations of risk.

Using social network analysis, this paper looks at bank officer involvement in service clubs, churches, and other civil society institutions before and after the banks embraced credit scoring to assess whether the decreased utility of these civil society institutions, for both bankers and customers, contributed to the decline of these institutions and the supply of social capital.