11 January 2011

Large organizations are not human beings

Large organizations aren't human beings. More pointedly, their success does not inevitably mean improvements in human well-being. I am glad that former US labour secretary, Robert Reich, realizes that fact.
“Corporate America is in a V-shaped recovery.... That’s great news for investors whose savings are mainly in stocks and bonds, and for executives and Wall Street traders. But most American workers are trapped in an L-shaped recovery.” Robert Reich, quoted in Deepening crisis traps America's have-nots, by Ambrose Evans-Pritchard, 'Daily Telegraph', 11 January
In former decades it was perhaps reasonable to identify corporate health with social well-being. But that doesn't apply now. Government, with its power and responsibility, would do better to target directly social outcomes that are more strongly correlated with well-being than the financial status of large corporations (or what passes for their financial status under a debased accountancy system).

Social Policy Bonds are one way in which governments could target essential elements of social welfare directly. Elements such as: a cleaner environment, universal literacy, better health and housing outcomes. Under a bond regime, governments would define and target such goals, and raise the funding necessary for their achievement. But it would be up to investors in the bonds to work out the best ways of achieving them. Corporations, some of them large and wealthy, might well become larger and wealthier under a bond regime (though new types of organization can be expected to arise), but if they did they would be doing so only because they are efficient at achieving society's aims, rather than, as under the current system, their own.

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