With globalization weakening the role of the nation state, increased theoretical and practical attention is being focused on community level action, especially on the role of social capital. Proponents of social capital have given primary emphasis to voluntary associations. This paper looks at the role the state can play in building social capital. The historical nature of social capital in the community, the organizational structure of governmental intermediaries, and the design of specific program interventions condition social capital building. Hierarchical governmental intermediaries are contrasted with participatory community based initiatives. Three key factors: autonomy, linkage and returns on investment for both intermediaries and participating residents, are shown to affect social capital construction.