ABSTRACT
This chapter argues that social capital formation is central for rural development in East Germany. It addresses the missing linkage of newly established state institutions to the rural society in East Germany as a fundamental problem for rural development. The chapter suggests that the role of local elites and local power networks is crucial to understand the practical outcomes of rural development policies. One of the most prominent concepts, which has been linked to networks and networks theory in general and which has also become a political catchword in the rural development debate, is social capital. The chapter outlines that basic characteristics of paternalistic local structures, and illustrates some experiences with its transformation under conditions of rapid economic change. The economic base of paternalism, which is usually connected with the primary sector or traditional industries, has come under immense pressure because of forced global competition.
