The recent tragic assassination of Yitzhak Rabin was a case in point. To take the extreme example, a society built upon rational self-interest could provide no motive for an individual to risk his or her life in defense of the community as a whole. A similar argument can be made with respect to economic liberalism. As Fukuyama demonstrates, rational utility maximization is not sufficient to explain the relative performance of different economies. Just as liberal democracy works best when individualism is moderated by public spirit, so too is capitalism facilitated when individualism is balanced with a readiness to associate.
Social capital is thus critical to prosperity.
Indeed the concept of social capital explains, at least in part, why capitalism and democracy are so closely related. A robust capitalist economy benefits from sufficient social capital in the underlying society to reduce transaction costs and permit enterprise to be self-organizing. In default, the state can step in to promote particular firms or sectors, but markets usually work more efficiently when private participants are making the decisions. Interestingly, the infamous market speculator George Soros comes to this very conclusion in his most recent ruminations. He argues that while these doctrines emphasize the importance of competing within an open system, they pay insufficient attention to the preservation of the system itself.