Local Capacity, Village Governance, and the Political Economy of Rural Development in Indonesia

This paper develops a framework for conceptualizing local capacity to address village level livelihood and governance problems. The framework is based on an analysis of asset distribution, combined with an explicit analysis of the links between processes of state formation, state-business linkages and local forms of social capital. The framework is used to discuss findings from recent research on village capacity in rural Indonesia. The discussion suggests that it is possible to link a political, economic approach to rural development with recent conceptualizations of social capital. Such an analysis can illuminate the forms taken by and the effectiveness of village level collective action in ways that either purely political economy or social capital approaches do not. © 2006 Elsevier Ltd. All rights reserved