05 June 2010

Preventing disasters

The vast majority of spending on social and environmental programmes is carried out by bodies whose success is barely linked to the welfare of those who are their intended beneficiaries. These bodies, for the most part, are government agencies, or non-governmental organizations. The motivations of individual employees can scarcely be questioned. My own experience of working in the public sector tells me that they are usually well intentioned and hard working. But they work for an institution within which the over-arching goal is self-perpetuation, and that goal often conflcits with the ostensible aim of the organization. The bigger the organization, the more remote it is from both the people it employs and the people it is supposed to serve. About half of the funds allocated to humanitarian relief and development aid organizations stays with these bodies. Corporations are little different from government. Big private sector companies spend much of the time and energy trying to manipulate government and stifle competition. Unfortunately, the trend is toward more bigness.

Social Policy Bonds could be one way of realigning the goals of organizations with those of ordinary people. Under a bond regime, it would be unimportant whether problem-solving organizations were public or private sector. The structure and activities of the organization would be entirely subordinated to the goals targeted by Social Policy Bonds. The organization's funding - its very existence - would be dictated by the well-being of society, as expressed in the social and environmental outcomes targeted by the bonds. New types of organization could come into being, motivated by the cascading incentives that the bonds would generate.

All this would be a radical change from the current system. But a gradual transition is possible: one that would reward and encouarge those who, even under the current system, are efficient in converting taxpayer dollars into meaningful outcomes. I go into some detail as to how a transition to a Social Policy Bond regime can occur in my book, which can now be downloaded freely - see here.

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